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What changed in BITMINE IMMERSION TECHNOLOGIES, INC.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of BITMINE IMMERSION TECHNOLOGIES, INC.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+544 added−899 removedSource: 10-K (2024-12-09) vs 10-K (2023-12-14)

Top changes in BITMINE IMMERSION TECHNOLOGIES, INC.'s 2024 10-K

544 paragraphs added · 899 removed · 174 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

10 edited+153 added−177 removed3 unchanged
Biggest changePecos, Texas Operations In October 2022, we entered into a joint venture arrangement with ROC Digital Mining to jointly develop and operate a Bitcoin mining operation in Pecos, Texas. Under the joint venture, we contributed one immersion container, six transformers and cash with a value of $987,429 as a capital contribution to ROC Digital Mining I, LLC (the “ROC Digital”).
Biggest changeTransactions with ROC Digital Mining I, LLC In October 2022, we entered into a joint venture arrangement with ROC Digital Mining I, LLC (“ROC Digital”) to jointly develop and operate a bitcoin mining operation in Pecos, Texas.
We simultaneously sold ROC Digital four immersion containers for $1,200,000, which is payable pursuant to a promissory note the bears interest at 5% per annum, and is payable pursuant to monthly payments of $31,203.64 per month commencing on December 30, 2022, with any remaining principal and interest payable in full on May 31, 2026.
We simultaneously sold ROC Digital four immersion containers for $1,200,000, which is payable pursuant to a promissory note that bears interest at 5% per annum, and is payable pursuant to monthly payments of $31,203.64 per month commencing on December 30, 2022, with any remaining principal and interest payable in full on May 31, 2026.
At the same time, we finalized a hosting agreement with the joint venture, under which we will locate one immersion container at the site for $500 per month, plus payment of our pro rata share of electricity, internet and insurance for the site.
At the same time, we finalized a hosting agreement with the joint venture, under which we located one immersion container at the site for $500 per month, plus payment of our pro rata share of electricity, internet and insurance for the site.
The note is secured by the equipment that was sold. We also obtained the right to locate one container at the location that we would be able to use for self-mining. As of August 31, 2023 the note receivable from ROC Digital amounted to $1,029,721.
The note is secured by the equipment that was sold. As of August 31, 2023 and August 31, 2024, the note receivable from ROC Digital amounted to $1,029,721 and $655,277, respectively. We also obtained the right to locate one container at the location that we would be able to use for self-mining.
Murray, Kentucky Operations On October 4, 2023, the Company purchased 1,050 used ASIC miners from Luxor Technology Corporation (“Luxor”) for $488,775, and simultaneously entered into a Co-Location Services Agreement to host the miners at a hosting facility owned by Soluna SW, LLC (“Soluna”) in Murray, Kentucky.
Murray, Kentucky Operations On October 4, 2023, the Company purchased 1,050 used ASIC miners from Luxor Technology Corporation (“Luxor”) for $488,775, and simultaneously entered into a Co-Location Services Agreement to host the miners at a hosting facility owned by Soluna SW, LLC (“Soluna”) in Murray, Kentucky. We subsequently added 45 ASIC miners in May 2024 that we purchased from Soluna.
In addition, a dispute with the joint venture’s vendor for ASIC miners delayed the delivery of miners for the facility. In April 2023, the joint venture entered into a new one year agreement with the electricity provider, under which the site will receive electricity at $0.03991 per kwh for at least 95% of the annualized hourly intervals during the period.
In April 2023, the joint venture entered into a new one year agreement with the electricity provider, under which the site received electricity at $0.03991 per kwh for at least 95% of the annualized hourly intervals during the period, which provided the joint venture with more predictable pricing than the initial agreement.
As of December 1, 2023, we had deployed 96 Antminer S-19 pro miners to our hosting container at the site. The joint venture has filled its five immersion containers with ASIC miners provided by hosting clients.
As of December 5, 2024, we had deployed 145 Antminer S-19 pro miners to our hosting container at the site. The joint venture initially filled its six immersion containers with ASIC miners provided by hosting clients, although most of the hosting clients agreements terminated in April 2024.
Our joint venture partner initially expected the site would be operational by December 31, 2022. After the site work was substantially completed, the commencement of operations was delayed as a result of a request by the electricity provider for an additional deposit as a result of recent bankruptcies in the mining and hosting industry.
After the site work was substantially completed, the commencement of operations was delayed as a result of a request by the electricity provider for an additional deposit as a result of recent bankruptcies in the mining and hosting industry. In addition, a dispute with the joint venture’s vendor for ASIC miners delayed the delivery of miners for the facility.
In return, we received 240 Class B Units of ROC Digital pursuant to an ongoing offering of a total of 1,000 Class B Units at $4,400 per unit.
Under the joint venture, we contributed one immersion container, six transformers and cash with a value of $987,429 as a capital contribution to ROC Digital Mining I, LLC (the “ROC Digital”). In return, we received 240 Class B Units of ROC Digital pursuant to an ongoing offering of a total of 1,000 Class B Units at $4,400 per unit.
We have an account with Gemini Trust Company, LLC, which is a qualified custodian regulated by the New York Department of Financial Services, to which we transfer any digital assets that we decide to liquidate immediately prior to their liquidation. We do not store any digital assets at Gemini.
The Company also has an account with Gemini Trust Company, LLC, which is a qualified custodian regulated by the New York Department of Financial Services as a backup facility, and may hold bitcoin from time to time in a cold storage wallet. The Company uses Bitgo’s multi-signature feature for account access.
Removed
Item 1. Business Company Background A predecessor to the Company was incorporated in the state of Nevada on August 16, 1995 as Interactive Lighting Showrooms, Inc. On June 30, 2004, the predecessor changed its name to Am/Tex Oil and Gas, Inc. On January 24, 2008, the predecessor changed its name to Critical Point Resources, Inc.
Added
Item 1. Business – Company Overview – Pecos, Texas Operations ” for a more complete description of the terms of the joint venture. 52 Our joint venture partner initially expected the site would be operational by December 31, 2022.
Removed
On February 2, 2012, the predecessor changed its name to Renewable Energy Solution Systems, Inc. On May 18, 2012, the predecessor changed its name to RES Systems, Inc. On May 23, 2013, the predecessor changed its name back to Renewable Energy Solution Systems, Inc.
Added
Currently, five of the operational hosting containers owned by the joint venture are fully or partially occupied by clients, although the joint venture is aggressively trying to fill the remaining capacity with hosting clients. The joint venture also owns two immersion containers which are not installed, but will be if hosting demand warrants.
Removed
On April 6, 2020, the predecessor redomiciled in the State of Delaware by merging with a Delaware subsidiary named RESS Merger Corp., which was the successor in the merger.
Added
On April 29, 2024, the joint venture executed an energy services agreement for the site that runs from May 1, 2024 to April 30, 2025. Under the current agreement, the site will receive electricity at the prevailing rate plus $0.0055 per kwh.
Removed
Thereafter, effective July 15, 2020, the predecessor and the Company effected a holding company reorganization pursuant to Section 251(g) of the Delaware General Corporation Law (the “DGCL”) under which RESS Merger Corp. merged with RESS of Delaware, Inc., a Delaware subsidiary of RESS Merger Corp., and all shareholders of RESS Merger Corp. received one share of common stock of the Company, another Delaware subsidiary of RESS Merger Corp., for each share that they previously held in RESS Merger Corp., and RESS of Delaware, Inc.
Added
The joint venture is not obligated to purchase any specific quantity of electricity, and employs software which automatically discontinues mining operations when the prevailing rate exceeds certain levels. In April 2024, we renewed our hosting contract with the joint venture for an additional year.
Removed
(the successor in the merger with RESS Merger Corp.) becoming a subsidiary of the Company. Effective July 17, 2020, the Company divested RESS of Delaware, Inc. to Sterling Acquisitions I, Inc.
Added
The hosting facility has an electricity cost of $0.025 per kwh and guarantees uptime of 83% per week. 53 Miner Summary Set forth below is a summary of the Company’s ASIC miner inventory as of August 31, 2024: Site Present Installed In Transit Needing Repair Immersion/Air-cooled Trinidad 400 367 – – Immersion Pecos, Texas 145 145 – – Immersion Murray, Kentucky 1,095 1,095 – – Air Cooled Other – – – 85 n/a Total 1,640 1,607 – 85 Results of Operations Comparison of Results of Operations for Years Ended August 31, 2024 and 2023.
Removed
(“Sterling”), which is owned by the chief executive officer of the Company, pursuant to an agreement under Sterling (i) purchased Ten Million (10,000,000) common shares of the Company for an aggregate price of Ten Dollars ($10), and (ii) was issued Ten Million (10,000,000) Class A Warrants at an aggregate price of Ten Dollars ($10), and (iii).
Added
Revenues During the year ended August 31, 2024, the Company generated $3,310,348 in revenue, compared to $645,278 in revenue in the year ended August 31, 2023. During the year ended August 31, 2024, the Company generated $3,030,910 in bitcoin revenue from self-mining digital assets, compared to $389,222 revenue in the year ended August 31, 2023.
Removed
Ten Million (10,000,000) Class B Warrants at an aggregate price of Ten Dollars ($10). In addition, the Company agreed to pay a fee of $1,000 to Sterling to cover the expenses associated with the maintenance of RESS of Delaware, Inc. until such time as a certificate of dissolution is filed with the state of Delaware.
Added
Mining revenues were impacted somewhat by miners that were offline due to maintenance issues. Mining revenue should be higher in future periods as we continue to add miners. We expected mining revenues to be lower in 2024 as a result of a halving that occurred in April 2024.
Removed
By a written consent dated July 16, 2021, holders of a majority of the Company’s issued and outstanding common stock approved a resolution to appoint Jonathan Bates, Raymond Mow, Michael Maloney and Seth Bayles to the board of directors of the Company, and to appoint Jonathan Bates as Chairman, Seth Bayles as Corporate Secretary, Raymond Mow as Chief Financial Officer, and Ryan Ramnath as Chief Operating Officer (collectively, the “New O&Ds”).
Added
However, the impact of the halving was offset by a rise in the price of bitcoin due to fewer miners online after the halving event, as has historically occurred after a halving event, and by the positive impact of “ordinals,” which are increased transaction fees that occur as parties have discovered ways to imbed data regarding other assets, such as art, in the bitcoin blockchain.
Removed
Erik S. Nelson remained a director and the chief executive officer. At the same time, the shareholders approved the issuance of 32,994,999 shares of common stock in the Company’s offering of common stock at $0.015 per share, and the grant of 4,750,000 shares for services, which were valued at $0.015 per share.
Added
Mining revenues in the year ended August 31, 2024 were also positively impacted by the resolution of operating issues at the Company’s first hosting facilities in Trinidad and Pecos, Texas, and the commencement of operations at a facility in Murray, Kentucky that is hosted by a third-party.
Removed
As a result of the foregoing stock issuances, the New O&Ds (or entities controlled by them) collectively acquired 24,893,877 shares of common stock, which represented approximately 62% of the issued and outstanding shares at the time.
Added
Self-mining revenues were positively impacted by 4.70 bitcoin earned, with a value of $319,465, from operating 777 S-19 miners under a short-term lease from Luxor Technology Corporation (“LTC”) that began on March 8, 2024 and expired when the halving occurred on April 19, 2024.
Removed
The appointment of certain of the New O&Ds to the Company’s board, and issuance to the New O&Ds of a controlling interest in the Company, were made in order to enable the Company to enter the business of creating a hosting center for Bitcoin mining computers primarily utilizing immersion cooling technology, as well mining the Bitcoin digital currency for its own account.
Added
During the year ended August 31, 2024, the Company generated $231,133 in revenue from equipment sales, compared to $244,036 in revenue in the year ended August 31, 2023.
