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What changed in BITMINE IMMERSION TECHNOLOGIES, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of BITMINE IMMERSION TECHNOLOGIES, INC.'s 2022 and 2023 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 2023 report.

+443 added−347 removedSource: 10-K (2023-12-14) vs 10-K (2022-12-09)

Top changes in BITMINE IMMERSION TECHNOLOGIES, INC.'s 2023 10-K

443 paragraphs added · 347 removed · 225 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

41 edited+42 added−32 removed107 unchanged
Biggest changeHowever, historical trends are not indicative of future adoption, and it is possible that the adoption of digital assets and blockchain technology may slow, take longer to develop, or never be broadly adopted, which would negatively impact our business and operating results.
Biggest changeHowever, historical trends are not indicative of future adoption, and it is possible that the adoption of digital assets and blockchain technology may slow, take longer to develop, or never be broadly adopted, which would negatively impact our business and operating results. 9 Network Hash Rate Our business is not only impacted by the volatility in digital asset prices, but also by increases in cost of mining digital assets, as reflected by the blockchain’s network hash rate resulting from the growth in the overall quantity and quality of miners working to solve blocks on the blockchain and the difficulty index associated with the secure hashing algorithm employed in solving the blocks.
The Company’s primary business is hosting third-party equipment used in mining of digital asset coins and tokens, specifically Bitcoin, as well as self-mining for its own account. Our state-of-the-art facilities will be specifically designed and constructed for housing advanced mining equipment.
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.
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.
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.
We compete with other companies that focus all or a portion of their activities on mining activities at scale.
We compete with other companies that focus all or a portion of their activities on mining activities at scale.
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.
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.
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.
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.
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.
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.
In addition, the margins from mining have also fluctuated widely in recent years due to wide fluctuations in the price of digital assets and the electricity prices need to mine digital assets. 3 We do not generally accept digital assets as payment for goods and services.
In addition, the margins from mining have also fluctuated widely in recent years due to wide fluctuations in the price of digital assets and the electricity prices need to mine digital assets. We do not generally accept digital assets as payment for goods and services.
This has become the cryptocurrency mining industry’s great “arms race.” 7 Halving Further affecting the industry, and particularly for the Bitcoin blockchain, the digital asset reward for solving a block is subject to periodic incremental halving.
This has become the cryptocurrency mining industry’s great “arms race.” Halving Further affecting the industry, and particularly for the Bitcoin blockchain, the digital asset reward for solving a block is subject to periodic incremental halving.
When we host, we look for opportunities to profitably sell miners to the hosting client in a buy/host transaction. In some instances, we may resell data center and electrical equipment if we are offered an attractive price and believe that we can replace it at a lower price and by the time we may need it for our internal operations.
When we host, we look for opportunities to profitably sell miners to the hosting client in a buy/host transaction. In some instances, we may resell data centers and electrical equipment if we are offered an attractive price and believe that we can replace it at a lower price and by the time we may need it for our internal operations.
We face significant competition in every aspect of our business, including, but not limited to, the acquisition of new miners, the ability to raise capital, obtaining low-cost electricity, obtaining access to energy sites with reliable sources of power, and evaluating new technology developments in the industry.
We face significant competition in every aspect of our business, including, but not limited to, the acquisition of new miners, the ability to raise capital, obtaining the lowest cost of electricity, obtaining access to energy sites with reliable sources of power, and evaluating new technology developments in the industry.
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 (primarily 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).
However, prior to commencing operations, TSTT advised us that the local utility had refused to honor its existing agreement with TSTT with respect to electricity supplied to our hosting containers, and instead indicated that the rate would be approximately $0.09 per kwh.
However, prior to commencing operations, TSTT advised us that the local utility had refused to honor its existing agreement with TSTT with respect to electricity supplied to our hosting containers, and instead indicated that the rate would be approximately $0.09 per kwh, which TSTT disputed.
We face significant competition in every aspect of our business, including, but not limited to, the acquisition of new miners, the ability to raise capital, obtaining the lowest cost of electricity, obtaining access to energy sites with reliable sources of power, and evaluating new technology developments in the industry. 8 At present, the information concerning the activities of these enterprises may not be readily available as the vast majority of the participants in this sector do not publish information publicly or the information may be unreliable.
We face significant competition in every aspect of our business, including, but not limited to, the acquisition of new miners, the ability to raise capital, obtaining low-cost electricity, obtaining access to energy sites with reliable sources of power, and evaluating new technology developments in the industry. 10 At present, the information concerning the activities of these enterprises may not be readily available as the vast majority of the participants in this sector do not publish information publicly or the information may be unreliable.
However, cryptocurrencies may not provide all of the benefits they purport to offer at all or at any time. 5 As with many new and emerging technologies, there are potentially significant risks.
However, cryptocurrencies may not provide all of the benefits they purport to offer at all or at any time. 7 As with many new and emerging technologies, there are potentially significant risks.
We will conduct proprietary digital asset mining operations using 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 (primarily Bitcoin).
We will conduct proprietary digital asset mining operations using 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).
However, prior to commencing operations, TSTT advised us that the utility had refused to honor its existing agreement with TSTT with respect to electricity supplied to our pilot hosting site, and instead indicated that the rate would be approximately $0.09 per kwh.
However, prior to commencing operations, TSTT advised us that the utility refused to honor its existing agreement with TSTT with respect to electricity supplied to our pilot hosting site, and instead indicated that the rate would be approximately $0.09 per kwh, which TSTT disputed.
In addition, some of our agreements may allow a client to terminate the agreement in the event the price of electricity exceeds a certain benchmark, which is negotiated on a case-by-case basis based on the location of the hosting facility. Our hosting customers may supply their own equipment or may purchase the equipment from us. · Digital asset mining income.
In addition, some of our agreements may allow a client to terminate the agreement in the event the price of electricity exceeds a certain benchmark, which is negotiated on a case-by-case basis based on the location of the hosting facility. Our hosting customers may supply their own equipment or may purchase the equipment from us.
We have also agreed to sell hosting containers to a third party for a note payable in Bitcoin. We do not have a set policy in regard to how long we hold digital assets that we receive as payment, other than to immediately sell digital assets as needed to pay operating expenses or for capital expenditures.
We have also agreed to sell hosting containers to a third party for a note payable in Bitcoin. 5 We do not have a set policy in regard to how long we hold digital assets that we receive as payment, although our practice has been to immediately sell digital assets as needed to pay operating expenses or for capital expenditures.
General purpose chipsets like CPUs and GPUs have since been replaced as the standard in the mining industry by ASIC chips such as those found in the S17 and S19 miners that we and our customers use to mine Bitcoin.
General purpose chipsets like CPUs and GPUs have since been replaced as the standard in the mining industry by ASIC chips such as those found in the S17 and S19 miners that we and our customers use to mine Bitcoin. These ASIC chips are designed specifically to maximize the rate of hashing operations.
Equipment Costs As the market value of digital assets has increased in 2020 and 2021, the demand for the newest, most efficient miners also increased, leading to scarcity in the supply of and thereby a resulting increase in the price of miners.
Equipment Costs As the market value of digital assets increased in 2020 and 2021, the demand for the newest, most efficient miners also increased, leading to scarcity in the supply of and thereby a resulting increase in the price of miners. When the market value of digital assets declined in 2022, the demand for all types of mines also decreased.
Additionally, the demand for hosting space in 2020 and 2021 increased the demand for the equipment necessary to build and operate hosting centers, which resulted in price increases and long lead times to acquire such equipment from manufacturers.
As a result, the cost of new machines can be unpredictable. Additionally, the demand for hosting space in 2020 and 2021 increased the demand for the equipment necessary to build and operate hosting centers, which resulted in price increases and long lead times to acquire such equipment from manufacturers.
At a predetermined block, the mining reward is reduced by half, hence the term “halving.” Electricity Costs Electricity cost is the major operating cost for the mining fleet, both to power miners and to dissipate the heat generated by the miners’ operations, as well as for the hosting services provided to customers and related parties.
Electricity Costs Electricity cost is the major operating cost for the mining fleet, both to power miners and to dissipate the heat generated by the miners’ operations, as well as for the hosting services provided to customers and related parties.
Presently, we do not believe any U.S. or State regulatory body has taken any action or position adverse to our main cryptocurrency, Bitcoin, with respect to its production, sale, and use as a medium of exchange; however, future changes to existing regulations or entirely new regulations may affect our business in ways it is not presently possible for us to predict with any reasonable degree of reliability.
Further, in early March 2021, the SEC chairperson nominee expressed an intent to focus on investor protection issues raised by Bitcoin and other cryptocurrencies. 11 Presently, we do not believe any U.S. or State regulatory body has taken any action or position adverse to our main cryptocurrency, Bitcoin, with respect to its production, sale, and use as a medium of exchange; however, future changes to existing regulations or entirely new regulations may affect our business in ways it is not presently possible for us to predict with any reasonable degree of reliability.
Network Hash Rate Our business is not only impacted by the volatility in digital asset prices, but also by increases in cost of mining digital assets, as reflected by the blockchain’s network hash rate resulting from the growth in the overall quantity and quality of miners working to solve blocks on the blockchain and the difficulty index associated with the secure hashing algorithm employed in solving the blocks.
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.
This cooler environment has been shown to extend machine lives by 30% or longer. 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.
Our Facilities We initially planned 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.
In comparison, the average price in the United States was 16.2 cents per kwh, and in Canada was 10.7 cents per kwh. Most countries with lower rates have either unstable political environments or inadequate and unstable electrical infrastructure that make then unsuitable for data centers. See https://globalpetrolprices.com/electricity_prices/.
Most countries with lower rates have either unstable political environments or inadequate and unstable electrical infrastructure that make then unsuitable for data centers. See https://globalpetrolprices.com/electricity_prices/.
These ASIC chips are designed specifically to maximize the rate of hashing operations. 6 Network Hash Rate In digital assets mining, hash rate is a measure of the processing speed by a mining computer for a specific digital asset.
Network Hash Rate In digital assets mining, hash rate is a measure of the processing speed by a mining computer for a specific digital asset.
