DarkHorse Technologies Inc.
For the period ended Dec 31, 2024. Filed Mar 28, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 28, 2025
DRK$1.57+0.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-13.
0001591956-24-000004
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-28.
0001628280-25-015457
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 72 previous paragraphs and 74 current paragraphs.
25 unchanged; 17 reworded; 32 added; 28 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 1 previous and 1 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (32)
Current report
As of December 31, 2024, we owned approximately 14,000 miners, of which approximately 6,300 were in service, and a total hashrate capacity of 0.76 exahash per second (“EH/s”). We are strategizing for our future growth by refreshing a significant portion of our fleet with newer-generation machines to bolster efficiency and developing a 8 megawatt (“MW”) site in Iowa. Vertically integrating with self owned facilities, like the Iowa site, allows us to reduce our reliance on third-parties and decrease our overall cost to mine a Bitcoin. As a result of our strategic changes, during the third and fourth quarter of 2024 mining production decreased as we focused on our long-term strategic goals of transitioning to lower-cost hosting sites, vertically integrating to own our own sites, and refreshing our fleet with newer-generation machines.
Current report
As of December 31, 2024, we held approximately 14.9 Bitcoin. The fair value of our Bitcoin as of December 31, 2024 was approximately $1.4 million on our consolidated balance sheet. We account for Bitcoin as indefinite-lived intangible assets. Effective January 1, 2024, we early adopted ASU 2023-08, Intangibles - Goodwill - and Other - Crypto Assets (Subtopic 350-60): Accounting For and Disclosure of Crypto Assets(“ASU 2023-08”) and recorded a $20,000 decrease to the opening balance of accumulated deficit and an increase to cryptocurrency. The new guidance requires Bitcoin to be valued at fair value each reporting period with changes in fair value recorded in operating expenses in the consolidated statement of operations. The fair value of Bitcoin is measured using the period-end closing price from the Company’s principal market. When Bitcoin is sold, the gains and losses from such transactions are measured as the difference between the cash proceeds and the carrying basis of the Bitcoin as determined on a first in-first out (“FIFO”) basis and are recorded within the same line item, Change in fair value of Bitcoin, in the consolidated statements of operations.
Current report
•On March 7, 2025, we reached a settlement with Gryphon Digital Mining, Inc. to resolve all claims against each other on mutually satisfactory terms that will result in the complete dismissal of the outstanding litigation. We were required to make no payments under the settlement agreement.
Current report
•On March 10, 2025, our new 8 MW hosting site in Iowa was energized.
Current report
•On March 6, 2025, we received a notice from the Nasdaq Listing Qualifications Department of the Nasdaq Stock Market LLC stating that the bid price of our common shares for the last 30 consecutive trading days had closed below the minimum $1.00 per share required for continued listing under Listing Rule 5550(a)(2) (the “Listing Rule”). We have a period of 180 calendar days, or until September 2, 2025, to regain compliance with the Listing Rule.
Current report
•On January 29, 2025, we granted 1,684,783 restricted stock units with a fair value of $1.5 million and vesting periods of two years. On March 4, 2025, we canceled 927,310 RSUs that were granted on January 29, 2025.
Current report
•On January 21, 2025, we issued 507,000 common shares for the exercise of pre-funded warrants issued in November 2024.
Current report
•On January 16, 2025, we ended our hosting agreement with Rebel Mining Company, LLC (the “Rebel Hosting Agreement”) and agreed to a termination and settlement amount of $2.4 million payable to us in satisfaction of all obligations of the Rebel Hosting Agreement, and it constitutes a final settlement of all amounts owed by either party.
Current report
•On January 3, 2025, we entered into a sales agreement (the “AGP Agreement”) with A.G.P./Alliance Global Partners (the “Sales Agent”). In accordance with the terms of the AGP Agreement, we may offer and sell from time to time through or to the Sales Agent, as agent or principal, the Company's common shares having an aggregate offering price of up to $8.0 million. Subsequent to December 31, 2024, we sold 210,448 common shares for approximately $0.1 million of net proceeds under the AGP Agreement.
Current report
We had revenue of $16.6 million during 2024 compared to $21.9 million during 2023. The $5.3 million decrease in revenue is due to the decrease of $3.1 million in revenues from our Bitcoin mining operation and a decrease of $2.2 million in service and product. The Bitcoin mining revenue decreased primarily due to one of our previous hosting providers taking approximately 3,300, or 22%, of our mining machines offline in the third quarter of 2024 to relocate them and the majority of such machines are still pending redeployment. In addition, beginning the third quarter of 2024, we are in the process of removing our older mining equipment and replacing it with newer generation machines. This is expected to be an ongoing process through 2025, which may result in further fluctuations in exahash. There was also a decrease in revenues of $2.2 million related to our former Service and Product segment which was sold in December 2023.
