CLEANSPARK INC

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read together with the interim condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 ("Form 10-K"). This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in other parts of this Quarterly Report on Form 10-Q, as well as those identified in the “Risk Factors” section of our Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. See “Forward-Looking Statements.”

Current wording

The following discussion and analysis of our financial condition and results of operations should be read together with the interim condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024 (the “Form 10-K”). This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in other parts of this Quarterly Report on Form 10-Q, as well as those identified in the “Risk Factors” section of our Form 10-K. Our historical results are not necessarily indicative of the results that may be expected for any period in the future. See “Forward-Looking Statements.”

Previous wording

We are a bitcoin mining company. We have no intention to mine, purchase or hold any other cryptocurrency at this time or in the foreseeable future, and we did not hold any other cryptocurrency as of June 30, 2024. We independently own and operate nine data centers in Georgia and three data centers in Mississippi for a total developed power capacity of approximately 520 megawatts (“MW”) as of June 30, 2024. We have completed an additional 50 MW of data center infrastructure in Sandersville, GA, which is pending the commissioning of a utility transformer before it goes into service, and we are currently finalizing the development of an additional 15 MW expansion at our Dalton, GA location. An independent data center operation in Massena, NY hosts 50 MW for us. We have also entered into a hosting agreement on June 26, 2024 with GRIID Infrastructure, Inc. to host up to 12 MW of our bitcoin miners. We design our infrastructure to responsibly secure and support bitcoin, the world’s most recognized digital commodity. We strive to leave the planet better than we found it by investing in communities that source low-carbon energy, like wind, solar, nuclear, and hydro. We cultivate trust and transparency among our employees, the communities we operate in, and the people around the world who depend on bitcoin.

Current wording

We design our infrastructure to efficiently, profitably, and responsibly secure and support bitcoin, the world’s most recognized digital commodity. We cultivate trust and transparency among our employees, the communities where we operate, our public market stakeholders, and the people around the world who depend on bitcoin.

Previous wording

Bitcoin was introduced in 2008 with the goal of serving as a digital means of exchanging and storing value. Bitcoin is a form of digital currency that depends upon a consensus-based network and a public ledger called a “blockchain”, which contains a record of every bitcoin transaction ever processed. The bitcoin network is the first decentralized peer-to-peer payment network, powered by users participating in the consensus protocol, with no central authority or middlemen, that has wide network participation. The authenticity of each bitcoin transaction is protected through digital signatures that correspond with addresses of users that send and receive bitcoin. Users have full control over remitting bitcoin from their own sending addresses. All transactions on the bitcoin blockchain are transparent, allowing those running the appropriate software to confirm the validity of each transaction. To be recorded on the blockchain, each bitcoin transaction is validated through a proof-of-work consensus method, which entails solving complex mathematical problems to validate transactions and post them on the blockchain. This process is called mining. Miners are rewarded with bitcoins, both in the form of newly created bitcoins and fees in bitcoin, for successfully solving the mathematical problems and providing computing power to the network.

Current wording

Bitcoin was introduced in 2008 with the goal of serving as a digital means of exchanging and storing value. Bitcoin is a form of digital currency that depends upon a consensus-based network and a public ledger called a “blockchain”, which contains a record of every bitcoin transaction ever processed. The bitcoin network is the first decentralized peer-to-peer payment network, powered by users participating in the consensus protocol, with no central authority or middlemen, that has wide network participation. The authenticity of each bitcoin transaction is protected through digital signatures that correspond with addresses of users that send and receive bitcoin. Users have full control over remitting bitcoin from their own sending addresses. All transactions on the bitcoin blockchain are transparent, allowing those running the appropriate software to confirm the validity of each and every transaction. To be recorded on the blockchain, each bitcoin transaction is validated through a proof-of-work consensus method, which entails demonstrating sufficient computation through the “proof of work” process to validate transactions and post them on the blockchain. This process is called mining. Miners are rewarded with bitcoins, both in the form of newly created bitcoins and transaction fees paid in bitcoin, for successfully constructing a block with the required network difficulty and disseminating that block to the global network of nodes. The mining process now represents the largest distributed computing network on Earth due to demand for bitcoin, the commodity, and the revenues associated with securing it.

Previous wording

Factors such as access to specialized mining servers, energy, electricity cost, environmental factors (such as cooling capacity) and location play important roles in mining. As of June 30, 2024, our operating mining units were capable of producing over 20.4 exahash per second (“EH/s”) of computing power. In bitcoin mining, “hashrate” is a measure of the computing and processing power and speed by which a mining computer mines and processes transactions on the bitcoin network. We expect to continue increasing our computing power through 2024 and beyond as we expand our infrastructure at our owned sites in Georgia and Mississippi, seek strategic acquisition targets, and through strategic co-location agreements. As of July 31, 2024, we operated a high of 21.2 EH/s of computing power. A company’s computing power measured in hashrate is a significant factor in its bitcoin mining revenue.

Current wording

Factors such as access to specialized mining servers, energy, electricity cost, environmental factors (such as cooling capacity) and location play important roles in mining. As of December 31, 2024, our operating mining units were capable of producing over 39.1 exahash per second (“EH/s”) of computing power. In bitcoin mining, “hashrate” is a measure of the computing and processing power and speed by which a mining computer mines and processes transactions on the bitcoin network. We expect to continue increasing our computing power through 2025 and beyond as we expand our infrastructure at our owned sites in Wyoming, Tennessee, and Georgia, seek regional expansion opportunities, and evaluate strategic acquisition targets. As of January 31, 2025, we operated a high of 40 EH/s of computing power. A company’s computing power measured in hashrate is a significant factor in its bitcoin mining revenue.

