14 unchanged sentences
• volatile and unpredictable cycles in the emerging and evolving industries in which we operate;
−Removed: competition in the markets in which we operate;
−Removed: our reliance on and ability to manage our construction contractors and suppliers to meet our expansion efforts in keeping with planned timelines and cost estimates;
• our reliance on our management team, and any failure by management to properly manage growth;
3 unchanged sentences
• our need for financing in the future to sustain and expand our operations and any inability to obtain such financing on acceptable terms, or at all;
−Removed: we maintain our cash at financial institutions, often in balances that exceed federally insured limits;
−Removed: the uncertain impact of geopolitical and economic events on the demand for bitcoin;
• our exposure to pricing risk and volatility associated with the value of bitcoin because we do not hedge our investment in bitcoin;
−Removed: the development and acceptance of competing blockchain platforms or technologies;
−Removed: the reward for successfully solving a block will halve in the future, and its value may not adjust to compensate us for the reduction in the rewards we receive from our mining efforts;
• our reliance on a third-party mining pool service provider for our mining revenue payouts;
−Removed: forks in the bitcoin network;
−Removed: the open-source structure of the bitcoin network protocol and any failure to properly monitor and upgrade the protocol;
• the possibility that banks and financial institutions may not provide services to businesses that engage in cryptocurrency-related activities;
−Removed: the lack of limitations of FDIC or SIPC protections for the bitcoin we hold;
• bitcoins we mine or hold for our own account may be subject to loss, theft, or restriction on access;
2 unchanged sentences
• potential failures of digital asset exchanges and custodians;
−Removed: risks due to disruptions in the digital asset markets, including, but not limited to, the risk from depreciation in our stock price, financing risk, risk of increased losses or impairments in our investments or other assets, risks of legal proceedings and government investigations, and risks from price declines or price volatility of digital assets;
−Removed: inadequate sources of recovery if our bitcoin holdings are lost, stolen or destroyed;
• our ability to adopt technology in response to changing security needs or trends and reliance on a third party, Coinbase, for custody of our bitcoin holdings;
−Removed: security threats to us;
−Removed: a loss of confidence in our security systems, or a breach of our security systems;
−Removed: the irreversibility of incorrect or fraudulent bitcoin transactions;
−Removed: potential Internet disruptions;
• the limited rights of legal recourse available to us following any loss of our bitcoins;
−Removed: the sale of our bitcoins to pay for expenses a time of low bitcoin prices;
−Removed: the possibility that a cryptocurrency other than bitcoin could be more desirable to the digital asset user base;
• the possibility that our mining costs may exceed our mining revenues;
2 unchanged sentences
• increased scrutiny and changing expectations from stakeholders with respect to ESG practices and the impacts of climate change;
−Removed: our operations and profitability may be adversely affected by competition from other methods of investing in cryptocurrencies;
• the possibility that large holders of bitcoin may sell bitcoin into the market in large amounts all at once, thereby impacting the growth of the price of bitcoin;
• the potential that, in the event of a bankruptcy filing by a custodian, bitcoin held in custody could be determined to be property of a bankruptcy estate and we could be considered a general unsecured creditor thereof;
−Removed: risks related to technological obsolescence, the vulnerability of the global supply chain for cryptocurrency hardware disruption and difficulty in obtaining new hardware;
• the limited precedent for financial accounting of digital assets, and the possibility of future accounting requirements for transactions involving digital assets;
−Removed: the possibility of our failure to grow our hashrate;
−Removed: risks arising from pandemics, epidemics or an outbreak of diseases, such as the COVID-19 pandemic;
−Removed: global economic conditions, including continuing or worsening inflationary issues and associated changes in monetary policy and potential economic recession, and geopolitical events such as the Russia-Ukraine conflict and the subsequent imposition of sanctions as a result of the Russia-Ukraine conflict, and the Israeli-Palestinian conflict, could adversely affect our business, financial condition and results of operations;
−Removed: potential product defect or liability suits, or any recall of our products, particularly those in the discontinued operations;
• our limited insurance protection exposes us and our stockholders to the risk of loss of our bitcoin for which no person is liable.
5 unchanged sentences
• changing environmental regulation and public energy policy;
+Added: • if we fail to qualify for certain state government tax incentives or to comply with local tax regulations, we may suffer financial losses;
• future developments regarding the treatment of digital assets for U.S.
8 unchanged sentences
• we have financed our strategic growth primarily by issuing new shares of our common stock, which dilutes the ownership interests of current stockholders;
−Removed: we have not, and do not presently intend to, pay dividends on shares of our common stock;
−Removed: if securities or industry analysts do not publish or do not continue to publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline;
−Removed: our indebtedness could adversely affect our financial health and prevent us from fulfilling our debt obligations;
−Removed: significant costs and demands upon management as a result of complying with the laws and regulations affecting public companies, and the possible failure to comply with internal control over financial reporting requirements under Section 404 of the Sarbanes-Oxley Act of 2002;
−Removed: our management has identified a material weakness in its internal control over financial reporting and may identify additional material weaknesses in the future;
−Removed: we are an accelerated filer and may no longer provide scaled disclosures as a smaller reporting company beginning with our Quarterly Report on Form 10-Q for the quarter ending December 31, 2023, which will increase our costs and demands on management;
• provisions in the Nevada Revised Statutes and our bylaws could make it very difficult for an investor to bring any legal actions against our directors or officers for violations of their fiduciary duties or could require us to pay any amounts incurred by our directors or officers in any such actions.
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Although we have achieved profitable quarters in the past, to date, we have not maintained consistent profitability from period to period, and no assurances can be made that we will achieve consistent profitability in the near future, if ever.
−Removed: From the Company’s inception through September 30, 2023, we sustained $332,643 in cumulative net losses, and we had a net loss from our continuing operations for the fiscal year ended September 30, 2023 of $132,160.
+Added: From the Company’s inception through September 30, 2024, we sustained $479,218 in cumulative net losses, and we had a net loss from our continuing operations for the fiscal year ended September 30, 2024 of $145,777.
We have generated these losses as we execute our business plan and expand on our bitcoin mining activities as bitcoin prices have at times been in a bear market.
14 unchanged sentences
Our failure to timely replace our manufacturers and suppliers, should that become necessary, could materially and adversely affect our results of operations.
−Removed: For example, we depend on Bitmain, MicroBT, Canaan Crypt Solutions and Sunnyside Digital for our mining rigs and any change in their ability to manufacture or distribute and deliver these products could have a significant impact on our results of operations.
+Added: For example, we depend on Bitmain, MicroBT, Canaan Crypt Solutions and Sunnyside Digital for our miners and any change in their ability to manufacture or distribute and deliver these products could have a significant impact on our results of operations.
Supply chain disruptions resulting from factors such as inflation, labor supply and shipping container shortages and the COVID-19 pandemic have impacted, and may continue to impact, us and our third-party manufacturers and suppliers.
−Removed: We are reliant on third parties for our expansion efforts, including construction contractors and suppliers of infrastructure, to provide accurate
−Removed: estimates and timelines.
+Added: We are reliant on third parties for our expansion efforts, including construction contractors and suppliers of infrastructure, to provide accurate estimates and timelines.
If those parties experience delays, cannot access adequate capital, or are exposed to inflation pressures or supply chain disruptions, our expansion efforts will be similarly impacted.
1 unchanged sentence
Any failure by management to properly manage growth, including hiring and retaining competent and skilled management and other personnel, could have a material adverse effect on our business, operating results and financial condition.
−Removed: We currently have three executive officers — our Chief Executive Officer and President, Zachary Bradford, our Chief Financial Officer, Gary Vecchiarelli, and S.
−Removed: Matthew Schultz, our Executive Chairman — who are responsible for our management functions and are responsible for strategic development, financing and other critical functions.
+Added: We currently have six executive officers — our Chief Executive Officer and President, Zachary Bradford, our Chief Financial Officer, Gary Vecchiarelli, our Executive Chairman, S.
+Added: Matthew Schultz, our Chief Operating Officer, Scott Garrison, our Chief Technology Officer, Taylor Monnig, and our Chief Accounting Officer, Brian Carson — who are responsible for our management functions and are responsible for strategic development, financing and other critical functions.
Our future success depends significantly on the continued service and performance of our existing management team.
10 unchanged sentences
We have engaged in, and in the future may engage in, strategic acquisitions and other arrangements that could disrupt our business, cause dilution to our stockholders, reduce our financial resources and harm our operating results.
−Removed: We have previously engaged in strategic transactions, including acquisitions of companies, technologies and personnel, such as our recent asset and business acquisitions related to our Dalton, GA, Sandersville, GA and Washington, GA facilities, and, as part of our growth strategy, in the future, we may seek additional opportunities to grow our mining operations, including through purchases of miners and facilities from other operating companies, including companies in financial distress.
+Added: We have regularly engaged in strategic transactions, including acquisitions of companies, technologies and personnel, such as our recent asset and business acquisitions related to our Georgia, Mississippi, Wyoming and Tennessee properties, and, as part of our growth strategy, in the future, we expect to seek additional opportunities to grow our mining operations, including through purchases of miners and facilities from other operating companies, including companies in financial distress.
