BITMINE IMMERSION TECHNOLOGIES INC

Previous wording

The following discussion and analysis of the results of operations and financial condition of the Company for the three and three months ended November 30, 2023, and 2022, should be read in conjunction with the other sections of this Quarterly Report, including the Financial Statements and notes thereto of the Company included in this Quarterly Report. The various sections of this discussion contain forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this Quarterly Report as well as other matters over which we have no control. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results may differ materially. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report.

Current wording

The following discussion and analysis of the results of operations and financial condition of the Company for the three and six months endedFebruary 29, 2024*, and February 28, 2023, should be read in conjunction with the other sections of this Quarterly Report, including the Financial Statements and notes thereto of the Company included in this Quarterly Report. The various sections of this discussion contain forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this Quarterly Report as well as other matters over which we have no control. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results may differ materially. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report.*

Previous wording

Our digital asset mining operation is focused on the generation of digital assets by solving complex cryptographic algorithms to validate transactions on specific digital asset network blockchains, which is commonly referred to as “mining.” Mining requires the use of specialized computers equipped with application-specific integrated circuit (ASIC) chips (known as “miners”) to solve complex cryptographic algorithms in support of the Bitcoin blockchain (in a process known as “solving a block”) in exchange for digital asset rewards (to date, only bitcoin). Whether we are hosting our client’s computers or mining for our own account with our own computers, the miners participate in “mining pools” organized by “mining pool operators” in which we or our clients share mining power (known as “hash rate”) with the hash rate generated by other miners participating in the pool to earn digital asset rewards. The mining pool operator provides a service that coordinates the computing power of the independent mining enterprises participating in the mining pool. Fees are paid to the mining pool operator to cover the costs of maintaining the pool. The pool uses software that coordinates the pool members’ mining power, identifies new block rewards, and records how much hash rate each participant contributes to the pool. Pools typically pay rewards in two different ways: as a percentage of the total reward received by the mining pool each day based on each pool participant’s proportionate share of hashing power provided that day (the “Actual Reward Method”); or based on the theoretical reward the pool participant should have received each day based on its hashing power contributed to the pool each day times the difficulty index (the “Expected Reward Method”). We only use mining pools that pay rewards under the Expected Reward Method. Even though we plan to effect our self-mining operations in data centers that we own, we reserve the right to operate miners in third-party data centers when we receive advantageous terms and/or do not have sufficient capacity in our own data centers.

Current wording

Our digital asset mining operation is focused on the generation of digital assets by solving complex cryptographic algorithms to validate transactions on specific digital asset network blockchains, which is commonly referred to as “mining.” Mining requires the use of specialized computers equipped with application-specific integrated circuit (ASIC) chips (known as “miners”) to solve complex cryptographic algorithms in support of the Bitcoin blockchain (in a process known as “solving a block”) in exchange for digital asset rewards (to date, only bitcoin). Whether we are hosting our client’s computers or mining for our own account with our own computers, the miners participate in “mining pools” organized by “mining pool operators” in which we or our clients share mining power (known as “hash rate”) with the hash rate generated by other miners participating in the pool to earn digital asset rewards. The mining pool operator provides a service that coordinates the hash calculation services of the independent mining enterprises participating in the mining pool. Fees are paid to the mining pool operator to cover the costs of maintaining the pool. The pool uses software that coordinates the pool members’ mining power, identifies new block rewards, and records how much hash rate each participant contributes to the pool. Pools typically pay rewards in two different ways: as a percentage of the total reward received by the mining pool each day based on each pool participant’s proportionate share of hashing power provided that day (the “Actual Reward Method”); or based on the theoretical reward the pool participant should have received each day based on its hashing power contributed to the pool each day times the difficulty index (the “Expected Reward Method”). We only use mining pools that pay rewards under the Expected Reward Method. Even though we plan to effect our self-mining operations in data centers that we own, we reserve the right to operate miners in third-party data centers when we receive advantageous terms and/or do not have sufficient capacity in our own data centers.