Current report
Cost of Revenue (exclusive of depreciation and amortization expense)
Current report
For the years ended December 31, 2024 and 2023, direct cost of revenues were $13.4 million and $15.9 million, respectively, representing a decrease of $2.5 million primarily due to lower hosting fees due to machines being taken offline to be relocated and the transition of removing older mining machines and replacing them with newer generation machines, as well the prior year disposal of our Service and Product segment.
Current report
Sales and marketing expenses were nil and $0.9 million for the years ended December 31, 2024 and 2023, respectively. The decrease of $0.9 million was due to the sale of our Service and Product segment in December 2023 and we no longer have sales and marketing expenses.
Current report
Research and development expenses were nil and $1.0 million for the years ended December 31, 2024 and 2023, respectively. The decrease of $1.0 million was due to the sale of our Service and Product segment in December 2023 and we no longer have research and development expense.
Current report
Depreciation and amortization expense was $7.1 million and $6.2 million for the years ended December 31, 2024 and 2023, respectively. The increase of $0.9 million was primarily due to depreciation related to our Bitcoin mining machines.
Current report
Impairment of Property and Equipment
Current report
Impairment of property and equipment was $1.1 million and nil for the years ended December 31, 2024 and 2023, respectively, and related to idle mining equipment not expected to return to use.
Current report
Impairment of Other Assets
Current report
Impairment of other assets was $1.1 million and nil for the years ended December 31, 2024 and 2023, respectively, and primarily related to a $0.9 million impairment to our prepaid service fees held by Rebel Mining Company, and a $0.2 million impairment for an uncollectible other receivable.
Current report
Change in Fair Value of Bitcoin
Current report
Change in fair value of Bitcoin was $0.7 million and nil for the years ended December 31, 2024 and 2023, respectively. Effective January 1, 2024, we early adopted ASU 2023-08 and recorded a $20,000 decrease to the opening balance of accumulated deficit and an increase to digital assets. The gain in the year ended December 31, 2024 is the change in fair value of the Bitcoin held, as well as the gains and losses from when the Bitcoin was sold. Sale transactions are measured as the difference between the cash proceeds and the carrying basis of the Bitcoin as determined on a FIFO basis.
Current report
Impairment of Bitcoin was nil and $0.7 million for the years ended December 31, 2024 and 2023, respectively. Effective January 1, 2024, we early adopted ASU 2023-08, and in accordance with the new guidance we no longer report impairment of Bitcoin and realized gain on sale of Bitcoin separately. Instead, current period comparable information is reported in the line item Change in fair value of Bitcoin in the consolidated statement of operations.
Current report
Investment Income
Current report
Investment income was $9.0 million and nil for the years ended December 31, 2024 and 2023, respectively. In 2024, investment income related to a $4.1 million realized gain on the partial sale of our equity investment in Core Scientific Inc., and a $4.9 million unrealized gain on our equity investment in Core Scientific Inc.
Current report
Other Income, Net
Current report
Our principal sources of liquidity are our existing cash, cash equivalents and available-for-sale equity securities. We expect to fund our operations going forward with existing cash resources, anticipated revenue from our Bitcoin mining operation, and cash that we may raise through future financing transactions. At December 31, 2024, we had cash and cash equivalents of $5.4 million compared to $0.6 million at December 31, 2023. As of December 31, 2024, we had working capital of $13.9 million, reflecting an increase in current assets of $4.3 million and a decrease in current liabilities of $1.5 million primarily related to an increase in cash and the unrealized gain on our investment in equity securities. Cash management continues to be a priority and we are phasing out high-cost hosting contracts, leveraging our access to capital, and reducing our overall mining costs.
Current report
At-the-Market Offering Program. On January 3, 2025, we entered into a sales agreement (the “AGP Agreement”) with A.G.P./Alliance Global Partners (the “Sales Agent”). In accordance with the terms of the AGP Agreement, we may offer and sell from time to time through or to the Sales Agent, as agent or principal, the Company's common shares having an aggregate offering price of up to $8.0 million (the “Placement Shares”). The AGP Agreement can be terminated by either party by giving two days written notice. We expect that any proceeds received from the facility will be used primarily for working capital and general corporate purposes and in furtherance of our corporate strategy which may include to accelerate efficiency, for the purchase/upgrade of the Company’s mining fleet, and vertical integration of infrastructure.
Current report
Neither us nor the Sales Agent are obligated to sell any Placement Shares pursuant to the AGP Agreement. Subject to the terms and conditions of the AGP Agreement, the Sales Agent will use commercially reasonable efforts, consistent with its normal trading and sales practices and applicable state and federal law, rules and regulations and the rules of The Nasdaq Capital Market (“Nasdaq”), to sell the Placement Shares from time to time based upon our instructions, including any price, time or size limits or other customary parameters or conditions we may impose. Sales of the Placement Shares, if any, will be made on Nasdaq at market prices by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 of the Securities Act of 1933, as amended.