Our ability to grow through future acquisitions will depend on the availability of, and our ability to identify, suitable acquisition and investment opportunities at an acceptable cost, our ability to compete effectively to attract those opportunities and the availability of financing to complete acquisitions.
−Removed: Future acquisitions may require us to issue common stock that would dilute our current stockholders’
−Removed: percentage ownership, assume or otherwise be subject to liabilities of an acquired company, record goodwill and non-amortizable intangible assets that will be subject to impairment testing on a regular basis and potential periodic impairment charges, incur amortization expenses related to certain intangible assets, incur large acquisition and integration costs, immediate write-offs, and restructuring and other related expenses and become subject to litigation.
+Added: Previous acquisitions have required, and future acquisitions will likely require, us to issue common stock that would dilute our current stockholders’ percentage ownership, assume or otherwise be subject to liabilities of an acquired company, record goodwill and non-amortizable intangible assets that will be subject to impairment testing on a regular basis and potential periodic impairment charges, incur amortization expenses related to certain intangible assets, incur large acquisition and integration costs, immediate write-offs, and restructuring and other related expenses and/or become subject to litigation.
The benefits of an acquisition may also take considerable time to develop, and we cannot be certain that any particular acquisition will produce the intended benefits in a timely manner or to the extent anticipated or at all.
−Removed: We may experience difficulties integrating the operations, technologies and personnel of an acquired company or be subjected to liability for the target’s pre-acquisition activities or operations as a successor in interest.
−Removed: Such integration may divert management’s attention from normal daily operations of our business.
−Removed: Future acquisitions may also expose us to
−Removed: potential risks, including risks associated with entering markets in which we have no or limited prior experience, especially when competitors in such markets have stronger market positions, the possibility of insufficient revenues to offset the expenses we incur in connection with an acquisition and the potential loss of, or harm to, our relationships with employees and suppliers as a result of integration of new businesses.
+Added: We may experience difficulties integrating the operations, technologies and personnel of an acquired company or be subjected to liability for the target’s pre-acquisition activities or operations as a successor in interest.
+Added: Such integration may divert management’s attention from normal daily operations of our business.
+Added: Future acquisitions may also expose us to potential risks, including risks associated with entering markets in which we have no or limited prior experience, especially when competitors in such markets have stronger market positions, the possibility of insufficient revenues to offset the expenses we incur in connection with an acquisition and the potential loss of, or harm to, our relationships with employees and suppliers as a result of integration of new businesses.
We may not be able to timely complete our future strategic growth initiatives or within our anticipated cost estimates, if at all.
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We maintain the majority of our cash and cash equivalents in accounts at banking institutions in the United States that we believe are of high quality.
−Removed: Cash held in these accounts often exceed the Federal Deposit Insurance Corporation (“FDIC”)
−Removed: insurance limits.
+Added: Cash held in these accounts often exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits.
If such banking institutions were to fail, we could lose all or a portion of the amounts held in excess of such insurance limitations.
−Removed: The FDIC recently took control of three such banking institutions, Silicon Valley Bank on March 10, 2023, Signature Bank on March 12, 2023 and First Republic Bank on May 1, 2023.
+Added: The FDIC took control of three such banking institutions, Silicon Valley Bank on March 10, 2023, Signature Bank on March 12, 2023 and First Republic Bank on May 1, 2023.
While we did not have an account at any of these three banks, in the event of the failure of any of the financial institutions where we maintain our cash and cash equivalents, there can be no assurance that we would be able to access uninsured funds in a timely manner or at all.
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The value of bitcoin has historically been subject to wide swings.
−Removed: Because we do not currently hedge our investment in bitcoin and do not intend to for the foreseeable future, we are directly exposed to bitcoin’s price volatility and surrounding risks.
−Removed: The market price of one bitcoin in our principal market ranged from approximately $15,460 to $31,862 during the fiscal year ended September 30, 2023 and ranged from approximately $17,567 to $69,000 during the fiscal year ended September 30, 2022.
+Added: Because we do not currently hedge our investment in bitcoin and do not intend to for the foreseeable future, we are directly exposed to bitcoin’s price volatility and surrounding risks.
+Added: The market price of one bitcoin in our principal market ranged from approximately $26,500 to $73,800 during the fiscal year ended September 30, 2024, $15,500 to $31,900 during the fiscal year ended September 30, 2023 and ranged from approximately $17,600 to $69,000 during the fiscal year ended September 30, 2022.
While bitcoin prices are determined primarily using data from various exchanges, over-the-counter markets and derivative platforms, they have historically been volatile and are impacted by a variety of factors.
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Halving is a process designed to control the overall supply and reduce the risk of inflation in cryptocurrencies using a Proof-of-Work consensus algorithm.
−Removed: In an event referred to as bitcoin “halving,”
−Removed: the bitcoin reward for mining any
−Removed: block is cut in half.
−Removed: For example, the mining reward for bitcoin declined from 12.5 to 6.25 bitcoin on May 11, 2020.
+Added: In an event referred to as bitcoin “halving,” the bitcoin reward for mining any block is cut in half.
+Added: For example, the mining reward for bitcoin declined from 6.25 to 3.125 bitcoin on April 19, 2024.
This process is scheduled to occur once every 210,000 blocks.
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Our reliance on a third-party mining pool service provider for our mining revenue payouts may adversely affect an investment in us.
−Removed: We currently rely on Foundry Digital’s open access mining pool ("pool") that supports bitcoin to receive our mining rewards and fees from the network.
+Added: We currently rely on Foundry Digital’s open access mining pool (“pool”) that supports bitcoin to receive our mining rewards and fees from the network.
Our pool has the sole discretion to modify the terms of our agreement at any time, and, therefore, our future rights and relationship with our pool may change.
In general, mining pools allow miners to combine their computing and processing power, increasing their chances of solving a block and getting rewarded by the bitcoin network.
−Removed: The rewards, distributed proportionally to our contribution to the pool’s overall mining power, are distributed by the pool operator.
+Added: The rewards, distributed proportionally to our contribution to the pool’s overall mining power, are distributed by the pool operator.
Should our pool’s operator systems suffer downtime due to a cyber-attack, software malfunction or other similar issues, our ability to mine and receive revenue will be negatively impacted.
−Removed: Furthermore, while we receive daily reports from our pool detailing the total processing power provided to the pool and the proportion of that total processing power we provided to determine the distribution of rewards to us, we are dependent on the accuracy of our pool’s record keeping.
+Added: Furthermore, while we receive daily reports from our pool detailing the total processing power provided to the pool and the proportion of that total processing power we provided to determine the distribution of rewards to us, we are dependent on the accuracy of our pool’s record keeping.
Therefore, we have little means of recourse against our pool's operator if we determine the proportion of the reward paid out to us by the mining pool operator is incorrect, other than leaving the pools.
1 unchanged sentence
Forks in the bitcoin network may occur in the future, which may affect the value of bitcoins held by us.
−Removed: A small group of contributors can propose refinements or improvements to the bitcoin network’s source code that alter the protocols and software that govern the bitcoin network and the properties of bitcoin, including the irreversibility of transactions and limitations on the mining of new bitcoin.
−Removed: This is known as a “fork.”
−Removed: In the event a developer or group of developers proposes modifications to the bitcoin network that are not accepted by a majority of miners and users, but that are nonetheless accepted by a substantial plurality of miners and users, two or more competing and incompatible blockchain implementations could result.
−Removed: This is known as a “hard fork.”
+Added: A small group of contributors can propose refinements or improvements to the bitcoin network’s source code that alter the protocols and software that govern the bitcoin network and the properties of bitcoin, including the irreversibility of transactions and limitations on the mining of new bitcoin.
+Added: This is known as a “fork.” In the event a developer or group of developers proposes modifications to the bitcoin network that are not accepted by a majority of miners and users, but that are nonetheless accepted by a substantial plurality of miners and users, two or more competing and incompatible blockchain implementations could result.
+Added: This is known as a “hard fork.”
The value of bitcoin after the creation of a fork is subject to many factors, including, but not limited to, the value of the fork product, market reaction to the creation of the fork product and the occurrence of forks in the future.
−Removed: As such, existing forks, such as Bitcoin Cash and Bitcoin Gold, and future forks may have a negative effect on bitcoin’s value and may adversely affect an investment in us.
+Added: As such, existing forks, such as Bitcoin Cash and Bitcoin Gold, and future forks may have a negative effect on bitcoin’s value and may adversely affect an investment in us.
The open-source structure of the bitcoin network protocol means that the contributors to the protocol are generally not directly compensated for their contributions in maintaining and developing the protocol.
1 unchanged sentence
As an open-source project, bitcoin does not generate revenues for its contributors, and contributors are generally not compensated for maintaining and updating the bitcoin network protocol.
−Removed: The lack of guaranteed financial incentives for contributors to maintain or develop the bitcoin network and the lack of guaranteed resources to adequately address
−Removed: emerging issues with the bitcoin network may reduce incentives to address the issues adequately or in a timely manner.
+Added: The lack of guaranteed financial incentives for contributors to maintain or develop the bitcoin network and the lack of guaranteed resources to adequately address emerging issues with the bitcoin network may reduce incentives to address the issues adequately or in a timely manner.