Previous wording

Revenues from cryptocurrency mining, whether derived from hosting clients or from proprietary mining, are impacted significantly by volatility in Bitcoin prices, as well as increases in the Bitcoin blockchain’s network hash rate resulting from the growth in the overall quantity and quality of miners working to solve blocks on the Bitcoin blockchain and the difficulty index associated with the secure hashing algorithm employed in solving the blocks. Below are changes in key metrics effecting the profitability of mining Bitcoin during the quarter ended November 30, 2023:

Current wording

Revenues from cryptocurrency mining, whether derived from hosting clients or from proprietary mining, are impacted significantly by volatility in Bitcoin prices, as well as increases in the Bitcoin blockchain’s network hash rate resulting from the growth in the overall quantity and quality of miners working to solve blocks on the Bitcoin blockchain and the difficulty index associated with the secure hashing algorithm employed in solving the blocks. Below are changes in key metrics effecting the profitability of mining Bitcoin during the six months ended February 29, 2024:

Previous wording

In October 2022, we completed the installation of initial hosting containers under our agreement with TSTT. However, prior to commencing operations, TSTT advised us that the utility refused to honor its existing agreement with TSTT with respect to electricity supplied to our pilot hosting site, and instead indicated that the rate would be approximately $0.09 per kwh, which TSTT disputed. At this time, the dispute has been resolved, the site became operational in October 2023, and our rate for electricity will be TSTT’s existing rate of 3.5 cents per kwh. As of January 5, 2024, we had 135 miners located at our initial TSTT facility. While our TSTT site was delayed pending electrification, we entered into a hosting agreement with a third party in Trinidad to host up to 192 miners in one immersion container until August 31, 2024, and are leasing space with a third party on an at will basis to co-host 60 miners. We ultimately intend to move all of our currently owned and customer owned miners to our new TSTT hosting facilities.

Current wording

In October 2022, we completed the installation of initial hosting containers under our agreement with TSTT. However, prior to commencing operations, TSTT advised us that the utility refused to honor its existing agreement with TSTT with respect to electricity supplied to our pilot hosting site, and instead indicated that the rate would be approximately $0.09 per kwh, which TSTT disputed. At this time, the dispute has been resolved, the site became operational in October 2023, and our rate for electricity will be TSTT’s existing rate of 3.5 cents per kwh or 75% of the declared reserve capacity, which is equal to the customer’s highest expected monthly kilovolt-ampere demand at $7.40. As of April 9, 2024, we had 135 miners located at our initial TSTT facility. While our TSTT site was delayed pending electrification, we entered into a hosting agreement with a third party in Trinidad to host up to 192 miners in one immersion container until August 31, 2024. We do not pay a hosting fee for this space, but we do reimburse the host for its actual electricity costs, which are a variable rate that averages approximately $0.05 per kwh each month. We are also leasing space with a third party on an at will basis to co-host 56 miners, for which we pay a flat rate of $0.06 per kwh for the electricity used by our miners. We ultimately intend to move all of our currently owned and customer owned miners to our new TSTT hosting facilities.

Previous wording

In April 2023, the joint venture entered into a new one year agreement with the electricity provider, under which the site will receive electricity at $0.03991 per kwh for at least 95% of the annualized hourly intervals during the period. The initial agreement had a term of four years and seven months, and supplied electricity at $0.06896 per kwh, which the joint venture expected to reduce by reselling electricity during peak periods. The new agreement provides the joint venture with more predictable pricing, although a new agreement will need to be negotiated after the one year term. At the same time, we finalized a hosting agreement with the joint venture, under which we will locate one immersion container at the site for $500 per month, plus payment of our pro rata share of electricity, internet and insurance for the site. Under the hosting agreement, we also agreed to contribute $100,000 toward the electricity deposit for the site, which is refundable to us at the earlier of the date the electricity provider releases the deposit or 90 days after the expiration or termination of the hosting agreement. The hosting agreement has a term of one year, subject to our right to renew the agreement for two one year terms after receipt of notice of the renewal terms of the joint venture’s electricity supply agreement for the upcoming year. The site became fully electrified in June 2023. As of January 5, 2024, we had deployed 96 Antminer S-19 pro miners to our hosting container at the site. The joint venture has filled its five immersion containers with ASIC miners provided by hosting clients.

