DarkHorse Technologies Inc.

Current report

Changes in political and geopolitical conditions may be difficult to predict and may adversely affect our business, prospects, operations and financial performance. For example, changes in political and geopolitical conditions may lead to changes in governmental policies, laws and regulations, including with respect to sanctions, taxes, tariffs, surtaxes and other similar import or export duties, import and export controls or restrictions, tariff rate quotas, and the general movement of goods, materials, services and capital, or may lead to uncertainty as to the potential for such changes. Our data centers are located in the United States. In the past, we and our hosting customers have sourced miners and certain other hardware and equipment from suppliers that have previously had, and may continue to have, operations in China and Southeast Asian countries and the servers, graphics processing units, electrical and cooling equipment and other hardware that we expect to require to develop our sites for HPC and AI infrastructure workloads are largely manufactured outside the United States or contain foreign-sourced components. Accordingly, our business, prospects, operations and financial condition may be significantly impacted by such changes in political and geopolitical conditions, and in particular by changes in international trade policies, including the imposition of tariffs, surcharges and other similar import or export duties, or trade restrictions including tariff rate quotas, as well as by uncertainty with respect to the potential for such changes.

Current report

In particular, beginning in 2025, the United States imposed new tariffs on imports from substantially all countries, including countries from which we and our hosting customers have historically sourced miners and other hardware and equipment. In February 2026, the U.S. Supreme Court held that the International Emergency Economic Powers Act does not authorize the imposition of tariffs, and the tariffs imposed under that statute were terminated. The United States subsequently imposed a temporary global tariff under Section 122 of the Trade Act of 1974, which expired in July 2026, and tariffs imposed under other authorities, including Section 232 of the Trade Expansion Act of 1962 (which currently apply to, among other things, steel, aluminum, copper and their derivative products and certain semiconductors) and Section 301 of the Trade Act of 1974, remain in effect. The U.S. government has also initiated additional Section 232 and Section 301 investigations that could result in new tariffs. As a result, tariff rates are continuing to evolve; however, we expect such tariffs as currently in effect or as currently proposed, as applicable, will likely result in higher costs to acquire data center, power and computing equipment and other hardware shipped after the effectiveness of applicable tariffs. While we may revisit our procurement strategy to attempt to mitigate the impact of such tariffs on our business, including by sourcing hardware and equipment from countries subject to lower tariffs, there can be no assurance that any such efforts will be effective. It is also possible that such tariffs and other trade restrictions could limit the availability of data center, power and computing equipment and other hardware, increase the costs to our hosting customers of acquiring and deploying equipment at our sites, disrupt our operations, or adversely impact our growth plans. In addition, certain foreign countries have changed, and others may in the future change, their trade policies in response to changes in U.S. tariff policies, including by imposing reciprocal or retaliatory tariffs, surcharges or other similar import or export duties, and trade restrictions including tariff rate quotas, which may in turn escalate and result in a “trade war” or worsen an existing “trade war”. Any escalated trade war could have a significant adverse effect on world trade and the world economy.

Current report

Further, the U.S. Customs and Border Protection (the “CBP”) or other governmental agencies can dispute the origin of any imports into the U.S., which could in turn result in the imposition of higher tariffs than we previously paid or anticipated with respect to such hardware and equipment. Any such additional tariffs could be material and could materially impact our business, prospects, operations and financial performance. See “—An adverse outcome in our dispute with the CBP regarding the country of origin of certain imported Bitcoin miners could result in material additional tariff liability” below.

Current report

These shifts in trade policies in the United States and other countries are rapidly evolving and difficult to predict. The ultimate impact of any announced or future tariffs, surtaxes, or other similar import or export duties, and trade restrictions will depend on various factors, including what is ultimately implemented, the timing of implementation and the amount, scope and nature of such measures and potential exclusions from the application of those measures. The potential implications of such uncertainty, which include trade barriers, exchange rate fluctuations, rising costs for data center, power and computing equipment and other hardware and broader market contractions, could adversely affect our business, prospects, operations and financial performance.

Current report

An adverse outcome in our dispute with the CBP regarding the country of origin of certain imported Bitcoin miners could result in material additional tariff liability.

