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Digihost(DGHI) - 2024 Q4 - Annual Report
DGHIDigihost(DGHI)2025-03-31 13:17

Bitcoin Halving and Mining Rewards - The Bitcoin daily reward halved from 6.25 Bitcoin per block to 3.125 Bitcoin per block in April 2024, reducing the Corporation's potential daily earnings from approximately 900 Bitcoin to 450 Bitcoin[43]. - The next Bitcoin halving is expected in March 2028, which will further decrease the block reward to 1.5625 Bitcoin per block, potentially impacting profitability[43]. Growth Strategy and Market Diversification - The Corporation's growth strategy includes diversifying revenue sources into new markets, particularly focusing on operating data centers to support sustainable energy assets[35]. - The Corporation's plan to diversify into HPC and AI-driven processes may not be profitable and is contingent on market demand and infrastructure needs[36][38]. - The Corporation's ability to accurately predict facility requirements is crucial; overestimating could lead to reduced operating margins, while underestimating could limit growth opportunities[39]. Operational Risks and Challenges - The Corporation's profitability is highly dependent on the hashrate of its miners and the network, with increased mining difficulty potentially reducing competitiveness[45]. - The Corporation relies on a single mining pool operator, Foundry Pool, which poses risks if the operator modifies service agreements or ceases operations[49][50]. - Significant customers for the Corporation's data centers may face liquidity issues, impacting their ability to make timely payments and potentially leading to defaults[40]. - The Corporation may face heightened risks if it ceases participation in a mining pool and conducts independent mining, potentially disrupting its revenue stream[51]. - Transitioning to proof of stake validation could make the Corporation less competitive, adversely affecting its business and share value[52]. - The Corporation currently lacks binding commitments for additional financing, which may be necessary for acquiring more mining rigs and continuing operations[53]. - Failure to obtain required financing could lead to reduced operations or delays in business objectives, including equipment acquisition and strategic expansions[54]. - The Corporation may need to sell part of its cryptocurrency portfolio to cover expenses, potentially impacting profitability if sales occur at low prices[55]. - Competition from other cryptocurrency companies with greater resources may hinder the Corporation's ability to maintain profitability and operational continuity[56]. - Regulatory changes could significantly impact the Corporation's operations and the legality of cryptocurrency mining, affecting its business model[57]. - The U.S. political and economic environment may create uncertainty that adversely affects the Corporation's financial performance and operational strategy[59]. - The Corporation's mining operations could be negatively impacted by increased government influence over the Bitcoin network, affecting mining difficulty and profitability[60]. - The Corporation's reliance on electricity at commercially feasible rates poses risks, as shortages or price increases could render operations unprofitable[74]. - The Corporation's cryptocurrency inventory is at risk due to potential cybersecurity threats and hacks, which could lead to unauthorized access and loss of assets[78]. - Loss or theft of private keys required to access digital wallets may result in irreversible losses of cryptocurrencies, adversely affecting the Corporation's investments[81]. - The Corporation has identified material weaknesses in internal control over financial reporting, which could lead to misstatements in financial results and adversely affect investor confidence[95]. - The Corporation's operations may be negatively impacted by competition from other cryptocurrency investment methods, potentially limiting the market for its shares[85]. - The Corporation's ability to attract and retain key personnel is critical for its growth, and failure to do so could erode its competitive position[102]. Financial Performance and Revenue - For the year ended December 31, 2024, the Corporation reported a net loss from continuing operations of approximately 6.8million[111].−TheCorporationgeneratedrevenuesfromcryptocurrencyminingoperationsof6.8 million[111]. - The Corporation generated revenues from cryptocurrency mining operations of 10,318,500 in 2024, down from 18,128,241in2023and18,128,241 in 2023 and 24,190,060 in 2022, reflecting a significant decline in mining revenue due to diversification into colocation and electricity sales[168]. - The Corporation mined 188 Bitcoins in 2024 at an average price of 65,963,comparedto640Bitcoinsatanaveragepriceof65,963, compared to 640 Bitcoins at an average price of 28,861 in 2023, indicating a 129% increase in Bitcoin price year-over-year[169]. - Total cost of digital currency mining in 2024 was 7,192,288,downfrom7,192,288, down from 15,285,347 in 2023, demonstrating a reduction in operational costs[170]. - Revenue from colocation service agreements increased to 15,790,179in2024,upfrom15,790,179 in 2024, up from 1,675,269 in 2023, highlighting a successful shift in revenue strategy[170]. - Total revenue for the year ended December 31, 2024, was 37,002,263,a41.637,002,263, a 41.6% increase from 26,112,908 in 2023[199]. - The Corporation's net loss for the year ended December 31, 2024, was (6,797,718),animprovementfromanetlossof(6,797,718), an improvement from a net loss of (21,885,410) in 2023[199]. - The Corporation's total assets decreased to 34,318,088asofDecember31,2024,downfrom34,318,088 as of