To the extent that contributors may fail to adequately update and maintain the bitcoin network protocol, there may be a material adverse effect on our business, prospects, or operations and potentially the value of any bitcoin or other cryptocurrencies we mine or otherwise acquire or hold for our own account.
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Bitcoins held by us are not subject to FDIC or SIPC protections.
−Removed: We do not hold our bitcoins with a banking institution or a member of the FDIC or the Securities Investor Protection Corporation (“SIPC”), and, therefore, our bitcoins are not subject to the protections enjoyed by depositors with FDIC or SIPC member institutions.
+Added: We do not hold our bitcoins with a banking institution or a member of the FDIC or the Securities Investor Protection Corporation (“SIPC”), and, therefore, our bitcoins are not subject to the protections enjoyed by depositors with FDIC or SIPC member institutions.
As a result, we may suffer a loss with respect to our bitcoins that are not covered by insurance, and we may not be able to recover any of our carried value in these bitcoins if they are lost or stolen or suffer significant and sustained reduction in conversion spot price.
2 unchanged sentences
There is a risk that some or all of our bitcoins could be lost or stolen.
−Removed: Bitcoins are stored in and accessed by cryptocurrency sites commonly referred to as “wallets.”
−Removed: A hot wallet refers to any cryptocurrency wallet that is connected to the Internet.
+Added: Bitcoins are stored in and accessed by cryptocurrency sites commonly referred to as “wallets.” A hot wallet refers to any cryptocurrency wallet that is connected to the Internet.
Generally, hot wallets are easier to set up and access than wallets in cold storage, but they are also more susceptible to hackers and other technical vulnerabilities.
1 unchanged sentence
Cold storage is generally more secure than hot storage, but is not ideal for quick or regular transactions.
−Removed: When we keep our bitcoin in cold storage, we may experience lag time in our ability to respond to market fluctuations in the price of our cryptocurrency assets.
−Removed: We currently mine bitcoin by contributing to and benefiting from our pool’s processing power.
+Added: As of September 30, 2024, we held approximately 99% of our bitcoin in cold storage and 1% in hot wallets.
+Added: Due to our usage of in cold storage, we may experience lag time in our ability to respond to market fluctuations in the price of our cryptocurrency assets.
+Added: We currently mine bitcoin by contributing to and benefiting from our pool’s processing power.
Our share of bitcoins mined from our pool is initially received by us in wallets we control, which are maintained by Coinbase.
4 unchanged sentences
We may be in control and possession of substantial holdings of bitcoin, and as we increase in size, we may become a more appealing target of hackers, malware, cyber-attacks or other security threats.
−Removed: Any of these events may adversely affect our operations and, consequently, our investments and profitability.
+Added: In addition, our borrowings under the Master Loan (as defined below) are collateralized by approximately $78,125 of bitcoin as of September 30, 2024.
+Added: Pursuant to the terms of the Master Loan and related security agreement, Coinbase has the right to sell, pledge, rehypothecate, assign, use or otherwise dispose of the bitcoin collateralizing our borrowings under the Master Loan.
+Added: This could increase our exposure to the risk of a counterparty default since, under such circumstances, we may be unable to recover the posted collateral promptly or may be unable to recover all of the posted collateral Any of these events may adversely affect our operations and, consequently, our investments and profitability.
If a malicious actor or botnet obtains control of more than 50% of the processing power on the bitcoin network, such actor or botnet could manipulate the network to adversely affect us, which would adversely affect an investment in us.
1 unchanged sentence
The malicious actor or botnet could control, exclude or modify the order of transactions, though it could not generate new units or transactions using such control.
−Removed: The malicious actor or botnet could also “double-spend,”
−Removed: or spend the same
−Removed: bitcoin in more than one transaction, or it could prevent transactions from being validated.
+Added: The malicious actor or botnet could also “double-spend,” or spend the same bitcoin in more than one transaction, or it could prevent transactions from being validated.
In certain instances, reversing any fraudulent or malicious changes made to the bitcoin blockchain may not be possible.
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A perceived lack of stability in the digital asset exchange market and the closure or temporary shutdown of digital asset exchanges due to business failure, hackers or malware, government-mandated regulation, or fraud, may reduce confidence in digital asset networks and result in greater volatility in cryptocurrency values.
−Removed: These potential consequences of a digital asset exchange’s failure could adversely affect an investment in us.
+Added: These potential consequences of a digital asset exchange’s failure could adversely affect an investment in us.
We may face several risks due to disruptions in the digital asset markets, including but not limited to the risk from depreciation in our stock price, financing risk, risk of increased losses or impairments in our investments or other assets, risks of legal proceedings and government investigations, and risks from price declines or price volatility of digital assets.
1 unchanged sentence
In November 2022, FTX, the third-largest digital asset exchange by volume at the time, halted customer withdrawals, and shortly thereafter, FTX and its subsidiaries filed for bankruptcy.
−Removed: In response to these and other similar events (including significant activity by various regulators regarding digital asset activities, such as enforcement actions, against a variety of digital asset entities, including Coinbase and Binance), the digital asset markets, including the market for bitcoin specifically, have experienced extreme price volatility and several other entities in the digital asset industry have been, and may continue to be, negatively affected, further undermining confidence in the digital asset markets and in bitcoin.
−Removed: These events have also negatively impacted the liquidity of the digital asset markets as certain entities affiliated with FTX and platforms such as Coinbase and
−Removed: Binance have engaged, or may continue to engage, in significant trading activity.
+Added: In response to these and other similar events (including significant activity by various regulators regarding digital asset activities, such as enforcement actions, against a variety of digital asset entities, including Coinbase, Kraken and Binance), the digital asset markets, including the market for bitcoin specifically, have experienced extreme price volatility and several other entities in the digital asset industry have been, and may continue to be, negatively affected, further undermining confidence in the digital asset markets and in bitcoin.
+Added: These events have also negatively impacted the liquidity of the digital asset markets as certain entities affiliated with FTX and platforms such as Coinbase, Kraken and Binance have engaged, or may continue to engage, in significant trading activity.
If the liquidity of the digital asset markets continues to be negatively impacted by these events, digital asset prices (including the price of bitcoin) may continue to experience significant volatility and confidence in the digital asset markets may be further undermined.
These events are continuing to develop and it is not possible to predict at this time all of the risks that they may pose to us, our service providers or on the digital asset industry as a whole.
−Removed: Although we had no direct exposure to FTX or any of the above-mentioned cryptocurrency companies (with the exception of Coinbase, which is discussed in “—Potential that, in the event of a bankruptcy filing by a custodian, bitcoin held in custody could be determined to be property of a bankruptcy estate and we could be considered a general unsecured creditor thereof”), nor any material assets that may not be recovered or may otherwise be lost or misappropriated due to the above-mentioned bankruptcies, the failure or insolvency of large exchanges like FTX or other significant players in the digital asset space may cause the price of bitcoin to fall and decrease confidence in the ecosystem, which could adversely affect an investment in us.
−Removed: Such market volatility has had a material and adverse effect on our results of operations and financial condition, and we expect our results of operations to continue to be affected by bitcoin’s price as the results of our operations are significantly tied to the price of bitcoin.
+Added: Although we had no direct exposure to FTX or any of the above-mentioned cryptocurrency companies (with the exception of Coinbase, which is discussed in “—Potential that, in the event of a bankruptcy filing by a custodian, bitcoin held in custody could be determined to be property of a bankruptcy estate and we could be considered a general unsecured creditor thereof”), nor any material assets that may not be recovered or may otherwise be lost or misappropriated due to the above-mentioned bankruptcies, the failure or insolvency of large exchanges like FTX or other significant players in the digital asset space may cause the price of bitcoin to fall and decrease confidence in the ecosystem, which could adversely affect an investment in us.
+Added: Such market volatility has had a material and adverse effect on our results of operations and financial condition, and we expect our results of operations to continue to be affected by bitcoin’s price as the results of our operations are significantly tied to the price of bitcoin.
If we do not continue adjusting our short-term strategy to optimize our operating efficiency in the current dynamic market conditions, such market conditions could have a further negative result on our business, prospects or operations.
3 unchanged sentences
For example, as to a particular event of loss, the only source of recovery for us might be limited, to the extent identifiable, to other responsible third parties (e.g., a thief or terrorist), any of which may not have the financial resources (including liability insurance coverage) to satisfy a valid claim of ours.
−Removed: While Coinbase maintains insurance coverage of such types and amounts as Coinbase asserts to be commercially reasonable for its custodial services provided under the Company’s custody agreement with Coinbase, including certain commercial crime insurance of limited aggregate principal amount which covers losses stemming from fraud, security breach, hack and asset theft, such insurance coverage may be insufficient to protect the Company against all losses of its bitcoin holdings held in custody with Coinbase, whether or not stemming from security breaches, cyberattacks or other types of unlawful activity.
−Removed: See “–Our limited insurance protection exposes us and our stockholders to the risk of loss of our bitcoin for which no person is liable.”