Current report
Securities Purchase Agreement. On November 19, 2024, we entered into a Securities Purchase Agreement with a single institutional investor pursuant to which we issued and sold (i) 2,350,000 common shares of the Company (the “Shares”), and (ii) pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 1,875,353 of our common shares (such offering, the “Registered Offering”). The Shares had a purchase price of $1.42 per share; and the Pre-Funded Warrants had a purchase price of $1.4199 per share, have an exercise price of $0.0001 per share, are exercisable immediately, and will expire when exercised in full. The net proceeds from the Registered Offering, after deducting the placement agent's fees and other offering expenses payable by us, was approximately $5.4 million.
Current report
Contractual Commitments
Current report
In September 2024, we entered into a letter of intent with Simple Mining LLC (“Simple Mining”) to build-out a 12.5 MW site in Iowa with Simple Mining managing the build-out of the infrastructure for the new mining site. Due to delays in permitting and timeline, we shifted to a different site, under the same construct and power cost assumptions, reducing the overall capacity from 12.5 MW to 8 MW. For the year ended December 31, 2024, we have made payments of $1.4 million towards the infrastructure.
Current report
Subsequent to December 31, 2024, we incurred additional costs of $1.4 million towards the infrastructure of the new 8 MW mining site in Iowa. The 8 MW site was energized on March 10, 2025. In March 2025, we entered into a Managed Services Agreement with Simple Mining to operate the site on our behalf.
Removed paragraphs (28)
Previous report
Share Consolidation
Previous report
On June 28, 2023, we filed Articles of Amendment to effect a share consolidation (also known as a reverse stock split) of our issued and outstanding common shares on a 1-for-7 basis. The share consolidation became effective on June 28, 2023. All share and per share amounts have been restated for all periods presented to reflect the share consolidation.
Previous report
We owned approximately 13,530 miners as of December 31, 2023, of which approximately 12,800 were in service. We do not have scheduled downtime for our miners. We periodically perform both scheduled and unscheduled maintenance on our miners, but such downtime has not historically been significant. Depending on the type of repair, the miner may run at a reduced speed or be taken offline. We use multiple software programs to monitor the performance of our machines. The miners owned as of December 31, 2023 have a range of energy efficiency (joules per terahash – “J/th”) of 21.5 to 38 J/th with an average energy efficiency of 28.4 J/th. The miner efficiency is an indication of how efficient we can earn Bitcoin and minimize cost to run the miner.
Previous report
As of December 31, 2023, we held approximately 23.8 Bitcoin. The carrying value of our Bitcoin as of December 31, 2023 was $1.0 million on our consolidated balance sheet. We account for our Bitcoin as indefinite-lived intangible assets, which are subject to impairment losses if the fair value of our Bitcoin decreases below their carrying value at any time since their acquisition. Impairment losses cannot be recovered for any subsequent increase in fair value. The carrying value of each Bitcoin we held at the end of each reporting period reflects the lowest price of one Bitcoin quoted on the active exchange at any time since its acquisition. Therefore, negative swings in the market price of Bitcoin could have a material impact on our earnings and on the carrying value of our Bitcoin.
Previous report
•On January 16, 2024 we reached a settlement agreement (the “Settlement Agreement”) with Core Scientific Inc., which was approved by a United States Bankruptcy Judge on January 16, 2024 as part of Core Scientific’s emergence from bankruptcy, for $10.0 million of Core Scientific’s equity. The Settlement Agreement includes access to potential additional funds for interest as well as an additional equity pool if the value of Core Scientific’s equity decreases in the 18 months after the date of the Settlement Agreement commensurate with the other unsecured creditors. On January 23, 2024, we received 2,050,982 common shares of Core Scientific Inc. trading under the Nasdaq symbol CORZ.
Previous report
•In January 2024, we granted 1,114,942 RSUs with a fair value of $2.2 million and vesting periods of up to two years and 246,150 options with a fair value of $0.5 million and a vesting period of 11 months.
Previous report
•Subsequent to December 31, 2023, pursuant to the Modified Hertford Agreement, we issued 2,422,710 common shares for the conversion of 16,959 Series H Preferred Shares.
Previous report
•On October 6, 2023, in accordance with the cure period, we terminated the Gryphon MSA. In November 2023, Gryphon indicated that upon receipt of certain information it would remit outstanding Bitcoin proceeds, less fees and expenses that we assert is currently held by Gryphon on behalf of us, which we believe amounts to approximately 21.6 Bitcoin and approximately $0.6 million of revenue at December 31, 2023, before factoring in fees and expenses. Due to the uncertainty regarding when we would receive the Bitcoin, the Bitcoin proceeds, less fees and expenses, will be recognized when received.