Performance Metrics Hash Rate Miners perform computational operations in support of digital asset blockchains measured in “hash rate” or “hashes per second.” A “hash” is the computation run by mining hardware in support of the blockchain; therefore, a miner’s “hash rate” refers to the rate at which it is capable of solving such computations.
The Company monitors the Blockchain network and, as of July 16, 2022, based on the information we collected from our network access, more than 19 million Bitcoins have been mined. 8 Performance Metrics Hash Rate Miners perform computational operations in support of digital asset blockchains measured in “hash rate” or “hashes per second.” A “hash” is the computation run by mining hardware in support of the blockchain; therefore, a miner’s “hash rate” refers to the rate at which it is capable of solving such computations.
The online network hosts the public transaction ledger, known as the blockchain, and each cryptocurrency is associated with a source code that comprises the basis for the cryptographic and algorithmic protocols governing the blockchain.
Transactions occur via an open source, cryptographic protocol platform which uses peer-to-peer technology to operate with no central authority. The online network hosts the public transaction ledger, known as the blockchain, and each cryptocurrency is associated with a source code that comprises the basis for the cryptographic and algorithmic protocols governing the blockchain.
The pool uses software that coordinates the pool members’ mining power, identifies new block rewards, records how much hash rate each participant contributes to the pool, and assigns digital asset rewards earned by the pool among its participants in proportion to the hash rate each participant contributed to the pool in connection with solving a block.
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.
The pool uses software that coordinates the pool members’ mining power, identifies new block rewards, records how much hash rate each participant contributes to the pool, and assigns digital asset rewards earned by the pool among its participants in proportion to the hash rate each participant contributed to the pool in connection with solving a block.
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.
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. 2 Revenue Sources Our revenue will consist primarily of fees generated from our hosting operations, sales of mining equipment to be hosted in our data centers and proceeds related to Bitcoin transaction processing for our own account. · Hosting revenue from customers and related parties.
Revenue Sources Our revenue will consist primarily of fees generated from our hosting operations, sales of mining equipment to be hosted in our data centers and proceeds related to Bitcoin transaction processing for our own account. · Hosting revenue from customers and related parties.
As the regulatory and legal environment evolves, we may become subject to new laws, such as further regulation by the SEC and other agencies, which may affect our mining and other activities.
As the regulatory and legal environment evolves, we may become subject to new laws, such as further regulation by the SEC and other agencies, which may affect our mining and other activities. For additional discussion regarding our belief about the potential risks existing and future regulation pose to our business, see the Section entitled “Risk Factors” herein.
Accordingly, Bitcoin may be subject to protocol design changes, governance disputes such as “forked” protocols, competing protocols, and other open source-specific risks that do not affect conventional proprietary software. 4 Distributed blockchain technology is a decentralized and encrypted ledger that is designed to offer a secure, efficient, verifiable, and permanent way of storing records and other information without the need for intermediaries.
Accordingly, Bitcoin may be subject to protocol design changes, governance disputes such as “forked” protocols, competing protocols, and other open source-specific risks that do not affect conventional proprietary software.
Cryptocurrencies serve multiple purposes. They can serve as a medium of exchange, store of value or unit of account. Examples of cryptocurrencies include: Bitcoin, Bitcoin cash, and litecoin. Blockchain technologies are being evaluated for a multitude of industries due to the belief in their ability to have a significant impact in many areas of business, finance, information management, and governance.
Blockchain technologies are being evaluated for a multitude of industries due to the belief in their ability to have a significant impact in many areas of business, finance, information management, and governance. 6 Cryptocurrencies are decentralized currencies that enable near instantaneous transfers.
Halving is a process designed to control the overall supply and reduce the risk of inflation in digital assets using a proof of work consensus algorithm.
Halving is a process designed to control the overall supply and reduce the risk of inflation in digital assets using a proof of work consensus algorithm. At a predetermined block, the mining reward is reduced by half, hence the term “halving.” For Bitcoin the reward was initially set at 50 Bitcoin currency rewards per block.
We have the right to terminate our agreement with TSTT at any time that the price for electricity consumption exceeds $0.05 per kwh. Until our permanent hosting facilities are operational, we are temporarily leasing space for a small number of ASIC computers with a co-host.
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.
In light of the recent developments in Trinidad, we are focusing our efforts in the near term on developing hosting locations in the United States and Canada.
At this time, we believe that the dispute has been resolved, the site became operational in October 2023, and our rate will be TSTT’s existing rate of 3.5 cents per kwh. 12 In light of the recent developments in Trinidad, we are focusing our efforts in the near term on developing hosting locations in the United States and Canada.
We intend to move all of our currently owned and customer owned miners to our new TSTT hosting facilities once they are operational. In October 2022, we completed the installation of initial hosting containers under our agreement with TSTT.
We ultimately intend to move all of our currently owned and customer owned miners to our new TSTT hosting facilities. 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.
For additional discussion regarding our belief about the potential risks existing and future regulation pose to our business, see the Section entitled “Risk Factors” herein. 9 Our Facilities We initially planned 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.
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.
Removed
TSTT has informed us that it does not believe that its contract with the local utility entitles it to vary the rate it charges for the use of electricity and has protested the decision.
Added
This cooler environment has been shown to extend machine lives by 30% or longer.
Removed
At this time, we are unable to predict how this dispute between TSTT and the utility will be resolved, what form any resolution may take or how long any resolution may take. Accordingly, we are delaying the installation of additional containers in Trinidad until this dispute is resolved.
Added
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”).
Removed
Until the dispute between TSTT and the utility is resolved, we intend to focus our efforts on purchasing or developing hosting locations in the United States and Canada, either directly or in joint ventures with other industry participants.
Added
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.
Removed
We recently entered into a joint arrangement whereby we would contribute one immersion contain and six transformers, and sold four immersion containers to a joint venture with a third party that has procured a location and a medium or long-term power purchase agreement in Pecos, Texas.
Added
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.
Removed
Cryptocurrencies are decentralized currencies that enable near instantaneous transfers. Transactions occur via an open source, cryptographic protocol platform which uses peer-to-peer technology to operate with no central authority.
Added
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.
Removed
The Company monitors the Blockchain network and, as of July 16, 2022, based on the information we collected from our network access, more than 19 million Bitcoins have been mined.
Added
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.
Removed
Since the market value of digital assets have declined in 2020, the demand for all types of mines has also decreased. As a result, the cost of new machines can be unpredictable.
Added
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.
Removed
Further, in early March 2021, the SEC chairperson nominee expressed an intent to focus on investor protection issues raised by Bitcoin and other cryptocurrencies.
Added
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.
Removed
TSTT has informed us that it does not believe that the local utility’s contract entitles it to vary the rate it charges for the use of electricity and has protested the decision.
Added
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.
Removed
At this time, we are unable to predict how this dispute between TSTT and the local utility will be resolved, what form any resolution may take or how long any resolution may take. Accordingly, we are delaying the installation of additional containers in Trinidad until this dispute is resolved.
Added
At this time, the dispute has been resolved, the site became operational in October 2023, and our rate for electricity will be TSTT’s existing rate of 3.5 cents per kwh.
Removed
We lease 1,800 square feet of warehouse space in Trinidad that we use to house a 72-slot fan cooled container that we also lease. The warehouse lease is for eleven months beginning on February 1, 2022 and provides for rental payments of $3,818 per month.
Added
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 August 31, 2024, and are leasing space with a third party on an at will basis to co-host 56 miners.
Removed
The container lease is for twelve months beginning February 1, 2022, and provides for rental payments of $2,500 per month. We are using this space as a temporary facility for our initial hosting customer until our permanent facilities become operational.
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Pecos, 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”).
Removed
In light of the recent developments in Trinidad, we are focusing our efforts in the near term on developing hosting locations in the United States and Canada.
Added
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.
Removed
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.
Added
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.
Removed
The Company’s president allows the Company to utilized the office space of an affiliated company for its executive offices without charge to the Company. 10 Hosting Equipment Our focus is to build data center 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.
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 the note receivable from ROC Digital amounted to $1,029,721.
Removed
We 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 is 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.
Added
Any distributions of assets by ROC Digital are allocated as follows: i) 100% to the Class B Members until each Class B Member has received the return of its capital contributions; ii) 100% to the Class B Members until each Class B Member has received a non-compounded preferred return of 1% per month (12% per year) on its capital contribution, provided that a Class Member will no longer entitled to a preferred return once it has received total distributions equal to five times its capital contributions; iii) 70% to the Class Members and 30% to the Class A Members until each Class B Member has received total distributions equal to three times its capital contributions; (iv) 60% to the Class Members and 40% to the Class A Members until each Class B Member has received total distributions equal to four times its capital contributions; (v) 50% to the Class Members and 50% to the Class A Members until the seventh anniversary of the final closing of Class B Units; and (vi) thereafter, all to the Class A Members. 3 ROC Digital is managed by ROC Digital Mining Manager LLC (“ROC Manager”), which owns all of the Class A Units of ROC Digital.
Removed
Our equity contribution also included six GE Protec 1500 KVA transformers valued at $150,000 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.
Added
The Class A Units have the sole right to vote on any matter that requires a vote of members, including in the selection of the manager. We own 33 1/3% of ROC Manager. ROC Manager is managed by from one to three managers selected by a vote of the members.
Removed
Although we originally bought our immersion containers with the intention of using them purely for hosting third party equipment, we elected to sell two 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.
Added
We do not currently have a representative or designee serving as manager of ROC Manager.
Removed
While we do not have any agreements to purchase additional immersion containers from Submer, we believe that additional immersion containers available for purchase from Submer or other vendors as we need them for additional hosting facilities.
Added
However, the operating agreement for ROC Manager provides that ROC Manager may not take a number of actions in relation to ROC Digital without the unanimous consent of its members, such as incurring more than $50,000 of indebtedness, approval of operating budget, filing for bankruptcy, making any material change in ROC Digital’s business, merging, consolidating or combining ROC Digital with another entity, selling off a substantial part of ROC Digital’s assets, amending the operating agreement of ROC Digital, or causing ROC Digital to enter into any agreement with a related party.