+Added: While Coinbase maintains insurance coverage of such types and amounts as Coinbase asserts to be commercially reasonable for its custodial services provided under the Company’s custody agreement with Coinbase, including certain commercial crime insurance of limited aggregate principal amount which covers losses stemming from fraud, security breach, hack and asset theft, such insurance coverage may be insufficient to protect the Company against all losses of its bitcoin holdings held in custody with Coinbase, whether or not stemming from security breaches, cyberattacks or other types of unlawful activity.
+Added: See “–Our limited insurance protection exposes us and our stockholders to the risk of loss of our bitcoin for which no person is liable.”
Our ability to adopt technology in response to changing security needs or trends and reliance on a third party, Coinbase, for custody pose a challenge to the safekeeping of our bitcoin holdings.
1 unchanged sentence
All of the bitcoin we hold is held in either cold or hot storage by Coinbase.
−Removed: We rely on Coinbase’s security systems, derived from established, industry-best practices, to safeguard our bitcoin holdings from theft, loss, destruction or other issues relating to hackers and technological attack.
+Added: We rely on Coinbase’s security systems, derived from established, industry-best practices, to safeguard our bitcoin holdings from theft, loss, destruction or other issues relating to hackers and technological attack.
We believe that we may become a more appealing target of security threats as the size of our bitcoin holdings grow.
1 unchanged sentence
To the extent that Coinbase is no longer able to safeguard our assets, we would be at risk of loss if safeguarding protocols fail.
+Added: Any potential use of emerging technologies like artificial intelligence, machine learning and generative artificial intelligence could lead to unintended consequences and result in reputational harm and litigation.
+Added: We continue to evaluate emerging technologies like artificial intelligence, machine learning and generative artificial intelligence for incorporation into our business.
+Added: State and federal regulations relating to these emerging technologies are quickly evolving, and, should we adopt such technologies, we may require significant resources to maintain our business practices while seeking to comply with U.S.
+Added: Any failure to accurately identify and address our responsibilities and liabilities in this new environment could negatively affect any solutions we develop incorporating such technologies and could subject us to reputational harm, regulatory action or litigation, any of which may harm our financial condition and operating results.
+Added: These same risks apply to our use of third-party service providers who are implementing these tools into the products or services they provide to us.
Security threats to us could result in a loss of our bitcoin holdings or damage to our reputation and brand, each of which could adversely affect an investment in us.
3 unchanged sentences
Furthermore, we believe that, as our assets grow, we may become a more appealing target for security threats such as hackers and malware.
−Removed: We rely on Coinbase’s security systems, derived from established, industry-best practices, to safeguard our bitcoin holdings from theft, loss, destruction or other issues relating to hackers and technological attack.
−Removed: Nevertheless, Coinbase’s security systems may not be impenetrable and may not be free from defect or immune to acts of God, and any loss due to a security breach, software defect or act of God may be borne by us.
+Added: We rely on Coinbase’s security systems, derived from established, industry-best practices, to safeguard our bitcoin holdings from theft, loss, destruction or other issues relating to hackers and technological attack.
+Added: Nevertheless, Coinbase’s security systems may not be impenetrable and may not be free from defect or immune to acts of God, and any loss due to a security breach, software defect or act of God may be borne by us.
Our security system and operational infrastructure may be breached due to the actions of outside parties, error or malfeasance of an employee of ours, or otherwise, and, as a result, an unauthorized party may obtain access to our private keys, data or bitcoin.
19 unchanged sentences
Generally, cryptocurrencies and our business of mining bitcoin are dependent upon the Internet.
−Removed: A significant disruption in Internet connectivity could disrupt bitcoin’s network operations until the disruption is resolved and have an adverse effect on the price of bitcoin and our ability to mine bitcoin.
+Added: A significant disruption in Internet connectivity could disrupt bitcoin’s network operations until the disruption is resolved and have an adverse effect on the price of bitcoin and our ability to mine bitcoin.
The limited rights of legal recourse available to us expose us and our investors to the risk of loss of our bitcoins for which no person is liable.
7 unchanged sentences
At this time, we do not engage in contractual or financial hedging activities related to our bitcoin holdings to mitigate potential decreases in the price of bitcoin.
−Removed: See the above risk factor entitled, “The value of bitcoin has historically been subject to wide swings.
−Removed: Because we do not currently hedge our investment in bitcoin and do not intend to for the foreseeable future, we are directly exposed to bitcoin’s price volatility and surrounding risks."
+Added: See the above risk factor entitled, “The value of bitcoin has historically been subject to wide swings.
+Added: Because we do not currently hedge our investment in bitcoin and do not intend to for the foreseeable future, we are directly exposed to bitcoin’s price volatility and surrounding risks.”
Demand for bitcoin is driven, in part, by its status as a prominent and secure cryptocurrency.
It is possible that a cryptocurrency other than bitcoin could have features that make it more desirable to a material portion of the digital asset user base, resulting in a reduction in demand for bitcoin.
−Removed: Bitcoin holds a “first-to-market”
−Removed: advantage over other cryptocurrencies.
+Added: Bitcoin holds a “first-to-market” advantage over other cryptocurrencies.
This first-to-market advantage is driven in large part by having the largest user base and, more importantly, the largest combined mining power in use.
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Although our mining sites are equipped with standard security measures normally associated with a traditional data center, and insured by tier one insurance providers, our mining sites could still be rendered inoperable, temporarily or permanently, as a result of a fire or other natural disaster or by a terrorist or other events outside of our control.
−Removed: For a summary of our insurance coverage, see “Business—Insurance.”
−Removed: The measures we have taken, and may take in the future, to prevent and insure against these risks may prove to not be sufficient or effective.
+Added: For a summary of our insurance coverage, see “Business—Insurance.” The measures we have taken, and may take in the future, to prevent and insure against these risks may prove to not be sufficient or effective.
We are subject to risks associated with our need for significant electrical power.
The operation of a bitcoin mining facility requires significant amounts of electrical power.
−Removed: Any mining site we currently operate or establish in the future can only be successful if we can continue to obtain sufficient electrical
−Removed: power for that site on a cost-effective basis.
−Removed: We currently have five fully-owned campuses and operate additional miners under one active hosting agreement, each of which have unique power agreements.
+Added: Any mining site we currently operate or establish in the future can only be successful if we can continue to obtain sufficient electrical power for that site on a cost-effective basis.
+Added: Our mining operations are conducted across a mix of fully-owned campuses, leased properties, and active hosting agreements, each of which have unique power agreements.
Geopolitical events including the war in Ukraine and inflationary impacts have caused power prices to increase worldwide;
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To the extent we are unable to receive adequate power supply and are forced to reduce or cease our operations due to the availability or cost of electrical power, our business would be adversely affected.
−Removed: Further, one of our key strategies is to use sustainable and environmentally friendly sources of energy, including nuclear energy sources.
−Removed: To the extent we are unable to obtain sustainable sources of energy on a cost-effective basis and execute on this strategy, our business could be adversely affected.
Increased scrutiny and changing expectations from stakeholders with respect to our ESG practices and the impacts of climate change may result in additional costs or risks.
−Removed: Companies across many industries are facing increasing scrutiny related to their environmental, social and governance (“ESG”) practices.
+Added: Companies across many industries are facing increasing scrutiny related to their environmental, social and governance (“ESG”) practices.
Investor advocacy groups, certain institutional investors, investment funds and other influential investors are also increasingly focused on ESG practices and in recent years have placed increasing importance on the non-financial impacts of their investments.
−Removed: In May 2021, the SEC proposed rule changes that would require public companies to include certain climate-related disclosures in their periodic reports, including information about climate-related risks that are reasonably likely to have a material impact on their business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to their audited financial statements.
−Removed: The SEC noted that such rule changes were proposed in response to investor demands for consistent and comparable data on climate change.
+Added: In May 2021, the SEC proposed rule changes that would require public companies to include certain climate-related disclosures in their periodic reports, including information about climate-related risks that are reasonably likely to have a material impact on their business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to their audited financial statements noting that such rule changes were proposed in response to investor demands for consistent and comparable data on climate change.
Furthermore, increased public awareness and concern regarding environmental risks, including global climate change, may result in increased public scrutiny of our business and our industry, and our management team may divert significant time and energy away from our operations and towards responding to such scrutiny and reassuring our employees.
−Removed: In addition, the physical risks of climate change may impact the availability and cost of materials and natural resources, sources and supplies of energy, and demand for bitcoin and other cryptocurrencies, and could increase our insurance and other operating costs, including, potentially, to repair damage incurred as a result of extreme weather events or to renovate or retrofit facilities to better withstand extreme weather events.
+Added: The implementation of the SEC’s proposed rule changes was stayed in April 2024 in response to consolidated legal challenges.
+Added: However, should the rule changes ultimately become effective, in either their current or a revised form, we, as a public company, may also face increased oversight from the SEC with respect to our climate-related disclosures.
+Added: The physical risks of climate change may also impact the availability and cost of materials and natural resources, sources and supplies of energy, and demand for bitcoin and other cryptocurrencies, and could increase our insurance and other operating costs, including, potentially, to repair damage incurred as a result of extreme weather events or to renovate or retrofit facilities to better withstand extreme weather events.
If environmental laws or regulations or industry standards are either changed or adopted and impose significant operational restrictions and compliance requirements on our operations, or if our operations are disrupted due to physical impacts of climate change, our business, capital expenditures, results of operations, financial condition and competitive position could be negatively impacted.