Previous wording

1-42 months and have an average age of approximately 14 months. We do not have scheduled downtime for our miners, however, we periodically perform unscheduled maintenance and curtailments on our miners, but such downtime has not historically been significant. When performing unscheduled maintenance, we will typically replace the miner with a substitute miner to limit overall downtime. The miners owned as of June 30, 2024 had a range of energy efficiency (watts per terahash – “w/th”) of 17.5 to 29.5 w/th with an average energy efficiency of 21.2 w/th.

Current wording

We owned approximately 285,098 miners as of December 31, 2024, of which approximately 201,808 were in service as of December 31, 2024 and the remainder pertain to new machines ready to install in the Cheyenne, WY expansion and Jackson, TN and other expansion opportunities, are being evaluated for relocation or are pending repair. Our miners range in age from 1-48 months and have an average age of approximately 13 months. Effective May 2024, we estimate the useful lives of our miners to be three years. We do not have scheduled downtime for our miners, however, we periodically perform unscheduled maintenance and curtailments on our miners, but such downtime has not historically been significant. When performing unscheduled maintenance, we will typically replace the miner with a substitute miner to limit overall downtime. The miners owned as of December 31, 2024 had a range of energy efficiency (watts per terahash – “w/th”) of 13.5 to 29.5 w/th with an average operating energy efficiency of 17.6 w/th.

Previous wording

We obtain bitcoin as a result of our mining operations, and we sell bitcoin from time to time to support our operations and strategic growth. Although we may engage in regular trading of bitcoin in the future, we have not previously engaged in trading of bitcoin (other than as necessary to convert our bitcoin into U.S. dollars) or hedging activities related to our holding of bitcoin; however, our decisions to hold or sell bitcoin at any given time may be impacted by the bitcoin market, which has been historically characterized by significant volatility. Currently, we do not use a formula or specific methodology to determine whether or when we will sell bitcoin that we hold, or the number of bitcoins we will sell. Rather, decisions to hold or sell bitcoins are currently determined by management by analyzing forecasts and monitoring the market in real time.

Current wording

We obtain bitcoin as a result of our mining operations, and we sell bitcoin from time to time to support our operations and strategic growth. We also will utilize our bitcoin as collateral for lending arrangements. We do not currently engage in regular trading of bitcoin (other than as necessary to convert our bitcoin into U.S. dollars) or engage in hedging activities related to our holding of bitcoin; however, our decisions to hold or sell bitcoin at any given time may be impacted by the bitcoin market, which has been historically characterized by significant volatility. As hedging, derivative, lending, and other structured products mature, we will evaluate them and consider integrating them into our regular treasury management activities. Treasury management activities may serve cash management, strategic growth, revenue or bitcoin balance hedging, incremental revenue or other general corporate purposes. Currently, we do not use a formula or specific methodology to determine whether or when we will sell bitcoin that we hold, or the number of bitcoins we will sell. Rather, decisions to hold or sell bitcoins are currently determined by management by analyzing the need for working capital, forecasts and monitoring the market in real time.

Previous wording

As of June 30, 2024, we held 6,590 bitcoins. As of June 30, 2024, the Company held 99.8% of its bitcoin in cold storage and 0.2% in hot wallets. The fair value of our bitcoins as of June 30, 2024 was $413,033 on our Condensed Consolidated Balance Sheets. Effective October 1, 2023, we adopted ASC 350-60, which requires bitcoin to be measured at fair value. See Note 2 - Summary of Significant Accounting Policies for more details on the impact of implementation to the condensed consolidated financial statements. As a result, the carrying value of each bitcoin we held at October 1, 2023 and each subsequent reporting period reflects the price of one bitcoin quoted on the active exchange, Coinbase, at the end of the reporting period. Therefore, decreases in the market price of bitcoin could have a material impact on our earnings and on the carrying value of our bitcoin.

Current wording

As of December 31, 2024, we held 9,952 bitcoins. As of December 31, 2024, we held 99% of our bitcoin in cold storage and 1% in hot wallets. The fair value of our bitcoins as of December 31, 2024 was $929,080 on our condensed consolidated balance sheets. Effective October 1, 2023, we adopted ASC 350-60, which requires bitcoin to be measured at fair value; as a result, the carrying value of each bitcoin we held at October 1, 2023 and each subsequent reporting period reflects the price of one bitcoin quoted on the active exchange, Coinbase, at the end of the reporting period. Therefore, decreases in the market price of bitcoin could have a material impact on our earnings and on the carrying value of our bitcoin. See Note 2 - Summary of Significant Accounting Policies for more details on the impact of implementation in the Form 10-K.

Previous wording

As of September 30, 2023, we held $0.05 in USD Coin (“USDC”), which is a digital currency that is fully backed by U.S. dollar assets, with the value of one USDC coin pegged 1:1 to the value of one U.S. dollar. As of June 30, 2024, the Company did not hold any digital currency other than bitcoin.

Current wording

As of December 31, 2024 and September 30, 2024, the Company did not hold any digital currency other than bitcoin.