Current wording

In April 2023, the joint venture entered into a new one year agreement with the electricity provider, under which the site will receive electricity at $0.03991 per kwh for at least 95% of the annualized hourly intervals during the period. The initial agreement had a term of four years and seven months, and supplied electricity at $0.06896 per kwh, which the joint venture expected to reduce by reselling electricity during peak periods. The new agreement provides the joint venture with more predictable pricing, although a new agreement will need to be negotiated after the one year term. At the same time, we finalized a hosting agreement with the joint venture, under which we will locate one immersion container at the site for $500 per month, plus payment of our pro rata share of electricity, internet and insurance for the site. Under the hosting agreement, we also agreed to contribute $100,000 toward the electricity deposit for the site, which is refundable to us at the earlier of the date the electricity provider releases the deposit or 90 days after the expiration or termination of the hosting agreement. The hosting agreement has a term of one year, subject to our right to renew the agreement for two one year terms after receipt of notice of the renewal terms of the joint venture’s electricity supply agreement for the upcoming year. The site became fully electrified in June 2023. As of April 9, 2024, we had deployed 145 Antminer S-19 pro miners to our hosting container at the site. The joint venture has filled its five immersion containers with ASIC miners provided by hosting clients, although the hosting clients agreements currently terminate in April 2024.

Previous wording

During the three months ended November 30, 2023, the Company generated $511,308 in revenue, compared to $101,716 of revenue in the three months ended November 30, 2022.

Current wording

During the three months ended February 29, 2024, the Company generated $891,613 revenue, compared to $156,090 of revenue in the three months ended February 28, 2023.

Previous wording

During the three months ended November 30, 2023, the Company generated $329,723 in Bitcoin revenue from self-mining digital assets, compared to $28,916 of revenue from self-mining in the three months ended November 30, 2022. At November 30, 2023, the Company owned 1,716 miners, of which only 1,429 were deployed for self-mining. The number of undeployed miners was higher than normal at the end of the period as a result of miners that were being transitioned to new hosting locations, miners that were being transitioned from air-cooled to immersion cooled environment, and miners that were offline due to maintenance issues. Mining revenue should be higher in future periods as many of the undeployed miners are deployed into new hosting environments. Mining revenues in the three months ended November 30, 2023 were positively impacted due to resolution of operating issues at the Company’s first hosting facilities in Trinidad and Pecos, Texas, and the commencement of operations at a facility in Murray, Kentucky that is hosted by a third-party.

Current wording

During the three months ended February 29, 2024, the Company generated $861,026 in Bitcoin revenue from self-mining digital assets, compared to $104,526 of revenue from self-mining in the three months ended February 28, 2023. At February 29, 2024, the Company owned 1,644 miners, of which 1,526 were deployed for self-mining. The number of undeployed miners was mainly impacted by miners that were offline due to maintenance issues. Mining revenue should be lower in future periods as a halving expected to occur in April 2024 could significantly reduce the rewards from mining. However, the impact of the halving may be offset by a rise in the price of the bitcoin due to fewer miners online after halving event, as has historically occurred after a halving event. Mining revenues in the three months ended February 29, 2024 were positively impacted due to resolution of operating issues at the Company’s first hosting facilities in Trinidad and Pecos, Texas, and the commencement of operations at a facility in Murray, Kentucky that is hosted by a third-party.

Previous wording

During the three months ended November 30, 2023 and November 2022, the Company generated $169,721 in revenue from equipment sales, compared to $72,800 in revenue in the three months ended November 30, 2022. The revenue from equipment sales in the three months ended November 30, 2023 were derived from the following transactions:

Current wording

During the three months ended February 29, 2024 and February 28, 2023, the Company generated $20,471 in revenue from equipment sales, compared to $51,564 in revenue in the three months ended February 28, 2023. The revenue from equipment sales in the three months ended February 29, 2024 were derived from the following transactions:

Previous wording

Under the guidelines of ASC 606, the Company reports revenue from both equipment sales described above under the installment sale method, under which the Company reports its gross profit on the sales as payments are received from the purchaser. As of February 1, 2023, the Company reached an agreement with the obligor under the $910,000 note to convert the note into an interest only note commencing as of February 1, 2023, with a balloon payment being due at maturity on August 31, 2024, and an agreement that the principal balance on the note was $731,472. One effect of the agreement with the obligor is to materially reduce any deferred revenue associated with the sale, as the note is scheduled to receive interest only payments until August 31, 2024. As a result, the Company expects revenue from these two equipment sales to be lower in future periods. During the three months ended November 30l 2023, the Company recorded $20,071 in equipment sales as a result of the receipt of three payments of $31,204 each on the October 2022 note. No revenue was recorded on the August 2022 note since all payments were of interest only.