Previous report
We had revenue of $21.9 million during 2023 compared to $6.1 million during 2022. The $15.8 million increase in revenue is due to the increase of $16.3 million in revenues from our digital mining operation, offset by a decrease of $0.5 million in service and product. The majority of our revenue was derived from digital currency mining and data management services. Income from our mining segment is a result of Bitcoin mining activities in the United States. Income from our product and services segment is primarily generated in the United States. On December 28, 2023, we sold our service and product segment.
Previous report
Cost of Revenue
Previous report
For the years ended December 31, 2023 and 2022, direct cost of revenues were $15.9 million and $3.4 million, respectively, representing an increase of $12.5 million primarily due to the increase in miners deployed related to our digital mining operation.
Previous report
Sales and marketing expenses were $0.9 million and $1.0 million for the years ended December 31, 2023 and 2022, respectively. The decrease of $0.1 million was primarily due to a $0.2 million decrease in employee related costs associated with a lower average headcount, offset by an increase in share-based compensation.
Previous report
Research and development expenses were $1.0 million and $0.6 million for the years ended December 31, 2023 and 2022, respectively. The increase of $0.4 million was primarily due to a $0.2 million increase in employee and related expenses associated with internal projects, and $0.2 million due to severance costs.
Previous report
Depreciation and amortization expense was $6.2 million and $28.3 million for the years ended December 31, 2023 and 2022, respectively. The decrease of $22.1 million was primarily due to fully amortized supplier agreements related to our digital mining machines.
Previous report
Impairment of Bitcoin was $0.7 million and $1.1 million for the years ended December 31, 2023 and 2022, respectively. The decrease of $0.4 million was due to a reduction inimpairment losses recognized on our Bitcoin. An impairment analysis is performed daily to determine if the lowest intraday price of Bitcoin is lower than the Company’s carrying value for Bitcoin until the Company’s Bitcoin is sold or until the end of the reporting period, whichever comes first. If the carrying value of the digital assets exceeds the fair value based on the lowest intraday quoted price as reported in our principal market during the period, an impairment loss has occurred with respect to those digital assets in the amount equal to the difference between their carrying values and the price determined.
Previous report
Impairment of Mining Equipment
Previous report
For the year ended December 31, 2022, adverse changes in the business climate, including the decline in the price of Bitcoin and two vendor bankruptcy filings, indicated that an impairment triggering event occurred, and it was determined the carrying value of mining equipment exceeded its estimated fair value. As a result of the analysis, an impairment charge on mining equipment of $75.9 million was recorded for the year ended December 31, 2022.
Previous report
Interest Income and Other Expense, Net
Previous report
Impairment of Investments
Previous report
Impairment of investments was nil and $14.5 million for the years ended December 31, 2023 and 2022, respectively. The decrease of $14.5 million was due to a prior year $12.4 million impairment loss recognized on our Filecoiner investments, and $2.1 million impairment loss recognized on our Silicon Valley Technology Partners Preferred Shares. The fair value of the Filecoiner investments was impacted by the decrease in the price of Filecoin since the time of the investments resulting in an impairment.
Previous report
Forgiveness of Note Receivable
Previous report
Forgiveness of note receivable was nil and $13.1 million for the years ended December 31, 2023 and 2022, respectively. The decrease of $13.1 million was due to the prior year forgiveness of our note receivable, including accrued interest, with Gryphon which occurred when the Merger Agreement with Gryphon was terminated by us on April 4, 2022.
Previous report
Provision for Losses on Deposit for Mining Equipment
Previous report
Provision for deposit on mining equipment was nil and $10.0 million for the years ended December 31, 2023 and 2022, respectively. The decrease of $10.0 million was due to a prior year provision made for the deposit we made to NuMiner Global, Inc. for the purchase of mining machines.
Previous report
We have recurring losses from operations. Our primary source of cash flow is generated from digital mining revenue and service revenue through December 28, 2023. In addition, we have financed our operations through proceeds from the issuance of private and public sales of securities. At December 31, 2023, we had cash and cash equivalents of $0.6 million compared to $1.3 million at December 31, 2022. As of December 31, 2023, we had working capital of $8.2 million, reflecting an increase in current assets of $3.2 million and a decrease in current liabilities of $0.9 million compared to December 31, 2022. The increase in current assets was primarily related to a $10.0 million recovery of a deposit for prepaid hosting services, primarily offset by decreases of $3.8 million for notes receivable, $1.7 million for cash, restricted cash, and digital asset related balances, and $1.1 million for prepaid services and other. The decrease in current liabilities was primarily related to a decrease in accounts payable and accrued liabilities. Cash management continues to be a top priority. We expect to incur negative operating cash flows as we work to increase our digital mining revenue and maintain operational efficiencies.