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Market and financial conditions, and other conditions beyond our control, may make it more attractive to invest in other financial vehicles, or to invest in cryptocurrencies directly, which could limit the market for our shares and reduce their liquidity.
−Removed: The emergence of other financial vehicles and exchange-traded funds have increased scrutiny on cryptocurrencies, and such scrutiny could be applicable to us and impact our
−Removed: ability to successfully establish or maintain a public market for our securities.
+Added: The emergence of other financial vehicles and exchange-traded funds have increased scrutiny on cryptocurrencies, and such scrutiny could be applicable to us and impact our ability to successfully establish or maintain a public market for our securities.
Such circumstances could have a material adverse effect on our business, prospects or operations and potentially the value of any bitcoin we mine or otherwise acquire or hold for our own account, and harm investors.
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A change in regulatory or financial accounting standards or interpretations by the SEC, particularly as they relate to the Company and the financial accounting of our bitcoin-related operations, could result in changes in our accounting treatment and the necessity to restate our financial statements.
−Removed: In addition, the accounting policies of many companies are being subjected to heightened scrutiny by regulators and the public, and we have received comments from the staff of the SEC’s Division of Corporation Finance Office of Crypto Assets (the “Staff”) during fiscal year 2023 related to the accounting of our bitcoin-related operations.
−Removed: See Item 1B, Unresolved Staff Comments.
+Added: In addition, the accounting policies of many companies are being subjected to heightened scrutiny by regulators and the public, and we have received comments from the staff of the SEC’s Division of Corporation Finance Office of Crypto Assets (the “Staff”) during fiscal year 2023 related to the accounting of our bitcoin-related operations, which have been resolved.
Such continued uncertainty with regard to financial accounting matters, particularly as they relate to the Company, the financial accounting of our bitcoin-related operations and the SEC comments we have received in respect of such matters, could negatively impact our business, prospects, financial condition and results of operations and our ability to raise capital.
If we fail to grow our hashrate, we may be unable to compete, and our results of operations could suffer.
−Removed: Generally, a bitcoin miner’s chance of solving a block on the bitcoin blockchain and earning a bitcoin reward is a function of the miner’s hashrate (i.e., the amount of computing power devoted to supporting the bitcoin blockchain), relative to the global network hashrate.
+Added: Generally, a bitcoin miner’s chance of solving a block on the bitcoin blockchain and earning a bitcoin reward is a function of the miner’s hashrate (i.e., the amount of computing power devoted to supporting the bitcoin blockchain), relative to the global network hashrate.
As demand for bitcoin has increased, the global network hashrate has increased, and to the extent more adoption of bitcoin occurs, we would expect the demand for bitcoin would increase, drawing more mining companies into the industry and further increasing the global network hashrate.
−Removed: As new and more powerful and energy-efficient mining servers are deployed, the global network hashrate will continue to increase, meaning a miner’s respective percentage of the total daily rewards will decline unless it deploys additional hashrate at pace with the growth of global hashrate.
+Added: As new and more powerful and energy-efficient mining servers are deployed, the global network hashrate will continue to increase, meaning a miner’s respective percentage of the total daily rewards will decline unless it deploys additional hashrate at pace with the growth of global hashrate.
Accordingly, to compete in this highly competitive industry, we believe we will need to continue to acquire new miners, both to replace those lost to ordinary wear and tear and other damage, and to increase our hashrate to keep up with a growing global network hashrate.
−Removed: We plan to grow our hashrate, in part, by acquiring newer, more powerful and energy-efficient miners.
+Added: During the fiscal year ended September 30, 2024, we grew our hashrate, in part, by acquiring newer, more powerful and energy-efficient miners through sales and purchase agreements with suppliers, and we plan to continue to acquire new miners to compete effectively in the market.
These new miners are highly specialized servers that are very difficult to produce at scale.
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If we are unable to acquire sufficient numbers of new miners or access sufficient capital to fund our acquisitions, our results of operations and financial condition may be adversely affected, which could adversely affect investments in our securities.
−Removed: Our business has been, and in the future may be, subject to risks arising from pandemic, epidemic or an outbreak of diseases, such as the outbreak of the COVID-19 pandemic.
−Removed: On March 11, 2020, the World Health Organization declared the COVID-19 outbreak to be a pandemic.
−Removed: Since then, COVID-19 spread across the globe and impacted worldwide economic activity, including through quarantines, travel bans and restrictions, shelter-in-place orders, shutdowns of businesses, reductions in business activity, supply chain interruptions and overall economic and financial market instability.
−Removed: These measures impacted, and may further impact, our workforce and operations, as well as the operations of our customers, our partners and our vendors and suppliers.
−Removed: Our critical business operations, including our headquarters, and many of our key suppliers, are located in regions which have been and may continue to be impacted by COVID-19.
−Removed: Our suppliers worldwide have also been affected by COVID-19 and may continue to experience material impacts well beyond the end of the pandemic.
−Removed: Specifically, the manufacture of components of our miners, the final assembly of our miners and other critical operations are concentrated in China and other geographic locations that have been impacted by COVID-19 and in which local governments continue to take measures to try to contain the pandemic.
−Removed: There is considerable uncertainty regarding the impact of such measures and potential future measures, including restrictions on manufacturing facilities, on our support operations or workforce, or on our customers, partners, vendors and suppliers.
−Removed: Such measures, as well as restrictions on or disruptions of transportation, such as reduced availability or increased cost of air transport, port closures, and increased border controls or closures, could limit our capacity to meet customer demand and have a material adverse effect on our financial condition and results of operations.
−Removed: The COVID-19 pandemic and other factors have historically impacted, and may further adversely affect our supply chain, consistent with their effect across many industries, including creating shipping and logistics challenges and placing significant limits on component supplies.
−Removed: They have also historically and may further result in significantly increased costs for shipping miners, related components and infrastructure.
−Removed: In addition, while the extent of the COVID-19 pandemic's continued effect on the global economy and our business in particular are difficult to assess or predict, the pandemic has historically resulted in, and may continue to result in, significant disruption of global financial markets, which may reduce our ability to access capital or our customers’
−Removed: ability to pay us for past or future purchases, which could negatively affect our working capital and liquidity.
−Removed: A recession or financial market correction resulting from the lack of containment and spread of COVID-19 or a similar
−Removed: health epidemic could impact overall spending, adversely affecting demand for bitcoin, our business and the value of our common stock.
−Removed: The ultimate impact of the COVID-19 pandemic or a similar health epidemic is highly uncertain and subject to change.
−Removed: The extent of the impact of the COVID-19 pandemic on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, including, but not limited to, the potential resurgence of COVID-19, the duration and spread of any other pandemic, its severity, any related restrictions on travel, any closures worldwide, the effectiveness of previous and any future actions taken in the United States and other countries to contain and treat the disease, including, without limitation, the effectiveness of vaccination initiatives in the United States and worldwide and the duration, timing and severity of the impact on customer spending, including any recession resulting from the pandemic, all of which are uncertain and cannot be predicted.
−Removed: An extended period of global supply chain and economic disruption as a result of the COVID-19 pandemic could have a materially adverse impact on our business, results of operations, access to sources of capital and financial condition, though the full extent and duration of any such impact is also uncertain.
Global economic conditions, including continuing or worsening inflationary issues and associated changes in monetary policy and potential economic recession, and geopolitical events such as the Russia-Ukraine conflict, and the subsequent imposition of sanctions as a result of the Russia-Ukraine conflict, and the Israeli-Palestinian conflict, could adversely affect our business, financial condition and results of operations.
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Sustained levels of high inflation caused the U.S.
−Removed: Federal Reserve and other central banks to increase interest rates, which have raised the cost of acquiring capital and reduced economic growth, either of which—or the combination thereof—could hurt the financial and operating results of our business.
+Added: Federal Reserve and other central banks to increase interest rates, which have raised the cost of acquiring capital and reduced economic growth, either of which—or the combination thereof—could hurt the financial and operating results of our business.
In addition, the extent and duration of the situation in Ukraine, resulting sanctions and resulting future market disruptions are impossible to predict, but could be significant.
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Further, in the course of our discontinued operations, we may become subject to legal actions based on a claim that our legacy energy products are or were defective in workmanship or have caused personal or other injuries.
−Removed: We may also be subject to lawsuits and other claims in the future if our legacy products or installed systems malfunction,
−Removed: including, for example, if any of our energy system offerings (such as installed racking systems, photovoltaic modules, batteries, inverters, or other products) causes injuries.
+Added: We may also be subject to lawsuits and other claims in the future if our legacy products or installed systems malfunction, including, for example, if any of our energy system offerings (such as installed racking systems, photovoltaic modules, batteries, inverters, or other products) causes injuries.
Because energy systems and many of our other products are electricity-producing devices, it is possible that customers or their property could be injured or damaged by our products, whether due to product malfunctions, defects, improper installation or other causes.
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The successful assertion of product liability claims against us could result in potentially significant monetary damages that could require us to make significant payments, as well as subject us to adverse publicity, thereby damaging our reputation and competitive position.