Current wording

Under the guidelines of ASC 606, the Company reports revenue from both equipment sales described above under the installment sale method, under which the Company reports its gross profit on the sales as payments are received from the purchaser. As of February 1, 2023, the Company reached an agreement with the obligor under the $910,000 note to convert the note into an interest only note commencing as of February 1, 2023, with a balloon payment being due at maturity on August 31, 2024, and an agreement that the principal balance on the note was $731,472. One effect of the agreement with the obligor is to materially reduce any deferred revenue associated with the sale, as the note is scheduled to receive interest only payments until August 31, 2024. As a result, the Company expects revenue from these two equipment sales to be lower in future periods. During the three months ended February 29, 2024, the Company recorded $20,471 in equipment sales as a result of the receipt of three payments of $31,204 each on the October 2022 note. No revenue was recorded on the August 2022 note since all payments were of interest only.

Previous wording

The Company generated $11,864 revenues from hosting in the three months ended November 30, 2023, as compared to $-0- in hosting revenues in the three months ended November 30, 2022. In October 2022, the Company reached an agreement to terminate its only hosting client at the time and repurchased the miners which it had previously sold to the hosting client, which resulted in the Company not having any hosting revenues in the three months ended November 2022. In June 2023, the Company signed two new hosting clients. In the current market environment, the price of ASIC miners has fallen to the point that we believe self-mining is more profitable than hosting third party miners, however we will pursue hosting opportunities on a selective basis. While the Company still sees good opportunities to acquire mining equipment at attractive prices, the price of mining equipment has recently increased with the recent increase in the price of Bitcoin.

Current wording

The Company generated $10,116 in revenues from hosting in the three months ended February 29, 2024, as compared to $-0- in hosting revenues in the three months ended February 28, 2023. The Company did not have any hosting clients during the three months ended February 29, 2023. In June 2023, the Company signed two new hosting clients. In the current market environment, the price of ASIC miners has fallen to the point that we believe self-mining is more profitable than hosting third party miners, however we will pursue hosting opportunities on a selective basis. While the Company still sees good opportunities to acquire mining equipment at attractive prices, the price of mining equipment has recently increased with the recent increase in the price of Bitcoin.

Previous wording

Cost of sales related to mining was $222,942 in the three months ended November 30, 2023, compared to $43,080 in the three months ended November 30, 2022. Cost of sales normally includes electricity, utilities, facilities costs, and supplies. Major components of cost of sales include rent to house mining and hosting equipment in temporary facilities, electricity, and supplies. The Company believes that cost of sales related to mining as a percentage of revenues were greater in the three months ended November 30, 2023 than what it expects to incur in future periods. Cost of sales in the most recent period were inflated by costs associated with maintaining temporary hosting facilities, and initial commencement of operations at both our Trinidad and Pecos, Texas facilities.

Current wording

Cost of sales related to mining was $556,849 in the three months ended February 29, 2024, compared to $93,957 in the three months ended February 28, 2023. Cost of sales normally includes electricity, utilities, facilities costs, and supplies where we perform mining from our own facilities, but not depreciation of equipment, which is stated separately. Major components of cost of sales include rent to house mining and hosting equipment, electricity, and supplies. Where our miners are hosted by third parties, cost of sales normally includes hosting fees and/or electricity costs. The Company believes that cost of sales related to mining as a percentage of revenues will be greater in futures periods as revenues will be adversely impacted by a halving that is expected to occur in April 2024.

Previous wording

The table below describes the average cost of mining each bitcoin for the years ended November 30, 2023 and 2022, and the total energy usage and cost per each kilowatt hour ("KWH") utilized within both our facilities.