Removed
Prior to the change of control to the New O&Ds, the Company was a shell company. Company Overview Since July 2021, our business has been as a blockchain technology company that is building out industrial scale digital asset mining, equipment sales and hosting operations.
Added
The revenue from equipment sales in the years ended August 31, 2024 and 2023 were primarily derived from the following transactions: · In October 2022, the Company sold four hosting containers to ROC Digital, which was constructing a hosting facility in Texas, for $1,200,000.
Removed
The Company’s primary business is self-mining bitcoin for its own account, as well as hosting third-party equipment used in mining of digital asset coins and tokens, specifically bitcoin. Our state-of-the-art facilities will be specifically designed and constructed for housing advanced mining equipment.
Added
The purchase price is payable pursuant to a promissory note bearing interest at 5% per annum, and is paid by 41 equal monthly payments of $31,204 commencing December 30, 2022, with any remaining principal and interest payable in full on May 31, 2026. · In August 2022, the Company sold two hosting containers to a private party in Trinidad for $960,000.
Removed
Our data centers will provide power, racks, proprietary thermodynamic management (heat dissipation and airflow management), redundant connectivity, 24/7 security, as well as software which provide infrastructure management and custom firmware that boost performance and energy efficiency. 1 We plan to operate our data centers using immersion cooling technology.
Added
After a down payment of $50,000, the balance of the purchase price is payable pursuant to a promissory note bearing interest at 7.5% per annum, and is paid by 24 equal monthly payments of $40,949.62 commencing September 30, 2022.
Removed
Immersion cooling is the process of submerging computer components (or full servers) in a thermally, but not electrically, conductive liquid (dielectric coolant) allowing higher heat transfer performance than air and many other benefits. Immersion cooling can be up to 95% more efficient than standard air cooling, producing an estimated PUE (power usage effectiveness) of 1.05.
Added
On February 1, 2023, the Company modified this agreement in conjunction with its entry into a new hosting agreement with the party, under which the Company agreed that the remaining principal balance of the note was $731,472, and that the note would be converted into an interest only note until August 31, 2024, at which time all principal and interest due is payable in full.
Removed
This cooler environment has been shown to extend machine lives by 30% or longer.
Added
In addition, the Company agreed to allow the note obligor to repay the note principal at a 10% discount. In March 2024, the note was further amended to extend the maturity date to December 31, 2024.
Removed
Our digital asset mining operation is focused on the generation of digital assets by solving complex cryptographic algorithms to validate transactions on specific digital asset network blockchains, which is commonly referred to as “mining.” Mining requires the use of specialized computers equipped with application-specific integrated circuit (ASIC) chips (known as “miners”) to solve complex cryptographic algorithms in support of the Bitcoin blockchain (in a process known as “solving a block”) in exchange for digital asset rewards (to date, only bitcoin).
Added
Due to defaults by the borrower, the Company repossessed the collateral in July 2024. · In June 2023, the Company sold a total of 34 Antminer S-19 miners in two transactions for gross proceeds of $70,000 cash or bitcoin. · In October 2023, the Company sold 100 new ASIC miners to a third party for $149,250. 54 Under the guidelines of ASC 606, the Company determined that payments due to under notes receivable arrangements from certain customers was not “probable” due to the start-up nature of the customer.
Removed
Whether we are hosting our client’s computers or mining for our own account with our own computers, the miners participate in “mining pools” organized by “mining pool operators” in which we or our clients share mining power (known as “hash rate”) with the hash rate generated by other miners participating in the pool to earn digital asset rewards.
Added
As a result the Company reported revenue from equipment sales on October 2022 and August 2022, which were vendor financed by the Company, under the installment sale method, under which the Company reports its gross profit on the sales only after payments are received from the purchaser.
Removed
The mining pool operator provides a service that coordinates the computing power of the independent mining enterprises participating in the mining pool. Fees are paid to the mining pool operator to cover the costs of maintaining the pool.
Added
As of February 1, 2023, the Company reached an agreement with the obligor under the $910,000 note to convert the note into an interest only note commencing as of February 1, 2023, with a balloon payment being due at maturity on August 31, 2024, and an agreement that the principal balance on the note was $731,472.
Removed
The pool uses software that coordinates the pool members’ mining power, identifies new block rewards, and records how much hash rate each participant contributes to the pool.
Added
The maturity date was later extended to December 31, 2024. One effect of the agreement with the obligor is to materially reduce any deferred revenue associated with the sale, as the note is scheduled to receive interest only payments until December 31, 2024.
Removed
Pools typically pay rewards in different ways: as a percentage of the total reward received by the mining pool each day based on each pool participant’s proportionate share of hashing power provided that day (the “Actual Reward Method”); or based on the theoretical reward the pool participant should have received each day based on its hashing power contributed to the pool each day times the difficulty index (the “Expected Reward Method”).
Added
In July the Company repossessed the collateral securing the August 2022 note as a result of a default by the obligor, and as a result the Company does not expect to report any further revenues under this note.
Removed
We only use mining pools that pay rewards under the Expected Reward Method. As the demand for digital assets increases and digital assets become more widely accepted, there is an increasing demand for professional-grade, scalable infrastructure to support growth of the blockchain ecosystem.
Added
During the fiscal year ended August 31, 2024 the Company recorded $6,824 in equipment sales on each of the twelve monthly payments of $31,204 received from ROC Digital, for a total of $81,883 in equipment sales. See “ Note 5. Investments and Notes Receivable ” in the accompanying financial statements for additional information about both notes.
Removed
We expect to continually evaluate the performance of our data centers, including our ability to access additional megawatts of electric power and to expand our total self-mining and customer and related party hosting hash rates.
Added
During the years ended August 31, 2024 and 2023, the Company recorded $149,250 and $70,000, respectively, of revenue from isolated sales of equipment recorded under the “completed sale” method.
Removed
Our digital asset self-mining activity competes with a myriad of mining operations throughout the world to complete new blocks in the blockchain and earn the reward in the form of an established unit of a digital asset.
Added
In future periods, the Company expects to generate additional revenues from the resale of certain hosting equipment, primarily containers and transformers, and of miners in “buy/host” transactions, in which the Company sells miners already installed in its hosting facilities to buyers that simultaneously execute a hosting agreement for the purchased miners, and in some cases additional miners.
Removed
Revenue from digital asset mining and hosting third party digital asset miners are impacted by volatility in bitcoin prices, as well as increases in the Bitcoin blockchain’s network hash rate 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.
Added
During the year ended August 31, 2024, the Company generated $48,305 in revenue from hosting, compared to $12,022 in revenue from hosting in the year ended August 31, 2023. In October 2022, the Company reached an agreement to terminate its only hosting client at the time and repurchased the miners which it had previously sold to the hosting client.
Removed
Gross profits from digital asset mining are primarily impacted by the market price of bitcoin at the time of mining and the cost of electricity to operate the miners and to a lesser extent by other operating costs.
Added
In June 2023, the Company signed two new hosting clients. However, it elected not to renew both hosting contracts in the Summer of 2024, and therefore as of August 31, 2024 it did not have any hosting clients.
Removed
While we expect to sell or exchange a portion of the digital assets we mine to fund our growth strategies or for general corporate purposes, we may hold our digital assets as investments in anticipation of continued adoption of digital assets as a “store of value” and a more efficient medium of exchange than traditional fiat currencies.
Added
In the current market environment, the Company believes that self-mining is more profitable than hosting third party miners, however we will pursue hosting opportunities on a selective basis. While the Company still sees good opportunities to acquire mining equipment at attractive prices, the price of mining equipment has recently increased with the recent increase in the price of bitcoin.
Removed
As the demand for digital assets increases and digital assets become more widely accepted, there is an increasing demand for professional-grade, scalable infrastructure to support growth of the blockchain ecosystem.
Added
The primary factors that will impact our revenues in subsequent periods are described in the “—Overview ” above.
Removed
We expect to continually evaluate the performance of our data centers, including our ability to access additional megawatts of electric power and to expand our total self-mining and customer and related party hosting hash rates. We also generate revenues from the advantageous purchase and sale of equipment used for digital asset mining and hosting.
Added
Cost of Sales Cost of sales related to bitcoin hosting and mining revenue was $37,678 for hosting and $2,330,752 for mining, respectively in the year ended August 31, 2024, compared to $9,098 for hosting and $326,630 for mining, respectively, in the year ended August 31, 2023.
Removed
We have relationships with some suppliers that enable us to acquire highly desired equipment at attractive prices, which we plan to resell to third parties.
Added
Cost of sales normally includes electricity, utilities, facilities costs and supplies where we perform mining from our own facilities. Major components of cost of sales include rent to house mining and hosting equipment, electricity, and supplies. Where our miners are hosted by third parties, major components of cost of sales include hosting fees and/or electricity costs.
Removed
In most cases, resales of digital asset mining equipment would be to our hosting customers, which have the dual benefit of generating short-term gross profits from the equipment sale as well as growing the customer base of our hosting business. 2 Trinidad Operations We initially decided to locate our initial facilities in Trinidad, because it has some of the cheapest electricity in the world due to its abundant supplies of oil and gas and because some of our technical staff is located there.
Added
Cost of sales for both owned and hosted facilities does not include depreciation, which is stated separately.
Removed
We have entered into an agreement with Telecommunications Services of Trinidad & Tobago Limited (“TSTT”), the largest and oldest telecom company in Trinidad, to co-locate up to 125 800 kw containers for hosting digital asset miners. TSTT has up to 93 potential locations for co-location of our containers.
Added
The Company believes that cost of sales as a percentage of revenues may be less in future periods as compared to prior periods if the market price of bitcoin remains at its current level or increases. 55 The table below describes the average cost of mining each bitcoin for the years ended August 31, 2024 and 2023, and the total energy usage and cost per each kilowatt hour ("KWH") utilized within both our facilities.
Removed
Under the agreement, we have the option, but not obligation, to co-locate containers at our own pace. We pay a fixed amount per container, plus the actual electricity costs incurred by our containers in the amount billed to TSTT by the local utility without any markup.
Added
For the Year Ended Cost of Revenues - Analysis of costs to mine one bitcoin (per bitcoin amounts are actual) August 31, 2024 August 31, 2023 Cost of Mining - owned facilities Cost of energy per bitcoin mined $ 23,417.85 $ 47,157.74 Other direct costs of mining per bitcoin mined (1) $ 17,057.26 $ 8,175.10 Depreciation expense per bitcoin mined (2) $ 34,083.94 $ 30,158.13 Financing expense per bitcoin mined (3) $ - 0- $ - 0- Cost to mine one bitcoin - owned $ 74,559.05 $ 85,491.00 Cost of Mining - hosted facilities Cost of energy per bitcoin mined $ 19,346.84 $ 14,980.78 Other direct costs of mining per bitcoin mined (1) $ 13,578.03 $ 2,517.01 Depreciation expense per bitcoin mined (2) $ 15,038.95 $ 30,158.13 Financing expense per bitcoin mined (3) $ 1,257.30 $ - 0- Cost to mine one bitcoin - hosted $ 49,221.12 $ 47,655.92 Average revenue of each bitcoin mined (4) $ 50,911.20 $ 24,937.49 Cost of mining one bitcoin as % of average bitcoin mining revenue (5) 96.68% 191.10% Statistics - owned facilities Total bitcoin mined 9.398856297 0.36491909 Bitcoin mining revenue $ 482,936.12 $ 10,109.56 Total miners - as of the periods ended 485 72 Total KWHs utilized 5,287,881.49 276915.49 Total energy expense $ 220,101.04 $ 17,208.76 Cost per KWH $ 0.042 $ 0.062 Energy expense as % of bitcoin mining revenue, net 45.58% 170.22% Other direct costs of mining (1) $ 160,318.78 $ 2,983.25 Total depreciation expense (2) $ 320,348.11 $ 11,004.75 Total financing costs (3) $ - 0- $ - 0- Statistics - hosted facilities Total bitcoin mined 40.10897465 15.24350171 Bitcoin mining revenue $ 2,037,564.911 $ 379,112.41 Total miners - as of the periods ended 1,155 208 Total KWHs utilized 23,010,940.56 4,307,982.87 Total energy expense 775,981.99 228,359.54 Cost per KWH $ 0.034 $ 0.053 Energy expense as % of bitcoin mining revenue, net 38.08% 60.24% Other direct costs of mining (1) $ 544,601.04 $ 38,368.00 Total depreciation expense (2) $ 603,196.89 $ 459,700.30 Total financing costs (3) $ 50,429 $ - 0- (1) Other direct costs of mining for owned facilities consists mostly of rent for the facility, as well as minor costs such as supplies and internet.