Previous wording

Through our wholly owned subsidiaries CSRE Properties, LLC, CSRE Property Management Company LLC, CSRE Properties Norcross, LLC, CSRE Properties Washington, LLC, CSRE Properties Sandersville, LLC, CSRE Properties Dalton, LLC, Dalton15, LLC, CleanSpark MS, LLC, CSRE Properties Mississippi, LLC, CSRE Properties Vicksburg, LLC, and CleanSpark HQ, LLC, we maintain real property holdings.

Current wording

We maintain real property holdings through our wholly owned and consolidated subsidiaries.

Previous wording

The energy efficiency of a mining fleet helps drive profitability, because the most significant direct expense for bitcoin mining is power. We measure efficiency by the watts of energy required to produce each terahash of processing power. We believe we operate a highly efficient fleet of miners. The table below describes our fleet as of June 30, 2024 and 2023 and our miner efficiency and computing power as compared to the global computing power.

Current wording

The energy efficiency of a mining fleet helps drive profitability, because the most significant direct expense for bitcoin mining is power. We measure efficiency by the watts (or joules) of energy required to produce each terahash of processing power. We believe we operate a highly efficient fleet of miners.

Previous wording

As of June 30, 2024, our operating hashrate was approximately 3.66% of the total global hashrate, and we received approximately the same percentage of the global blockchain rewards, which as of that date equaled approximately 14-16 bitcoin per day, excluding the bitcoin earned from network transaction fees. Ultimately, in order to mine profitably, we work to ensure that these mining rewards cover our direct operating costs.

Current wording

As of December 31, 2024, our operating hashrate was approximately 4.87% of the total global hashrate, and we received approximately the same percentage of the global blockchain rewards, which as of that date equaled approximately 21-22 bitcoin per day, excluding the bitcoin earned from network transaction fees. Ultimately, in order to mine profitably, we work to ensure that these mining rewards cover our direct operating costs.

Previous wording

The table below describes the average cost of mining each bitcoin for the three and nine months ended June 30, 2024 and 2023 and the total energy usage and cost per each kilowatt hour ("KWH") utilized within our owned facilities.

Current wording

The table below describes the average cost of mining each bitcoin for the three months ended December 31, 2024 and 2023 and the total energy usage and cost per each kilowatt hour (“KWH”) utilized within our owned facilities.

Previous wording

(1) Average revenue of each bitcoin mined is calculated by dividing the sum of bitcoin mining revenue for our owned facilities by the total number of bitcoin mined by our owned facilities during the respective periods. We have determined that Coinbase is the principal market for valuing bitcoin transactions and use the closing price of bitcoin at 23:59:59 UTC as the source of recording revenue. See the table "Range of intraday bitcoin prices" for information on the range of intraday bitcoin prices for quarterly periods since October 1, 2022.

Current wording

(1)Average revenue of each bitcoin mined is calculated by dividing the sum of bitcoin mining revenue for our owned facilities by the total number of bitcoin mined by our owned facilities during the respective periods. We have determined that Coinbase is the principal market for valuing bitcoin transactions and use the closing price of bitcoin at 23:59:59 UTC as the source of recording revenue. See the table “Range of intraday bitcoin prices” for information on the range of intraday bitcoin prices for quarterly periods since September 30, 2023.

Previous wording

Power prices are the most significant cost driver for our wholly owned locations, and energy costs represented 40.7% and 40.6% as expressed as a percentage of bitcoin mining revenues during the three months ended June 30, 2024 and 2023, respectively, and were 33.9% and 50.3% for the nine months ended June 30, 2024 and 2023, respectively.

Current wording

Power prices are the most significant cost driver for our wholly owned locations, and energy expense represented 40.4% and 35.0% as expressed as a percentage of bitcoin mining revenues during the three months ended December 31, 2024 and 2023, respectively.

Previous wording

Energy prices can be highly volatile and global events (including the war in Ukraine and the resulting natural gas shortage) caused power prices to increase nationwide in 2022. All of our wholly owned and operated sites in the State of Georgia, Mississippi and our hosted miners in New York State are currently subject to variable prices and market rate fluctuations with respect to wholesale power costs. Such prices are governed by power purchase agreements which vary by location, and said prices can change hour to hour. While this renders energy prices less predictable, it also gives us greater ability and flexibility to actively manage the energy we consume with a goal of increasing profitability and energy efficiency. Energy prices are also highly sensitive to weather events, such as winter storms and polar vortices, which increase the demand for power regionally. When such events occur, we may curtail our operations to avoid using power at increased rates. The average power prices we paid in our owned facilities for the three months ended June 30, 2024 and 2023 were $0.048 and $0.041 per KWH, respectively, and were $0.045 and $0.048 per KWH for the nine months ended June 30, 2024 and 2023, respectively.

Current wording

Energy prices can be highly volatile and global events can impact energy rates. We have a diverse portfolio of power contracts across our wholly owned and operated sites in the State of Georgia, Mississippi, Tennessee and Wyoming. The majority of these contracts and our previously hosted miners in New York State are currently subject to variable prices and market rate fluctuations with respect to wholesale power costs. Such prices are governed by power purchase agreements which vary by location, and said prices can change hour to hour. While this renders energy prices less predictable, it also gives us greater ability and flexibility to actively manage the energy we consume with a goal of increasing profitability and energy efficiency. Energy prices are also highly sensitive to weather events, such as winter storms and polar vortices, which periodically increase the demand for power regionally. When such events occur, we may curtail our operations to avoid using power at increased rates, at the request of grid operators in cases of emergencies or to support utility grid resiliency efforts. The average power prices we paid under our power contracts at our owned facilities for the three months ended December 31, 2024 and 2023 were $0.049 and $0.044 per KWH, respectively.