−Removed: We rely on third-party manufacturing warranties, warranties provided by our manufacturing partners and our general liability insurance to cover product liability claims and have not obtained separate product liability insurance.
+Added: We rely on third-party manufacturing warranties provided by our manufacturing partners and our general liability insurance to cover product liability claims and have not obtained separate product liability insurance.
Such warranties and insurance coverage may not be adequate to cover all potential claims.
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We do not currently maintain our own insurance coverage for our bitcoin holdings, which are held in custody by Coinbase.
−Removed: In addition, while Coinbase maintains insurance coverage of such types and amounts as Coinbase asserts to be commercially reasonable for its custodial services provided under the Company’s custody agreement with Coinbase, including certain commercial crime insurance of limited aggregate principal amount which covers losses stemming from fraud, security breach, hack and asset theft, such insurance coverage may be insufficient to protect the Company against all losses of its bitcoin holdings held in custody with Coinbase, whether or not stemming from security breaches, cyberattacks or other types of unlawful activity.
+Added: In addition, while Coinbase maintains insurance coverage of such types and amounts as Coinbase asserts to be commercially reasonable for its custodial services provided under the Company’s custody agreement with Coinbase, including certain commercial crime insurance of limited aggregate principal amount which covers losses stemming from fraud, security breach, hack and asset theft, such insurance coverage may be insufficient to protect the Company against all losses of its bitcoin holdings held in custody with Coinbase, whether or not stemming from security breaches, cyberattacks or other types of unlawful activity.
Therefore, a loss may be suffered with respect to our bitcoin that is not covered by insurance and for which no person is liable in damages, which could adversely affect our operations and, consequently, an investment in us.
+Added: Noise Pollution and Community Opposition
+Added: The Company’s Mining operations involve the use of a large numbers of high-powered Miners and cooling systems that generate significant noise.
+Added: This noise can pose several risks to the Company’s business including community complaints, reputational damage, litigation risk, regulatory risk, operational constraints, increased costs and opposition to expansion.
+Added: These risks could lead to fines or penalties imposed by local governments, requirements to implement costly noise mitigation measures, restrictions on the Company’s operating hours, reduction of scale of the Company’s operations, stricter noise controls regulations on the Company’s operations, potential shutdown of data centers that cannot meet local noise regulations, damages resulting from lawsuits and difficulty obtaining necessary permits and approvals for expanding existing data centers or establishing new site operations.
+Added: While the Company strives to be a good corporate citizen and mitigate noise impacts where possible, the inherently noisy nature of large-scale cryptocurrency Mining operations presents ongoing risks to the Company’s business that may negatively affect its financial condition and results of operations.
Risks Related to Governmental Regulation and Enforcement Operations
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If we become subject to these regulations, our costs in complying with them may have a material adverse effect on our business and the results of our operations.
−Removed: To the extent our bitcoin mining activities cause us to be deemed a money services business (an “MSB”) under the regulations promulgated by the Financial Crimes Enforcement Network (“FinCEN”) under the authority of the U.S.
−Removed: Bank Secrecy Act (the “BSA”), we may be required to comply with FinCEN regulations, including those that would mandate us to implement anti-money laundering programs, make certain reports to FinCEN and maintain certain records.
−Removed: To the extent that our cryptocurrency activities cause us to be deemed a “money transmitter”
−Removed: ​(an “MT”) or be given an equivalent designation under state law in any state in which we operate, we may be required to seek a license or otherwise register with a state regulator and comply with state regulations that may include the implementation of anti-money laundering programs, maintenance of certain records and other operational requirements.
−Removed: Currently, the New York State Department of Financial Services maintains a comprehensive “BitLicense”
−Removed: framework for businesses that conduct “virtual currency business activity.”
−Removed: In July 2020, Louisiana enacted the Virtual Currency Businesses Act.
+Added: To the extent our bitcoin mining activities cause us to be deemed a money services business (an “MSB”) under the regulations promulgated by the Financial Crimes Enforcement Network (“FinCEN”) under the authority of the U.S.
+Added: Bank Secrecy Act (the “BSA”), we may be required to comply with FinCEN regulations, including those that would mandate us to implement anti-money laundering programs, make certain reports to FinCEN and maintain certain records.
+Added: To the extent that our cryptocurrency activities cause us to be deemed a “money transmitter” (an “MT”) or be given an equivalent designation under state law in any state in which we operate, we may be required to seek a license or otherwise register with a state regulator and comply with state regulations that may include the implementation of anti-money laundering programs, maintenance of certain records and other operational requirements.
+Added: Currently, the New York State Department of Financial Services maintains a comprehensive “BitLicense” framework for businesses that conduct “virtual currency business activity.” Effective August 2020, Louisiana enacted the Virtual Currency Businesses Act.
+Added: The implementing regulations were formally adopted in late 2022.
In October 2023, California enacted the Digital Financial Assets Law, which requires registration for certain digital financial asset business activities.
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Furthermore, we and our service providers may not be capable of complying with certain federal or state regulatory obligations applicable to MSBs and MTs or similar obligations in other countries.
−Removed: If we are deemed to be subject to such additional regulatory oversight and registration
−Removed: or licensing requirements, we may be required to substantially alter our bitcoin mining activities and possibly cease engaging in such activities.
+Added: If we are deemed to be subject to such additional regulatory oversight and registration or licensing requirements, we may be required to substantially alter our bitcoin mining activities and possibly cease engaging in such activities.
Any such action may adversely affect our business operations and financial condition and an investment in our company.
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to the extent we become subject to regulation by the CFTC in connection with our exchange of bitcoin, we may incur additional compliance costs, which may be significant.
−Removed: The Commodity Exchange Act, as amended (the “CEA”), does not currently impose any direct obligations on us related to the mining or exchange of bitcoins.
+Added: The Commodity Exchange Act, as amended (the “CEA”), does not currently impose any direct obligations on us related to the mining or exchange of bitcoins.
Generally, the CFTC, the federal agency that administers the CEA, regards bitcoin and other cryptocurrencies as commodities.
This position has been supported by decisions of federal courts.
−Removed: However, the CEA imposes requirements relative to certain transactions involving bitcoin and other digital assets that constitute a contract of sale of a commodity for future delivery (or an option on such a contract), a swap or a transaction involving margin, financing or leverage that does not result in actual delivery of the commodity within 28 days to persons not defined as “eligible contract participants”
−Removed: or “eligible commercial entities”
−Removed: under the CEA (e.g., retail persons).
+Added: However, the CEA imposes requirements relative to certain transactions involving bitcoin and other digital assets that constitute a contract of sale of a commodity for future delivery (or an option on such a contract), a swap or a transaction involving margin, financing or leverage that does not result in actual delivery of the commodity within 28 days to persons not defined as “eligible contract participants” or “eligible commercial entities” under the CEA (e.g., retail persons).
Changes in the CEA or the regulations promulgated by the CFTC thereunder, as well as interpretations thereof and official promulgations by the CFTC, may impact the classification of bitcoin and, therefore, may subject bitcoin to additional regulatory oversight by the agency.
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In general, novel or unique assets such as bitcoin and other digital assets may be classified as securities if they meet the definition of investment contracts under U.S.
−Removed: In recent years, the offer and sale of digital assets other than bitcoin, most notably Kik Interactive Inc.’s Kin tokens and Telegram Group Inc.’s TON tokens, have been deemed to be investment contracts by the SEC.
+Added: In recent years, the offer and sale of digital assets other than bitcoin, most notably Kik Interactive Inc.’s Kin tokens and Telegram Group Inc.’s TON tokens, have been deemed to be investment contracts by the SEC.
While we believe that bitcoin is unlikely to be considered an investment contract, and thus a security under the investment contract definition, we cannot provide any assurances that digital assets that we may mine or otherwise acquire or hold for our own account, including bitcoin, will never be classified as securities under U.S.
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It may be illegal now, or in the future, to mine, acquire, own, hold, sell or use bitcoin or other cryptocurrencies, participate in blockchains or utilize similar cryptocurrency assets in one or more countries, the ruling of which could adversely affect us.
−Removed: Although currently cryptocurrencies generally are not regulated or are lightly regulated in most countries, several countries, such as China, India and Russia, may continue taking regulatory actions in the future that could severely
−Removed: restrict the right to mine, acquire, own, hold, sell or use cryptocurrency assets or to exchange any such cryptocurrency assets for local currency.
+Added: Although currently cryptocurrencies generally are not regulated or are lightly regulated in most countries, several countries, such as China, India and Russia, may continue taking regulatory actions in the future that could severely restrict the right to mine, acquire, own, hold, sell or use cryptocurrency assets or to exchange any such cryptocurrency assets for local currency.
For example, in China and Russia (India is currently proposing new legislation), it is illegal to accept payment in bitcoin and other cryptocurrencies for consumer transactions and banking institutions are barred from accepting deposits of cryptocurrencies.
−Removed: In addition, in March 2021, the governmental authorities for the Chinese province of Inner Mongolia banned bitcoin mining in the province due to the industry’s intense electrical power demands and its negative environmental impacts.
+Added: In addition, in March 2021, the governmental authorities for the Chinese province of Inner Mongolia banned bitcoin mining in the province due to the industry’s intense electrical power demands and its negative environmental impacts.