Removed
Mining Equipment Digital asset mining is dependent on specialized digital asset mining hardware utilizing application-specific integrated circuit (“ASIC”) chips to solve blocks on blockchains using the 256-bit secure hashing algorithm.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe face 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; · any transition by our customers of blockchain hosting from third-party providers like us to customer-owned and operated facilities; 14 · the rapid development of new technologies or the adoption of new industry standards that render our or our customers’ current products and services obsolete or unmarketable and, in the case of our customers, that contribute to a downturn in their businesses, increasing the likelihood of a default under their service agreements or their becoming insolvent; · 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 and for customers who want to host with us to be able to do so; · 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.
Biggest changeThe 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.
It is necessary for us to grow our business in order to generate the free cash flow necessary to repay the principal and interest on our indebtedness.
It is necessary for us to grow our business in order to generate free cash flow necessary to repay the principal and interest on our indebtedness.
The costs of electric power account for a significant portion of our cost of revenue. We require a significant electric power supply to conduct our mining activity and to provide many hosting services we offer, such as powering and cooling our and our customers’ servers and network equipment and operating critical mining and hosting facility and equipment infrastructure.
We require a significant electric power supply to conduct our mining activity and to provide many hosting services we offer, such as powering and cooling our and our customers’ servers and network equipment and operating critical mining and hosting facility and equipment infrastructure. The costs of electric power account for a significant portion of our cost of revenue.
In order to minimize risk, we have established processes to manage wallets that are associated with our digital currency holdings. We utilize several layers of threat reduction techniques, including: (i) the use of hardware wallets to store sensitive private key information; (ii) performance of transactions offline; and (iii) offline generation storage and use of private keys.
In order to minimize risk, we have established processes to manage wallets that are associated with our digital currency holdings. We utilize several layers of threat reduction techniques, including: (i) the use of hardware wallets to store sensitive private key information; (ii) performance of transactions offline; and (iii) offline generation storage and use of private keys.
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.
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.
We are presently evaluating several third-party custodial wallet alternatives with multi-signature enterprise storage solution to safeguard our digital assets from theft, loss, destruction or other issues relating to hackers and technological attack.
We are presently evaluating several third-party custodial wallet alternatives with multi-signature enterprise storage solution to safeguard our digital assets from theft, loss, destruction or other issues relating to hackers and technological attack.
There can be no assurance that we will utilize such services, as other new options may develop in the future, and if a custodial wallet is used there can be no assurance that such services will be more secure than those that we presently employ.
There can be no assurance that we will utilize such services, as other new options may develop in the future, and if a custodial wallet is used there can be no assurance that such services will be more secure than those that we presently employ.
In order to minimize risk, we have established processes to manage wallets that are associated with our digital currency holdings. We utilize several layers of threat reduction techniques, including: (i) the use of hardware wallets to store sensitive private key information; (ii) performance of transactions offline; and (iii) offline generation storage and use of private keys.
In order to minimize risk, we have established processes to manage wallets that are associated with our digital currency holdings. We utilize several layers of threat reduction techniques, including: (i) the use of hardware wallets to store sensitive private key information; (ii) performance of transactions offline; and (iii) offline generation storage and use of private keys.
We believe the value of digital assets related to our business is dependent on a number of factors, including, but not limited to: · global digital asset supply; · global digital asset demand, which can be influenced by the growth of retail merchants’ and commercial businesses’ acceptance of digital assets as payment for goods and services, the security of online digital asset exchanges and digital wallets that hold digital assets, the perception that the use and holding of digital assets is safe and secure, and the regulatory restrictions on their use; · investors’ expectations with respect to the rate of inflation of fiat currencies; · investors’ expectations with respect to the rate of deflation of digital assets; · cyber theft of digital assets from online wallet providers, or news of such theft from such providers or from individuals’ online wallets; · the availability and popularity of businesses that provide digital asset-related services; • fees associated with processing a digital asset transaction; · changes in the software, software requirements or hardware requirements underlying digital assets; · changes in the rights, obligations, incentives, or rewards for the various participants in digital asset mining; · interest rates; 40 · currency exchange rates, including the rates at which digital assets may be exchanged for fiat currencies; · fiat currency withdrawal and deposit policies on digital asset exchanges and liquidity on such exchanges; · interruptions in service or failures of major digital asset exchanges; · investment and trading activities of large investors, including private and registered funds, that may directly or indirectly invest in digital assets; · momentum pricing; · monetary policies of governments, trade restrictions, currency devaluations and revaluations; · regulatory measures, if any, that affect the use of digital assets, restrict digital assets as a form of payment, or limit the purchase of digital assets; · global or regional political, economic or financial events and conditions; · expectations that the value of digital assets will change in the near or long term.
We believe the value of digital assets related to our business is dependent on a number of factors, including, but not limited to: · global digital asset supply; · global digital asset demand, which can be influenced by the growth of retail merchants’ and commercial businesses’ acceptance of digital assets as payment for goods and services, the security of online digital asset exchanges and digital wallets that hold digital assets, the perception that the use and holding of digital assets is safe and secure, and the regulatory restrictions on their use; · investors’ expectations with respect to the rate of inflation of fiat currencies; · investors’ expectations with respect to the rate of deflation of digital assets; · cyber theft of digital assets from online wallet providers, or news of such theft from such providers or from individuals’ online wallets; · the availability and popularity of businesses that provide digital asset-related services; • fees associated with processing a digital asset transaction; · changes in the software, software requirements or hardware requirements underlying digital assets; · changes in the rights, obligations, incentives, or rewards for the various participants in digital asset mining; · interest rates; · currency exchange rates, including the rates at which digital assets may be exchanged for fiat currencies; · fiat currency withdrawal and deposit policies on digital asset exchanges and liquidity on such exchanges; · interruptions in service or failures of major digital asset exchanges; · investment and trading activities of large investors, including private and registered funds, that may directly or indirectly invest in digital assets; · momentum pricing; · monetary policies of governments, trade restrictions, currency devaluations and revaluations; · regulatory measures, if any, that affect the use of digital assets, restrict digital assets as a form of payment, or limit the purchase of digital assets; · global or regional political, economic or financial events and conditions; 45 · expectations that the value of digital assets will change in the near or long term.
Please see “Cautionary Notes Regarding Forward-Looking Statements.” 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.
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.
Item 1A. Risk Factors Ownership of our securities involves a high degree of risk. Holders of our securities should carefully consider the following risk factors and the other information contained in this Form 10-K, including our historical financial statements and related notes included herein. The following discussion highlights some of the risks that may affect future operating results.
Item 1A. Risk Factors Ownership of our securities involves a high degree of risk. Holders of our securities should carefully consider the following risk factors and the other information contained in this Form 10-K, including our historical condensed financial statements and related notes included herein. The following discussion highlights some of the risks that may affect future operating results.
Should China or other countries that currently restrict digital asset mining eliminate such restrictions or actually seek to enhance such mining activity, the likely increase in mining activity could reduce our revenue and profitability. Adoption of a different method of validating transactions in bitcoin could materially impair the business of mining firms, and could even make them obsolete.
Should China or other countries that currently restrict digital asset mining eliminate such restrictions or actually seek to enhance such mining activity, the likely increase in mining activity could reduce our revenue and profitability. 18 Adoption of a different method of validating transactions in bitcoin could materially impair the business of mining firms, and could even make them obsolete.
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. 41 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. Currently, we hold the majority of our digital currencies in cold storage to reduce the risk of malfeasance, but this risk cannot be eliminated.
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. 24 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. We compete with a range of hosting providers and blockchain providers for some or all of the services we offer.
However, these trends may be temporary, particularly the drop in digital asset prices, and a return to higher prices could, once again, lead to shortages of mining equipment and an increase in prices, which could have a material adverse effect on our business, financial condition and results of operations.
However, these trends may be temporary, particularly the drop in digital asset prices, and a return to higher prices could, once again, lead to shortages of mining and hosting equipment and an increase in prices, which could have a material adverse effect on our business, financial condition and results of operations.
Additionally, a meritorious intellectual property rights claim could prevent us and other end-users from holding or transferring the digital assets, which could have a material adverse effect on our business, financial condition and results of operations. A soft or hard fork on a network could have a material adverse effect on our business, financial condition and results of operations.
Additionally, a meritorious intellectual property rights claim could prevent us and other end-users from holding or transferring the digital assets, which could have a material adverse effect on our business, financial condition and results of operations. 46 A soft or hard fork on a network could have a material adverse effect on our business, financial condition and results of operations.
For example, we will need to implement new revenue recognition modules into our existing enterprise resource planning system to facilitate the preparation of our financial statements under Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”).
For example, we will need to implement new revenue recognition modules into our existing enterprise resource planning system to facilitate the preparation of our condensed financial statements under Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”).
Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our business or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods.
Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could harm our business or cause us to fail to meet our reporting obligations and may result in a restatement of our condensed financial statements for prior periods.
The services we provide are subject to failures resulting from numerous factors, including: · power loss; · equipment failure; · human error or accidents; 19 · theft, sabotage and vandalism; · failure by us or our suppliers to provide adequate service or maintain our equipment; · network connectivity downtime and fiber cuts; · service interruptions resulting from server relocation; · security breaches of our infrastructure; · improper building maintenance by us; · physical, electronic and cybersecurity breaches; · animal incursions; · fire, earthquake, hurricane, tornado, flood and other natural disasters; · extreme temperatures; · water damage; · public health emergencies; and · terrorism.
The services we provide are subject to failures resulting from numerous factors, including: · power loss; · equipment failure; 22 · human error or accidents; · theft, sabotage and vandalism; · failure by us or our suppliers to provide adequate service or maintain our equipment; · network connectivity downtime and fiber cuts; · service interruptions resulting from server relocation; · security breaches of our infrastructure; · improper building maintenance by us; · physical, electronic and cybersecurity breaches; · animal incursions; · fire, earthquake, hurricane, tornado, flood and other natural disasters; · extreme temperatures; · water damage; · public health emergencies; and · terrorism.
To the extent that the Bitcoin or other digital asset ecosystems, including developers and administrators of mining pools, do not act to ensure greater decentralization of Bitcoin or other digital asset mining processing power, the feasibility of a malicious actor obtaining control of the processing power on the Bitcoin or other network will increase, which may adversely affect an investment us. 38 Transaction processing operators may sell a substantial amount of digital assets into the market, which may exert downward pressure on the price of the applicable digital asset and, in turn, could have a material adverse effect on our business, financial condition and results of operations.