Current wording

The table below describes the average cost of mining each bitcoin for the three months ended February 29, 2024 and February 28, 2023, and the total energy usage and cost per each kilowatt hour (“KWH”) utilized within our facilities.

Previous wording

Energy prices can be highly volatile and global events (including the war in Ukraine and the resulting natural gas shortage) have caused fuel prices, and to a lesser extent power prices, to fluctuate widely over the past year. All of our sites are currently subject to variable prices and market rate fluctuations with respect to wholesale power costs over the long-term. While this renders energy prices less predictable, it also gives us greater ability and flexibility to actively manage the energy we consume with an eye towards increasing profitability and energy efficiency. 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 facilities for the three months ended November 30, 2023 and 2022 was $0.0415 and $0.0767 per kilowatt hour, respectively.

Current wording

Energy prices can be highly volatile and global events (including the war in Ukraine and the resulting natural gas shortage) have caused fuel prices, and to a lesser extent power prices, to fluctuate widely over the past year. All of our sites are currently subject to relatively fixed rates during the term of their current power supply agreements, but variable prices and market rate fluctuations with respect to wholesale power costs over the long-term. While this renders energy prices less predictable, it also gives us greater ability and flexibility to actively manage the energy we consume with an eye towards increasing profitability and energy efficiency. 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.

Previous wording

Cost of sales related to hosting was $3,393 in the three months ended November 30, 2023, compared to $-0- in the three months ended November 30, 2022. Cost of sales normally includes utilities, facilities costs, and supplies. Unlike cost of sales from mining, cost of sales from hosting does not include electricity costs, as such costs are passed on to the hosting client.

Current wording

Cost of sales related to hosting was $11,142 in the three months ended February 29, 2024, compared to $-0- in the three months ended February 28, 2023. Cost of sales normally includes utilities, facilities costs, and supplies. Unlike cost of sales from mining, cost of sales from hosting does not include electricity costs, as such costs are passed on to the hosting client.

Previous wording

Cost of sales related to sales of mining equipment was $180,891 for the three months ended November 30, 2023, compared to $43,080 in the three months ended November 30, 2022. Cost of sales during the three months ended November 30, 2023 consisted of the purchase price of equipment sold, plus shipping and value added tax on the equipment for sales reported under the completed sales method. Cost of sales from equipment sales in the three months ended November 30, 2022 were materially lower as a result of the fact that most of the equipment sales in that period were reported under the installment sales method under the guidelines of ASC 606.

Current wording

Cost of sales related to sales of mining equipment was $-0- for the three months ended February 29, 2024, compared to $1,500 in the three months ended February 28, 2023. Cost of sales from equipment sales includes the purchase price of equipment sold, plus shipping and value added tax on the equipment for sales reported under the completed sales method. There is no cost of sales associated with equipment sales reported under the installment sales method. Cost of sales from equipment sales in the six months ended February 28, 2024 and 2023 were low as a result of the fact that most of the equipment sales in those periods were reported under the installment sales method under the guidelines of ASC 606.

Previous wording

During the three months ended November 30, 2023, the Company incurred $715,961 in operating expenses, compared to $475,136 in operating expenses during the three months ended November 30, 2022. Major components of operating expenses for the 2023 period as compared to the 2022 period were:

Current wording

During the three months ended February 29, 2024, the Company incurred $972,363 in operating expenses, compared to $349,580 in operating expenses during the three months ended February 28, 2023. Major components of operating expenses for the 2024 period as compared to the 2023 period were:

Previous wording

The higher level of operating expenses in the 2023 period as compared to the 2022 period is partly attributable to increased depreciation in 2023 as compared 2022 as a result of higher level of equipment in service, and increased related party compensation in 2023 as compared to 2022. Included in operating expenses in the three months ended November 30, 2023 was $279,497 in non-cash expenses due to the issuance of common stock for professional services and to related parties as compensation, as compared to $59,053 in the three months ended November 30, 2022. Additionally, we incurred $222,530 in depreciation expense in the three months ended November 30, 2023 due to the deployment of new mining equipment compared to $59,053 during the same three month period in 2022. The Company expects that operating expenses will trend materially higher in future periods as the Company begins paying regular compensation to existing officers and directors, hires additional employees, and incurs other costs, such as increased depreciation expense due to the addition of new mining equipment and the completion of the buildout of the operating facilities.