Previous report
In August 2023, we entered into a Securities Purchase Agreement (the “Purchase Agreement”) pursuant to which we issued to two investors a total of 13,764 of our Series H Preferred Shares and a total of 1,966,293 common share purchase warrants (the “Warrants”), each of which entitled the holder to purchase one of our common shares (the “Warrant Shares”). Pursuant to the terms of the Purchase Agreement, we received gross proceeds of $3.0 million. We issued a total of 1,377 Series H Preferred Shares and 196,629 warrants as a finder’s fee for the transaction with an aggregate fair value of $0.5 million. Pursuant to the terms of the Purchase Agreement, we will reserve for issuance the maximum aggregate number of common shares that are issuable upon exercise in full of the Warrants at any time.
Previous report
The Warrants issued in connection with the Purchase Agreement are exercisable beginning February 23, 2024 at an initial exercise price of $2.75 per share and have a term of three years from the date of issuance. The exercise price of the Warrants are subject to adjustment for certain stock splits, stock combinations and dilutive share issuances.
Previous report
Significant changes from our current forecasts, including but not limited to: (i) shortfalls from projected mining earning levels; (ii) increases in operating costs; (iii) fluctuations in the value of cryptocurrency; and (iv) inability to maintain compliance with the requirements of the NASDAQ Capital Market and/or inability to maintain listing with the NASDAQ Capital Market could have a material adverse impact on our ability to access the level of funding necessary to continue our operations at current levels. If any of these events occurs or we are unable to generate sufficient cash from operations or financing sources, we may be forced to liquidate assets where possible and/or curtail, suspend or cease planned programs or operations generally or seek bankruptcy protection or be subject to an involuntary bankruptcy petition, any of, which would have a material adverse effect on our business, results of operations, financial position and liquidity.
Reworded paragraphs (17)
Previous wording
In January 2022, we commenced operations of our digital mining business and are dedicated to becoming a leader in the Blockchain and Crypto Industry. We have established and continue to grow an enterprise-scale mining operation through the procurement of mining equipment and partnering with experienced service providers. In addition to digital mining, through December 28, 2023, we delivered data management and desktop and application virtualization solutions through hybrid cloud, cloud and on premise implementations by its reseller network. We achieved this through a combination of containerized applications, virtual desktops, virtual storage and physical hyper-converged platforms. On December 28, 2023, we sold our service and product segment which included HVE ConneXions and Unified ConneXions.
Current wording
In January 2022, we commenced operations of our Bitcoin mining business and are dedicated to becoming a leader in the blockchain and cryptocurrency industry. We have established and continue to grow an enterprise-scale mining operation through the procurement of mining equipment and partnering with experienced service providers. In addition to Bitcoin mining, through December 28, 2023, we delivered data management and desktop and application virtualization solutions through hybrid cloud, cloud and on premise implementations by its reseller network. We achieved this through a combination of containerized applications, virtual desktops, virtual storage and physical hyper-converged platforms. On December 28, 2023, we sold our Service and Product segment which included HVE ConneXions and Unified ConneXions.
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. We do not currently plan to engage in regular trading of Bitcoin (other than as necessary to convert our Bitcoin into U.S. dollars) or to 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. 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. We have a hybrid treasury strategy to hold Bitcoin when possible, and sell at peaks or sell to fund working capital requirements.
Current wording
We obtain Bitcoin as a result of our mining operations, and when necessary we sell Bitcoin to support our operations and strategic growth. We mine Bitcoin in Missouri, Texas and Iowa, which these states do not have any material state-specific regulatory restrictions on the mining of Bitcoin. However, it is possible that these states or other states in which we may seek to operate may create laws that would impede Bitcoin mining. We do not currently plan to engage in regular trading of Bitcoin other than sales to convert our Bitcoin into U.S. dollars. Decisions to hold or sell our Bitcoin is currently determined by management by analyzing forecasts and monitoring the market in real time. We have a hybrid treasury strategy to hold Bitcoin when possible, and sell to fund working capital requirements.
Previous wording
General and administrative expenses were $15.8 million and $24.1 million for the years ended December 31, 2023 and 2022, respectively. The decrease of $8.3 million was primarily due to decreases of approximately $6.1 million in share-based compensation related to awards, $5.8 million associated with outside services primarily related to our 2022 expansion into the digital mining industry, $1.9 million for costs related to former proposed merger transaction that was terminated in 2022, and $0.3 million in other costs. These decreases were offset by increases of $2.8 million for legal expenses associated with litigation with Core Scientific Inc. and Gryphon Digital Mining Inc., a prior year nonrecurring adjustment of $1.4 million for a change in fair value of a crypto asset payable, $0.9 million related to formation and operating costs for MEOA, our special purpose acquisition company (“SPAC”), $0.5 million of additional insurance cost, and $0.2 million in director fees.