If other countries, including the U.S., implement similar restrictions, such restrictions may adversely affect us.
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As a result, any mine we establish can only be successful if we can obtain sufficient electrical power for that mine on a cost-effective basis, and our establishment of new mines requires us to find locations where that is the case.
−Removed: For instance, our plans and strategic initiatives for expansion are based, in part, on our understanding of current environmental and energy regulations, policies and initiatives enacted by federal, New York State and Georgia State regulators.
+Added: For instance, our plans and strategic initiatives for expansion are based, in part, on our understanding of current environmental and energy regulations, policies and initiatives enacted by federal and state regulators.
If new regulations are imposed, or if existing regulations are modified, the assumptions we made underlying our plans and strategic initiatives may be inaccurate, and we may incur additional costs to adapt our planned business, if we are able to adapt at all, to such regulations.
In addition, there continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty for our business because the bitcoin mining industry, with its high energy demand, may become a target for future environmental and energy regulation.
−Removed: New legislation and increased regulation regarding climate change could impose significant costs on us and our suppliers, including costs related to increased energy requirements, capital equipment, environmental monitoring and reporting, and other costs to comply with such regulations.
+Added: New legislation and increased regulation regarding climate change could impose significant costs on us and our suppliers, including costs related to increased renewable energy requirements, capital equipment, environmental monitoring and reporting, and other costs to comply with such regulations.
Further, any future climate change regulations could also negatively impact our ability to compete with companies situated in areas not subject to such limitations.
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Any of the foregoing could result in a material adverse effect on our business and financial condition.
+Added: If we fail to qualify for certain state government tax incentives or to comply with local tax regulations, we may suffer financial losses.
+Added: We expect to negotiate for certain sale and use tax incentives from U.S.
+Added: state governments in exchange for encouraging investment and employment.
+Added: Our interpretations and conclusions regarding these potential tax incentives are not binding on any taxing authority.
+Added: If our assumptions about, or interpretation or implementation of, tax and other laws are incorrect;
+Added: if tax laws or regulations are substantially modified or rescinded;
+Added: if the tax incentives from which we benefit in the jurisdictions in which we operate are substantially modified or rescinded;
+Added: if we fail to meet the conditions of any of the tax incentives;
+Added: or if we do not prevail in disputes with tax authorities, we could suffer material adverse tax and other financial consequences, including owing significant amounts of taxes and penalties that would increase our expenses, reduce our profitability and adversely affect our cash flows, results of operations and financial condition.
Future developments regarding the treatment of digital assets for U.S.
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Moreover, although current IRS guidance addresses the treatment of certain forks, there continues to be uncertainty with respect to the timing and amount of income inclusions for various digital asset transactions, including, but not limited to, staking rewards and other digital asset incentives and rewards products.
−Removed: While current IRS guidance creates
−Removed: a potential tax reporting requirement for any circumstance where the ownership of a bitcoin passes from one person to another, it preserves the right to apply capital gains treatment to those transactions, which is generally favorable for investors in bitcoin.
+Added: While current IRS guidance creates a potential tax reporting requirement for any circumstance where the ownership of a bitcoin passes from one person to another, it preserves the right to apply capital gains treatment to those transactions, which is generally favorable for investors in bitcoin.
There can be no assurance that the IRS will not alter its existing position with respect to digital assets in the future or that other state, local and non-U.S.
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Our interactions with the bitcoin network may expose us to SDN or blocked persons or cause us to violate provisions of law that did not contemplate distributed ledger technology.
−Removed: The Office of Financial Assets Control (“OFAC”) of the Treasury requires us to comply with its sanction program and not conduct business with persons named on its specially designated nationals (“SDN”) list.
−Removed: However, because of the pseudonymous nature of blockchain transactions, we may inadvertently and without our knowledge engage in transactions with persons named on OFAC’s SDN list.
+Added: The Office of Financial Assets Control (“OFAC”) of the Treasury requires us to comply with its sanction program and not conduct business with persons named on its specially designated nationals (“SDN”) list.
+Added: However, because of the pseudonymous nature of blockchain transactions, we may inadvertently and without our knowledge engage in transactions with persons named on OFAC’s SDN list.
We also may not be adequately capable of determining the ultimate identity of the persons with whom we transact.
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Specifically, the trading price of our common stock has already been correlated, and, in the future, as we continue to expand our bitcoin mining business, may be increasingly correlated, to the trading prices of bitcoin.
−Removed: The stocks of
−Removed: bitcoin mining companies have shown volatility relative to bitcoin.
+Added: The stocks of bitcoin mining companies have shown volatility relative to bitcoin.
Bitcoin and other cryptocurrency market prices, which have historically been volatile and are impacted by a variety of factors (including those discussed herein), are determined primarily by using data from various exchanges, over-the-counter markets and derivative platforms.
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Pricing may be the result of, and may continue to result in, speculation regarding future appreciation in the value of bitcoin, or our share price, inflating and making their market prices more.
−Removed: For example, the closing sales price of our common stock on September 30, 2022 was $3.18 and the closing price of bitcoin was $19,426 and, as of September 30, 2023, the closing sales price of our common stock was $3.81, and the closing price of Bitcoin was $26,961.
+Added: For example, the closing sales price of our common stock on September 30, 2023 was $3.81 and the closing price of bitcoin was $26,961 and, as of September 30, 2024, the closing sales price of our common stock was $9.34, and the closing price (per Coinbase) of bitcoin was $63,301.
In addition, the stock markets in general have often experienced volatility, including in the wake of COVID-19, that has sometimes been unrelated or disproportionate to the operating performance of particular companies.
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A continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to access capital, on our business, financial condition, results of operations, cash flow and prospects, and on the market price of our common stock.
−Removed: In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company.
+Added: In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company.
We may become involved in this type of litigation in the future.
−Removed: Litigation of this type may be expensive to defend and may divert our management’s attention and resources from the operation of our business.
+Added: Litigation of this type may be expensive to defend and may divert our management’s attention and resources from the operation of our business.
We have the right to designate and issue additional shares of preferred stock.
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Our Board of Directors is empowered, without stockholder approval, to issue preferred stock in one or more series, and to fix for any series the dividend rights, dissolution or liquidation preferences, redemption prices, conversion rights, voting rights and other rights, preferences and privileges for the preferred stock.
+Added: For example, on August 30, 2024, we filed a certificate of designation (the “Certificate of Designation”) with the Nevada Secretary of State, effective as of the time of filing, designating the rights, preferences, privileges and restrictions of our Series X Preferred Stock, par value $0.001 per share (the “Series X Preferred Stock”), in connection with a vote to increase the number of shares of our common stock authorized for issuance from 300,000,000 shares to 600,000,000 shares (the “Authorized Share Increase”) at our special meeting of stockholders held on October 25, 2024.
+Added: The Certificate of Designation provided that each share of Series X Preferred Stock would have 1,000 votes and vote together with the outstanding shares of our common stock and Series A Preferred Stock on the Authorized Share Increase.
+Added: Each outstanding share of Series X Preferred Stock was redeemed automatically and effective immediately after we published the final results of the stockholder vote on the Authorized Share Increase.
Currently, 2,000,000 shares are designated as Series A Preferred Stock, of which 1,750,000 shares are outstanding.
−Removed: The holders of our Series A Preferred Stock are entitled to have the Company redeem each share of Series A Preferred Stock for three shares of our common stock only if a change of control event (as defined in the certificate of designation) occurs, and they are entitled to vote together with the holders of the Company’s common stock on all matters submitted to stockholders at a rate of forty-five (45) votes for each share of Series A Preferred Stock held.
+Added: The holders of our Series A Preferred Stock are entitled to have the Company redeem each share of Series A Preferred Stock for three shares of our common stock only if a change of control event (as defined in the certificate of designation) occurs, and they are entitled to vote together with the holders of our common stock on all matters submitted to stockholders at a rate of forty-five (45) votes for each share of Series A Preferred Stock held.
The issuance of shares of preferred stock, depending on the rights, preferences and privileges attributable to the preferred stock, could reduce the voting rights and powers of our common stock and the portion of our assets allocated for distribution to common stockholders in a liquidation event, and could also result in dilution in the book value per share of our common stock.
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We are currently, and may from time to time in the future be, involved in and subject to material litigation and other legal proceedings.
−Removed: In particular, on January 20, 2021, a purported stockholder of the Company, individually and on behalf of all others similarly situated, filed a putative class action complaint (the “Class Complaint”) in the United States District Court for the Southern District of New York against us and certain members of our executive management team.
−Removed: The Class Complaint alleges that, between December 31, 2020 and January 14, 2021, we and
−Removed: certain members of our executive management team failed to disclose certain material information to investors and that, as a result of the foregoing, our positive statements about our business, operations and prospects were materially misleading and/or lacked a reasonable basis.
+Added: In particular, on January 20, 2021, a purported stockholder of the Company, individually and on behalf of all others similarly situated, filed a putative class action complaint (the “Class Complaint”) in the United States District Court for the Southern District of New York against us and certain members of our executive management team.