Removed
The agreement provides that our hosting containers will be billed for electricity usage at the local utility’s standard rates, which is the greater of 3.5 cents per kwh or 75% of the declared reserve capacity, which is equal to the customer’s highest expected monthly kilovolt-ampere demand at $7.40. The term of the agreement expires on October 14, 2031.
Added
Other direct costs of mining for hosted miners consist of hosting fees . (2) Depreciation expense includes depreciation of miners used in mining. For owned facilities, it also includes depreciation of the hosting containers and corollary equipment such as transformers and switches.
Removed
We have the right to terminate our agreement with TSTT at any time that the price for electricity consumption exceeds $0.05 per kwh. In October 2022, we completed the installation of initial hosting containers under our agreement with TSTT.
Added
(3) Financing costs include the cost of purchase money financing for miners, but do not include any financing costs for miners or hosting equipment acquired with general working capital, nor the cost of hedging the price of bitcoin.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

142 edited+200 added−405 removed57 unchanged
Biggest changeThe factors affecting the further development of this industry include, but are not limited to: · continued worldwide growth in the adoption and use of digital assets and blockchain technologies; · government and quasi-government regulation of digital assets and their use, or restrictions on or regulation of access to and operations of digital asset transaction processing; · changes in consumer demographics and public tastes and preferences; · the maintenance and development of the open-source software protocols or similar digital asset systems; · the availability and popularity of other forms or methods of buying and selling goods and services, or trading assets including new means of using fiat currencies; · general economic conditions and the regulatory environment relating to digital assets; and · negative consumer perception of digital assets, including digital assets specifically and digital assets generally. · a decline in the popularity or acceptance of digital assets could materially impact us or our potential hosting customers, which could have a material adverse effect on our business, financial condition and results of operations.
Biggest changeThe factors affecting the further development of the digital asset industry, as well as the digital asset networks, include: · continued worldwide growth in the adoption and use of bitcoins and other digital assets; · government and quasi-government regulation of bitcoins and other digital assets and their use, or restrictions on or regulation of access to and operation of the digital asset network or similar digital assets systems; · the maintenance and development of the open-source software protocol of the bitcoin network; · changes in consumer demographics and public tastes and preferences; · the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies; · general economic conditions and the regulatory environment relating to digital assets; · the impact of regulators focusing on digital assets and digital securities and the costs associated with such regulatory oversight; and · a decline in the popularity or acceptance of the digital asset networks of bitcoin, or similar digital asset systems, could adversely affect an investment in our securities. 22 The open-source structure of the bitcoin network protocol means the contributors to the protocol are generally not directly compensated for their contributions in maintaining and developing the protocol.
Factors that could cause fluctuations in the trading price of our common stock include the following: · price and volume fluctuations in the overall stock market from time to time; · volatility in the trading prices and trading volumes of technology stocks; · volatility in the price of Bitcoin and other digital assets; · changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; · sales of shares of our common stock by us or our stockholders; · failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; · the financial projections we may provide to the public, any changes in those projections, or our failure to meet those projections; · announcements by us or our competitors of new products, features, or services; · the public’s reaction to our press releases, other public announcements and filings with the SEC; · rumors and market speculation involving us or other companies in our industry; · actual or anticipated changes in our results of operations or fluctuations in our results of operations; · actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; · litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; · developments or disputes concerning our intellectual property or other proprietary rights; · announced or completed acquisitions of businesses, products, services or technologies by us or our competitors; · new laws or regulations or new interpretations of existing laws or regulations applicable to our business; · changes in accounting standards, policies, guidelines, interpretations or principles; · any significant change in our management; and · general economic conditions and slow or negative growth of our markets. 50 In addition, in the past, following periods of volatility in the overall market and in the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies.
Factors that could cause fluctuations in the trading price of our common stock include the following: · price and volume fluctuations in the overall stock market from time to time; · volatility in the trading prices and trading volumes of technology stocks; · volatility in the price of bitcoin and other digital assets; · changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; · sales of shares of our common stock by us or our stockholders; · failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; · the financial projections we may provide to the public, any changes in those projections, or our failure to meet those projections; · announcements by us or our competitors of new products, features, or services; · the public’s reaction to our press releases, other public announcements and filings with the SEC; · rumors and market speculation involving us or other companies in our industry; · actual or anticipated changes in our results of operations or fluctuations in our results of operations; · actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; · litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; · developments or disputes concerning our intellectual property or other proprietary rights; · announced or completed acquisitions of businesses, products, services or technologies by us or our competitors; · new laws or regulations or new interpretations of existing laws or regulations applicable to our business; · changes in accounting standards, policies, guidelines, interpretations or principles; · any significant change in our management; and · general economic conditions and slow or negative growth of our markets. 43 In addition, in the past, following periods of volatility in the overall market and in the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies.
Supply chain disruptions, resulting from factors such as the COVID-19 pandemic, labor supply and shipping container shortages, have impacted, and may continue to impact, us and our third-party manufacturers and suppliers. These disruptions have resulted in longer lead times and increased product costs and shipping expenses, including with respect to the delivery of miners that we have purchased.
Supply chain disruptions, resulting from factors such as the COVID-19 pandemic, labor supply and shipping container shortages, have impacted, and may continue to impact, us and our third-party manufacturers and suppliers. These disruptions have, at times, resulted in longer lead times and increased product costs and shipping expenses, including with respect to the delivery of miners that we have purchased.
There can be no assurances that any processes we have adopted or will adopt in the future are or will be secure or effective, and we would suffer significant and immediate adverse effects if we suffered a loss of our digital currency due to an adverse software or cybersecurity event.
However, there can be no assurances that any processes we have adopted or will adopt in the future are or will be secure or effective, and we would suffer significant and immediate adverse effects if we suffered a loss of our digital currency due to an adverse software or cybersecurity event.
The blockchain industry faces a number of material risks, including those related to: · a decline in the adoption and use of Bitcoin and other similar digital assets within the technology industry or a decline in value of digital assets; · increased costs of complying with existing or new government regulations applicable to digital assets and other factors; · a downturn in the market for blockchain hosting space generally, which could be caused by an oversupply of or reduced demand for blockchain space; · the rapid development of new technologies or the adoption of new industry standards that render the mining of digital assets unprofitable or obsolete, such as widespread adoption of “proof of stake” method of validating blockchain transactions instead of “proof of work;” · a slowdown in the growth of the Internet generally as a medium for commerce and communication; · availability of an adequate supply of new generation digital asset mining equipment to enable us to mine digital assets at scale; · the degree of difficulty in mining digital assets and the trading price of such assets; and · an increase in political opposition to mining digital assets, for example due to concerns about its impact on climate change or its impact on the availability of affordable electricity to other consumers in the local market, the degree of difficulty in mining digital assets and the trading price of such assets.
The blockchain industry faces a number of material risks, including those related to: · a decline in the adoption and use of bitcoin and other similar digital assets within the technology industry or a decline in value of digital assets; · increased costs of complying with existing or new government regulations applicable to digital assets and other factors; · a downturn in the market for blockchain hosting space generally, which could be caused by an oversupply of or reduced demand for blockchain space; · the rapid development of new technologies or the adoption of new industry standards that render the mining of digital assets unprofitable or obsolete, such as widespread adoption of “proof of stake” method of validating blockchain transactions instead of “proof of work;” · a slowdown in the growth of the Internet generally as a medium for commerce and communication; · availability of an adequate supply of new generation digital asset mining equipment to enable us to mine digital assets at scale; · the degree of difficulty in mining digital assets and the trading price of such assets; · an increase in political opposition to mining digital assets, for example due to concerns about its impact on climate change or its impact on the availability of affordable electricity to other consumers in the local market, the degree of difficulty in mining digital assets and the trading price of such assets; and · a material increase in the cost of electricity needed to operate mining equipment.
If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements, and the quality of our services and our ability to serve our customers could diminish, resulting in a material adverse effect on our business, financial condition and results of operations.
In addition, if we fail to retain our employees, we could incur significant expenses in hiring and training their replacements, and the quality of our services and our ability to serve our customers could diminish, resulting in a material adverse effect on our business, financial condition and results of operations.
As a result, stockholders must rely on sales of their common stock after price appreciation as the only way to realize any future gains on their investment. 52
As a result, stockholders must rely on sales of their common stock after price appreciation as the only way to realize any future gains on their investment.
A professionalized mining operation may be more likely to sell a higher percentage of its newly mined digital assets rapidly if it is operating at a low profit margin and it may partially or completely cease operations if its profit margin is negative.
A professionalized mining operation may be more likely to sell a higher percentage of its newly mined digital assets rapidly if it is operating at a low profit margin—and it may partially or completely stop operations if its profit margin is negative.
We cannot say with certainty whether our bitcoin held in custody by Gemini, should it declare bankruptcy, would be treated as property of the bankruptcy estate and, accordingly, whether we would be treated as a general unsecured creditor with respect of our bitcoin held in custody by Gemini.
We cannot say with certainty whether our bitcoin held in custody by BitGo, should it declare bankruptcy, would be treated as property of the bankruptcy estate and, accordingly, whether we would be treated as a general unsecured creditor with respect of our bitcoin held in custody by BitGo.
As an alternative to fiat currencies that are backed by central governments, digital assets, which are relatively new, are subject to supply and demand forces based upon the desirability of an alternative, decentralized means of buying and selling goods and services. It is unclear how this supply and demand will be impacted by geopolitical events.
As an alternative to fiat currencies that are backed by central governments, digital assets such as bitcoin, which are relatively new, are subject to supply and demand forces based upon the desirability of an alternative, decentralized means of buying and selling goods and services. It is unclear how such supply and demand will be impacted by geopolitical events.
While our primarily plan is to utilize our hosting facilities to mine Bitcoin for our own account, we may utilize our hosting facilities to host third-party miners where we can do so on attractive terms.
While our primary plan is to utilize our hosting facilities to mine bitcoin for our own account, we may utilize our hosting facilities to host third-party miners where we can do so on attractive terms.
Congress and certain U.S. agencies (e.g., FinCEN, the SEC, the CFTC and the Federal Bureau of Investigation) have begun to examine the operations of the Bitcoin network, Bitcoin users and Bitcoin exchange markets.
Congress and certain U.S. agencies (e.g., the CFTC, the SEC, FinCEN and the Federal Bureau of Investigation) have begun to examine the operations of the bitcoin network, bitcoin users and the bitcoin exchange market.
Our principal plan is to construct, develop and operate digital asset mining facilities, and to mine digital assets for our own account in those facilities by means of a fleet of the latest generation mining equipment. We may also use our mining facilities to host third-party miners.
Part of our business plan is to construct, develop and operate digital asset mining facilities, and to mine digital assets for our own account in those facilities by means of a fleet of the latest generation mining equipment. We may also use our mining facilities to host third-party miners.
Risks Related to Ownership of Our Common Stock An active trading market for our common stock may never develop or be sustained. Our common stock is quoted on the Pink OTC Market under the symbol “BMNR.” However, despite being quoted, there is currently no established market for our common stock.