Current wording

The higher level of operating expenses in the 2024 period as compared to the 2023 period is partly attributable to increased depreciation in 2024 as compared 2023 as a result of higher level of equipment in service, and increased related party compensation in 2024 as compared to 2023. Included in operating expenses in the three months ended February 29, 2024 was $277,465 in non-cash expenses due to the issuance of common stock for professional services and to related parties as compensation, as compared to $49,785 in the three months ended February 28, 2023. Additionally, we incurred $235,370 in depreciation expense in the three months ended February 29, 2024 due to the deployment of new mining equipment compared to $88,213 during the same three month period in 2023. The Company expects that operating expenses will trend materially higher in future periods as the Company begins paying regular compensation to existing officers and directors, hires additional employees, and incurs other costs, such as increased depreciation expense due to the addition of new mining equipment and the completion of the buildout of the operating facilities.

Previous wording

In addition, the Company recorded interest income of $14,793 in the three months ended November 30, 2023 compared to $9,099 in the three months ended November 30, 2022.

Current wording

In addition, the Company recorded interest income of $14,791 in the three months ended February 29, 2024 compared to $3,751 in the three months ended February 28, 2023.

Previous wording

As a result of the foregoing, during the three months ended November 30, 2023, the Company incurred a net loss of $(929,870), or ($0.02) per share, as compared to a net loss of ($470,665) or $(0.01) per share during the three months ended November 30, 2022. The increase in the Company’s net loss in the three months ended November 30, 2023, compared to the three months ended November 30, 2022, is attributable to the factors discussed above.

Current wording

As a result of the foregoing, during the three months ended February 29, 2024, the Company incurred a net loss of $902,682 or $(0.02) per share, as compared to a net loss of $307,407 or $(0.01) per share during the three months ended February 28, 2023. The increase in the Company’s net loss in the three months ended February 29, 2024, compared to the three months ended February 28, 2023, is attributable to the factors discussed above.

Previous wording

During the three months ended November 30, 2023, the Company sold 100 new ASIC miners to a third party for $149,250. Under the guidelines of ASC 606, the Company reported revenue from the June 2023 equipment sales under the completed sale method.

Current wording

During the six months ended February 29, 2024, the Company sold 100 new ASIC miners to a third party for $149,250. Under the guidelines of ASC 606, the Company reported revenue from the June 2023 equipment sales under the completed sale method.

Previous wording

During the three months ended November 30, 2023, the Company had ($317,990) in other (expense), net as compared to $21,230 of other income in the three months ended November 30, 2022. The significant increase in other (expense) was mainly attributable to a number of factors, including higher interest expense in the three months ended November 30, 2023 of ($99,420) as compared to ($4,808) in the three months ended November 30, 2022, which was due to higher outstanding loan balances during the 2023 period compared to the 2022 period. The Company also recorded a loss of ($37,537) from the extinguishment of debt, a loss of ($43,214) from the Company’s investment in ROC Digital and an expense of ($152,612) from a change in derivative liability in 2023 as compared to $-0- in 2022.

Current wording

During the six months ended February 29, 2024, the Company had $571,931 in other (expense), net as compared to $2,770 of other income, net in the six months ended February 28, 2023. The significant increase in other (expense) was mainly attributable to a number of factors, including higher interest expense in the six months ended February 29, 2024 of $153,699 as compared to $27,019 in the six months ended February 28, 2023, which was due to higher outstanding loan balances during the 2024 period compared to the 2023 period. The Company also recorded a loss of $221,208 from the extinguishment of debt, a loss of $111,773 from the Company’s investment in ROC Digital and an expense of $114,835 from a change in derivative liability in 2024 as compared to $-0- for these three categories in 2023.

Previous wording

As of November 30, 2023, the Company had $470,529 in cash on hand.

Current wording

As of February 29, 2024, the Company had $342,296 in cash on hand.

Previous wording

During the three months ended November 30, 2023, the Company had a net loss of $(929,870).