To the extent that the Bitcoin or other digital asset ecosystems, including developers and administrators of mining pools, do not act to ensure greater decentralization of Bitcoin or other digital asset mining processing power, the feasibility of a malicious actor obtaining control of the processing power on the Bitcoin or other network will increase, which may adversely affect an investment us. 43 Transaction processing operators may sell a substantial amount of digital assets into the market, which may exert downward pressure on the price of the applicable digital asset and, in turn, could have a material adverse effect on our business, financial condition and results of operations.
In the event bitcoin adopts a similar system, it could make bitcoin mining substantially less profitable and could even render the business obsolete. 15 Where there is no assurance that bitcoin will not adopt a “proof of stake” system.
In the event bitcoin adopts a similar system, it could make Bitcoin mining substantially less profitable and could even render the business obsolete. Where there is no assurance that Bitcoin will not adopt a “proof of stake” system.
Therefore, a loss may be suffered with respect to our digital assets which is not covered by insurance and for which no person is liable in damages which could adversely affect our operations and, consequently, an investment in us. 33 The impact of geopolitical, economic or other events on the supply of and demand for digital assets is uncertain, but could motivate large-scale sales of digital assets, which could result in a reduction in the price of such digital asset and could have a material adverse effect on our business, financial condition and results of operations.
Therefore, a loss may be suffered with respect to our digital assets which is not covered by insurance and for which no person is liable in damages which could adversely affect our operations and, consequently, an investment in us. 38 The impact of geopolitical, economic or other events on the supply of and demand for digital assets is uncertain, but could motivate large-scale sales of digital assets, which could result in a reduction in the price of such digital asset and could have a material adverse effect on our business, financial condition and results of operations.
If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate condensed financial statements or comply with applicable regulations could be impaired.
In the event we are unable to invest sufficient capital to grow or maintain the level of our processing power on a network relative to the total processing power of such network, our revenue from the applicable network will decline over time and as a result, it could have a material adverse effect on our business, financial condition and results of operations. 37 In addition, a decrease in the price of computer servers may result in an increase in transaction processors, which may lead to more competition for fees in a particular network.
In the event we are unable to invest sufficient capital to grow or maintain the level of our processing power on a network relative to the total processing power of such network, our revenue from the applicable network will decline over time and as a result, it could have a material adverse effect on our business, financial condition and results of operations. 42 In addition, a decrease in the price of computer servers may result in an increase in transaction processors, which may lead to more competition for fees in a particular network.
Because the mining portion of our business consumes a large amount of energy, it is not practical or economical for our operations to run on back-up generators in the event of a power outage. 17 Governments and government regulators may potentially restrict the ability of electricity suppliers to provide electricity to hosting and transaction processing operations such as ours, which could have a material adverse effect on our business, financial condition and results of operations.
Because the mining portion of our business consumes a large amount of energy, it is not practical or economical for our operations to run on back-up generators in the event of a power outage. 20 Governments and government regulators may potentially restrict the ability of electricity suppliers to provide electricity to hosting and transaction processing operations such as ours, which could have a material adverse effect on our business, financial condition and results of operations.
In particular, Bitcoin and other digital assets may not be excluded from the definition of “security” by SEC rulemaking or interpretation requiring registration of all transactions unless another exemption is available, including transacting in Bitcoin or digital assets among owners and require registration of trading platforms as “exchanges.” 29 Furthermore, the SEC may determine that certain digital assets or interests may constitute securities under the “Howey” test as stated by the United States Supreme Court.
In particular, Bitcoin and other digital assets may not be excluded from the definition of “security” by SEC rulemaking or interpretation requiring registration of all transactions unless another exemption is available, including transacting in Bitcoin or digital assets among owners and require registration of trading platforms as “exchanges.” 32 Furthermore, the SEC may determine that certain digital assets or interests may constitute securities under the “Howey” test as stated by the United States Supreme Court.
As a result of such conflicting positions taken within the Chinese government, a number of digital asset transaction processing operators have moved their operations from China to other jurisdictions in order to build in more regulatory certainty in their operations. 30 Governments may in the future take regulatory actions that prohibit or severely restrict the right to acquire, own, hold, sell, use or trade digital assets or to exchange digital assets for fiat currency.
As a result of such conflicting positions taken within the Chinese government, a number of digital asset transaction processing operators have moved their operations from China to other jurisdictions in order to build in more regulatory certainty in their operations. 33 Governments may in the future take regulatory actions that prohibit or severely restrict the right to acquire, own, hold, sell, use or trade digital assets or to exchange digital assets for fiat currency.
Any of these factors, consequently, could have a material adverse effect on our business, prospects, financial condition, and operating results. 44 Moreover, federal law prohibits any U.S. person from knowingly or unknowingly possessing any visual depiction commonly known as child pornography. Recent media reports have suggested that persons have imbedded such depictions on one or more blockchains.
Any of these factors, consequently, could have a material adverse effect on our business, prospects, financial condition, and operating results. 36 Moreover, federal law prohibits any U.S. person from knowingly or unknowingly possessing any visual depiction commonly known as child pornography. Recent media reports have suggested that persons have imbedded such depictions on one or more blockchains.
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.
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
Any such change to transaction validating protocols could have a material adverse effect on our business, financial condition and results of operations. 18 If we fail to accurately estimate the factors upon which we base our contract pricing, we may generate less profit than expected or incur losses on those contracts, which could have a material adverse effect on our business, financial condition and results of operations.
Any such change to transaction validating protocols could have a material adverse effect on our business, financial condition and results of operations. 21 If we fail to accurately estimate the factors upon which we base our contract pricing, we may generate less profit than expected or incur losses on those contracts, which could have a material adverse effect on our business, financial condition and results of operations.
There is no assurance that we will be able to raise such capital on terms that will be favorable to common stockholders. 16 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.
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.
Any enactment of laws or promulgations of regulations regarding greenhouse gas emissions by the United States, or any domestic or foreign jurisdiction in which we conduct business, could have a material adverse effect on our business, financial condition or results of operations. 35 Latency in confirming transactions on a network could result in a loss of confidence in the network, which could have a material adverse effect on our business, financial condition and results of operations.
Any enactment of laws or promulgations of regulations regarding greenhouse gas emissions by the United States, or any domestic or foreign jurisdiction in which we conduct business, could have a material adverse effect on our business, financial condition or results of operations. 40 Latency in confirming transactions on a network could result in a loss of confidence in the network, which could have a material adverse effect on our business, financial condition and results of operations.
The taxation of digital assets for state, local or foreign tax purposes may not be the same as the taxation of digital assets for U.S. federal income tax purposes. 34 In addition, under the Tax Cuts and Jobs Act of 2017 (the “Tax Cuts and Jobs Act”), as of January 1, 2018, “like-kind exchange” treatment does not apply to digital assets.
The taxation of digital assets for state, local or foreign tax purposes may not be the same as the taxation of digital assets for U.S. federal income tax purposes. 39 In addition, under the Tax Cuts and Jobs Act of 2017 (the “Tax Cuts and Jobs Act”), as of January 1, 2018, “like-kind exchange” treatment does not apply to digital assets.
In 2021, significant changes to U.S. federal income tax laws were proposed, including increasing the U.S. income tax rate applicable to corporations from 21% to 28% and changes implicating information reporting with respect to digital assets. Congress may include some or all of these proposals in future legislation.
In 2022, significant changes to U.S. federal income tax laws were proposed, including increasing the U.S. income tax rate applicable to corporations from 21% to 28% and changes implicating information reporting with respect to digital assets. Congress may include some or all of these proposals in future legislation.
Our common stock market price and trading volume could decline if securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business. The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business.
Our common stock market price and trading volume could decline if securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business. The trading market for our common stock may depend in part on the research and reports that securities or industry analysts publish about us or our business.
We may not be able to attract customers to our hosting capabilities for a number of reasons, including if: · 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; · 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.
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 cannot provide assurance as to whether the SEC will continue or increase its enforcement with respect to digital assets, including taking enforcement action against any person engaged in the sale of unregistered securities in violation of the Securities Act or any person acting as an unregistered investment company in violation of the Investment Company Act of 1940, as amended (the “Investment Company Act”).
We cannot provide assurance as to whether the SEC will continue or increase its enforcement with respect to digital assets or ICOs, including taking enforcement action against any person engaged in the sale of unregistered securities in violation of the Securities Act or any person acting as an unregistered investment company in violation of the 1940 Act.
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; 45 · 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.
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.
The 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. 23 We may not be able to adequately protect our intellectual property rights and other proprietary rights, which could have a material adverse effect on business, financial condition and results of operations.
The 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.
As of December 1, 2022, we owed $400,000 to an investment fund controlled by our chairman under a line of credit that permits draws by the company of up to $1,000,000. At maturity on December 1, 2023, the amount due under the line of credit along with accrued interest will be payable in full.
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.
Additional expansion of existing hosting facilities and construction of new hosting facilities is also being contemplated. Such expansion and construction require us to rely on the experience of one or more designers, general contractors and subcontractors, and such designers or contractors may experience financial or other problems during the design or construction process.
Additional expansion of existing hosting facilities and construction of new hosting require us to rely on the experience of one or more designers, general contractors and subcontractors, and such designers or contractors may experience financial or other problems during the design or construction process.
Additionally, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future. Our future success depends on our ability to keep pace with rapid technological changes that could make our current or future technologies less competitive or obsolete. Rapid, significant and disruptive technological changes continue to impact our industry.
Additionally, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future. 24 Our future success depends on our ability to keep pace with rapid technological changes that could make our current or future technologies less competitive or obsolete.
We are subject to risks associated with our need for significant electric power and the limited availability of power resources, which could have a material adverse effect on our business, financial condition and results of operations. Our mining and hosting services require a significant amount of electric power.
We are subject to risks associated with our need for significant electric power and the limited availability of power resources, which could have a material adverse effect on our business, financial condition and results of operations.
In addition, we may not be able to obtain all expected benefits, including tax abatements or government incentives offered in opportunity zones. Also, we generally do not charge a fixed sum for hosting, but charge a percentage of the Bitcoin mined by the customer.