Previous wording

The management team makes real-time determinations on the need and timing during which we should curtail our operations. We curtail when power prices exceed the value we would receive for the corresponding fixed bitcoin reward. This means if bitcoin’s value decreases or energy prices increase, our curtailment will increase; likewise, when bitcoin’s value increases and energy prices decrease, our curtailment will decrease. The management team manages this decision on an hour-by-hour basis across all our sites, both wholly owned and hosted. The Company did not have significant curtailment greater than 20% during the three months or nine months ended June 30, 2024.

Current wording

The management and operations teams make real-time determinations on the need and timing during which we should curtail our operations. We curtail when power prices exceed the value we would receive for the corresponding fixed bitcoin reward in response to utility programs. This means if bitcoin’s value decreases or energy prices increase, our curtailment may increase; likewise, when bitcoin’s value increases and energy prices decrease, our curtailment may decrease. The management and operations teams manage these decision on an hour-by-hour basis across all our sites, both wholly owned and hosted. The Company did not have significant curtailment and maintained an average uptime greater than 90% during the three months ended December 31, 2024. A large portion of the curtailment during the quarter related to Hurricane Helene which affected our Georgia sites at the end of September 2024 to the beginning of October 2024. The southeast Georgia sites were shut down as the hurricane began impacting the region, thus at the beginning of the October 2024, these sites were operating on approximately 200 MW which gradually increased during the same week to its the full 365 MW capacity when utilities was restored to the communities.

Previous wording

The Company records depreciation expense (a non-cash expense) on its miners on a straight-line basis over the miners' expected useful life. Such non-cash depreciation amounts are recorded within the Condensed Consolidated Statements of Operations and Comprehensive Loss as "Depreciation and Amortization". Although the Company recognizes depreciation with respect to its mining assets, it does not consider depreciation in determining whether it is economical to operate its mining equipment since depreciation expense is not an avoidable operating cost, such as energy costs. The table above presents the non-cash miner depreciation expense on a "per bitcoin" basis, calculated by dividing miner depreciation expense in our owned facilities by the number of bitcoin mined in the owned facilities. On a "cost per bitcoin" ratio, miner depreciation expense was $16,753 and $10,320 for the three months ended June 30, 2024 and 2023, respectively, and was $13,067 and $9,620 for the nine months ended June 30, 2024 and 2023, respectively. The Company recorded accelerated depreciation on certain of its miners based on the reduction of the estimated useful life from 5 years to 3 years, which equaled $5,060 and $1,473 on a cost per bitcoin ratio for the three and nine months ended June 30, 2024, respectively. The number of bitcoin received by the Company was reduced by 50% effective April 19, 2024 when the bitcoin algorithm halved the rewards from 6.25 per block to 3.125 per block.

Current wording

The Company records depreciation expense (a non-cash expense) on its miners on a straight-line basis over the miners' expected useful life. Such non-cash depreciation amounts are recorded within the condensed consolidated statements of operations and comprehensive income as “Depreciation and Amortization”. Although the Company recognizes depreciation with respect to its mining assets, it does not consider depreciation in determining whether it is economical to operate its mining equipment since depreciation expense is not an avoidable operating cost, such as energy costs. The table above presents the non-cash miner depreciation expense on a “per bitcoin” basis, calculated by dividing miner depreciation expense in our owned facilities by the number of bitcoin mined in the owned facilities. On a “cost per bitcoin" ratio, miner depreciation expense was $31,949 and $11,384 for the three months ended December 31, 2024 and 2023, respectively. The number of bitcoin received by all the miners, including the Company was reduced by 50% effective April 19, 2024 when the bitcoin algorithm halved the rewards from 6.25 per block to 3.125 per block increasing depreciation expense on a comparable per bitcoin basis as it takes more miners to produce the same number of bitcoin.

Previous wording

We have financing costs for a limited number of miners in our miner fleet and such costs are recorded within Interest Expense in our Condensed Consolidated Statements of Operations and Comprehensive Loss. The table above presents financing costs per bitcoin calculated by dividing direct interest expense on our miner financing agreement by the number of bitcoin mined in our owned facilities. On a cost per bitcoin ratio, financing costs were $208 and $419 for the three months ended June 30, 2024 and 2023, respectively, and were $214 and $460 for the nine months ended June 30, 2024 and 2023.

Current wording

We have financing costs for a limited number of miners in our miner fleet and such costs are recorded within Interest Expense in our condensed consolidated statements of operations and comprehensive income. The table above presents financing costs per bitcoin calculated by dividing direct interest expense on our miner financing agreement by the number of bitcoin mined in our owned facilities. On a cost per bitcoin ratio, financing costs were $98 and $237 for the three months ended December 31, 2024 and 2023, respectively.

Previous wording

The table below describes the average cost of mining each bitcoin for the three and nine months ended June 30, 2024 and 2023 and the total energy usage and cost per each KWH utilized within our hosted facilities.

Current wording

The table below describes the average cost of mining each bitcoin for the three months ended December 31, 2024 and 2023 and the total energy usage and cost per each KWH utilized within our hosted facilities.