Current report

On August 18, 2026, we received a notice from the CBP asserting Chinese origin supplemental import tariffs on certain Bitcoin miners purchased in 2022 by a subsidiary acquired in the Combination. The subsidiary received documentation during importation from the seller validating the non-Chinese origin. The documentation included both a certificate of origin and certificate of manufacture certifying the non-Chinese origin of the miners. In the event that the CBP were to successfully prevail in its allegations of Chinese origin and assert import duties for Chinese origin to this batch of Bitcoin miners, our total tariff liability in respect of these previously purchased miners could be up to $2.3 million, including statutory interest. We believe the CBP allegation of Chinese origin on the imported miners to be without merit and intend to defend against these charges vigorously. In September 2026, we filed a protest with the CBP, and we have not recorded a liability for this matter. If we are unsuccessful, we would owe additional tariffs with respect to the import of such miners, which could be material and could materially impact our business, prospects, operations, financial performance, and liquidity.

Current report

On July 22, 2026, the Company issued 32,158 common shares in a transaction exempt from registration under the Securities Act of 1933, as amended, to a service provider in settlement of services received.

Previous report

Our expansion into AI and HPC data-center infrastructure is subject to substantial development, financing, operational, technological and market risks, and we may not successfully implement or realize the anticipated benefits of this strategy.

Previous report

Our business strategy includes diversifying our operations beyond Bitcoin mining by pursuing opportunities involving AI, HPC and other high-density computing applications. Developing, converting and operating facilities for these applications is capital intensive and requires substantial operational and financial resources, specialized technical expertise, qualified personnel, reliable and significant power capacity, advanced cooling and networking systems, specialized computing equipment and relationships with customers, utilities, equipment suppliers, contractors and other third parties. We have limited experience developing or operating AI or HPC data-center infrastructure at scale, and there can be no assurance that we will be able to develop the necessary capabilities, obtain the necessary resources or successfully execute this strategy.

Previous report

The development, expansion or conversion of our existing or planned facilities for AI or HPC applications may be delayed, disrupted or cost more than anticipated. Such projects may be adversely affected by, among other things, delays in obtaining financing, permits, regulatory approvals, power commitments or utility interconnections; delays in the delivery or installation of equipment; difficulties integrating new equipment into existing infrastructure; shortages of skilled labor, materials, electrical equipment, servers, graphics processing units, cooling systems or other components; defects in design, engineering or construction; failures by contractors, vendors or other counterparties to perform their obligations; changes in applicable laws or regulations; and diversion of management’s attention and other resources. Actual project costs may exceed our budgets, and we may not have sufficient capital to complete a project as planned or at all. Delays, cost overruns or other development difficulties could prevent or delay our ability to generate revenue from a facility and could materially adversely affect our business, financial condition and results of operations.

Previous report

We may be required to commit substantial capital and operational resources to develop or convert facilities before securing customer contracts or other binding commitments. We may be unable to attract customers, enter into contracts on commercially acceptable terms or generate sufficient customer demand to support the facilities and capacity that we develop. Even if we enter into customer contracts, such contracts may not generate the revenue or returns we anticipate, may require us to make significant additional investments or may expose us to customer concentration and counterparty credit risks. Customers may delay or reduce their deployment requirements, terminate or elect not to renew their agreements, seek to renegotiate pricing or other terms or otherwise fail to perform their contractual obligations.

Previous report

The markets for AI and HPC infrastructure are rapidly evolving and highly competitive. We may compete against established data-center operators, cloud-service providers, technology companies and other Bitcoin mining companies seeking to diversify into similar businesses, many of which have substantially greater financial, technical, operational and personnel resources, longer operating histories and stronger customer relationships than we do. Competition for suitable sites, power capacity, equipment, financing, customers and qualified personnel may increase our costs and limit our ability to execute our strategy.

Previous report

Technological developments and customer requirements in these markets may change rapidly. Facilities and equipment that we develop or acquire may become obsolete or may not satisfy future requirements relating to computing density, power availability, cooling, networking, security, redundancy, latency, efficiency or other technical specifications. We may be required to make significant additional capital expenditures to modify or replace our infrastructure and equipment, and we may be unable to do so on a timely or cost-effective basis.