Risks Related to Ownership of Our Common Stock An active trading market for our common stock may never develop or be sustained. Our common stock is quoted on the OTCQX under the symbol “BMNR.” However, despite being quoted, there is currently no established market for our common stock.
We may not be able to attract customers to our hosting capabilities for a number of reasons, including if: · we are unable to find suitable locations for hosting facilities which have electricity at competitive rates; · there is a reduction in the demand for our services due to macroeconomic factors in the markets in which we operate; · we fail to provide competitive pricing terms or effectively market them to potential customers; · we provide hosting services that are deemed by existing and potential customers or suppliers to be inferior to those of our competitors, or that fail to meet customers’ or suppliers’ ongoing and evolving program qualification standards, based on a range of factors, including available power, preferred design features, security considerations and connectivity; · mining businesses decide to host internally as an alternative to the use of our services; · we fail to successfully communicate the benefits of our services to potential customers; · we are unable to strengthen awareness of our brand; · we are unable to provide services that our existing and potential customers’ desire; · our customers are unable to secure an adequate supply of new generation digital asset mining equipment to host with us; · we are unable to obtain deliveries of hosting equipment, including immersion containers and transformers, which have recently been in short supply; or · we are unable to find suitable locations for hosting facilities which have electricity at competitive rates. 16 Furthermore, all of the risks that exist for our mining business would also exist for our third-party hosting clients.
We may not be able to attract customers to our hosting capabilities for a number of reasons, including if: · we are unable to find suitable locations for hosting facilities which have electricity at competitive rates; · there is a reduction in the demand for our services due to macroeconomic factors in the markets in which we operate; · we fail to provide competitive pricing terms or effectively market them to potential customers; · we provide hosting services that are deemed by existing and potential customers or suppliers to be inferior to those of our competitors, or that fail to meet customers’ or suppliers’ ongoing and evolving program qualification standards, based on a range of factors, including available power, preferred design features, security considerations and connectivity; · mining businesses decide to host internally as an alternative to the use of our services; · we fail to successfully communicate the benefits of our services to potential customers; · we are unable to strengthen awareness of our brand; · we are unable to provide services that our existing and potential customers’ desire; · our customers are unable to secure an adequate supply of new generation digital asset mining equipment to host with us; · we are unable to obtain deliveries of hosting equipment, including immersion containers and transformers, which have recently been in short supply; or · we are unable to find suitable locations for hosting facilities which have electricity at competitive rates.
Any widespread delays in the recording of transactions could result in a loss of confidence in that digital asset network, which could adversely impact an investment in us. To the extent that any miners cease to record transactions in solved blocks, such transactions will not be recorded on the blockchain.
Any widespread delays in the recording of transactions could result in a loss of confidence in that digital asset network, which could adversely impact an investment in our securities. To the extent that any miners cease to record transaction in solved blocks, such transactions will not be recorded on the blockchain.
Department of Treasury (“OFAC”) requires us to comply with its sanction program and not conduct business with persons named on its specially designated nationals (“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.
The Office of Financial Assets Control (“OFAC”) of the Treasury requires us to comply with its sanction program and not conduct business with persons named on its specially designated nationals (“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.
Once a transaction has been confirmed and verified in a block that is added to the network blockchain, an incorrect transfer of a digital asset or a theft of a digital asset generally will not be reversible and we may not be capable of seeking compensation for any such transfer or theft.
Once a transaction has been verified and recorded in a block that is added to the blockchain, an incorrect transfer of digital assets or a theft of digital assets generally will not be reversible, and we may not be capable of seeking compensation for any such transfer or theft.
Currently, there are no known incentives for miners to elect to exclude the recording of transactions in solved blocks; however, to the extent that any such incentives arise (e.g., a collective movement among miners or one or more mining pools forcing Bitcoin users to pay transaction fees as a substitute for or in addition to the award of new Bitcoins upon the solving of a block), actions of miners solving a significant number of blocks could delay the recording and confirmation of transactions on the blockchain.
However, to the extent that any such incentives arise (e.g., a collective movement among miners or one or more mining pools forcing bitcoin users to pay transaction fees as a substitute for or in addition to the award of new bitcoins upon the solving of a block), actions of miners solving a significant number of blocks could delay the recording and confirmation of transactions on the blockchain.
Additionally, the impacts supply chain disruptions have on our third-party manufacturers and suppliers are not within our control. It is not currently possible to predict how long it will take for these supply chain disruptions to cease.
Additionally, the impacts supply chain disruptions have on our third-party manufacturers and suppliers are not within our control. When supply chain disruptions occur, it is often not possible to predict how long it will take for the supply chain disruptions to cease.
We may not be able to adapt to changing technologies, identify and implement new alternatives successfully or meet customer demands for new processes or technologies in a timely and cost-effective manner, if at all, which would have a material adverse effect on our business, financial condition and results of operations.
We may not be able to adapt to changing technologies, identify and implement new alternatives successfully or meet customer demands for new processes or technologies in a timely and cost-effective manner, if at all, which would have a material adverse effect on our business, financial condition and results of operations. 29 Variability in intellectual property laws may adversely affect our intellectual property position.
The malicious actor could “double-spend” its own Bitcoin or digital assets (i.e., spend the same Bitcoin or digital assets in more than one transaction) and prevent the confirmation of other users’ transactions for so long as it maintained control.
Using alternate blocks, the malicious actor or botnet 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.
An inability to obtain analyst coverage for our common stock, and expected gains in our stock price and trading volume, will impair our ability to raise capital to finance the growth of our business, which could have a material adverse effect on or business and stock price.
An inability to obtain analyst coverage for our common stock, and expected gains in our stock price and trading volume, will impair our ability to raise capital to finance the growth of our business, which could have a material adverse effect on or business and stock price. We do not intend to pay dividends for the foreseeable future.
As of December 1, 2023, we owed $1,625,000 to an investment fund controlled by our chairman under a line of credit that permits draws by the company of up to $1,750,000. At maturity on December 1, 2024, the amount due under the line of credit along with accrued interest will be payable in full.
As of December 5, 2024, we owed $1,875,000 in principal, plus interest, to an investment fund controlled by our chairman under a line of credit that permits draws by the company of up to $2,300,000. At maturity on December 1, 2024, the amount due under the line of credit along with accrued interest will be payable in full.
As of December 1, 2023, our executive officers, directors, significant shareholders and affiliated persons and entities collectively, beneficially owned approximately 56.5% of our outstanding common stock and 100% of our Series A Convertible Preferred Stock, and as a result control 62.4% of the votes on any matter submitted to a vote of shareholders.
As of December 5, 2024, our executive officers, directors, significant shareholders and affiliated persons and entities collectively, beneficially owned approximately 51% of our outstanding common stock and 100% of our Series A Convertible Preferred Stock and Series B Convertible Preferred Stock, and as a result control 74% of the votes on any matter submitted to a vote of shareholders.
Such circumstances could have a material adverse effect on our business, prospects or operations and potentially the value of Bitcoin and any other digital assets we mine or otherwise acquire or hold for our own account.
Such circumstances could have a material adverse effect on us, which could have a material adverse effect on our business, prospects or operations and potentially the value of any bitcoin or other cryptocurrencies we mine or otherwise acquire or hold for our own account, and thus harm investors.
The impact of these events would also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors or as members of senior management. We do not intend to pay dividends for the foreseeable future.
The impact of these events would also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors or as members of senior management.
We have mitigated to risk of delays in completing our hosting facilities by entering into agreements with third parties to host our miners, and we may continue to enter into additional such agreements when we encounter delays at our facilities or we otherwise are able to negotiate favorable terms.
We have mitigated the risk of delays in completing our hosting facilities by entering into agreements with third parties to host our miners, and we may continue to enter into additional such agreements when we encounter delays at our facilities or we otherwise are able to negotiate favorable terms. 32 We are subject to risks associated with our need for significant electrical power.
To the extent we host third party miners, our success will depend in large part on our ability to provide a competitive hosting environment, and our inability to attract customers for our hosting services could have a material adverse effect on our business, financial condition and results of operations.
An inability to obtain additional debt or equity financing would adversely affect our business, financial condition and results of operations. 18 To the extent we host third party miners, our success will depend in large part on our ability to provide a competitive hosting environment, and our inability to attract customers for our hosting services could have a material adverse effect on our business, financial condition and results of operations.
To the extent that we decide to continue operations, the required registrations and regulatory compliance steps may result in extraordinary expense or burdens to us. We may also decide to cease certain operations and change our business model. Any disruption of our operations in response to the changed regulatory circumstances may be at a time that is disadvantageous to us.
To the extent we decide to continue operations, the required registrations and regulatory compliance steps may result in extraordinary, non-recurring expenses to us. We may also decide to cease certain operations. Any disruption of our operations in response to the changed regulatory circumstances may be at a time that is disadvantageous to investors.
Intellectual property rights claims may adversely affect the operation of any or all of the networks. Third parties may assert intellectual property rights claims relating to the operation of digital assets and the holding and transfer of such assets.
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 and their source code.
As the number of digital assets awarded for solving a block in a blockchain decreases, the incentive for mining participants to contribute processing power to networks will transition from a set reward to transaction fees.
As the number of digital assets awarded for solving a block in the blockchain decreases, the incentive for miners to continue to contribute processing power to the respective digital asset network will transition from a set reward to transaction fees.
Bank Secrecy Act, 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. 31 To the extent that our activities would cause us to be deemed a “money transmitter” (“MT”) 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, maintenance of certain records and other operational requirements.
To the extent that our cryptocurrency activities cause us to be deemed a “money transmitter” (an “MT”) or be given an equivalent designation under state law in any state in which we 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, maintenance of certain records and other operational requirements.
Our security procedures and operational infrastructure may be breached due to the actions of outside parties, error or malfeasance of one of our employees, or otherwise, and, as a result, an unauthorized party may obtain access to our digital asset accounts, private keys, data or digital assets.
Our security system and operational infrastructure may be breached due to the actions of outside parties, error or malfeasance of an employee, or otherwise, and, as a result, an unauthorized party may obtain access to our private keys, data or bitcoins.
The malicious actor or botnet could control, exclude, or modify the ordering of transactions, though it could not generate new Bitcoin or digital assets or transactions using such control.
Within the alternate blocks, the malicious actor or botnet could control, exclude or modify the ordering of transaction. However, it could not generate new digital assets or transactions using such control.
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.
The approach towards and possible crossing of the 50% threshold indicates a greater risk that a single mining pool could exert authority over the validation of digital asset transactions.
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, operating results and financial condition could be adversely affected. We compete with a range of hosting providers and blockchain providers for some or all of the services we offer.
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, operating results and financial condition could be adversely affected.
Please see “Cautionary Notes Regarding Forward-Looking Statements.” 14 Risks Related to Company’s Business and Industry We may not be able to obtain new hosting and transaction processing hardware or purchase such hardware at competitive prices during times of high demand, which could have a material adverse effect on our business, financial condition and results of operations.
We may not be able to obtain new hosting and transaction processing hardware or purchase such hardware at competitive prices during times of high demand, which could have a material adverse effect on our business, financial condition and results of operations.
We are subject to the risk that counterparties with whom we do business default on their obligations to us. While we may have rights to recover damages for breach of contract in the event of a default, our contractual remedies may not compensate us for all of our damages, including particularly legal fees or lost opportunity costs.
While we may have rights to recover damages for breach of contract in the event of a default, our contractual remedies may not compensate us for all of our damages, including particularly legal fees or lost opportunity costs.
Although transfers of any digital assets we hold will regularly be made to or from vendors, consultants, services providers, etc., it is possible that, through computer or human error, or through theft or criminal action, our digital assets could be transferred from us in incorrect amounts or to unauthorized third parties.
Although we regularly transfer digital assets to or from custodians, vendors, consultants, services providers, it is possible that, through computer or human error, or through theft or criminal action, such assets could be transferred in incorrect amounts or to unauthorized third parties.