Previous wording

For our co-locations, hosting fees (which comprise direct operating costs of the third-party operator with energy as the largest cost) and profit sharing were a combined 69.5% and 59.0% as a percentage of bitcoin mining revenues during the three months ended June 30, 2024 and 2023, respectively, and were 63.8% and 64.4% for the nine months ended June 30, 2024 and 2023, respectively.

Current wording

For our co-locations, hosting fees (which comprise direct operating costs of the third-party operator with energy as the largest cost) and profit sharing were a combined 87.1% and 61.3% as a percentage of bitcoin mining revenues during the three months ended December 31, 2024 and 2023, respectively.

Previous wording

At our hosting facilities, the hosting fee as compared to KWHs utilized in the hosted facilities was $0.063 and $0.059 per KWH for the three months ended June 30, 2024 and 2023, respectively, and was $0.068 and $0.061 per KWH for the nine months ended June 30, 2024 and 2023, respectively. The Company did not have significant curtailment greater than 20% during the three months or nine months ended June 30, 2024.

Current wording

At our hosted facilities, the hosting fee as compared to KWHs utilized in the hosted facilities was $0.070 and $0.067 per KWH for the three months ended December 31, 2024 and 2023, respectively. The Company did not have significant curtailment greater than 20% of total operating time during the three months ended December 31, 2024.

Previous wording

Results of continuing operations for the three and nine months ended June 30, 2024 and 2023

Current wording

Results of continuing operations for the three months ended December 31, 2024 and 2023

Previous wording

We earned $104,108 in bitcoin mining revenue during the three months ended June 30, 2024, which was an increase of $58,681, or 129%, as compared with $45,427 for the three months ended June 30, 2023. Bitcoin mining revenues are recorded net of bitcoin mining fees charged by our sole mining pool operator that equaled approximately 0.15% of gross bitcoin mining revenues for the three months ended June 30, 2024, and are determined by two main drivers: quantity of bitcoin mined and the price of bitcoin on the date the bitcoin is mined. During the three months ended June 30, 2024, we mined 1,580 bitcoin with an average bitcoin price of $65,904 as compared to 1,623 bitcoin with an average bitcoin price of $27,982 during the three months ended June 30, 2023. The increase in bitcoin mining revenue for the three months ended June 30, 2024 was attributable to the increase in the average bitcoin price offset by the decrease in the bitcoin mined during the period and as compared to the three months ended June 30, 2023. The increase in the quantity of bitcoin mined was primarily driven by the increased number of our miners in operation, which increased to approximately 152,500 compared to 68,000, an increase of 124% between June 30, 2023 and June 30, 2024. The increase in our miners in operation increases our hashrate, which is our total computational power, and which when understood in the context of global hashrate, determines how much bitcoin we are able to mine.

Current wording

We earned $162,306 in bitcoin mining revenue during the three months ended December 31, 2024, which was an increase of $88,520, or 120%, as compared with $73,786 for the three months ended December 31, 2023. Bitcoin mining revenues are recorded net of bitcoin mining fees charged by our sole mining pool operator that equaled approximately 0.15% of gross bitcoin mining revenues for the three months ended December 31, 2024, and are determined by two main drivers: quantity of bitcoin mined and the price of bitcoin on the date the bitcoin is mined. During the three months ended December 31, 2024, we mined 1,945 bitcoin with an average bitcoin price of $83,443 as compared to 2,020 bitcoin with an average bitcoin price of $36,535 during the three months ended December 31, 2023. The increase in bitcoin mining revenue for the three months ended December 31, 2024 was attributable to the increase in the average bitcoin price offset by the decrease in the bitcoin mined during the period and as compared to the three months ended December 31, 2023. The decrease in the quantity of bitcoin mined was primarily driven by the reduction in bitcoin block rewards from 6.25 per block recognized during the three months ended December 31, 2023 as compared to 3.125 per block recognized during the three months ended December 31, 2024. This reduction in block rewards due to the halving in April 2024 was offset by the increased number of our miners in operation, which increased to 201,808 compared to 88,559, an increase of 128% between December 31, 2023 and December 31, 2024. The increase in our miners in operation increases our hashrate, which is our total computational power, and which when understood in the context of global hashrate, determines how much bitcoin we are able to mine.

Previous wording

Our cost of revenues were $45,180 for the three months ended June 30, 2024, an increase of $24,499, or 118%, as compared with $20,681 for the three months ended June 30, 2023. These costs were primarily related to energy costs to operate the miners within our owned facilities, which were $38,545 for the three months ended June 30, 2024, an increase of $24,659, or 178%, as compared to $13,886 for the three months ended June 30, 2023. The increase in energy costs was due to the increases in the volume of miners operating in our owned locations. We continually evaluate energy and bitcoin prices and periodically will curtail our mining operations when it is advantageous to do so.

Current wording

Our cost of revenues was $70,290 for the three months ended December 31, 2024, an increase of $41,394, or 143%, as compared with $28,896 for the three months ended December 31, 2023. These costs were primarily related to energy costs to operate the miners within our owned facilities, which were $63,075 for the three months ended December 31, 2024, an increase of $41,244, or 189%, as compared to $21,831 for the three months ended December 31, 2023. The increase in energy costs was due to the increases in the volume of miners operating in our owned locations. We continually evaluate energy and bitcoin prices and periodically will curtail our mining operations when it is advantageous to do so.