Current wording
General and administrative expenses were $12.4 million and $15.8 million for the years ended December 31, 2024 and 2023, respectively. The decrease of $3.4 million was primarily due to a decrease of $1.2 million in legal fees associated with the 2023 litigation with Core Scientific Inc. and Gryphon Digital Mining Inc., a decrease of $0.9 million related to operating costs for our former special purpose acquisition company which no longer exists for 2024, a $0.7 million decrease associated with outside services related to our expansion into the cryptocurrency industry, a decrease of $0.6 million for employee and related expenses, a decrease of $0.4 million in investor relations, and a decrease of $0.3 million in insurance cost. These decreases were offset by an increase of $0.5 million in share-based compensation primarily related to awards to certain executives, and a $0.3 million increase in costs related to strategic business growth.
Previous wording
Loss on disposal of property and equipment was $1.0 million and nil for the years ended December 31, 2023 and 2022, respectively, and related to the sale of mining equipment. During the year ended December 31, 2023, we sold 3,336 miners that were included in mining equipment, for cash proceeds of $4.5 million.
Current wording
Loss on disposal of property and equipment was $3.5 million and $1.0 million for the years ended December 31, 2024 and 2023, respectively, and related to the sale of mining equipment. We sold 3,263 and 3,336 miners during the years ended December 31, 2024 and 2023, respectively, for proceeds of $1.0 million and $4.5 million, respectively.
Previous wording
Provision for losses on deposits due to vendor bankruptcy filings was $8.5 million and $16.1 million for the years ended December 31, 2023 and 2022, respectively, primarily as a result of two vendors filing for Chapter 11 bankruptcy.
Current wording
Provision for losses on deposits due to vendor bankruptcy filings was nil and $8.5 million for the years ended December 31, 2024 and 2023, respectively, and in the prior year is primarily as a result of two vendors filing for Chapter 11 bankruptcy.
Previous wording
Impairment of acquired intangible assets were $3.0 million and $13.2 million for the years ended December 31, 2023 and 2022, respectively. For the year ended December 31, 2023, an impairment charge of $1.7 million was recorded for the carbon credits held for future use due to a certain vendor who was not able to perform under terms of the agreement. In addition, an impairment charge of $1.2 million was recorded for one supplier agreement due to an adverse change in the business climate which indicated that an impairment triggering event occurred. For the year ended December 31, 2022, an impairment charge of $13.2 million was recorded for supplier agreements due to adverse changes in the business climate, including the decline in the price of Bitcoin and two of our vendors, Core Scientific and Compute North filing for bankruptcy.
Current wording
Impairment of acquired intangible assets were nil and $3.0 million for the years ended December 31, 2024 and 2023, respectively. For the year ended December 31, 2023, an impairment charge of $1.7 million was recorded for carbon credits held for future use due to a certain vendor who was not able to perform under terms of the agreement. In addition, an impairment charge of $1.2 million was recorded for one supplier agreement due to an adverse change in the business climate which indicated that an impairment triggering event occurred.
Previous wording
Realized gain on sale of Bitcoin was $1.1 million and $19,000 for the years ended December 31, 2023 and 2022, respectively, and was due to the sale of Bitcoin and the difference between the sales proceeds from the Bitcoin and the carrying amount. Typically gains are higher when Bitcoin prices are increasing over a holding period.
Current wording
Realized gain on sale of Bitcoin was nil and $1.1 million for the years ended December 31, 2024 and 2023, respectively, and was due to the sale of Bitcoin and the difference between the sales proceeds from the Bitcoin and the carrying amount. Typically gains are higher when Bitcoin prices are increasing over a holding period. Effective January 1, 2024, we early adopted ASU 2023-08, and in accordance with the new guidance we no longer report impairment of Bitcoin and realized gain on sale of Bitcoin separately. Instead, current period comparable information is reported in the line item Change in fair value of Bitcoin in the consolidated statement of operations.
Previous wording
Interest income and other expense, net, was $1.1 million and $2.6 million for the years ended December 31, 2023 and 2022, respectively. In 2023, interest income and other expense, net, primarily related to a $1.0 million fair value adjustment for warrant liabilities, and $0.2 million in interest income from previously restricted funds that were held in a trust, offset by $0.1 million in other miscellaneous expenses. In 2022, we recognized a gain on forgiveness of liabilities of $2.1 million and interest income of $0.6 million from our notes receivable.
Current wording
Other income, net, was $3.1 million and $1.1 million for the years ended December 31, 2024 and 2023, respectively. In 2024, other income, net, primarily related to $2.9 million for the early termination of a hosting agreement and a $0.2 million fair value adjustment for warrant liabilities. In 2023, other income, net, primarily related to a $1.0 million fair value adjustment for warrant liabilities, and $0.2 million in interest income from previously restricted funds that were held in a trust, offset by $0.1 million in other miscellaneous expenses.