Previous report

AI and HPC customers may also require highly reliable infrastructure and may require us to satisfy service-level, uptime, security and performance commitments. Power outages, cooling-system failures, network disruptions, equipment failures, cybersecurity incidents, construction defects, natural disasters or other interruptions could prevent us from satisfying these commitments. Such events could result in service credits, contractual claims, loss of revenue, termination or non-renewal of customer agreements, damage to customer equipment, litigation and reputational harm. Contractual limitations on our liability may not be enforceable or may not adequately protect us from these losses.

Previous report

If we are unable to successfully develop, finance, market and operate AI or HPC infrastructure, we may not realize the anticipated benefits of our diversification strategy. We could incur substantial costs without generating corresponding revenue, be required to abandon or modify projects, recognize impairment charges relating to facilities or equipment or divert resources from our existing operations. Any of these events could materially adversely affect our business, financial condition, results of operations and prospects.

Previous report

Our mining equipment has been subject to impairment charges, and we may be required to recognize additional impairment losses in the future.

Previous report

During the three and six months ended June 30, 2026, we recorded an impairment charge of $7.0 million for property and equipment related to the decline in Bitcoin prices. Our mining equipment may become impaired as a result of changes in market or operating conditions, reduced mining profitability, technological obsolescence, reduced expected mining output or changes in expected future economic benefits. If any of these factors deteriorate, or if additional mining equipment becomes idle or is not expected to return to use, we may be required to recognize additional impairment charges, which could adversely affect our financial condition and results of operations.

Previous report

The conversion of our facilities from bitcoin mining to artificial intelligence and high-performance computing use is expected to result in the loss of favorable state and local tax treatment, which would increase our operating costs.

Previous report

A substantial portion of our operations is located in the state of Kentucky. Kentucky law provides certain tax exemptions for qualifying commercial cryptocurrency mining operations, including exemptions from sales and use taxes on electricity and certain tangible personal property and the utility gross receipts license tax. We currently benefit from these exemptions at our Kentucky facilities.

Previous report

These exemptions do not apply to artificial intelligence, high-performance computing, or general data center operations. Accordingly, as we convert facilities from bitcoin mining to artificial intelligence and high-performance computing use, we expect to lose these exemptions with respect to the converted capacity. The loss of these exemptions would increase our electricity costs at the affected facilities. In addition, artificial intelligence and high-performance computing equipment, which generally carries a higher assessed value than bitcoin mining equipment, is expected to increase our tangible personal property tax liability.

Previous report

The Kentucky Qualified Data Center Incentive Program provides a state sales and use tax exemption on qualifying computing equipment only. It does not exempt electricity or reduce local property tax, school tax, or occupational tax. Participation is subject to various eligibility and other conditions. We have not determined whether we will apply for that program, and we can provide no assurance that we would qualify or that its benefits would be material relative to the exemptions we expect to lose.

Previous report

Local zoning and permitting requirements, moratoriums on data center development, and community opposition may delay, restrict, or prevent the development, conversion, expansion, or continued operation of our facilities.

Previous report

Our operations involve large numbers of high-powered computers and supporting infrastructure that consume substantial amounts of electricity, may consume water, and can generate noise. Data center development, including cryptocurrency mining and artificial intelligence and high-performance computing operations, has become the subject of increasing public attention and, in a number of communities across the United States, organized opposition.

Previous report

A growing number of state, county, and municipal governments have adopted or are considering measures that restrict data center development. Such measures may include temporary moratoriums on new data center development or permitting while applicable regulatory standards are studied or revised and may be adopted in response to community opposition or concerns regarding environmental, infrastructure or other impacts.

Previous report

Communities that have not previously adopted zoning standards specific to data centers may do so, and the standards ultimately adopted may be more restrictive than those in effect at the time a site was acquired, developed, or placed into service. Such standards may include setback requirements measured from property lines, limits on facility size or footprint, screening, landscaping and berming requirements, noise limits measured at the property line, water use restrictions, decommissioning bond requirements, and restrictions on particular construction methods or building types. Depending on how such standards are formulated, they may materially restrict, or in some cases effectively preclude, the development or expansion of data center facilities on parcels that would otherwise be suitable.