In addition, we may not be able to obtain all expected benefits, including tax abatements or government incentives offered in opportunity zones. Also, we generally do not charge a fixed sum for hosting, but charge a percentage of the Bitcoin mined by the customer plus reimbursement of the actual costs of electricity used by the customer’s equipment.
In addition, the adverse publicity surrounding such claims may have a material adverse effect on our operations. 21 We may be exposed to cybersecurity threats and hacks, which could have a material adverse effect on our business, financial condition and results of operations. The threats to network and data security are increasingly diverse and sophisticated.
We may be exposed to cybersecurity threats and hacks, which could have a material adverse effect on our business, financial condition and results of operations. The threats to network and data security are increasingly diverse and sophisticated.
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.
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.
The analysts’ estimates are based upon their own opinions and are often different from our estimates or expectations. If one or more of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, the price of our securities would likely decline.
Even if one or more analysts begin to cover our common stock, analysts’ estimates are based upon their own opinions and are often different from the estimates or expectations of management. Analysts could downgrade our common stock or publish inaccurate or unfavorable research about our business, which would likely cause the price of our securities to decline.
Accordingly, we do not believe that we are an “orthodox” investment company as described in the first bullet point above. 27 While certain digital assets may be deemed to be securities, we do not believe that certain other digital assets, in particular Bitcoin, are securities; therefore, we believe that less than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis will comprise digital assets that could be considered investment securities.
While certain digital assets may be deemed to be securities, we do not believe that certain other digital assets, in particular Bitcoin, are securities; therefore, we believe that less than 40% of our total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis will comprise digital assets that could be considered investment securities.
As of December 1, 2022, our executive officers, directors, significant shareholders and affiliated persons and entities collectively, beneficially owned approximately 57.3% of our outstanding common stock and 100% of our Series A Convertible Preferred Stock, and as a result control 63.2% of the votes on any matter submitted to a vote of shareholders.
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.
Although we implement a number of security procedures with various elements such as two-factor verification, segregated accounts and secured facilities and plan to implement the maintenance of data on computers and/or storage media that is not directly connected to, or accessible from, the internet and/or networked with other computers, or (“cold storage”), to minimize the risk of loss, damage and theft, and we update such security procedures whenever reasonably practicable, we cannot guarantee the prevention of such loss, damage or theft, whether caused intentionally, accidentally or by an act of God.
Although we implement a number of security procedures with various elements such as two-factor verification, segregated accounts and secured facilities and plan to implement the maintenance of data on computers and/or storage media that is not directly connected to, or accessible from, the internet and/or networked with other computers, or (“cold storage”), to minimize the risk of loss, damage and theft, and we update such security procedures whenever reasonably practicable, we cannot guarantee the prevention of such loss, damage or theft, whether caused intentionally, accidentally or by an act of God. 47 Additionally, outside parties may attempt to fraudulently induce our employees to disclose sensitive information in order to gain access to our infrastructure.
In general, we anticipate that certain losses related to our business may be uninsurable, or the cost of insuring against these losses may not be economically justifiable. The digital assets held by us are not insured.
In general, we anticipate that certain losses related to our business may be uninsurable, or the cost of insuring against these losses may not be economically justifiable.
Competition is primarily centered on reputation and track record; design, size, quality, available power and geographic coverage of hosting space; quality of installation and customer equipment repair services; relationships with equipment manufacturers and ability to obtain replacement parts; technical and software expertise; and financial strength and price.
Our current and future competitors may vary from us in size, service offerings and geographic presence. 27 Competition is primarily centered on reputation and track record; design, size, quality, available power and geographic coverage of hosting space; quality of installation and customer equipment repair services; relationships with equipment manufacturers and ability to obtain replacement parts; technical and software expertise; and financial strength and price.
If future prices of Bitcoin are not sufficiently high, our business, results of operations and financial condition could be materially and adversely affected, which may have a negative impact on the trading price of our securities.
An inability to obtain additional debt or equity financing would adversely affect our business, financial condition and results of operations. If future prices of Bitcoin are not sufficiently high, our business, results of operations and financial condition could be materially and adversely affected, which may have a negative impact on the trading price of our securities.
Because the SEC has held that certain digital assets are securities based on the current rules and law, we may be required to register and comply with the rules and regulations under federal securities laws.
Because the SEC has held that certain digital assets are securities based on the current rules and law, we may be required to register and comply with the rules and regulations under federal securities laws. On March 9, 2022, President Biden signed an executive order on cryptocurrencies.
In addition, changes in accounting principles or interpretations could also challenge our internal controls and require that we establish new business processes, systems and controls to accommodate such changes.
Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. In addition, changes in accounting principles or interpretations could also challenge our internal controls and require that we establish new business processes, systems and controls to accommodate such changes.
Our financial condition and results of operations are, and are expected to increasingly be, reliant on our ability to sell the Bitcoin we receive from mining at a price greater than our costs to produce that Bitcoin, and our ability to sell Bitcoin that we receive as a fee for hosting services at price greater than our cost to provide hosting services.
Our financial condition and results of operations are reliant on our ability to sell the Bitcoin we receive from mining at a price greater than our costs to produce that Bitcoin.
As such, the value of certain digital assets could be materially reduced if existing and future hard forks have a negative effect on their value. 42 If a soft fork or hard fork occurs on a network, which we or our hosting customers are processing transactions or hold digital assets in, we may be required to upgrade our hardware or software in order to continue our transaction processing operations, and there can be no assurance that we may be able to make such upgrades.
If a soft fork or hard fork occurs on a network, which we or our hosting customers are processing transactions or hold digital assets in, we may be required to upgrade our hardware or software in order to continue our transaction processing operations, and there can be no assurance that we may be able to make such upgrades.
In addition, as a consequence of our seeking to avoid the need to register under the 1940 Act on an ongoing basis, we may be limited in our ability to engage in digital asset mining operations or otherwise make certain investments, and these limitations could result in our holding assets we may wish to sell or selling assets we may wish to hold, which could materially and adversely affect our business, financial condition and results of operations. 28 If regulatory changes or interpretations of our activities require our registration as a money services business (“MSB”) under the regulations promulgated by the Financial Crimes Enforcement Network (“FinCEN”) under the authority of the U.S.
In addition, as a consequence of our seeking to avoid the need to register under the 1940 Act on an ongoing basis, we may be limited in our ability to engage in digital asset mining operations or otherwise make certain investments, and these limitations could result in our holding assets we may wish to sell or selling assets we may wish to hold, which could materially and adversely affect our business, financial condition and results of operations.
There can be no assurance that we will utilize such services, as other new options may develop in the future, and if a custodial wallet is used there can be no assurance that such services will be more secure than those that we presently employ. The digital assets held by us are not subject to FDIC or SIPC protections.
There can be no assurance that we will utilize such services, as other new options may develop in the future, and if a custodial wallet is used there can be no assurance that such services will be more secure than those that we presently employ.
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.
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.
Any such action, if initiated, whether or not it is resolved in our favor, could result in significant expense to us, and divert the efforts of our technical and management personnel, which may have a material adverse effect on our business, financial condition and results of operations.
Any such action, if initiated, whether or not it is resolved in our favor, could result in significant expense to us, and divert the efforts of our technical and management personnel, which may have a material adverse effect on our business, financial condition and results of operations. 26 We are subject to risk that key counterparties file bankruptcy, enter insolvency proceedings or otherwise default on their obligations to us.
There is no assurance that we will be able to retain any member of management while we are unable to competitive compensation and benefits to management. 20 Competition for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support our business, which in turn could have a material adverse effect on our business, financial condition and results of operation.
Competition for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support our business, which in turn could have a material adverse effect on our business, financial condition and results of operation.
Companies across all industries and around the globe are facing increasing scrutiny relating to their ESG policies. Investors, lenders and other market participants are increasingly focused on ESG practices and in recent years have placed increasing importance on the implications and social cost of their investments.
Investors, lenders and other market participants are increasingly focused on ESG practices and in recent years have placed increasing importance on the implications and social cost of their investments.
As the relative market prices of a digital asset, such as Bitcoin, increases, more companies are encouraged to mine for that digital asset and as more miners are added to the network, its total hash rate increases.
We may not be able to maintain our competitive position as digital asset networks experience increases in total network hash rate. As the relative market prices of a digital asset, such as Bitcoin, increases, more companies are encouraged to mine for that digital asset and as more miners are added to the network, its total hash rate increases.
If this occurs, our business, results of operations and financial condition could be materially and adversely affected, which may have a negative impact on the trading price of our securities, which may have a materially adverse impact on investors’ investment in our Company.
If this occurs, our business, results of operations and financial condition could be materially and adversely affected, which may have a negative impact on the trading price of our securities, which may have a materially adverse impact on investors’ investment in our Company. 15 We believe that, at the current price of Bitcoin, we are able to mine Bitcoin profitably at our existing locations.
To the extent that any of these or other adverse conditions exist, they are likely to have an adverse impact on our mining rewards and market demand and pricing for our services, which could have a material adverse effect on our business, financial condition and results of operations.
To the extent that any of these or other adverse conditions exist, they are likely to have an adverse impact on our mining rewards, which could have a material adverse effect on our business, financial condition and results of operations. Additionally, we are affected by general business and economic conditions in the United States and globally.
Adverse developments in the blockchain industry, and in the blockchain hosting market could lead to a decrease in the demand for hosting resources, which could have a material adverse effect on our business, financial condition and results of operations.
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.
In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we anticipate that we will have to expend significant resources, including accounting-related costs and significant management oversight. 26 Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business.
We are also continuing to improve our internal control over financial reporting. In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we anticipate that we will have to expend significant resources, including accounting-related costs and significant management oversight.
COVID-19 reduced the number of new generation machines available for purchase by prospective customers of our blockchain hosting services, delayed the delivery and implementation of new generation mining machines and reduced demand for services.
COVID-19 reduced the number of new generation machines available for purchase, and delayed the delivery and implementation of new generation mining machines.
Federal and state laws and regulations may be subject to change or changes in enforcement policies or priorities, including changes that may result from changes in the political landscape and changing technologies.