Previous wording
Gain on deconsolidation of MEOA, our SPAC, was$6.1 million and nilfor the years ended December 31, 2023 and 2022, respectively. On December 19, 2023, our 3,162,500 shares of MEOA’s Class B common stock were cancelled, eliminating our ownership of MEOA, and we recognized a $6.1 million gain related to the deconsolidation of MEOA.
Current wording
Gain on deconsolidation of MEOA, our SPAC, wasnil and$6.1 million for the years ended December 31, 2024 and 2023, respectively. On December 19, 2023, our 3,162,500 shares of MEOA’s Class B common stock were cancelled, eliminating our ownership of MEOA, and we recognized a $6.1 million gain related to the deconsolidation of MEOA.
Previous wording
Interest expense was $1.2 million and nil for the years ended December 31, 2023 and 2022, respectively. The increase of $1.2 million was related to $1.0 million for warrants issued with our LDA convertible debt and $0.2 million of debt costs and interest expense.
Current wording
Interest expense was nil and $1.2 million for the years ended December 31, 2024 and 2023, respectively. In the current year we had no interest expense and the prior year was related to $1.0 million for warrants issued with our LDA convertible debt and $0.2 million of debt costs and interest expense.
Previous wording
Gain on disposal of service and product segment was $0.7 million and nil for the years ended December 31, 2023 and 2022, respectively. On December 28, 2023, Sphere 3D and Joseph O’Daniel (“Purchaser”), entered into a share purchase agreement under which we sold our service and product segment, which included HVE ConneXions and Unified ConneXions, for $1.00 and the transfer of outstanding assets and liabilities. As a result of the share purchase agreement, the Purchaser, who served as our President, resigned effective December 28, 2023. We recognized a noncash gain of $0.7 million related to the transfer of net liabilities to the Purchaser.
Current wording
Gain on disposal of Service and Product segment was nil and $0.7 million for the years ended December 31, 2024 and 2023, respectively. On December 28, 2023, Sphere 3D and Joseph O’Daniel (“Purchaser”), entered into a share purchase agreement under which we sold our Service and Product segment, which included HVE ConneXions and Unified ConneXions, for $1.00 and the transfer of outstanding assets and liabilities. As a result of the share purchase agreement, the Purchaser, who served as our President, resigned effective December 28, 2023. We recognized a noncash gain of $0.7 million related to the transfer of net liabilities to the Purchaser.
Previous wording
Management has projected that based on our hashing rate at December 31, 2023, cash on hand may not be sufficient to allow the Company to continue operations and there is substantial doubt about the Company’s ability to continue as a going concern within 12 months from the date of issuance of the financial statements if we are unable to raise additional funding for operations. We expect our working capital needs to increase in the future as we continue to expand and enhance our operations. Our ability to raise additional funds for working capital through equity or debt financings or other sources may depend on the financial success of our then current business and successful implementation of our key strategic initiatives, financial, economic and market conditions and other factors, some of which are beyond our control. Further equity financings may have a dilutive effect on shareholders and any debt financing, if available, may require restrictions to be placed on our future financing and operating activities. If we require additional capital and are unsuccessful in raising that capital at a reasonable cost and at the required times, or at all, we may not be able to continue our business operations in the cryptocurrency mining industry or we may be unable to advance our growth initiatives, either of which could adversely impact our business, financial condition and results of operations.
Current wording
Management has projected that based on our recurring losses, negative cash flows from operating activities, and our hashing rate at December 31, 2024, cash on hand may not be sufficient to allow us to continue operations and there is substantial doubt about our ability to continue as a going concern within 12 months from the date of issuance of our financial statements if we are unable to raise additional funding for operations. We expect our working capital needs to increase in the future as we continue to expand and enhance our operations. Included in our working capital is an investment in equity securities that we can liquidate as needed to assist in funding our operations. Our ability to raise additional funds for working capital through equity or debt financings or other sources may depend on the financial success of our business and successful implementation of our key strategic initiatives, financial, economic and market conditions and other factors, some of which are beyond our control. We require additional capital and if we are unsuccessful in raising that capital at a reasonable cost and at the required times, or at all, we may not be able to continue our business operations in the cryptocurrency mining industry or we may be unable to advance our growth initiatives, either of which could adversely impact our business, financial condition and results of operations. In an effort to mitigate these risks we expect to take steps to lower our cost of mining and also refresh our mining fleet to increase our mining efficiency.
Previous wording
These factors, among others, indicate there is substantial doubt about our ability to continue as a going concern within 12 months from the date of issuance of the financial statements. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and do not include any adjustments that might result from the outcome of this uncertainty.