Previous wording

We also incurred hosting fees of $5,598 and profit sharing fees of $911 for the three months ended June 30, 2024, an increase of $307, or 6%, and decrease of $423, or 32%, as compared to $5,291 and $1,334, respectively, for the three months ended June 30, 2023. The hosting fees and profit sharing fees were primarily the result of our co-location agreement with Coinmint. The hosting fees increased period over period due to increased rates charged per KWH even though KWHs utilized decreased slightly.

Current wording

We also incurred hosting fees of $6,350 and profit sharing fees of $683 for the three months ended December 31, 2024, an increase of $776, or 14%, and a decrease of $727, or 52%, as compared to $5,574 and $1,411, respectively, for the three months ended December 31, 2023. The hosting fees and profit sharing fees were primarily the result of our co-location agreement with Coinmint. The hosting fees increased period over period due to increased rates charged per KWH even though KWHs utilized decreased slightly.

Previous wording

Professional fees, which consisted primarily of legal, accounting and consulting fees, were $4,368 for the three months ended June 30, 2024, an increase of $2,143, or 96%, from $2,225 for the three months ended June 30, 2023. Legal expenses were $2,493 for the three months ended June 30, 2024, as compared to $1,210 for the three months ended June 30, 2023. This increase was primarily attributable to legal and other professional fees in connection with merger and acquisition transactions of $1,544 during the three months ended June 30, 2024, as compared to $16 of legal transactions during the three months ended June 30, 2023. Other professional fees, namely accounting and consulting, were $1,875 for the three months ended June 30, 2024, as compared to $1,015 for the three months ended June 30, 2023, representing an increase of $860. The increase in accounting fees was primarily related to tax services and consulting.

Current wording

Professional fees, which consisted primarily of legal, accounting and consulting fees, were $3,885 for the three months ended December 31, 2024, an increase of $2,313, or 147%, from $1,572 for the three months ended December 31, 2023. Legal expenses were $1,445 for the three months ended December 31, 2024, as compared to $173 for the three months ended December 31, 2023. This increase was primarily attributable to legal and other professional fees in connection with merger and acquisition transactions of $396 during the three months ended December 31, 2024, as compared to $0 during the three months ended December 31, 2023. Other professional fees, namely accounting and consulting, were $2,445 for the three months ended December 31, 2024, as compared to $1,403 for the three months ended December 31, 2023, representing an increase of $1,042. The increase in accounting fees was primarily related to tax services and consulting.

Previous wording

Payroll expenses were $17,150 for the three months ended June 30, 2024, an increase of $6,745, or 65%, from $10,405 for the three months ended June 30, 2023. Our payroll expenses include all compensation related expenses for our employees and mainly include salaries, wages, payroll-related taxes and benefits and non-cash stock-based compensation. Payroll expenses, excluding non-cash stock-based compensation, were $14,204 for the three months ended June 30, 2024, representing an increase of 219% from $4,458 for the three months ended June 30, 2023, mainly attributed to an increase in employee headcount along with employee bonuses.

Current wording

Payroll expenses were $20,869 for the three months ended December 31, 2024, an increase of $5,549, or 36%, from $15,320 for the three months ended December 31, 2023. Our payroll expenses include all compensation related expenses for our employees and mainly include salaries, wages, payroll-related taxes and benefits and non-cash stock-based compensation. Payroll expenses, excluding non-cash stock-based compensation, were $17,847 for the three months ended December 31, 2024, representing an increase of 232% from $5,368 for the three months ended December 31, 2023, mainly attributed to an increase in employee headcount along with employee bonuses.

Previous wording

We grant stock-based awards to certain employees as a significant portion of our payroll-related costs. Stock-based compensation, which is a non-cash expense, was $2,946 for the three months ended June 30, 2024, a decrease of $3,001, or 50%, from $5,947 for the three months ended June 30, 2023. The decrease in stock based compensation was mainly attributed to the vesting of a certain performance based restricted stock awards vesting in the three months ended June 30, 2023.

Current wording

We grant stock-based awards to certain employees as a significant portion of our payroll-related costs. Stock-based compensation, which is a non-cash expense, was $3,021 for the three months ended December 31, 2024, a decrease of $6,931, or 70%, from $9,953 for the three months ended December 31, 2023. The decrease in stock based compensation was mainly attributed to the vesting of a certain performance based restricted stock awards vesting in the three months ended December 31, 2023.

Previous wording

General and administrative expenses increased to $8,235 for the three months ended June 30, 2024 from $5,064 for the three months ended June 30, 2023, representing an increase of $3,171. This increase was primarily attributable to increases in corporate overhead, including, but not limited to, property taxes and insurance premiums (primarily due to the substantial increase in owned assets).

Current wording

General and administrative expenses increased to $10,054 for the three months ended December 31, 2024 from $5,003 for the three months ended December 31, 2023, representing an increase of $5,051. This increase was primarily attributable to increases in corporate overhead, including, but not limited to, property taxes and insurance premiums (primarily due to the substantial increase in owned assets).

Previous wording

(Loss) gain on fair value of bitcoin, net

Current wording

Gain on fair value of bitcoin

Previous wording

Loss on fair value of bitcoin, net for the three months ended June 30, 2024 was $48,338. As discussed in Notes 2 - Summary of Significant Accounting Policies and Note 5 - Bitcoin above, the Company adopted the amendments per ASC 350-60 in the current period; accordingly, we measured crypto assets within the scope of ASC Topic 350-60 -Intangibles - Goodwill and Other - Crypto Assetsat fair value in accordance with ASC Topic 820 -Fair Value Measurementand included the gains and losses from remeasurement in net income (loss). The loss pertains to the change in bitcoin's fair value from $71,291 per bitcoin on March 31, 2024 to $62,675 per bitcoin on June 30, 2024.