Current wording

During the six months ended February 29, 2024, the Company had a net loss of $1,830,522.

Previous wording

Cash flows used in investing activities were $(79,728) for the three months ended November 30, 2023, compared to cash flows used in investing activities of $-0- for the three months ended November 30, 2022. Cash flows used in investing activities consisted entirely of purchases of equipment for $(79,728) in 2023 as compared to $-0- in 2022.

Current wording

Cash flows used in investing activities were $48,946 for the six months ended February 29, 2024, compared to cash flows used in investing activities of $469,843 for the six months ended February 28, 2023. Cash flows used in investing activities consisted primarily of purchases of $57,335 and $469,843 in equipment, respectively in the 2024 and 2023 periods. In the 2024 period the Company also received a return on investment of $8,408.

Previous wording

Cash flows provided by financing activities were $325,000 for the three months ended November 30, 2023, compared to cash flows provided by financing activities of $400,000 for the three months ended November 30, 2022. The cash flows provided by financing activities in both periods included draws of $325,000 in 2023 and $400,000 in 2022 under a line of credit with Innovative Digital Investors Emerging Technology, L.P. (“IDI”), a limited partnership controlled by Jonathan Bates, our Chairman, and Raymond Mow, our chief financial officer.

Current wording

Cash flows provided by financing activities were $325,000 for the six months ended February 29, 2024, compared to cash flows provided by financing activities of $800,00 for the six months ended February 28, 2023. The cash flows provided by financing activities in both periods in both the 2024 and 2023 period were made pursuant to a line of credit with Innovative Digital Investors Emerging Technology, L.P. (“IDI”), a limited partnership controlled by Jonathan Bates, our Chairman, and Raymond Mow, our chief financial officer.

Previous wording

On October 19, 2022, the Company entered into a new Line of Credit Agreement with IDI (the “2022 LOC Agreement”), under which the Company has the right to borrow up to $1,000,000 to finance the purchase of equipment necessary for the operation of the Company’s business, and related working capital. Loans under the 2022 LOC Agreement accrue interest at twelve percent (12%) per annum, compounded on a 30/360 monthly basis until the loans have been repaid in full. Effective May 13, 2023, the Company and IDI amended the 2022 LOC Agreement. As amended, the 2022 LOC Agreement allows the Company to up to $1,750,000 thereunder until December 1, 2023. Each draw request is subject to the approval of IDI in its sole discretion. As amended, all principal and interest due under the 2022 LOC Agreement are due and payable on December 1, 2024. As of June 30, 2023, the amount borrowed under the 2022 LOC Agreement was $1,625,000.

Current wording

On October 19, 2022, the Company entered into a new Line of Credit Agreement with IDI (the “2022 LOC Agreement”), under which the Company has the right to borrow up to $1,000,000 to finance the purchase of equipment necessary for the operation of the Company’s business, and related working capital. Loans under the 2022 LOC Agreement accrue interest at twelve percent (12%) per annum, compounded on a 30/360 monthly basis until the loans have been repaid in full. Effective May 13, 2023, the Company and IDI amended the 2022 LOC Agreement. As amended, the 2022 LOC Agreement allows the Company to up to $1,750,000 thereunder until December 1, 2023. Each draw request is subject to the approval of IDI in its sole discretion. As amended, all principal and interest due under the 2022 LOC Agreement are due and payable on December 1, 2024. As of February 29, 2024, the amount borrowed under the 2022 LOC Agreement was $1,650,000.