Banking relationships can be difficult to maintain for companies in the crypto currency space. A number of companies that engage in Bitcoin and/or other cryptocurrency-related activities have been unable to find banks or financial institutions that are willing to provide them with bank accounts and other services.
In particular, a number of companies that engage in bitcoin and/or other cryptocurrency-related activities have been unable to find banks or financial institutions that are willing to provide them with bank accounts and other services.
In a low profit margin environment, a higher percentage could be sold more rapidly, thereby potentially depressing digital asset prices.
In a low profit margin environment, a higher percentage could be sold into the digital asset exchange market more rapidly, potentially reducing digital asset prices.
Digital assets are each accessible and controllable only by the possessor of both the unique public key and private key associated with the digital asset, wherein the public and private keys are held in an offline or online digital wallet.
We also may temporarily lose access to any digital assets we hold in a cold wallet account. Digital assets are each accessible and controllable only by the possessor of both the unique public key and private key associated with the digital asset, wherein the public and private keys are held in an offline or online digital wallet.
If we are treated as a general unsecured creditor, we may not be able to recover our bitcoin in the event of a Gemini bankruptcy or a bankruptcy of any other custodian we may use in the future.
If we are treated as a general unsecured creditor, we may not be able to recover our bitcoin in the event of a BitGo bankruptcy or a bankruptcy of any other custodian we may use in the future. However, we mitigate our risk of a bankruptcy by BitGo by routinely liquidating our bitcoin shortly after it is earned.
Competition for highly qualified employees in the data storage industry is intense. Our success will depend to a significant degree upon our ability to attract, train, and retain highly skilled directors, officers, management, business, financial, legal, marketing, sales, and technical personnel and upon the continued contributions of such people.
Our success will depend to a significant degree upon our ability to attract, train, and retain highly skilled directors, officers, management, business, financial, legal, marketing, sales, and technical personnel and upon the continued contributions of such people. In addition, we may not be able to retain our current key employees.
Typically, digital asset transactions are not, from an administrative perspective, reversible without the consent and active participation of the recipient of the transaction or, in theory, control or consent of a majority of the processing power on the applicable network.
As a result, any incorrectly executed digital asset transactions could adversely affect an investment in our securities. Digital asset transactions are not, from an administrative perspective, reversible without the consent and active participation of the recipient of the transaction or, in theory, control or consent of a majority of the processing power on that digital asset network.
Lower digital asset prices could result in further tightening of profit margins for professionalized mining operations creating a network effect that may further reduce the price of digital assets until mining operations with higher operating costs become unprofitable forcing them to reduce mining power or cease mining operations temporarily.
Lower digital asset prices may result in further tightening of profit margins, particularly for professionalized mining operations with higher costs and more limited capital reserves, creating a network effect that may further reduce the price of digital assets until mining operations with higher operating costs become unprofitable and remove mining power from the respective digital asset network.
We currently do not have employment agreements with most of our management and are not currently paying them any compensation. As a result, management’s only incentive for continuing to work for us is due to their stock ownership in us. Our management will not be able to work for us indefinitely without being paid.
As a result, management’s only incentive for continuing to work for us is due to their stock ownership in us. Our management will not be able to work for us indefinitely without being paid. We plan to enter into employment contracts with management, and begin paying them compensation, once we are able to raise capital to fund our business.
If our stock price declines and/or our trading volume remains low, our ability to raise capital to expand our business will be impaired. We have retained investment bankers to assist in raising the necessary capital to expand our business, but they can provide no assurance that capital is available on attractive terms in the current market environment.
We have retained investment bankers to assist in raising the necessary capital to expand our business, but they can provide no assurance that capital is available on attractive terms in the current market environment.
Any systemic delays in the recording and confirmation of transactions on the blockchain could result in greater exposure to double-spending transactions and a loss of confidence in certain or all digital asset networks, which could have a material adverse effect on our business, prospects, financial condition, and operating results.
Any systemic delays in the recording and confirmation of transactions on the blockchain could result in greater exposure to double-spending transactions and a loss of confidence in certain or all digital asset networks, which could adversely impact an investment in our securities.
To the extent that any miners cease to record transactions in solved blocks, transactions that do not include the payment of a transaction fee will not be recorded on the blockchain until a block is solved by a miner who does not require the payment of transaction fees.
Decreased use and demand for bitcoins that we have accumulated may adversely affect its value and may adversely impact an investment in it. 23 To the extent that any miners cease to record transactions in solved blocks, transactions that do not include the payment of a transaction fee will not be recorded on the blockchain until a block is solved by a miner who does not require the payment of transaction fees.
A significant portion of our assets are pledged to an entity controlled by our chairman and failure to repay obligations to such entity when due will have a material adverse effect on our business and could result in foreclosure on our assets.
We have in the past, and may in the future, exchange outstanding securities for other securities on terms that are dilutive to the securities held by other stockholders not participating in such exchange. 45 A significant portion of our assets are pledged to an entity controlled by our chairman and failure to repay obligations to such entity when due will have a material adverse effect on our business and could result in foreclosure on our assets.
Any loss of private keys relating to digital wallets used to store the applicable digital assets could have a material adverse effect on our business, financial condition and results of operations. Currently, we hold the majority of our digital currencies in cold storage to reduce the risk of malfeasance, but this risk cannot be eliminated.
Any loss of private keys relating to digital wallets used to store the applicable digital assets could have a material adverse effect on our business, financial condition and results of operations. We do not currently hold any digital assets in an online wallet account.
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.
To the extent that such malicious actor or botnet does not yield its majority control of the processing power or the digital asset community does not reject the fraudulent blocks as malicious, reversing any changes made to the blockchain may not be possible. Such changes could adversely affect an investment in our securities.
In order to incentivize mining participants to continue to contribute processing power to the networks, the network may transition from a set reward to transaction fees earned upon solving for a block.
In order to incentivize miners to continue to contribute processing power to any digital asset network, such network may either formally or informally transition from a set reward to transaction fees earned upon solving for a block.
There is no assurance that we will be able to raise such capital on terms that will be favorable to common stockholders. 19 Delays in the construction of our hosting facilities or significant cost overruns could present significant risks to our business and could have a material adverse effect on our business, financial condition and results of operations.
Delays in the construction of our hosting facilities or significant cost overruns could present significant risks to our business and could have a material adverse effect on our business, financial condition and results of operations.
The immediate selling of newly mined digital assets greatly increases the trading volume of the digital assets, creating downward pressure on the market price of digital asset rewards. The extent to which the value of digital assets mined by a professionalized mining operation exceeds the allocable capital and operating costs determines the profit margin of such operation.
The extent to which the value of digital assets mined by a professionalized mining operation exceeds the allocable capital and operating costs determines the profit margin of such operation.
Potential that, in the event of a bankruptcy filing by a custodian, bitcoin held in custody could be determined to be property of a bankruptcy estate and we could be considered a general unsecured creditor thereof. All of the bitcoin we hold is held in either cold storage or hot storage at Gemini.
Cooling of bitcoin miners in general is a risk to achieving full potential from our hash rate. Potential that, in the event of a bankruptcy filing by a custodian, bitcoin held in custody could be determined to be property of a bankruptcy estate and we could be considered a general unsecured creditor thereof.
Power outage in our hosting facilities could have a material adverse effect on our business, financial condition and results of operations.
The elimination of ordinals could have a material adverse effect on our results of operations and financial condition.
When that occurs, the demand for equipment may outpace supply and create mining machine equipment shortages. Currently, with the drop in digital asset prices from their highs in 2021, there is increased availability, and decreased prices, of new and used mining and hosting equipment.
When that occurs, the demand for equipment may outpace supply and create mining machine equipment shortages. Currently, with the substantial increase in the price of bitcoin from its lows in late 2023, there is increased demand for new and used mining and hosting equipment.
Current and future legislation and SEC-rulemaking and other regulatory developments, including interpretations released by a regulatory authority, may impact the manner in which Bitcoin or other digital assets are viewed or treated for classification and clearing purposes.
Current and future legislation and the SEC rulemaking and other regulatory developments, including interpretations released by a regulatory authority, may impact the manner in which bitcoins are treated for classification and clearing purposes. The SEC’s July 25, 2017 Report expressed its view that digital assets may be securities depending on the facts and circumstances.
Any security breach caused by hacking, which involves efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, and the inadvertent transmission of computer viruses, could harm our business operations or result in loss of our assets. We are subject to litigation risks.
A security breach caused by hacking, could include, but is not limited to: · efforts to gain unauthorized access to information or systems; · efforts to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment; and · the inadvertent transmission of computer viruses.
If actual results differ from our estimates, analysts or investors may negatively react and our stock price could be materially impacted. 28 We may experience difficulties in establishing relationships with banks, leasing companies, insurance companies and other financial institutions that are willing to provide us with customary financial products and services, which could have a material adverse effect on our business, financial condition and results of operations.
Prolonged supply chain disruptions impacting us and our third-party manufacturers and suppliers could have a material adverse effect on our business, operating results and financial condition. 21 We may experience difficulties in establishing relationships with banks, leasing companies, insurance companies and other financial institutions that are willing to provide us with customary financial products and services, which could have a material adverse effect on our business, financial condition and results of operations.
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 MSBs and MTs.
Furthermore, we and our service providers may not be capable of complying with certain federal or state regulatory obligations applicable to MSBs and MTs or similar obligations in other countries.
Even if Bitcoin decided to adopt such a system, we do not believe that the adoption would occur during in the near term, given the number of years it took Ethereum to create and implement its alternative system. Continuing coronavirus outbreaks may have a material adverse impact on our business, liquidity, financial condition and results of operations.
Where there is no assurance that bitcoin will not adopt a “proof of stake” system. Even if bitcoin decided to adopt such a system, we do not believe that the adoption would occur during in the near term, given the number of years it took Ethereum to create and implement its alternative system.
If we become subject to these regulations, our costs in complying with them may have a material negative effect on our business and the results of our operations. To the extent that our activities cause us to be deemed an MSB under the regulations promulgated by FinCEN under the authority of the U.S.
If we become subject to these regulations, our costs in complying with them may have a material adverse effect on our business and the results of our operations.
The treatment of bitcoins held by custodians that file for bankruptcy protection is uncharted territory in U.S. Bankruptcy law.
Substantially all of the bitcoin we hold is held in an account at BitGo Trust, a well-known custodian. The treatment of bitcoins held by custodians that file for bankruptcy protection is uncharted territory in U.S. Bankruptcy law.
A perceived lack of stability in the digital asset exchange market and the closure or temporary shutdown of digital asset exchanges due to business failure, hackers or malware, government-mandated regulation, or fraud, may reduce confidence at least in part in digital asset networks and result in greater volatility in bitcoin’s value.
Negative perception, a lack of stability in the broader bitcoin markets and the closure or temporary shutdown of bitcoin trading venues due to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence in bitcoin and result in greater volatility in the prices of bitcoin.
To the extent that we are unable to seek a corrective transaction with such third party or are incapable of identifying the third party that has received our digital assets through error or theft, we will be unable to revert or otherwise recover our incorrectly transferred digital assets.
To the extent we are unable to seek a corrective transaction to identify the third party which has received our digital assets through error or theft, we will be unable to revert or otherwise recover the impacted digital assets, and any such loss could adversely affect an investment in our securities.
Regardless of the merit of any intellectual property rights claims or other legal action, any threatened action that reduces confidence in the long-term viability of any or all of the networks or other similar peer-to-peer networks, or in the ability of end-users to hold and transfer digital assets, may have a material adverse effect on our business, results of operations and financial condition.
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 may adversely affect an investment in our securities.
In addition, we may not be able to retain our current key employees. The loss of the services of one or more of our key personnel and our failure to attract additional highly qualified personnel could impair our ability to expand our operations and provide service to our customers.