Current wording

Gain on fair value of bitcoin for the three months ended December 31, 2024 was $218,206 as compared to $36,041 for the three months ended December 31, 2023, an increase of $182,165. We measured crypto assets within the scope of ASC Topic 350-60 -Intangibles - Goodwill and Other - Crypto Assetsat fair value in accordance with ASC Topic 820 -Fair Value Measurementand included the gains and losses from remeasurement in net income. The gain for the three months ended December 31, 2024 pertains to the change in bitcoin's fair value from approximately $63,300 per bitcoin on September 30, 2024 to approximately $93,400 per bitcoin on December 31, 2024.

Previous wording

Other income, net was $3,347 for the nine months ended June 30, 2024, compared with other expense, net of $817 for the nine months ended June 30, 2023, which is a change of $4,164. Other income, net for the nine months ended June 30, 2024 consisted primarily of interest income, which increased to $5,909 from $174 for the nine months ended June 30, 2023, an increase of $5,735 due to an increase in short-term overnight investments.

Current wording

Other income, net was $46,032 for the three months ended December 31, 2024, compared with other expense, net of $1,203 for the three months ended December 31, 2023, which is a change of $47,235. Other income (expenses) for the three months ended December 31, 2024 consisted primarily of gain on bitcoin collateral returned of $42,493. The Company did not have any bitcoin collateral in the three months ended December 31, 2023.

Previous wording

Net loss for the three months ended June 30, 2024 was $236,242, a fluctuation of $222,023 compared to net loss of $14,219 for the three months ended June 30, 2023, for the reasons stated above.

Current wording

Net income for the three months ended December 31, 2024 was $246,791, an increase of $220,882 compared to net income of $25,909 for the three months ended December 31, 2023, for the reasons stated above.

Previous wording

We present adjusted EBITDA, which is not a measurement of financial performance under generally accepted accounting principles in the United States ("GAAP"). Our non-GAAP "Adjusted EBITDA" excludes (i) impacts of interest, taxes, and depreciation; (ii) our share-based compensation expense, unrealized gains/losses on securities, and, changes in the fair value of contingent consideration with respect to previously completed acquisitions, all of which are non-cash items that we believe are not reflective of our general business performance, and for which the accounting requires management judgment, and the resulting expenses could vary significantly in comparison to other companies; (iii) non-cash impairment losses related to long-lived assets (including goodwill); (iv) legal fees related to litigation and various transactions, which fees management does not believe are reflective of our ongoing operating activities; (v) severance costs related to certain senior management employees, (vi) gains and losses on disposal of assets, the majority of which are related to obsolete or unrepairable machines that are no longer deployed; and (vii) gains and losses related to discontinued operations that would not be applicable to our future business activities.

Current wording

We present adjusted EBITDA, which is not a measurement of financial performance under GAAP. Our non-GAAP “Adjusted EBITDA” excludes (i) impacts of interest, taxes, and depreciation; (ii) our share-based compensation expense, unrealized gains/losses on securities, and changes in the fair value of contingent consideration with respect to previously completed acquisitions, all of which are non-cash items that we believe are not reflective of our general business performance, and for which the accounting requires management judgment, and the resulting expenses could vary significantly in comparison to other companies; (iii) non-cash impairment losses related to long-lived assets; (iv) realized gains and losses on sales of equity securities, the amounts of which are directly related to the unrealized gains and losses that are also excluded; (v) legal fees related to litigation and various transactions, which fees management does not believe are reflective of our ongoing operating activities; (vi) gains and losses on disposal of assets, the majority of which are related to obsolete or unrepairable machines that are no longer deployed; (vii) gains and losses related to discontinued operations that would not be applicable to our future business activities; and (viii) severance expenses.

Previous wording

Management believes that providing this non-GAAP financial measure that excludes these items allows for meaningful comparisons between the Company's core business operating results and those of other companies, and provides the Company and its management with an important tool for financial and operational decision making and for evaluating its own core business operating results over different periods of time. In addition to management's internal use of non-GAAP Adjusted EBITDA, management believes that Adjusted EBITDA is also useful to investors and analysts in comparing our performance across reporting periods on a consistent basis. Management believes the foregoing to be the case even though some of the excluded items involve cash outlays and some of them recur on a regular basis (although management does not believe any of such items are normal operating expenses necessary to generate our bitcoin related revenues). For example, we expect that share-based compensation expense, which is excluded from Adjusted EBITDA, will continue to be a significant recurring expense over the coming years and is an important part of the compensation provided to certain employees, officers, and directors. Additionally, management does not consider any of the excluded items to be expenses necessary to generate our bitcoin related revenue.

Current wording

Management believes that providing this non-GAAP financial measure that excludes these items allows for meaningful comparisons between the Company's core business operating results and those of other companies, and provides the Company with an important tool for financial and operational decision making and for evaluating its own core business operating results over different periods of time. In addition to management's internal use of non-GAAP adjusted EBITDA, management believes that adjusted EBITDA is also useful to investors and analysts in comparing our performance across reporting periods on a consistent basis. Management believes the foregoing to be the case even though some of the excluded items involve cash outlays and some of them recur on a regular basis (although management does not believe any of such items are normal operating expenses necessary to generate our bitcoin related revenues). For example, we expect that share-based compensation expense, which is excluded from adjusted EBITDA, will continue to be a significant recurring expense over the coming years and is an important part of the compensation provided to certain employees, officers and directors. Additionally, management does not consider any of the excluded items to be expenses necessary to generate our bitcoin-related revenue.