Changing laws and regulations and changing enforcement policies and priorities have the potential to cause additional expenditures, restrictions, and delays in connection with our business operations. Federal and state laws and regulations may be subject to change or changes in enforcement policies or priorities, including changes that may result from changes in the political landscape and changing technologies.
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.
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.
While we plan to devote significant resources to develop policies and procedures to identify, monitor and manage our risks, we cannot assure you that our policies and procedures will always be effective against all types of risks, including unidentified or unanticipated risks, or that we will always be successful in monitoring or evaluating the risks to which we are or may be exposed in all market environments. 22 We may infringe on third-party intellectual property rights or other proprietary rights, which could have a material adverse effect on our business, financial condition and results of operations.
While we plan to devote significant resources to develop policies and procedures to identify, monitor and manage our risks, we cannot assure you that our policies and procedures will always be effective against all types of risks, including unidentified or unanticipated risks, or that we will always be successful in monitoring or evaluating the risks to which we are or may be exposed in all market environments.
If we were to be deemed an inadvertent investment company, we may seek to rely on Rule 3a-2 under the 1940 Act, which allows an inadvertent investment company a grace period of one year from the earlier of (a) the date on which the issuer owns securities and/or cash having a value exceeding 50% of the issuer’s total assets on either a consolidated or unconsolidated basis or (b) the date on which the issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.
Regulatory changes or actions in one or more countries may alter the nature of an investment in us or restrict the use of digital assets in a manner that adversely affects our business, prospects or operations.” If certain digital assets, including Bitcoin, were to be deemed securities, and consequently, investment securities by the SEC, we could be deemed an inadvertent investment company. 30 If we were to be deemed an inadvertent investment company, we may seek to rely on Rule 3a-2 under the 1940 Act, which allows an inadvertent investment company a grace period of one year from the earlier of (a) the date on which the issuer owns securities and/or cash having a value exceeding 50% of the issuer’s total assets on either a consolidated or unconsolidated basis or (b) the date on which the issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis.
The field of digital assets is constantly expanding with over 4,000 digital assets in existence as of January 2021. We intend to evaluate the potential for mining or investing in existing, new and alternative digital assets.
We may diversify our business by mining or investing in additional digital assets which could require significant investment or expose us to trading risks. The field of digital assets is constantly expanding with over 4,000 digital assets in existence as of January 2021. We intend to evaluate the potential for mining or investing in existing, new and alternative digital assets.
While we will assess the merits of any lawsuits and defend such lawsuits accordingly, we may be required to incur significant expense or devote significant financial resources to such defenses.
While we will assess the merits of any lawsuits and defend such lawsuits accordingly, we may be required to incur significant expense or devote significant financial resources to such defenses. In addition, the adverse publicity surrounding such claims may have a material adverse effect on our operations.
Cloud offerings may also influence our customers to move workloads to cloud providers, which may reduce the services they obtain from us. Our current and future competitors may vary from us in size, service offerings and geographic presence.
Cloud offerings may also influence our customers to move workloads to cloud providers, which may reduce the services they obtain from us.
A lack of expansion in the use of digital assets in retail and commercial markets, or a contraction of such use, may result in increased price volatility of digital assets or a reduction in the market price of digital assets or in the demand for digital assets which would reduce the demand of our hosting and colocation services or in the value of the digital assets held by us, any of which could have a material adverse effect on our business, financial condition and results of operations. 36 We may diversify our business by mining or investing in additional digital assets which could require significant investment or expose us to trading risks.
A lack of expansion in the use of digital assets in retail and commercial markets, or a contraction of such use, may result in increased price volatility of digital assets or a reduction in the market price of digital assets or in the demand for digital assets which would reduce the demand of our hosting and colocation services or in the value of the digital assets held by us, any of which could have a material adverse effect on our business, financial condition and results of operations. 41 If the transaction fees for recording digital assets in a blockchain increase, demand for digital assets may be reduced and prevent the expansion of the networks to retail merchants and commercial business, resulting in a reduction in the acceptance or price of digital assets.
Such events could have a material adverse effect on our business, financial condition and results of operations and potentially the value of any digital assets we hold or expect to acquire for our own account. 25 Our projections are subject to significant risks, assumptions, estimates and uncertainties, including assumptions regarding the demand for our hosting services and the adoption of Bitcoin and other digital assets.
Such events could have a material adverse effect on our business, financial condition and results of operations and potentially the value of any digital assets we hold or expect to acquire for our own account.
Digital assets exchanges and other trading venues are relatively new and, in some cases, partially unregulated and may therefore be more exposed to fraud and failure. To the extent that digital asset exchanges or other trading venues are involved in fraud or experience security failures or other operational issues, a reduction in digital asset prices could occur.
To the extent that digital asset exchanges or other trading venues are involved in fraud or experience security failures or other operational issues, a reduction in digital asset prices could occur.
In 2012, the reward for validating a new block was reduced to 25 Bitcoin. In July 2016, the reward for validating a new block was reduced to 12.5 Bitcoin, and in May 2020, the reward was further reduced to 6.25 Bitcoin.
In 2012, the reward for validating a new block was reduced to 25 Bitcoin. In July 2016, the reward for validating a new block was reduced to 12.5 Bitcoin, and in May 2020, the reward was further reduced to 6.25 Bitcoin. The next halving for the Bitcoin blockchain is currently anticipated to occur in April 2024 at block height 840,000.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe Company’s president allows the Company to utilized the office space of an affiliated company for its executive offices without charge to the Company.
Biggest changeThe 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.
Removed
Item 2. Properties 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
We are exploring additional 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.
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
We 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.
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
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.
Removed
However, we have the right to terminate our agreement with TSTT at any time that the price for electricity consumption exceeds $0.05 per kwh. Also, both parties have the right to terminate the agreement on one month notice to the other party in either the third or sixth year of the term.
Added
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.
Removed
We lease 1,800 square feet of warehouse space in Trinidad that we use to house a 72-slot fan cooled container that we also lease. The warehouse lease is for eleven months beginning on February 1, 2022 and provides for rental payments of $3,818 per month.
Added
While we do not have any agreements to purchase additional immersion containers from Submer, we believe that additional immersion containers are available for purchase from Submer or other vendors as we need them for additional hosting facilities.
Removed
The container lease is for twelve months beginning February 1, 2022, and provides for rental payments of $2,500 per month. We are using this space as a temporary facility for our initial hosting customer until our permanent facilities become operational.
Added
Mining Equipment Digital asset mining is dependent on specialized digital asset mining hardware utilizing application-specific integrated circuit (“ASIC”) chips to solve blocks on blockchains using the 256-bit secure hashing algorithm.
Added
Almost all of these miners are produced outside of the United States, mostly in China and Southeast Asia, by a few manufacturers, the largest of which is Bitmain Technologies, Ltd (“Bitmain”). Our principal supplier for miners has been Bitmain.
Added
Our mining business is highly dependent upon digital asset mining equipment suppliers such as Bitmain providing an adequate supply of new generation digital asset mining machines at economical prices to enable profitable mining by us and by third-party customers intending to purchase our hosting and other solutions. We do not have any agreements for the acquisition of miners.
Added
To date, we have purchased miners opportunistically as they been available for sale in the “spot” market. Based on historical market activity, as the market value of digital assets increases, the demand for the newest, most efficient miners will also increase, leading to scarcity in the supply, and thereby a resulting increase in the price of miners.
Added
If we need to purchase miners in larger quantities in order to fill data center capacity, we have to enter into formal agreements with Bitmain or other suppliers. These agreements, like those of other miner manufacturers, generally require significant refundable deposits payable months in advance of delivery and additional advance payments in monthly installments thereafter.
Added
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.
Added
The miners that we owned as of December 1, 2023 have an average mining efficiency of 33.92 j/TH.
Added
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.
Added
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.
Added
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.
Added
Available Information We make available free of charge on our Internet website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission, or (the “SEC”).
Added
Our corporate website is bitminetech.io. The information in this website is not a part of this report.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeRecent Sales of Unregistered Securities During the fourth quarter of the fiscal year covered by this report we issued shares of common stock and Series A Preferred Stock in the following unregistered transactions: · On August 2022, the Company issued 600,000 shares of common stock to Erik Nelson, our president, 850,000 shares of common stock to Raymond Mow, our chief financial officer, and 150,000 shares of Series A Preferred Stock to Jonathan Bates, our chief executive officer.
Biggest changeInvestors 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.
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 Pink OTC Market 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, 2022.
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.
Price Range High Low Year ended August 31, 2021 First Quarter $ 3.20 $ 1.00 Second Quarter $ 44.00 $ 1.60 Third Quarter $ 19.20 $ 0.26 Fourth Quarter $ 2.07 $ 0.24 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, 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.
No dividends have ever been declared, and it is not anticipated that dividends will be paid in the foreseeable future. Any indebtedness the Company incurs in the future may also limit its ability to pay dividends. Investors should not purchase the Company’s common stock with the expectation of receiving cash dividends.
No dividends have ever been declared, and it is not anticipated that dividends will be paid in the foreseeable future. Any indebtedness the Company incurs in the future may also limit its ability to pay dividends.
Holders At December 1, 2022, the Company had 48,706,915 outstanding shares of common stock and 280 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 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.
Removed
The shares were issued for executive compensation. · On August 31, 2022, the Company issued 58,824 shares of common stock to Chris Moses, our Executive Vice President for Client Relations and Power Acquisitions, for executive compensation. 49 · On August 31, 2022, the Company issued 303,966 shares of Series A Convertible Preferred Stock to Innovative Digital Investors Emerging Technology, L.P. in satisfaction of $3,039,662 of indebtedness. · In June 2022, the Company issued 3,012,000 Units in its Unit Offering for $3,765,000 in a private placement conducted pursuant to Rule 506(b) under the Securities Act of 1933.
Added
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.
Removed
Each Unit consists of one share of common stock, one Class C-1 Warrant and one Class C-2 Warrant. In connection with the private placement, the Company also issued 25,600 Class C-1 Warrants, 25,600 Class C-2 Warrants, and 25,600 C-3 Warrants to a registered broker who referred three of the investors.
Added
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

65 edited+60 added−48 removed40 unchanged
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.