The loss of the services of one or more of our key personnel and our failure to attract additional highly qualified personnel could impair our ability to expand our operations and provide service to our customers. We currently do not have employment agreements with most of our management and are not currently paying them any compensation.
The history of digital asset exchanges has shown that exchanges and large holders of digital assets must adapt to technological change in order to secure and safeguard their digital assets. We currently keep all of our digital assets in a cold storage wallet in our name to reduce the risk of malfeasance, but this risk cannot be eliminated.
The history of digital asset exchanges has shown that exchanges and large holders of digital assets must adapt to technological change in order to secure and safeguard their digital assets.
We may utilize third party mining pools to receive our mining rewards from a given network. Mining pools allow mining participants to combine their processing power, which increases the chances of solving a block and getting paid by the network.
Mining pools allow mining participants to combine their processing power, which increases the chances of solving a block and getting paid by the network. The rewards are distributed by the pool operator, proportionally to our contribution to the pool’s overall mining power used to generate each block.
We depend on key personnel and could be harmed by the loss of their services because of the limited number of qualified people in our industry. Because of our small size, we require the continued service and performance of our management team, all of whom we consider to be key employees.
Because of our small size, we require the continued service and performance of our management team, all of whom we consider to be key employees. Competition for highly qualified employees in the data storage industry is intense.
This concentration of ownership might also have the effect of delaying or preventing a change in control of our company that other stockholders may view as beneficial. Compliance with the Sarbanes-Oxley Act of 2002 will require substantial financial and management resources.
This concentration of ownership might also have the effect of delaying or preventing a change in control of our company that other stockholders may view as beneficial. We have the right to designate and issue additional shares of preferred stock.
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 the Bitcoin or other network, it may be able to alter the blockchain on which the Bitcoin or other network and most Bitcoin or other digital asset transactions rely by constructing fraudulent blocks or preventing certain transactions from completing in a timely manner, or at all.
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, it may be able to alter the blockchain by constructing alternate blocks if it is able to solve for such blocks faster than the remainder of the miners on the blockchain can add valid blocks.
The inability of our hosting clients to operate profitably adversely impact on our hosting business, which could have a material adverse effect on our business, financial condition and results of operations. Adverse developments in the blockchain industry, and in the blockchain hosting market could have a material adverse effect on our business, financial condition and results of operations.
These costs would need to be compared to the current revenue being produced by our miners. Adverse developments in the blockchain industry and in the blockchain hosting market could have a material adverse effect on our business, financial condition and results of operations.
Recently, there has been a significant amount of regulatory attention directed toward digital assets, digital asset networks and other industry participants by United States federal and state governments, foreign governments and self-regulatory agencies. For example, as digital assets such as Bitcoin have grown in popularity and in market size, the Federal Reserve Board, U.S.
Until recently, little or no regulatory attention has been directed toward bitcoin and the bitcoin network by U.S. federal and state governments, foreign governments and self-regulatory agencies. As bitcoin has grown in popularity and in market size, the Federal Reserve Board, U.S.
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. We intend to hold ourselves out as a digital asset mining business.
Additionally, although we are not engaged in the business of investing, reinvesting, or trading in securities, and we do not hold ourselves out as being engaged in those activities, we could inadvertently be deemed an investment company under the Investment Act.
We will incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies in the United States, which may harm our business. As a public company quoted in the United States, we will incur significant additional legal, accounting and other expenses.
As a public company quoted in the United States, we will incur significant additional legal, accounting and other expenses.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe have deployed or sold the immersion containers as follows: · We installed two of the immersion containers at our initial co-location facility in Trinidad, although operations are the facility are currently delayed pending the resolution of a dispute between TSTT and the local utility regarding the rate that will be charged for electricity supplied to the facility. · In August 2022, we sold two immersion containers to a third party in Trinidad for $960,000, of which $910,000 was payable over twenty five months with interest at 7.5% per annum, for monthly payments of $40,950 per month. · In October 2022, we sold four immersion containers to a joint venture with ROC Digital Mining I, LLC (“ROC Digital”) for $1,200,000, and made an equity contribution of one immersion container.
Biggest changeWe have deployed or sold the immersion containers as follows: · We installed two of the immersion containers at our initial co-location facility in Trinidad. · In August 2022, we sold two immersion containers to a third party in Trinidad for $960,000, of which $910,000 was payable over twenty five months with interest at 7.5% per annum, for monthly payments of $40,950 per month.
The Company’s president allows the Company to utilize the office space of an affiliated company for its executive offices without charge to the Company. Hosting Equipment Our focus is to build data centers using immersion hosting containers. In 2021 and 2022, we purchased a total of ten immersion hosting containers from Submer for an average of approximately $269,000 each.
The Company’s president allows the Company to utilize the office space of an affiliated company for its executive offices without charge to the Company. 13 Hosting Equipment Our focus is to build data centers using immersion hosting containers. In 2021 and 2022, we purchased a total of ten immersion hosting containers from Submer for an average of approximately $269,000 each.
Although we originally bought our immersion containers with the intention of using them purely for hosting third party equipment, we elected to sell six of the containers because we were offered an attractive price for them and because we did not a suitable location to install them in the short-term.
Although we originally bought our immersion containers with the intention of using them purely for hosting third party equipment, we elected to sell or contribute six of the containers because we were offered an attractive price for them and because we did not have a suitable location to install them in the short-term.
These agreements also contain other terms and conditions favorable to the manufacturer. 13 As of December 1, 2023, we own a total of 1,691 miners, consisting of: 121 Whatsminers, 72 Antminer T-19s, and 1,498 Antminer S-19s (not including retired miners). For our current inventory of miners, we paid an average of approximately $955 per machine, or $9.34 per terahash.
These agreements also contain other terms and conditions favorable to the manufacturer. As of December 5, 2024, we own a total of 4,725 miners, consisting of: 121 Whatsminers, 72 Antminer T-19s, and 4532 Antminer S-19s (not including retired miners). For our current inventory of miners, we paid an average of approximately $550 per machine, or $5.58 per terahash.
Our equity contribution also included six GE Protec 1500 KVA transformers valued at $125,000 each. · Under our agreement with ROC Digital, we retained the right to install one container at the joint venture’s hosting site, which we are entitled to use for self-mining or hosting third party miners.
Our equity contribution also included six GE Protec 1500 KVA transformers valued at $125,000 each. · Under our agreement with ROC Digital, we installed one container at the joint venture’s hosting site, which we are using for self-mining.
We have no collective bargaining agreements with our employees, and believe all independent contractor and employment agreements relationships are satisfactory. We hire independent contractors on an as-needed basis, and we may retain additional employees and consultants during the next twelve months, including additional executive management personnel with substantial experience in development business.
We hire independent contractors on an as-needed basis, and we may retain additional employees and consultants during the next twelve months, including additional executive management personnel with substantial experience in development business.
Due to the significant drop in the price of miners (70-80% since early 2021) relative to the cost of the datacenter and electrical equipment needed to host the miners has led us to focus more on self-mining, since the capital investment needed to self-mine is significantly less than last year.
Due to the significant drop in the price of miners (70-80% since early 2021) relative to the cost of the datacenter and electrical equipment needed to host the miners has led us to focus more on self-mining, since the capital investment needed to self-mine is significantly less than last year. 14 Patents and Trademarks We intend to protect our intellectual property rights through a combination of trademark, patent, copyright and trade secrets laws.
The miners that we owned as of December 1, 2023 have an average mining efficiency of 33.92 j/TH.
The miners that we owned as of December 5, 2024 have an average mining efficiency of 31.83 j/TH.
Patents and Trademarks We intend to protect our intellectual property rights through a combination of trademark, patent, copyright and trade secrets laws. Employees and Independent Contractors As of December 1, 2023, we had six employees and independent contractors, which do not include our officers who are performing services without a contract or compensation until we raise capital.
Employees and Independent Contractors As of December 5, 2024, we had seven employees and independent contractors, which do not include our officers who are performing services without a contract or compensation until we raise capital. We have no collective bargaining agreements with our employees, and believe all independent contractor and employment agreements relationships are satisfactory.
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In July 2024, we repossessed the immersion containers.
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We are currently evaluating different TSTT locations at which to deploy these containers, and expect to reinstall them in the first calendar quarter of 2025. · In October 2022, we sold four immersion containers to a joint venture with the ROC Digital joint venture for $1,200,000, and made an equity contribution of one immersion container.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOther than the securities issued in the Unit Offering, all of the securities were issued pursuant to the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933. Purchase of Equity Securities by the Issuer and Affiliated Purchasers We did not repurchase any securities in the fourth quarter of the fiscal year covered by this report.
Biggest changePurchase of Equity Securities by the Issuer and Affiliated Purchasers We did not repurchase any securities in the fourth quarter of the fiscal year covered by this report.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Price for Equity Securities Our common stock is quoted on the OTCQX under the symbol “BMNR” The following table sets forth the quarterly high and low daily close for our common stock for the two years ended August 31, 2023.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Price for Equity Securities Our common stock is quoted on the OTCQX under the symbol “BMNR” The following table sets forth the quarterly high and low daily close for our common stock for the two years ended August 31, 2024.
Holders At November 30, 2023, the Company had 49,665,649 outstanding shares of common stock and 160 shareholders of record. Dividends Holders of common stock are entitled to receive dividends as may be declared by the Company’s Board. The Company’s Board is not restricted from paying any dividends but is not obligated to declare a dividend.
Holders At December 5, 2024, the Company had 39,667,607 outstanding shares of common stock and 160 shareholders of record. Dividends Holders of common stock are entitled to receive dividends as may be declared by the Company’s Board. The Company’s Board is not restricted from paying any dividends but is not obligated to declare a dividend.
Price Range High Low Year ended August 31, 2023 First Quarter $ 1.30 $ 0.70 Second Quarter $ 1.20 $ 0.00 Third Quarter $ 1.15 $ 0.45 Fourth Quarter $ 3.19 $ 0.22 Year ended August 31, 2022 First Quarter $ 5.49 $ 2.22 Second Quarter $ 3.85 $ 0.41 Third Quarter $ 3.74 $ 1.34 Fourth Quarter $ 2.70 $ 0.71 The over the counter market does not impose listing standards or requirements, does not provide automatic trade executions and does not maintain relationships with quoted issuers.
Price Range High Low Year ended August 31, 2024 First Quarter $ 0.86 $ 0.40 Second Quarter $ 0.90 $ 0.49 Third Quarter $ 0.88 $ 0.51 Fourth Quarter $ 0.60 $ 0.44 Year ended August 31, 2023 First Quarter $ 1.30 $ 0.70 Second Quarter $ 1.20 $ 0.00 Third Quarter $ 1.15 $ 0.45 Fourth Quarter $ 3.19 $ 0.22 The over the counter market does not impose listing standards or requirements, does not provide automatic trade executions and does not maintain relationships with quoted issuers.
Investors should not purchase the Company’s common stock with the expectation of receiving cash dividends. 54 Recent Sales of Unregistered Securities During the fourth quarter of the fiscal year covered by this report we issued shares of common stock in the following unregistered transactions: · In August 2023, the Company issued 150,000 shares of restricted common stock to Lori Love.
Investors should not purchase the Company’s common stock with the expectation of receiving cash dividends. 49 Recent Sales of Unregistered Securities During the fourth quarter of the fiscal year covered by this report we did not issue any shares of common stock in unregistered transactions.
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The shares were issued as compensation for her services as a director. These shares vest pro rata over a fifteen month period commencing on August 31, 2023.