Previous wording

The Company's adjusted EBITDA measure may not be directly comparable to similar measures provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently. The Company's Adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to operating income (loss) or any other measure of performance derived in accordance with GAAP. Although management utilizes internally and presents Adjusted EBITDA, we only utilize and present that measure supplementally and do not consider it to be a substitute for, or superior to, the information provided by GAAP financial results.

Current wording

The Company's adjusted EBITDA measure may not be directly comparable to similar measures provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently. The Company's adjusted EBITDA is not a measurement of financial performance under GAAP and should not be considered as an alternative to operating (loss) income or any other measure of performance derived in accordance with GAAP. Although management utilizes internally and presents adjusted EBITDA, we only utilize that measure supplementally and do not consider it to be a substitute for, or superior to, the information provided by GAAP financial results.

Previous wording

We have not excluded our net (loss) gain on fair value of bitcoin ($48,338 and $107,406 in the three and nine months ended June 30, 2024, respectively), which we now record in our Condensed Consolidated Statements of Operations and Comprehensive Loss as provided in ASC 350-60, as discussed elsewhere in this Quarterly Report on Form 10-Q.

Current wording

We have not excluded our net gain on fair value of bitcoin ($218,206 and $36,041 in the three months ended December 31, 2024 and 2023, respectively), which we now record in our condensed consolidated statements of operations and comprehensive income as provided in ASC 350-60, as discussed in the Form 10-K.

Previous wording

Our primary requirements for liquidity and capital are working capital, capital expenditures, public company costs and general corporate needs. We expect these needs to continue as we further develop and grow our business. Our principal sources of liquidity have been and are expected to be our cash and cash equivalents and bitcoin inventory.

Current wording

Our primary requirements for liquidity and capital are working capital, capital expenditures, loan payments, public company costs and general corporate needs. We expect these needs to continue as we further develop and grow our business. Our principal sources of liquidity have been and are expected to be our cash and cash equivalents, bitcoin inventory and proceeds from our convertible note.

Previous wording

As of June 30, 2024, we had total current assets of $598,835, consisting of cash and cash equivalents, inventory, prepaid expenses and other current assets, bitcoin, investment in debt security and related derivative asset, current assets held for sale, and total assets in the amount of $1,475,575. Our total current liabilities and total liabilities as of June 30, 2024 were $66,985 and $73,376, respectively. We had working capital of $531,849 as of June 30, 2024. We sell the bitcoin we mine to fund operations and to fund capital expenditures. In addition, we have access to equity financing through our At-the-Market offering facility (see Note 13 - Stockholders' Equity and Note 18 - Subsequent Events to our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q).

Current wording

As of December 31, 2024, we had total current assets of $1,225,265, consisting of cash and cash equivalents, inventory, prepaid expenses and other current assets, bitcoin, investment in debt security and related derivative asset, current assets held for sale, and total assets in the amount of $2,779,292. Our total current liabilities and total liabilities as of December 31, 2024 were $96,677 and $757,706, respectively. We had working capital of $1,128,588 as of December 31, 2024. We may sell the bitcoin we mine to fund operations and to fund capital expenditures. In addition, we have $633,812 zero-coupon convertible notes and a $50,000 line of credit with Coinbase as discussed in Note 9 - Loans.

Previous wording

We believe our cash and cash equivalents on hand, together with cash we expect to generate from future operations, will be sufficient to meet our working capital and capital expenditure requirements for a period of at least twelve months from the date of this Quarterly Report on Form 10-Q. We are likely to require additional capital to respond to technological advancements, competitive dynamics or technologies, customer demands, business opportunities, challenges, acquisitions or unforeseen circumstances and in either the short-term or long-term may determine to engage in equity or debt financings. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited. In particular, the ongoing impacts of inflation and rising interest rates, and the conflict between Russia and Ukraine, have resulted in, and may continue to result in, significant disruption and volatility in the global financial markets, reducing our ability to access capital. If we are unable to raise additional funds when or on the terms desired, our business, financial condition and results of operations could be adversely affected.

Current wording

Based on our current plans and business conditions, we believe that existing cash and cash equivalents and bitcoin, together with cash generated from operations, will be sufficient to satisfy our anticipated cash requirements for the next 12 months and for the reasonably foreseeable future until we reach consistent profitability, and we are not aware of any trends or demands, commitments, events or uncertainties that are reasonably likely to result in a decrease in the liquidity of our assets. We are likely to require additional capital to respond to technological advancements, competitive dynamics or technologies, business opportunities, challenges, acquisitions or unforeseen circumstances and in either the short-term or long-term may determine to engage in equity or debt financings. If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be significantly limited. In particular, the ongoing impacts of inflation and fluctuations in interest rates, global conflicts including the conflict between Russia and Ukraine, and increases in tariffs, have resulted in, and may continue to result in, significant disruption and volatility in the global financial markets, reducing our ability to access capital. If we are unable to raise additional funds when or on the terms desired, our business, financial condition and results of operations could be adversely affected.