December 31, 2024, down from 42,147,347 in 2023[200]. Environmental and Regulatory Considerations - The Corporation aims to achieve 100% carbon neutrality by 2026 and is on track to use 100% renewable energy by 2030[149]. - The Corporation's community solar project in North Tonawanda, NY, will produce approximately 9,500,000 kWh of clean electricity annually, enough to power over 1,000 homes[163]. - Increased scrutiny regarding the Corporation's ESG practices may result in additional costs and operational risks[90]. - The Corporation's operations could be adversely affected by environmental liabilities and hazards, leading to fines and penalties[93]. - The U.S. Treasury Department proposed a 30% excise tax on mining operations, which could significantly impact the Corporation's profitability if enacted[155]. Strategic Partnerships and Investments - A strategic MOU was formalized with NANO Nuclear Energy to integrate advanced nuclear technologies at the 60 MW New York power facility, promoting zero-emission energy solutions[127]. - The Corporation entered into subscription agreements for gross proceeds of up to US4millioninaprivateplacement,consistingof3,636,363unitsatapurchasepriceofUS4 million in a private placement, consisting of 3,636,363 units at a purchase price of US1.10 per unit, representing a 9% premium to the recent closing price[125]. - A private placement closed on February 7, 2025, for gross proceeds of 6,609,500,consistingof2,503,601SVSharesandwarrantsexercisableforupto1,251,805SVSharesatacombinedpriceof6,609,500, consisting of 2,503,601 SV Shares and warrants exercisable for up to 1,251,805 SV Shares at a combined price of 2.64 per SV Share[128]. Operational Capacity and Infrastructure - The Corporation's mining operations included approximately 13,000 active miners under self-mining agreements and 9,100 under colocation agreements for the year ended December 31, 2024[138]. - The Corporation's power plant in North Tonawanda has a capacity of 60 MW and an operating hashrate of 1.2 EH, while its facilities in Buffalo and Alabama have capacities of 18.7 MW and 22 MW, respectively, each with an operating hashrate of 500 PH[136]. - The acquisition of the 60 MW power plant increased the Corporation's consolidated operating capacity to approximately 90 MW, equating to about 2 EH/s of computing power[180]. - The Corporation plans to transform its facility in Columbiana, Alabama into a Tier 3 data center with a total planned capacity of 55 MW, focusing on HPC and AI workloads[187]. - The Corporation's digital custody account with Gemini holds 100% of its cryptocurrency assets, with 100millionininsurancecoveragefordigitalassets[192].FinancialManagementandReporting−TheCorporationissubjecttosignificantlegal,accounting,andfinancialcostsasapubliclytradedcompany,whichmayreduceresourcesavailableforcryptocurrencyminingoperations[106].−TheCorporationmayfaceincreasedcostsandchallengesinmaintainingcompliancewithU.S.federalsecuritieslawsifitlosesitsforeignprivateissuerstatus[110].−TheCorporation′staxfilingsaresubjecttoaudit,andevolvingregulationsinthecryptocurrencyindustrymayleadtoincreasedtaxliabilities[113].−TheCorporation′smanagementmaybedivertedfromotherbusinessconcernsduetotheneedtomeetreportingrequirements,potentiallyharmingoperations[107].−TheCorporation′slimitedoperatinghistorypresentsriskssuchasunder−capitalizationandcashshortages,affectingthelikelihoodofachievingconsistentprofitability[111].−TheCorporationdoesnotcurrentlyengageinforeigncurrencyhedging,exposingittorisksfromcurrencyfluctuations[116].−TheCorporation′smarketpriceforSVSharesmaybevolatile,influencedbyexternalfactorssuchasgovernmentregulationandmarketsentiment[105].CostManagementandFinancialPerformance−Generalandadministrativeexpensessignificantlydecreasedto100 million in insurance coverage for digital assets[192]. Financial Management and Reporting - The Corporation is subject to significant legal, accounting, and financial costs as a publicly traded company, which may reduce resources available for cryptocurrency mining operations[106]. - The Corporation may face increased costs and challenges in maintaining compliance with U.S. federal securities laws if it loses its foreign private issuer status[110]. - The Corporation's tax filings are subject to audit, and evolving regulations in the cryptocurrency industry may lead to increased tax liabilities[113]. - The Corporation's management may be diverted from other business concerns due to the need to meet reporting requirements, potentially harming operations[107]. - The Corporation's limited operating history presents risks such as under-capitalization and cash shortages, affecting the likelihood of achieving consistent profitability[111]. - The Corporation does not currently engage in foreign currency hedging, exposing it to risks from currency fluctuations[116]. - The Corporation's market price for SV Shares may be volatile, influenced by external factors such as government regulation and market sentiment[105]. Cost Management and Financial Performance - General and administrative expenses significantly decreased to 476,891 in 2024 from 7,653,629in2023,indicatingimprovedcostmanagement[210].−Cashusedbyoperatingactivitiesincreasedto7,653,629 in 2023, indicating improved cost management[210]. - Cash used by operating activities increased to 17,532,344 in 2024 from 13,572,958in2023,primarilyduetohigherdepreciationandamortizationexpenses[227].−Cashprovidedininvestingactivitiesroseto13,572,958 in 2023, primarily due to higher depreciation and amortization expenses[227]. - Cash provided in investing activities rose to 14,716,849 in 2024 from $12,007,498 in 2023, reflecting ongoing investments in equipment and digital currencies[229].