Previous wording

The Company believes that cash on hand, amounts that it may borrow under the 2022 LOC Agreement, and expected receipts from the sale of equipment, and revenue from self-mining and hosting will provide it with sufficient liquidity to fund its operations for the next 12 months. The Company expects revenue from self-mining to increase throughout the year as it deploys more miners in its Trinidad and Pecos-Texas locations, and as it completes repayment of the purchase price of its Murray, Kentucky miners in March 2024, after which we are entitled to receive all of the cash flow from those miners. However, those improvements from self-mining will be negatively impacted in the short-term from a halving event that is scheduled to take place in April 2024. The halving will reduce the block rewards from mining by exactly 50%. However, the halving will not reduce revenues from self-mining by exactly 50% since part of the rewards consist of transaction fees which are not impacted by the halving. In recent periods, transaction fees have made up an ever-increasing share of mining revenue due to the impact of “ordinals,” which are increased transaction fees that occur result as parties have discovered ways to imbed data regarding other assets, such as art, in the bitcoin blockchain. In past halving events, the price of bitcoin typically increased in the six months after the halving event, in part as a result of the retirement of miners that were rendered uneconomic as a result of the reduced rewards. Furthermore, there has been a sufficient increase in the price of bitcoin this fiscal year, which will lessen the impact of the halving event. Nevertheless, the upcoming halving event has increased the difficulty of predicting cash flows from mining activities for all industry participants, including the Company.

Current wording

The Company believes that cash on hand, amounts that it may borrow under the 2022 LOC Agreement, expected receipts from the sale of equipment, and revenues from self-mining and hosting will provide it with sufficient liquidity to fund its operations for the next 12 months. The Company expects revenue from self-mining to decrease following the halving expected to occur in April 2024, but the decrease will be mitigated by an expected increase in the price of bitcoin, as has typically happened following a halving event, as well as increased cash flow from our Murray, Kentucky miners after the derivative financing used to acquire them is repaid. The halving will reduce the block rewards from mining by exactly 50%. However, the halving will not reduce revenues from self-mining by exactly 50% since part of the rewards consist of transaction fees which are not impacted by the halving. In recent periods, transaction fees have made up an ever-increasing share of mining revenue due to the impact of “ordinals,” which are increased transaction fees that occur result as parties have discovered ways to imbed data regarding other assets, such as art, in the bitcoin blockchain. In past halving events, the price of bitcoin typically increased in the six months after the halving event, in part as a result of the retirement of miners that were rendered uneconomic as a result of the reduced rewards. Furthermore, there has been a sufficient increase in the price of bitcoin this fiscal year, which will lessen the impact of the halving event. Nevertheless, the upcoming halving event has increased the difficulty of predicting cash flows from mining activities for all industry participants, including the Company.

Previous wording

The Company also expects to receive approximately $4,572 in interest payments monthly from the sale of two immersion containers in August 2022, and a balloon payment of approximately $730,000 in principal in August 2024, and approximately $31,000 per month from the sale of four immersion containers to a joint venture in which the Company is both a lender to and equity investor. As of January 5, 2024 the Company owned 1,961 miners, most of which the Company intends to use for self-mining. Other sources of revenue that the Company expects to receive include equity distributions from the ROC Digital. The Company does not budget to include any proceeds from the exercise of its outstanding warrants because it is not able to predict when or if the market price of its common stock will exceed the exercise price of its warrants. Nevertheless, the Company still may not achieve profitable operations within the next 12 months. In that event, the Company may need to raise additional capital or liquidate part of its operations to sustain its business. At this time, the Company does not have any commitments for additional capital after the next 12 months, and there is no assurance that it be able to locate additional capital on terms that are not unduly dilutive to existing shareholders.

Current wording

The Company also expects to receive approximately $4,572 in interest payments monthly from the sale of two immersion containers in August 2022, and approximately $31,000 per month from the sale of four immersion containers to a joint venture in which the Company is both a lender to and equity investor. While the Company is scheduled to receive a balloon payment of approximately $734,000 in principal in August 2024, the Company expects to extend the maturity of that note to a later date. The Company does not budget to include any further equity distributions from ROC Digital in the short-term, as ROC Digital will have significant vacancies in its facilities when an agreement with a major hosting client expires in April 2024, and it is unknown how long it will take the joint venture to fill the facility with a new hosting client or its own miners. The Company does not budget to include any proceeds from the exercise of its outstanding warrants because it is not able to predict when or if the market price of its common stock will exceed the exercise price of its warrants. Nevertheless, the Company still may not achieve profitable operations within the next 12 months. In that event, the Company may need to raise additional capital or liquidate part of its operations to sustain its business. At this time, the Company does not have any commitments for additional capital after the next 12 months, and there is no assurance that it be able to locate additional capital on terms that are not unduly dilutive to existing shareholders.