Current wording
Significant changes from our current forecasts, including but not limited to: (i) shortfalls from projected mining earning levels; (ii) increases in operating costs; (iii) decreases in the value of cryptocurrency; and (iv) if we do not maintain compliance with the requirements of Nasdaq and/or we do not maintain our listing with Nasdaq could have a material adverse impact on our ability to access the level of funding necessary to continue its operations at current levels. These factors, among others, should they occur may result in our inability to continue as a going concern within 12 months from the date of issuance of our financial statements. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and do not include any adjustments that might result from the outcome of this uncertainty.
Previous wording
Net cash used in operating activities. The use of cash during 2023 was primarily a result of our net loss of $23.3 million, offset by $15.7 million in noncash items, which primarily included provision for losses on deposits made due to vendor bankruptcy filings, depreciation and amortization, gain on the deconsolidation of our SPAC, impairments of acquired intangible assets, share-based compensation expense, Bitcoin issued for services, change in fair value of warrant liabilities, realized gain on the sale of Bitcoin, warrants issued with convertible debt, loss on the disposal of mining equipment, impairment of Bitcoin, gain on the disposal of our service and product segment, and the noncash exercise of warrants.
Current wording
Net cash used in operating activities. The use of cash during 2024 was primarily a result of our net loss of $9.5 million, offset by $6.4 million in noncash items, which primarily included an unrealized gain on investment in equity securities, realized gain on investment in equity securities, depreciation and amortization, share-based compensation expense, impairment of property and equipment, loss on disposal of property and equipment, impairment of other assets, change in fair value of Bitcoin, Bitcoin issued for services, and change in fair value of warrant liabilities.
Previous wording
Net cash provided by (used in) investing activities. During 2023, we sold 3,336 miners originally included in mining equipment, for cash proceeds of $4.5 million, our SPAC received $10.3 million from the redemption of the trust account and paid $10.4 million for the redemption of the redeemable non-controlling interest related to MEOA, and we paid $1.6 million towards digital asset mining machines and shipping costs. During 2022, we paid $17.6 million towards digital asset mining machines and shipping costs, we entered into promissory notes receivable with Gryphon and MEOA for $2.5 million and $1.8 million, respectively, and we purchased $0.3 million of carbon credits for future use. The Gryphon note receivable was forgiven on April 4, 2022 upon termination of the Merger Agreement with Gryphon.
Current wording
Net cash provided by investing activities. During 2024, we received $11.4 million from proceeds from the sale of investment in equity securities and $1.5 million from proceeds from the sale of Bitcoin, offset by $7.1 million of payments for the purchase of property and equipment consisting of newer generation mining machines and $1.8 million in payments for construction in progress primarily for the mining site we have partnered with Simple Mining LLC to acquire and operate. During 2023, we sold 3,336 miners originally included in mining equipment, for cash proceeds of $4.5 million, our SPAC received $10.3 million from the redemption of the trust account and paid $10.4 million for the redemption of the redeemable non-controlling interest related to MEOA, and we paid $1.6 million towards Bitcoin mining machines and shipping costs.
Previous wording
Net cash provided by financing activities. During 2023, we received $3.0 million from the issuance of preferred shares and warrants, $0.8 million, net, from the issuance of a convertible note, and $0.6 million from the exercise of stock options. These inflows were offset by $1.3 million of payments made on our convertible debt which was paid in full in August 2023.
Current wording
Net cash provided by financing activities. During 2024, we received $5.4 million, net, from the issuance of common shares and warrants. During 2023, we received $3.0 million from the issuance of preferred shares and warrants, $0.8 million, net, from the issuance of a convertible note, and $0.6 million from the exercise of stock options. These inflows were offset by $1.3 million of payments made on our convertible debt which was paid in full in August 2023.
Previous wording
The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We review our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. In 2022, we believe the most significant accounting estimates inherent in the preparation of our consolidated financial statements include estimates associated with the impairment analysis of long-lived assets. Our significant accounting policies include revenue recognition and long-lived assets and are outlined in Note 2 to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
Current wording
The discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP. The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. We review our estimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are outlined in Note 2 to the Consolidated Financial Statements included in this Annual Report on Form 10-K.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
•On December 28, 2023, we entered into a share purchase agreement with Joseph O’Daniel (“Purchaser”), a related party, under which we sold our service and product segment, including HVE ConneXions and Unified ConneXions, for $1.00 and the transfer of outstanding assets and liabilities. As a result of the share purchase agreement, the Purchaser, who served as our President, resigned effective December 28, 2023. We recognized a noncash gain of $0.7 million related to the transfer of net liabilities to the Purchaser.
Previous report — wording carried elsewhere
•On December 19, 2023, our 3,162,500 shares of Minority Equality Opportunities Acquisition Inc. (“MEOA”) Class B common stock were cancelled, eliminating our ownership of MEOA, and we recognized a $6.1 million gain related to the deconsolidation of MEOA.