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.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with the financial statements and notes thereto included elsewhere in this Form 10-K. All information presented herein is based on the Company’s fiscal year, which ends August 31.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with the condensed financial statements and notes thereto included elsewhere in this Form 10-K. All information presented herein is based on the Company’s fiscal year, which ends August 31.
An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are uncertain at the time the estimate is made and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements.
An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are uncertain at the time the estimate is made and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the condensed financial statements.
The Company accounts for income taxes in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 740 (“FASB ASC 740”), Income Taxes, which clarifies the accounting and disclosure requirements for uncertainty in tax positions. It requires a two-step approach to evaluate tax positions and determine if they should be recognized in the financial statements.
The Company accounts for income taxes in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 740 (“FASB ASC 740”), Income Taxes, which clarifies the accounting and disclosure requirements for uncertainty in tax positions. It requires a two-step approach to evaluate tax positions and determine if they should be recognized in the condensed financial statements.
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. 51 We also generate revenues from the advantageous purchase and sale of equipment used for digital asset mining and hosting.
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.
The two-step approach involves recognizing any tax positions that are “more likely than not” to occur and then measuring those positions to determine if they are recognizable in the financial statements. Management regularly reviews and analyzes all tax positions and has determined that no uncertain tax positions requiring recognition have occurred.
The two-step approach involves recognizing any tax positions that are “more likely than not” to occur and then measuring those positions to determine if they are recognizable in the condensed financial statements. Management regularly reviews and analyzes all tax positions and has determined that no uncertain tax positions requiring recognition have occurred.
In accordance with ASC 850, the Company’s financial statements include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business, as well as transactions that are eliminated in the preparation of financial statements.
In accordance with ASC 850, the Company’s condensed financial statements include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business, as well as transactions that are eliminated in the preparation of the condensed financial statements.
Critical Accounting Policies General Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles.
Critical Accounting Policies General Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our condensed financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles.
Management believes the following critical accounting policies reflect its most significant estimates and assumptions used in the preparation of the financial statements. For further information on the critical accounting policies, see Note 1 of the Financial Statements.
Management believes the following critical accounting policies reflect its most significant estimates and assumptions used in the preparation of the condensed financial statements. For further information on the critical accounting policies, see Note 1 of the Condensed Financial Statements.
The preparation of our financial statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, net sales and expenses and related disclosure of contingent assets and liabilities.
The preparation of our condensed financial statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, net sales and expenses and related disclosure of contingent assets and liabilities.
Through August 31, 2022, a significant component of the Company’s current liquidity has been 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.
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.
The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates. There have been no material changes to the Company’s accounting estimates since the Company’s financial statements for the fiscal year ended August 31, 2021.
The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates. There have been no material changes to the Company’s accounting estimates since the Company’s condensed financial statements for the fiscal year ended August 31, 2022.
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, 2022 and 2021.
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.
In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct.
Step 2 : In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct.
As of August 31, 2022 there were no common stock equivalents that were dilutive. 59 Income Taxes Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between depreciation which is deductible for tax purposes prior to being deductible for book purposes.
As of August 31, 2023 there were no common stock equivalents that were dilutive. 66 Income Taxes Income taxes are provided for the tax effects of transactions reported in the condensed financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between depreciation which is deductible for tax purposes prior to being deductible for book purposes.
Cost of sales in the year ended August 31, 2022 were inflated by costs associated with maintaining temporary hosting facilities while our permanent hosting facility was being completed, costs associated with the setup of temporary hosting facilities and the completion of our new hosting facility that we determined not to capitalize.
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.
Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
The increase in the Company’s net loss in the year ended August 31, 2022, compared to the year ended August 31, 2021, is attributable to the factors discussed above. Liquidity and Capital Resources As of August 31, 2022, the Company had $392,550 in cash on hand.
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.
Subsequent reversal of impairment losses, if the price of cryptocurrency increases is not permitted. During the year ended August 31, 2022, the Company recorded an impairment charge of $11,535 due to a reduction in the quoted price of cryptocurrency.
Subsequent reversal of impairment losses, if the price of cryptocurrency increases is not permitted. During the year ended August 31, 2023, the Company recorded an impairment charge of $3,523 due to a reduction in the quoted price of cryptocurrency.
With regard to hosting revenues that are based on a percentage of cryptocurrency generated by the customer, revenues are recorded based on the Company’s share of cryptocurrency received from the mining pool on the date of receipt. During the period ending August 31, 2022, all of the Company’s hosting revenue was derived from one hosting customer.
With regard to hosting revenues that are based on a percentage of cryptocurrency generated by the customer, revenues are recorded based on the Company’s share of cryptocurrency received from the mining pool on the date of receipt or invoicing. During the period ending August 31, 2023, the Company’s hosting revenue was derived from two hosting customers.
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 (primarily bitcoin).
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).
The Company completed its first hosting facility in Trinidad in October 2022, but has delayed opening the facility pending resulting 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 your hosting operations.
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.
During the year ended August 31, 2022 we incurred an impairment charge on cryptocurrency of $11,535 due to the significant decline in the market price of cryptocurrency.
During the year ended August 31, 2023 we incurred an impairment charge on cryptocurrency of $3,523 due to the decline in the market price of cryptocurrency.
The following five steps are applied to achieve that core principle: · Step 1: Identify the contract with the customer; · Step 2: Identify the performance obligations in the contract; · Step 3: Determine the transaction price; · Step 4: Allocate the transaction price to the performance obligations in the contract; and · Step 5: Recognize revenue when the Company satisfies a performance obligation.
The following five steps are applied to achieve that core principle: · Step 1: Identify the contract with the customer; · Step 2: Identify the performance obligations in the contract; · Step 3: Determine the transaction price; · Step 4: Allocate the transaction price to the performance obligations in the contract; and · Step 5: Recognize revenue when the Company satisfies a performance obligation. 63 Step 1: The Company enters into a contract with a bitcoin mining pool operator (i.e., the customer) to provide computing power to the mining pools.
During the year ended August 31, 2022 the Company had a net loss of $2,005,233. Cash flows used in operating activities were $1,629,243 for the year ended August 31, 2022 compared to cash flows used of $76,361 for the year ended August 31, 2021.
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.
As of the date of this Report the amount borrowed under the 2022 LOC Agreement amounted to $400,000 The Company believes that cash on hand, amounts that may borrow under the 2022 LOC Agreement, and expected receipts from sale transactions will provide it with sufficient liquidity to fund its operations for the next 12 months.
The Company believes that cash on hand, amounts that may borrow under the 2022 LOC Agreement, and expected receipts from the sale of equipment, and revenue from self-mining and hosting will provide it with sufficient liquidity to fund its operations for the next 12 months.
The Company expects to receive approximately $41,000 monthly from the sale of two immersion containers in August 2022, and approximately $31,000 per month from the sale of four immersion containers to a joint venture in which the company will be both lender to and equity investor. Currently, the Company owns 362 miners which it plans to use for self-mining.
The Company expects to receive approximately $4,572 in interest payments monthly from the sale of two immersion containers in August 2022, and approximately $31,000 per month from the sale of four immersion containers to a joint venture in which the Company will be both lender to and equity investor.
On July 22, 2021, the Company entered into a LOC Agreement with Innovative Digital Investors Emerging Technology, L.P., a limited partnership controlled by Jonathan Bates, our Chairman, and Raymond Mow, our chief financial officer and a director.
The amount due of principal of $87,447 and interest of $19,476. Was repaid in full in the quarter ended August 31, 2021. On July 22, 2021, the Company entered into a LOC Agreement with Innovative Digital Investors Emerging Technology, L.P., a limited partnership controlled by Jonathan Bates, our Chairman, and Raymond Mow, our chief financial officer and a director.
The most significant estimates relate to the calculation of stock-based compensation, useful lives and recoverability of long-lived assets, income taxes and contingencies. The Company bases its estimates on historical experience, known or expected trends, and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements.
The Company bases its estimates on historical experience, known or expected trends, and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these condensed financial statements.
Basis of Presentation The accompanying financial statements have been prepared in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), which is the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States. 56 Use of Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements.
Basis of Presentation The accompanying condensed financial statements have been prepared in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), which is the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of condensed financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States.
Cash flows used in investing activities were $6,107,306 for the year ended August 31, 2022 compared to cash flows used in investing activities of $427,296 for the year ended August 31, 2021.
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.
Bitcoin Holdings At August 31, 2022, we held approximately 1.07 Bitcoin with a fair market value of $21,433 on the balance sheet. All of the Bitcoin were classified as “Cryptocurrencies” on the balance sheet. The quoted market value of a single Bitcoin as of August 31, 2022 was approximately $20,050.
Bitcoin Holdings At August 31, 2023, we held approximately 4.99 Bitcoin with a fair market value of $129,469 on the balance sheet. All of the Bitcoin were classified as “Cryptocurrencies” on the balance sheet. The quoted market value of a single Bitcoin as of August 31, 2023 was approximately $25,931.47.
We describe in this section certain critical accounting policies that require us to make significant estimates, assumptions and judgments.
Actual results may differ from these estimates under different assumptions or conditions. 62 We describe in this section certain critical accounting policies that require us to make significant estimates, assumptions and judgments.
For the year ended August 31, 2022, major components of cost of sales include rent to house mining and hosting equipment in temporary facilities, electricity, and supplies. The Company believes that cost of sales as a percentage of revenues were greater in the year ended August 31, 2022 than what it expects to incur in future periods.
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.
Nevertheless, while the Company does not need additional capital to maintain operations, it will need additional capital to expand its digital asset hosting and mining business, and take advantage of opportunities in the market place that currently exist due to the recent decline in digital asset prices.
The Company does not budget to include any proceeds from the exercise of its outstanding warrants because it is not able to predict when or if the market price of its common stock will exceed the exercise price of its warrants. 61 Nevertheless, while the Company does not need additional capital to maintain operations, it will need additional capital to expand its digital asset hosting and mining business, and take advantage of opportunities in the marketplace that currently exist due to the recent decline in digital asset prices.
The pool uses software that coordinates the pool members’ mining power, identifies new block rewards, records how much hash rate each participant contributes to the pool, and assigns digital asset rewards earned by the pool among its participants in proportion to the hash rate each participant contributed to the pool in connection with solving a block.