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As of August 31, 2023, 10,000 shares had vested. · On August 31, 2023, the Company issued 71,429 shares of common stock to Chris Moses, our Executive Vice President for Client Relations and Power Acquisitions, for executive compensation.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe primary factors that will impact proprietary mining revenues include: (i) the price of bitcoin; (ii) the completion of operational facilities to provide us with a cost-effective facility to operate in; (iii) the availability of attractive electricity prices, since power usage is the primary marginal cost for any mining operation; and (iv) the availability of mining equipment suitable for the Company’s immersion hosting environment at attractive prices and available capacity in the Company’s hosting facilities. 56 Revenues from cryptocurrency mining, whether derived from hosting clients or from proprietary mining, are impacted significantly by volatility in Bitcoin prices, as well as increases in the Bitcoin blockchain’s network hash rate 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.
Biggest changeThe primary factors that will impact proprietary mining revenues include: (i) the price of bitcoin; (ii) the completion of operational facilities to provide us with a cost-effective facility to operate in; (iii) the availability of attractive electricity prices, since power usage is the primary marginal cost for any mining operation; and (iv) the availability of mining equipment suitable for the Company’s immersion hosting environment at attractive prices and available capacity in the Company’s hosting facilities.
Pools typically pay rewards in two different ways: as a percentage of the total reward received by the mining pool each day based on each pool participant’s proportionate share of hashing power provided that day (the “Actual Reward Method”); or based on the theoretical reward the pool participant should have received each day based on its hashing power contributed to the pool each day times the difficulty index (the “Expected Reward Method”).
Pools typically pay rewards in two different ways: as a percentage of the total reward received by the mining pool each day based on each pool participant’s proportionate share of hashing power provided that day (the “Pay-Per-Share Method”); or based on the theoretical reward the pool participant should have received each day based on its hashing power contributed to the pool each day times the difficulty index (the “Full-Pay-Per-Share Method”).
This cooler environment has been shown to extend machine lives by 30% or longer. 55 Our digital asset mining operation is focused on the generation of digital assets by solving complex cryptographic algorithms to validate transactions on specific digital asset network blockchains, which is commonly referred to as “mining.” Mining requires the use of specialized computers equipped with application-specific integrated circuit (ASIC) chips (known as “miners”) to solve complex cryptographic algorithms in support of the Bitcoin blockchain (in a process known as “solving a block”) in exchange for digital asset rewards (to date, only bitcoin).
Our digital asset mining operation is focused on the generation of digital assets by solving complex cryptographic algorithms to validate transactions on specific digital asset network blockchains, which is commonly referred to as “mining.” Mining requires the use of specialized computers equipped with application-specific integrated circuit (ASIC) chips (known as “miners”) to solve complex cryptographic algorithms in support of the bitcoin blockchain (in a process known as “solving a block”) in exchange for digital asset rewards (to date, only bitcoin).
Below are changes in key metrics effecting the profitability of mining Bitcoin during the year ended August 31, 2023: As of August 31, 2023 As of August 31, 2022 Percent Change Network hash rate 368.924 EH/s 219.86 EH/s 67.80% Difficulty index 55.61 trillion 30.98 trillion 79.54% Bitcoin market price $25,931.47 $20,049.76 29.33% The primary factors that will impact resales of mining equipment include the availability of equipment at attractive prices and the number of participants willing to enter the mining business or expand their existing operations, which is highly correlated to the margin from mining, as determined by the market price of bitcoin and prevailing energy costs.
Below are changes in key metrics effecting the profitability of mining bitcoin during the year ended August 31, 2024: As of August 31, 2024 As of August 31, 2023 Percent Change Network hash rate 620.355 EH/s 368.924 EH/s 68.15 % Difficulty index 89.47 trillion 55.61 trillion 60.89 % Bitcoin market price $58,969.90 $25,931.47 127.41 % The primary factors that will impact resales of mining equipment include the availability of equipment at attractive prices and the number of participants willing to enter the mining business or expand their existing operations, which is highly correlated to the margin from mining, as determined by the market price of bitcoin and prevailing energy costs.
Despite the expective favorable resolution of our dispute in Trinidad, we are currently focusing our efforts on the development of hosting centers in the United States and Canada, both directly and in joint ventures with third parties. 57 During the year ended August 31, 2023, the Company generated $244,036 in revenue from equipment sales, compared to $394,700 in revenue in the year ended August 31, 2022.
Despite the expective favorable resolution of our dispute in Trinidad, we are currently focusing our efforts on the development of hosting centers in the United States and Canada, both directly and in joint ventures with third parties.
We only use mining pools that pay rewards under the Expected Reward Method. Even though we plan to effect our self-mining operations in data centers that we own, we reserve the right to operate miners in third-party data centers when we receive advantageous terms and/or do not have sufficient capacity in our own data centers.
Even though we plan to effect our self-mining operations in data centers that we own, we reserve the right to operate miners in third-party data centers when we receive advantageous terms and/or do not have sufficient capacity in our own data centers. 50 Our digital asset self-mining activity competes with a myriad of mining operations throughout the world to complete new blocks in the blockchain and earn the reward in the form of an established unit of a digital asset.
The purchase price is payable pursuant to a promissory note bearing interest at 5% per annum, and is paid by 41 equal monthly payments of $31,204 commencing December 30, 2022. · In August 2022, the Company sold two hosting containers to a private party in Trinidad for $960,000.
We simultaneously sold ROC Digital four immersion containers for $1,200,000, which is payable pursuant to a promissory note that bears interest at 5% per annum, and is payable pursuant to monthly payments of $31,203.64 per month commencing on December 30, 2022, with any remaining principal and interest payable in full on May 31, 2026.
Also, our resales of mining equipment will be impacted by the existence of hosting capacity with attractive electricity rates in our hosting operations. Results of Operations Comparison of Results of Operations for Years Ended August 31, 2023 and 2022.
Also, our resales of mining equipment will be impacted by the existence of hosting capacity with attractive electricity rates in our hosting operations. 51 Trinidad Operations We initially decided to locate our initial facilities in Trinidad, because it has some of the cheapest electricity in the world due to its abundant supplies of oil and gas and because some of our technical staff is located there.
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Our digital asset self-mining activity competes with a myriad of mining operations throughout the world to complete new blocks in the blockchain and earn the reward in the form of an established unit of a digital asset.
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This cooler environment has been shown to extend machine lives by 30% or longer.
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Revenues During the year ended August 31, 2023, the Company generated $645,278 in revenue, compared to $427,669 of revenue in the year ended August 31, 2022. During the year ended August 31, 2023, the Company generated $389,222 in Bitcoin revenue from self-mining digital assets, compared to $9,325 revenue in the year ended August 31, 2022.
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We only use mining pools that pay rewards under the Full-Pay-Per-Share Method.
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At August 31, 2023, the Company owned 472 miners, of which only 280 were deployed for self-mining.
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Revenues from cryptocurrency mining, whether derived from hosting clients or from proprietary mining, are impacted significantly by volatility in bitcoin prices, as well as increases in the bitcoin blockchain’s network hash rate 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.
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The number of undeployed miners was higher than normal at the end of the period as a result of miners that were being transitioned to new hosting locations, miners that were being transitioned from air-cooled to immersion cooled environment, and miners that were offline due to maintenance issues.
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We have entered into an agreement with Telecommunications Services of Trinidad & Tobago Limited (“TSTT”), the largest and oldest telecom company in Trinidad, to co-locate up to 125 800 kw containers for hosting digital asset miners. TSTT has up to 93 potential locations for co-location of our containers.
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Mining revenue should be higher in future periods as many of the undeployed miners are deployed into new hosting environments. Mining revenues in the year ended August 31, 2023 were adversely impacted by delays in opening the Company’s first hosting facilities in Trinidad and Pecos, Texas.
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Under the agreement, we have the option, but not the obligation, to co-locate containers at our own pace. We pay a fixed amount per container, plus the actual electricity costs incurred by our containers in the amount billed to TSTT by the local utility without any markup. The term of the agreement expires on October 14, 2031.
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The Trinidad facility was completed in October 2022, but its opening was delayed pending resolution of a dispute between our co-location partner in Trinidad and the electricity company in Trinidad over the price that will be charged for electricity provided to our hosting operations. The dispute has been resolved and the site became operational in October 2023.
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We have the right to terminate our agreement with TSTT at any time that the price for electricity consumption exceeds $0.05 per kwh. In October 2022, we completed the installation of initial hosting containers under our agreement with TSTT.
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In the interim, the Company entered into a hosting agreement with a third party in Trinidad to host 192 machines until August 31, 2024, and is hosting an additional 56 machines with another party in Trinidad on an at will basis, both of which provide competitive electricity rates.
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Our rate for electricity is TSTT’s existing rate of 3.5 cents per kwh or 75% of the declared reserve capacity, which is equal to the customer’s highest expected monthly kilovolt-ampere demand at $7.40. See “ Item 1. Business – Company Overview – Trinidad Operations ” for a more complete description of our relationship with TSTT.
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The Company also entered into a joint venture with a third party to open a hosting facility in Pecos, Texas, which was expected to open by December 31, 2022. Under the joint venture, the Company has the right to locate one immersion container at the site for its proprietary use.
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While our TSTT site was delayed pending electrification, we entered into a hosting agreement with a third party in Trinidad to host up to 192 miners in one immersion container until December 31, 2024. We had previously sold two containers to the third party under a long-term note secured by the containers.
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However, the opening was delayed as a result of a request from the utility provider for a substantial additional retainer. In April 2023, the joint venture entered into a new agreement with the utility that resolved the dispute, and the site became fully operational in June 2023.
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In July 2024, we foreclosed on the containers as a result of a default by the third party on the note. We moved our miners to our existing TSTT site, where we now have 440 operational miners as of December 5, 2024.
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The Company has located 96 machines at the site, of which 75 were fully operational as of October 31, 2023.
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We are currently evaluating other TSTT sites as a location for the two repossessed immersion containers, and expect to install them in the first calendar quarter of 2025.
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The revenue from equipment sales in the year ended August 31, 2023 were primarily derived from the following transactions: · In October 2022, the Company sold four hosting containers to a joint venture that is constructing a hosting facility in Texas for $1,200,000.
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We are also leasing space from a third party on an at will basis to co-host 60 miners, for which we pay a flat rate of $0.06 per kwh for the electricity used by our miners. We ultimately intend to move all of our Trinidad miners to our TSTT hosting facilities.
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After a down payment of $50,000, the balance of the purchase price is payable pursuant to a promissory note bearing interest at 7.5% per annum, and is paid by 24 equal monthly payments of $40,949.62 commencing September 30, 2022.
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We are exploring situations where medium to long-term power agreements may be available at affordable prices, whether using traditional power sources such as coal or natural gas, as well as environmentally friendly sources such as hydroelectric, wind and solar-backed projects, which might allow us to generate collateral revenue from the sale of excess power to the local utility grid and from the generation of saleable carbon credits.
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On February 1, 2023, the Company modified this agreement in conjunction with its entry into a new hosting agreement with the party, under which the Company agreed that the remaining principal balance of the note was $731,472, and that the note would be converted into an interest only note until August 31, 2024, at which time all principal and interest due is payable in full.
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Pecos, Texas Operations In October 2022, we entered into a joint venture arrangement with ROC Manager to jointly develop and operate a bitcoin mining operation in Pecos, Texas. Under the joint venture, we contributed one immersion container, six transformers and cash with a value of $987,429 as a capital contribution to ROC Digital Mining I, LLC (the “ROC Digital”).
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In addition, the Company agreed to allow the note obligor to repay the note principal at a 10% discount. · In June 2023, the Company sold a total of 34 Antminer S-19 miners in two transactions for gross proceeds of $70,000 cash or bitcoin.
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In return, we received 240 Class B Units of ROC Digital pursuant to an ongoing offering of a total of 1,000 Class B Units at $4,400 per unit. An affiliate of ROC Manager also contributed an immersion container.
Removed
Under the guidelines of ASC 606, the Company reported revenue from equipment sales on October 2022 and August 2022, which were vendor financed by the Company, under the installment sale method, under which the Company reports its gross profit on the sales as payments are received from the purchaser.