+Added: The Class Complaint alleges that, between December 31, 2020 and January 14, 2021, we and certain members of our executive management team failed to disclose certain material information to investors and that, as a result of the foregoing, our positive statements about our business, operations and prospects were materially misleading and/or lacked a reasonable basis.
The claims made in the Class Complaint appear to be derived from a short seller report that was published about us.
We have financed our strategic growth primarily by issuing new shares of our common stock in public offerings, which dilutes the ownership interests of our current stockholders, and which may adversely affect the market price of our securities.
−Removed: We have raised capital to finance our strategic growth of our business through public offerings of our common stock, including through our at-the-market offering program, and we expect to need to raise additional capital through similar public offerings to finance the completion of current and future expansion initiatives.
+Added: We have raised capital to finance our strategic growth of our business through public offerings of our common stock, including through our current and former at-the-market offering programs, and we expect to need to raise additional capital through similar public offerings to finance the completion of our expansion initiatives and any expansion initiatives we may undertake in the future.
Utilizing those sources may be more challenging in the current financial market conditions, in particular where trading volume is diminished.
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Our indebtedness could adversely affect our financial health and prevent us from fulfilling our debt obligations.
−Removed: In April 2022, we entered into a Master Equipment Financing Agreement with Trinity Capital Inc., as the lender (the “Financing Agreement”).
+Added: In April 2022, we entered into a Master Equipment Financing Agreement with Trinity Capital Inc., as the lender (the “Financing Agreement”).
The Financing Agreement provided for up to $35,000 of borrowings to finance our acquisition of blockchain computing equipment.
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Should we fail to satisfy our obligations with respect to our indebtedness, and should Trinity Capital Inc.
−Removed: foreclose on the miners collaterizing our indebtedness, we could potentially lose up to 0.33 exahashes of computing power, or 3.3% of our current computing power.
+Added: foreclose on the miners collateralizing our indebtedness, we could potentially lose up to 0.33 EH/s of computing power, or 1% of our current computing power.
In addition, to the extent the value of the miners securing our borrowings under the Financing Agreement decreases and falls the below the aggregate amount of our obligations under the Financing Agreement, the lender thereunder would be our unsecured creditor in respect of the difference in the value of the collateral and our obligations.
−Removed: In addition, our indebtedness could:
−Removed: increase our vulnerability to general adverse economic and industry conditions;
−Removed: require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, research and development efforts and other general corporate purposes;
−Removed: limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
−Removed: place us at a competitive disadvantage compared to our competitors that have less debt;
−Removed: result in greater interest rate risk and volatility;
−Removed: limit our ability to borrow additional funds;
+Added: In August 2024, we entered into a Master Loan Agreement (the “Master Loan”) with Coinbase Credit, Inc., as the lender (the “Lender”).
+Added: The Master Loan provides for a line of credit under which the Lender may lend us digital assets or cash.
+Added: We received $50,000 in financing under the Master Loan during the year ended September 30, 2024, and, as of September 30, 2024, $50,000 in principal was outstanding and due to the Lender.
+Added: The borrowings under the Master Loan are collateralized by approximately $78,125 of bitcoin as of September 30, 2024.
+Added: Our indebtedness could:
+Added: • increase our vulnerability to general adverse economic and industry conditions;
+Added: • require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, thereby reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions, research and development efforts and other general corporate purposes;
+Added: • limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
+Added: • place us at a competitive disadvantage compared to our competitors that have less debt;
+Added: • result in greater interest rate risk and volatility;
+Added: • limit our ability to borrow additional funds;
• make it more difficult for us to satisfy our obligations with respect to our debt, including our obligation to repay our Financing Agreement under certain circumstances, or refinance our indebtedness on favorable terms or at all.
+Added: In addition, if the value of bitcoin declines precipitously, the value of our collateral under the Master Loan would also decline.
+Added: In such case, we could be required to provide Coinbase with additional collateral in the form of bitcoin.
+Added: If we are unable to do so, we could default under the Master Loan, which could have a material adverse effect on our operations, liquidity, financial condition, and results of operations.
We incur significant costs and demands upon management and accounting and finance resources as a result of complying with the laws and regulations affecting public companies;
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The existence of one or more material weaknesses could affect the accuracy and timing of our financial reporting.
−Removed: Testing and maintaining internal control over financial reporting involves significant costs and could divert management’s attention from other matters that are important to our business.
+Added: Testing and maintaining internal control over financial reporting involves significant costs and could divert management’s attention from other matters that are important to our business.
Additionally, we may not be successful in remediating any deficiencies that may be identified.
−Removed: Our management has identified a material weakness in its internal control over financial reporting and may identify additional material weaknesses in the future.
−Removed: If we fail to remediate the material weakness or if we otherwise fail to establish and maintain effective control over financial reporting, our ability to accurately and timely report our financial results may be affected, and such failure may adversely affect investor confidence and business operations.
−Removed: In the course of preparing our financial statements for fiscal 2023, we and our independent registered public accounting firm have identified a material weakness in our internal control over financial reporting.
+Added: Our management has identified material weaknesses in its internal control over financial reporting and may identify additional material weaknesses in the future.
+Added: If we fail to remediate the material weaknesses or if we otherwise fail to establish and maintain effective control over financial reporting, our ability to accurately and timely report our financial results may be affected, and such failure may adversely affect investor confidence and business operations.
+Added: In the course of preparing our fiscal year 2024 financial statements, we and our independent registered public accounting firm have identified material weaknesses in our internal control over financial reporting.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.
−Removed: We have identified a material weakness related to information technology general controls (ITGCs) in the area of not having controls fully documented responding to all of the Complementary User Entity Controls forwarded through Software as a Service (SaaS) vendor audit reports in the design and implementation of suggested controls and not always having appropriate IT controls related to information produced by the entity (IPE), including spreadsheets, that are relevant to the preparation of our consolidated financial statements.
−Removed: To address our material weakness, we need to make changes to our program and controls as set forth in Part II, Item 9A “Controls and Procedures.”
−Removed: We will not be able to remediate this material weakness unless and until these steps
−Removed: have been completed and have been operating effectively for a sufficient period of time.
−Removed: We cannot assure you that the measures we plan to take will in fact be sufficient to remediate the control deficiencies that led to the material weakness in our internal control over financial reporting or that such measures will prevent or avoid potential future material weaknesses, and our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business.
+Added: To address our material weaknesses, we need to make changes to our program and controls as set forth in Part II, Item 9A “Controls and Procedures.” We will not be able to remediate these material weaknesses unless and until these steps have been completed and have been operating effectively for a sufficient period of time.
+Added: We cannot assure you that the measures we plan to take will in fact be sufficient to remediate the control deficiencies that led to the material weaknesses in our internal control over financial reporting or that such measures will prevent or avoid potential future material weaknesses, and our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business.
Further, additional weaknesses in our internal control over financial reporting may be discovered in the future.
−Removed: If we are unable to remediate our material weakness and otherwise implement and maintain effective internal control over financial reporting, our ability to record, process and report financial information accurately, and to prepare financial statements and satisfy our public reporting obligations within required time periods, could be adversely affected.
+Added: If we are unable to remediate our material weaknesses and otherwise implement and maintain effective internal control over financial reporting, our ability to record, process and report financial information accurately, and to prepare financial statements and satisfy our public reporting obligations within required time periods, could be adversely affected.
We could also be required to restate financial statements for prior periods.
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Those adverse consequences could be more severe if we are forced to effect any financial statement restatements.
−Removed: We are an accelerated filer and may no longer provide scaled disclosures as a smaller reporting company beginning with our Quarterly Report on Form 10-Q for the quarter ending December 31, 2023, which will increase our costs and demands on management.
−Removed: We are an accelerated filer and beginning with our Quarterly Report on Form 10-Q for the quarter ending December 31, 2023, we may no longer provide scaled disclosure as a “smaller reporting company”
−Removed: as defined under the Exchange Act.
−Removed: As a smaller reporting company, we had the option to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies, including, but not limited to, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and the ability to provide only two years of audited financial statements in our annual reports.
−Removed: In addition, as a non-accelerated filer and smaller reporting company, we have availed ourselves of the exemption from the requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting under Section 404(b) of the Sarbanes Oxley Act.
−Removed: However, we may no longer avail ourselves of this exemption as an accelerated filer, which will increase our expenses and require a significant amount of management time.
Provisions in the Nevada Revised Statutes and our bylaws could make it very difficult for an investor to bring any legal actions against our directors or officers for violations of their fiduciary duties or could require us to pay any amounts incurred by our directors or officers in any such actions.
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In addition, our bylaws allow us to indemnify our directors and officers from and against any and all costs, charges and expenses resulting from their acting in such capacities with us.
−Removed: This means that if one were able to enforce an action against our directors or officers, in all likelihood, we would be required to pay any expenses our directors or officers incur in defending the lawsuit and any judgment or settlement they otherwise
−Removed: would be required to pay.
+Added: This means that if one were able to enforce an action against our directors or officers, in all likelihood, we would be required to pay any expenses our directors or officers incur in defending the lawsuit and any judgment or settlement they otherwise would be required to pay.
Accordingly, our indemnification obligations could divert needed financial resources and may adversely affect our business, financial condition, results of operations and cash flows and the prevailing market prices for our common stock.
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.