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.
The Company uses Gemini’s multi-signature feature for account access. Stock-based Compensation The Company accounts for stock-based compensation using the fair value method following the guidance outlined in Section 718-10 of the FASB ASC for disclosure about stock-based compensation.
The Company intends to use BitGo for a significant amount of custody moving forward. Stock-based Compensation The Company accounts for stock-based compensation using the fair value method following the guidance outlined in Section 718-10 of the FASB ASC for disclosure about stock-based compensation.
As a consequence, 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. 52 During the year ended August 31, 2022, the Company generated $9,325 in Bitcoin revenue from self-mining digital assets, compared to $-0- revenue in the year ended August 31, 2021.
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.
Included in the $1,585,154 in 2022 operating expenses is $856,724 in non-cash stock based compensation due to the issuance of common stock for services and to related parties as compensation pursuant to the terms of employment agreements.
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.
Cost of sales consists of the purchase price of equipment sold, plus shipping and value added tax on the equipment, as well as the cost of writing off a note for $168,750 payable by our initial hosting client in relation to mining equipment sold to the client. 53 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 to generate asset revenue from hosting or mining for our own account will exceed the revenue we generate until we achieve sufficient economies of scale by deploying more miners.
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.
Net Income (Loss) As a result of the foregoing, during the year ended August 31, 2022, the Company incurred a net loss of ($2,005,233), or ($0.05) per share, as compared to a net loss of ($154,239) or ($0.02) per share during the year ended August 31, 2022.
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.
Other Income (Expense) During the year ended August 31, 2022, the Company incurred $291,048 in other expenses, which was comprised solely of interest expense of $291,048 compared to $22,424 of interest expenses during the same year ended August 31, 2021.
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.
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.
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 reserve the right to hold our digital assets as a long-term investment.
Off-Balance Sheet Arrangements The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on the Company’s financial condition, changes in financial condition, and results of operations, liquidity or capital resources. 55 Related Party Transactions Starting in 2020, Coral Investment Partners, LP, a partnership controlled by Erik Nelson, agreed to make loans to the Company from time to time pursuant to a demand promissory note that bore interest at 24% per annum.
Off-Balance Sheet Arrangements The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on the Company’s financial condition, changes in financial condition, and results of operations, liquidity or capital resources.
The contracts are terminable at any time by either party and the Company’s enforceable right to compensation only begins when the Company provides computing power to the mining pool operator.
The Company only utilizes pool operators that determine awards under the Full Pay-Per-Share method. The contracts are terminable at any time by either party without penalty and the Company’s enforceable right to compensation only begins when the Company starts providing computing power to the mining pool operator (which occurs daily at midnight Universal Time Coordinated (UTC)).
On August 31, 2022, and August 31, 2021, the Company’s cash equivalents totaled $392,550 and $218,737, respectively. Cryptocurrency Cryptocurrencies held are accounted for as intangible assets with indefinite useful lives.
Cash and cash equivalents The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. On August 31, 2023, and August 31, 2022, the Company’s cash equivalents totaled $270,547 and $392,550, respectively. 65 Cryptocurrency Cryptocurrencies held are accounted for as intangible assets with indefinite useful lives.
Loans under the 2022 LOC Agreement accrue interest at twelve percent (12%) per annum, compounded on a 30/360 monthly basis until the loans have been repaid in full. The Company has the right to submit draw requests under the 2022 LOC Agreement until April 15, 2023. Each draw request is subject to the approval of IDI in its sole discretion.
Loans under the 2022 LOC Agreement accrue interest at twelve percent (12%) per annum, compounded on a 30/360 monthly basis until the loans have been repaid in full. Effective May 13, 2023, the Company and IDI amended the 2022 LOC Agreement. As amended, the 2022 LOC Agreement allows the Company to up to $1,750,000 thereunder until December 1, 2023.
Loans under the 2022 LOC Agreement accrue interest at twelve percent (12%) per annum, compounded on a 30/360 monthly basis until the loans have been repaid in full. The Company has the right to submit draw requests under the 2022 LOC Agreement until April 15, 2023. Each draw request is subject to the approval of IDI in its sole discretion.
Loans under the 2022 LOC Agreement accrue interest at twelve percent (12%) per annum, compounded on a 30/360 monthly basis until the loans have been repaid in full. Effective May 13, 2023, the Company and IDI amended the 2022 LOC Agreement. As amended, the 2022 LOC Agreement allows the Company to up to $1,750,000 thereunder until December 1, 2023.
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. The Company currently owns 362 miners that it plans to use for proprietary mining, the deployment of which will occur when its immersion hosting environment is operational.
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.
During the year ended August 31, 2022, the Company generated $394,700 in revenue from equipment sales, compared to $-0- revenue in the year ended August 31, 2021. The largest sale consisted of the sale of non-customized 72 Antminer T-17's and 25 Whatsminer M31S with an aggregate cost basis of $186,657.
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.
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, 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.
The increase in cash flows provided by financing activities in fiscal 2022 is attributable to $5,152,500 received from the Unit Offering conducted in the year ended August 31, 2022 as well as $2,757,861 in draws under the LOC Agreement with IDI, net of repayment.
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.
Furthermore, our temporary hosting facilities carried electricity costs that were materially higher than the costs that we expect to incur in our permanent facilities. Cost of sales related to sales of mining equipment was $355,407 for the year ended August 31, 2022, compared to $-0- in the year ended August 31, 2021 when there was no revenue.
Furthermore, our temporary hosting facilities carried electricity costs that were somewhat higher than the costs that we expect to incur in our permanent facilities.
The balance of the electricity costs attributable to our proprietary mining operations will be paid for by bitcoin revenues generated from those operations. Operating Expenses During the year ended August 31, 2022, the Company incurred $1,585,154 in operating expenses compared to $131,815 in operating expenses during the year ended August 31, 2021.
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.
Revenues During the year ended August 31, 2022, the Company generated $23,644 in Bitcoin revenue from hosting third-party miners, compared to $-0- revenue in the year ended August 31, 2021.
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.
The Company also expects to generate additional revenues from the resale of certain hosting equipment, primarily containers and transformers.
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.
The transaction consideration the Company receives, if any, is noncash consideration, which the Company measures at fair value on the date received, which is not materially different than the fair value at contract inception or the time the Company has earned the award from the pools. The consideration is all variable.
Step 3 : The transaction consideration the Company earns is non-cash digital consideration in the form of bitcoin, which the Company measures at fair value on the date earned at the daily closing price, which is not materially different from the fair value at contract inception, which is the daily opening price.
The amount drawn, plus all accrued interest therein, is repayable in full on December 1, 2023. As of November 4, 2022, the amount advanced under the 2022 LOC Agreement was $400,000.
Each draw request is subject to the approval of IDI in its sole discretion. As amended, all principal and interest due under the 2022 LOC Agreement are due and payable on December 1, 2024. As of December 1, 2023, the amount borrowed under the 2022 LOC Agreement was $1,625,000.
Cost of Sales Cost of sales related to Bitcoin hosting and mining revenue was $201,292 for the year ended August 31, 2022, compared to $-0- in the year ended August 31, 2021 when there was no revenue. Cost of sales normally includes electricity, utilities, facilities costs, depreciation and supplies.
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.
In exchange for providing computing power, the Company is entitled to a fractional share of the fixed cryptocurrency award the mining pool operator receives (less digital asset transaction fees to the mining pool operator which are immaterial and are recorded as a deduction from revenue), for successfully adding a block to the blockchain.
When a mining pool successfully finds a block, it is awarded all of the transaction fees in that block and the reward from the network. In exchange for providing computing power to the pool, the Company is entitled to an award of bitcoin equal to the expected reward per block over the measurement period of midnight-to-midnight UTC time.
Additionally, we incurred $11,535 in impairment expenses on our cryptocurrency holdings due to the significant decline in the price of Bitcoin we are holding. The higher level of operating expenses in the 2022 period as compared to the 2021 period is attributable to expenses incurred as part of the Company’s entry into the bitmine hosting business.
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.
Other sources of revenue that the Company expects to receive include equity distributions from the ROC Digital joint venture once it becomes operational in late 2022.
As of August 31, 2023 the Company owned 472 miners, most of which the Company intends to use for self-mining. Other sources of revenue that the Company expects to receive include equity distributions from the ROC Digital joint venture, and self-mining revenue from an additional 1,194 miners purchased after the end of the fiscal year.
In the fourth quarter of 2022, the Company sold two hosting containers to a third party, and subsequent to August 31, 2022 has sold or contributed five hosting containers and six transformers to a joint venture that is constructing a hosting facility in Texas.
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.
The gross profit on the sale of these units was calculated but subtracting the cost of the units from the sales proceeds, less accrued depreciation of the equipment. The cost basis of the equipment consisted of the purchase price of the equipment plus shipping costs and value added taxes.
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.
The entire increase during fiscal 2022 period compared to fiscal 2021 in cash flows used by investing activities is due to the purchase of $5,680,010 more in Bitmine equipment in 2022 compared to 2021. 54 Cash flows provided by financing activities were $7,910,361 for the year ended August 31, 2022 compared to cash flows provided by financing activities of $720,464 for the year ended August 31, 2021.
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
This cooler environment has been shown to extend machine lives by 30% or longer. 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
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”).
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
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.
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
At August 31, 2023, the Company owned 472 miners, of which only 280 were deployed for self-mining.
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
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.
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. 50 Until our permanent hosting facilities are operational, we are temporarily leasing space for a small number of ASIC computers with a co-host.
Added
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.
Removed
We intend to move all of our currently owned and customer owned miners to our new TSTT hosting facilities once they are operational. In October 2022, we completed the installation of initial hosting containers under our agreement with TSTT.
Added
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.
Removed
However, prior to commencing operations, TSTT advised us that the utility had refused to honor its existing agreement with TSTT with respect to electricity supplied to our pilot hosting site, and instead indicated that the rate would be approximately $0.09 per kwh.
Added
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.
Removed
TSTT has informed us that it does not believe that its contract with the local utility entitles it to vary the rate it charges for the use of electricity and has protested the decision.

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