Added
The note is secured by the equipment that was sold. We also obtained the right to locate one container at the location that we would be able to use for self-mining. As of August 31, 2023 and August 31, 2024, the note receivable from ROC Digital amounted to $1,029,721 and $655,277, respectively. See “
Removed
As of February 1, 2023, the Company reached an agreement with the obligor under the $910,000 note to convert the note into an interest only note commencing as of February 1, 2023, with a balloon payment being due at maturity on August 31, 2024, an agreement that the principal balance on the note was $731,472, and an agreement to offset note payments due for December 2022, January 2023 and the interest only payment due for February 2023 against amounts due the obligor under a separate hosting agreement.
Removed
The Company received all payments due on this note during the period. One effect of the agreement with the obligor is to materially reduce any deferred revenue associated with the sale, as the note is scheduled to receive interest only payments until August 31, 2024.
Removed
As a result, the Company expects revenue from these two equipment sales to be lower in future periods. Under the guidelines of ASC 606, the Company reported revenue from the June 2023 equipment sales under the completed sale method. See Note 5. to the financial statement for further detail on both notes.
Removed
During the year ended August 31, 2022, the revenue from equipment sales was generated from a sale to the Company’s first hosting client of 72 Antminer T-17's and 25 Whatsminer M31S.
Removed
The terms of the sale were a cash payment of $168,750 and the execution of a note by the purchaser for $168,750, payable with interest at 10% in two installments, one in the amount of $84,375 due on April 15, 2022 and a second installment of $84,375 in principal and all accrued interest due on May 15, 2022.
Removed
Under the guidelines of ASC 606, the Company reported revenue from this equipment sale under the completed sale method.
Removed
In future periods, the Company expects to generate additional revenues from the resale of certain hosting equipment, primarily containers and transformers, and of miners in “buy/host” transactions, in which the Company sells miners already installed in its hosting facilities to buyers that simultaneously execute a hosting agreement for the purchased miners, and in some cases additional miners.
Removed
During the year ended August 31, 2023, the Company generated $12,022 in revenue from hosting, compared to $23,644 in revenue from hosting in the year ended August 31, 2022. In October 2022, the Company reached an agreement to terminate its only hosting client at the time and repurchased the miners which it had previously sold to the hosting client.
Removed
In June 2023, the Company signed two new hosting clients. In the current market environment, the price of ASIC miners has fallen to the point that we believe self-mining is more profitable than hosting third party miners, however we will pursue hosting opportunities on a selective basis.
Removed
While the Company still sees good opportunities to acquire mining equipment at attractive prices, the price of mining equipment has recently increased with the recent increase in the price of Bitcoin.
Removed
The primary factors that will impact our revenues in subsequent periods are described in the “—Overview” above. 58 Cost of Sales Cost of sales related to Bitcoin hosting and mining revenue was $9,098 for hosting and $326,630 for mining, respectively in the year ended August 31, 2023, compared to $6,527 for hosting and $194,765 for mining, respectively, in the year ended August 31, 2022.
Removed
Cost of sales normally includes electricity, utilities, facilities costs, depreciation and supplies. Major components of cost of sales include rent to house mining and hosting equipment in temporary facilities, electricity, and supplies.
Removed
The Company believes that cost of sales as a percentage of revenues were greater in the year ended August 31, 2023 than what it expects to incur in future periods.
Removed
Cost of sales in the year ended August 31, 2023 were inflated by costs associated with the setup and maintenance of temporary hosting facilities while our permanent hosting facility was being completed that we determined not to capitalize.
Removed
Furthermore, our temporary hosting facilities carried electricity costs that were somewhat higher than the costs that we expect to incur in our permanent facilities.
Removed
The table below describes the average cost of mining each bitcoin for the years ended August 31, 2023 and 2022, and the total energy usage and cost per each kilowatt hour ("KWH") utilized within both our facilities.
Removed
For the Year Ended Cost of Revenues - Analysis of costs to mine one bitcoin (per bitcoin amounts are actual) August 31, 2023 August 31, 2022 Cost of Mining Cost of energy per bitcoin mined $ 17,243.32 $ 19,517.97 Other direct costs of mining - non energy utilities per bitcoin mined 1,733.86 – Cost to mine one bitcoin $ 18,977.18 $ 19,517.97 Average revenue of each bitcoin mined $ 24,626.13 $ 28,458.06 Cost of mining one bitcoin as % of average bitcoin mining revenue 77.06% 68.59% Statistics Total bitcoin mined 15.44066548 0.32856039 Bitcoin mining revenue $ 380,243.84 $ 9,350.19 Total miners - as of the periods ended 472 23 Total MWHs utilized 4.59 0.10 Total energy expense - $ 266,248.34 $ 6,412.83 Cost per KWH $ 0.0580 $ 0.0613 Energy expense as % of bitcoin mining revenue, net 70.02% 68.59% Other direct costs of mining - non energy utilities - ($ in thousands) $ 26,772.00 $ – Power prices are the most significant cost driver for our locations, and energy costs represented 70.02% and 68.59% as expressed as a percentage of bitcoin mining revenues during the years ended August 31, 2023 and 2022, respectively.
Removed
Energy prices can be highly volatile and global events (including the war in Ukraine and the resulting natural gas shortage) have caused fuel prices, and to a lesser extent power prices, to fluctuate widely over the past year.
Removed
All of our sites are currently subject to variable prices and market rate fluctuations with respect to wholesale power costs over the long-term. While this renders energy prices less predictable, it also gives us greater ability and flexibility to actively manage the energy we consume with an eye towards increasing profitability and energy efficiency.
Removed
Energy prices are also highly sensitive to weather events, such as winter storms and polar vortices, which increase the demand for power regionally. When such events occur, we may curtail our operations to avoid using power at increased rates.
Removed
The average power prices we paid in our facilities for the years ended August 31, 2023 and 2022 was $0.0580 and $0.0613 per kilowatt hour, respectively. 59 Cost of sales related to sales of mining equipment was $87,080 for the year ended August 31, 2023, compared to $355,407 for the year ended August 31, 2022.
Removed
Cost of sales during the year ended August 31, 2022 consisted of the purchase price of equipment sold, plus shipping and value added tax on the equipment.
Removed
Cost of sales from equipment sales in the year ended August 31, 2023 were materially lower as a result of the fact that most of the equipment sales in that period were reported under the installment sales method under the guidelines of ASC 606.
Removed
Since we are in the early stages of setting up our infrastructure to generate higher levels of revenues, we expect that our cost of sales as a percentage of revenue from hosting or mining for our own account will be higher than we expect to incur when we achieve sufficient economies of scale by deploying more miners.
Removed
In future periods, the largest component of our cost of sales will consist of electricity costs. Operating Expenses During the year ended August 31, 2023, the Company incurred $2,657,152 in operating expenses, compared to $1,585,154 in operating expenses during the year ended August 31, 2022.
Removed
Major components of operating expenses for the 2023 period as compared to the 2022 period were: Year ended Year ended Percentage August 31, 2023 August 31, 2022 Change % General and administrative expenses $ 293,989 $ 227,597 29.2% Depreciation 470,705 – N/A Professional fees 456,322 856,925 -46.7% Related party compensation 1,309,663 489,096 167.8% Impairment of fixed assets 122,950 – N/A Gain from sale of digital currencies (21,682 ) – N/A Impairment of cryptocurrency 3,523 11,535 -69.5% Total operating expenses $ 2,635,470 $ 1,585,154 66.2% The increase in operating expenses in the fiscal year ended August 31, 2023 as compared to the fiscal year ended August 31, 2022 is primarily attributable to increased general and administrative expenses, depreciation, and related party compensation in 2023 as compared to 2022, partially offset by a decrease in professional fees over the 2022 period.
Removed
Included in operating expenses in the year ended August 31, 2023 was $1,309,663 in non-cash expenses due to the issuance of common stock for professional services and to related parties as compensation, as compared to $856,724 in the year ended August 31, 2022.
Removed
We also incurred $122,950 in impairment expenses in the year ended August 31, 2023 to write-down certain mining equipment to current market prices.
Removed
Additionally, we incurred $3,523 in impairment expenses in the year ended August 31, 2023 on our cryptocurrency holdings due to the temporary decline in the price of Bitcoin we were holding, as compared to an impairment expense of $11,535 in the year ended August 31, 2022, which was offset by gains from the sale of digital currencies of $21,682 in the year ended August 31, 2023, as compared to $-0- in the year ended August 31, 2022.
Removed
The Company expects that operating expenses will trend materially higher in future periods as the Company begins paying regular compensation to existing officers and directors, hires additional employees, and incurs other costs associated with the commencement of operations.
Removed
Other Income (Expense) During the year ended August 31, 2023, the Company incurred ($51,801) in other expenses, as compared to other expenses of ($297,049) in the year ended August 31, 2022.
Removed
Other income (expense) in the year ended August 31, 2023 was comprised of interest expense of ($97,460), other income of $16,939 and interest income of $28,720, as compared to ($291,048) of interest expenses during the year ended August 31, 2022.
Removed
The decrease in interest expense in fiscal 2023 is due to a decrease in the average amount borrowed by the Company under its line of credit in fiscal 2023 compared to fiscal 2022. 60 Net Income (Loss) As a result of the foregoing, during the year ended August 31, 2023, the Company incurred a net loss of ($2,464,801), or ($0.05) per share, as compared to a net loss of ($2,005,233) or ($0.05) per share during the year ended August 31, 2022.
Removed
The increase in the Company’s net loss in the year ended August 31, 2023, compared to the year ended August 31, 2022, is attributable to the factors discussed above. Liquidity and Capital Resources As of August 31, 2023, the Company had $270,547 in cash on hand.
Removed
During the year ended August 31, 2023 the Company had a net loss of $2,464,801. Cash flows used in operating activities were $809,715 for the year ended August 31, 2023 compared to cash flows used of $1,629,243 for the year ended August 31, 2022.
Removed
The decrease in cash used in operating activities for fiscal 2023 compared to fiscal 2022 is primarily attributable to a material decrease in the operating loss in 2023 compared to 2022 after excluding non-cash items in both periods, which include depreciation, stock based compensation and impairment of fixed assets and changes in balance sheet accounts.
Removed
Cash flows used in investing activities were $612,288 for the year ended August 31, 2023 compared to cash flows used in investing activities of $2,767,306 for the year ended August 31, 2022.
Removed
The decrease in net cash used during fiscal 2023 period compared to the same period in 2022 is solely due to a decrease in cash used to purchase equipment.
Removed
Cash flows provided by financing activities were $1,300,000 for the year ended August 31, 2023 compared to cash flows provided by financing activities of $4,570,363 for the year ended August 31, 2022.
Removed
The decrease in cash flows provided by financing activities in fiscal 2023 is attributable to $1,812,500 received from the sale of equity securities during the period ended August 31, 2022 compared to $-0- in 2023, as well as a reduction in 2023 in net amounts received under related party loans, which decreased from $2,757,861 in the year ended August 31, 2022 to $1,300,000 in the year ended August 31, 2023.
Removed
Through August 31, 2022, a significant component of the Company’s current liquidity was derived from the LOC Agreement with IDI. The LOC Agreement was initially entered into on July 22, 2021, and was amended and restated in its entirety on August 4, 2021, September 29, 2021, March 30, 2022 and June 24, 2022.
Removed
On August 31, 2022, the Company and IDI agreed to convert all amounts then due under the LOC Agreement into shares of Series A Convertible Preferred Stock with a stated value equal to the principal and interest due under the LOC Agreement, which resulted in the issuance of 303,966 shares of Series A Preferred Stock for $3,039,662 due thereunder On October 19, 2022, the Company entered into a new Line of Credit Agreement with IDI (the “2022 LOC Agreement”), under which the Company has the right to borrow up to $1,000,000 to finance the purchase of equipment necessary for the operation of the Company’s business, and related working capital.

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