Previous report

If standards of this kind were adopted in a jurisdiction in which we operate, facilities we operate today could fail to obtain or retain legal nonconforming use status, could be required to be modified at significant cost, or could become subject to operating restrictions. Approvals we require may be subject to public hearing processes that are lengthy, uncertain in outcome, and susceptible to organized opposition, and adverse action in one jurisdiction may influence the approach taken by others, including jurisdictions in which we operate or may seek to operate.

Previous report

These matters could result in delays in or denial of permits and approvals; requirements that we implement costly noise, screening, water, or other mitigation measures; restrictions on operating hours or the scale of our operations; obligations to post decommissioning bonds or provide other financial assurances or community commitments as a condition of approval; fines or penalties; litigation; reputational harm; and, in certain circumstances, the curtailment or shutdown of facilities that cannot satisfy applicable requirements. Any of the foregoing could delay or prevent execution of our conversion and growth strategy, increase our costs, reduce our operating capacity, and materially adversely affect our business, financial condition, results of operations, and prospects.

Previous report

Our Rights Agreement includes terms and conditions that could discourage a takeover or other transaction that stockholders may consider favorable.

Previous report

On August 7, 2026, our Board of Directors adopted a shareholder rights plan, pursuant to the Rights Agreement. The Rights Agreement is intended to ensure, to the extent possible, that all shareholders of the Company are treated fairly in connection with a take-over bid or other acquisition of Voting Shares that could result in a person becoming the beneficial owner of 20% or more of the outstanding Voting Shares of the Company. Pursuant to the Rights Agreement, one Right will attach to each Voting Share outstanding as of the close of business on August 20, 2026, the Record Time, and to each Voting Share issued after the Record Time and prior to the earlier of the Separation Time and the Expiration Time. From and after the Separation Time and prior to the Expiration Time, each Right entitles its holder to purchase one common share of the Company at an exercise price equal to three times the market price of a common share determined as of the Separation Time, subject to adjustment in accordance with the Rights Agreement. Upon the occurrence of certain triggering events, each Right, other than Rights beneficially owned by an Acquiring Person or certain related persons, will entitle its holder to purchase common shares having an aggregate market value equal to twice the exercise price of the Right. Alternatively, in certain circumstances, the Company may exchange each outstanding Right, other than Rights that have become void under the Rights Agreement, for one common share, subject to adjustment. The Rights will expire on August 10, 2027, unless earlier redeemed, exchanged or otherwise terminated in accordance with the Rights Agreement.

Previous report

The Board of Directors adopted the Rights Agreement to protect the interests of the Company’s shareholders. In general terms, subject to the terms and exceptions set forth in the Rights Agreement, the Rights Agreement is designed to impose significant dilution upon any person that becomes an Acquiring Person by acquiring beneficial ownership of 20% or more of the outstanding Voting Shares of the Company without complying with the Rights Agreement. As a result, the overall effect of the Rights Agreement and the issuance of the Rights may be to render more difficult or discourage a take-over bid, merger, arrangement or other business combination or acquisition involving the Company that is not approved by the Board.

Previous report

The Rights Agreement is intended to protect shareholders’ interests, including by providing the Board of Directors sufficient time to make informed judgments and take actions that the Board of Directors determines are in the best interests of the Company and its shareholders. Nevertheless, the Rights Agreement may be considered to have certain anti-takeover effects, including potentially discouraging a third party from attempting to obtain a substantial position in the Voting Shares or seeking to obtain control of the Company and discouraging a take-over attempt that shareholders may consider favorable or that could result in a premium over the market price of the Company’s common shares. Even in the absence of a take-over attempt, the Rights Agreement may adversely affect the prevailing market price of the Company’s common shares if it is viewed as discouraging take-over attempts in the future.

Previous report

For additional information regarding the Rights Agreement, refer to Note 16 Subsequent Events to the condensed consolidated financial statements.

Previous report

None.