Bit Digital, Inc (BTBT) FY 2024 MD&A

Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations

The following discussion and analysis of our
financial condition and results of operations should be read in conjunction with our financial statements and the related notes included
elsewhere in this report. This discussion contains forward-looking statements reflecting our current expectations that involve risks
and uncertainties. See “Disclosure Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks, and
assumptions associated with these statements. Actual results and the timing of events could differ materially from those discussed in
our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” and elsewhere
in this report.

Overview

Bit Digital, Inc. or the “Company”,
is a global platform for high performance computing (“HPC”) infrastructure and digital asset production, with headquarters
in New York City.

HPC Business

The Company’s HPC business operates under
the WhiteFiber Inc. (“WhiteFiber”) brand. Our operations are located in the US, Canada, and Iceland. We are a leading provider
of high-performance computing (“HPC”) data centers/colocation services and cloud-based HPC graphics processing units (“GPU”)
services, which we term cloud services, for customers such as artificial intelligence (“AI”) and machine learning (“ML”)
developers. Our HPC Tier-3 data centers provide colocation services and are developed and operated by our wholly-owned subsidiary, Enovum.
Our cloud services are provided by our WhiteFiber AI, Inc subsidiary. Collectively, we refer to these offerings as our HPC Business.

On October 11, 2024, we significantly expanded
our HPC data center operations and capabilities by acquiring Enovum Data Centers Corp (“Enovum”), a Tier-3 HPC data center
platform based in Montreal, Canada. Through Enovum, we lease and operate a 4MW AI data center located in Montreal, Canada (“MTL
1”). MTL 1 is a fully operational Tier-3 data center that is designed for HPC workloads. MTL 1’s full capacity is occupied
by customers under lease agreements with an average duration of approximately 30 months. On December 27, 2024, we announced that we had
acquired the real estate and building for a build-to-suit 5MW Tier-3 data center expansion project in Montreal (“MTL 2”).
The MTL 2 data center is expected to be completed and operational by June 2025.

In addition to providing highly desirable HPC
data center hosting capacity to our customers, our business model integrates HPC data center infrastructure and cloud service to provide
scalable, high-performance computing solutions for enterprises, research institutions, and AI-driven businesses. Our integrated approach
aligns specialized data center operations with GPU-focused cloud services, addressing the unique requirements of AI and HPC workloads.
These workloads demand greater power density, advanced cooling solutions, and robust bandwidth to handle large-scale data transfers. By
operating our data centers, we believe we can better meet these needs and reduce the complexity associated with procuring power and connectivity
from external vendors. We can also design our facilities to accommodate the higher heat loads generated by modern GPUs, potentially shortening
deployment timelines for customers who require rapid expansion of their compute infrastructure. From a financial standpoint, our vertically
integrated solution allows us to capture additional margin for both of our HPC data center and cloud services businesses, avoiding expenses
that would otherwise be due to third-party providers.

Cloud Services

Our cloud services business provides cutting-edge, bespoke services
involving a sophisticated array of computers and chips, including NVIDIA GPUs, servers, network equipment, and data storage solutions.
We believe we provide our cloud services customers with the highest levels of performance and reliability while offering flexibility to
scale with customer needs. Our cloud services solutions include a proprietary software layer that enables our customers to rapidly and
reliably deploy AI applications with superior performance. We are offering our cloud services initially at a data center maintained by
a third-party colocation provider in Iceland (the “Iceland Data Center”) but have plans to seamlessly integrate our cloud
services at data centers across key regions in Europe and North America. We believe that both of our businesses are posted to benefit
from increased market demand. This is illustrated by our demonstrated ability to pre-sign end users prior to committing capital for expansions,
both for new data center sites and for GPU server procurement.

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We are actively engaged in research and development
efforts to enhance our cloud services capabilities for our customers. For example, we are developing integrated software to automate layering
of stacks and self-service portals on top of the cross-data center fabric, allowing our customers to access GPU or CPU nodes on demand—no
matter where they physically reside. This provides significant flexibility as scaling is required to accelerate development of AI applications.
In addition, we are working on advanced interconnect technologies like InfiniBand (IB) or RDMA over Converged Ethernet (“RoCE”).
When combined with cross-data center links, these ensure that training jobs can be distributed without bottlenecks or high latency. By
emphasizing scale, performance, and reliability, we believe that we will be positioned to maximize customer retention while pricing our
services at a premium to those offered by our competitors.

We leverage a global network of data center resources
by partnering with eight third-party data center providers to achieve high autonomy in locations across Europe, Canada, and the U.S. Our
initial HPC data center partnership through which we lease capacity is at BlöndUos Campus, Iceland, offering a world-class operations
team with certified technicians and reliable engineers. The facility has 50kW rack density and 6MW total capacity. Its energy source is
100% renewable energy, mainly from Blanda Hydro PowerStation, the winner of IHA Blue Planet Awards in 2017. In the fourth quarter of 2023,
we secured our first cloud customer through a three-year service agreement to provide services using our advanced AI equipment. In January
2024, the Company announced that its WhiteFiber AI business commenced generating revenue.

Colocation/HPC Data Center Services

We design, develop, and operate HPC data centers,
through which we offer our hosting and colocation services. Our data centers meet the requirements of the Tier-3 standard, including power
redundancy, concurrent maintainability, multiple power feeds, uninterruptible power supply, highly reliable cooling systems, and strict
monitoring and management systems. On October 11, 2024 the Company completed the acquisition of Enovum Data Centers Corp (“Enovum”).
On December 27, 2024, we acquired the real estate and building for a build-to-suit 5MW Tier-3 data center expansion project near Montreal,
Canada.

We use a well-defined set of criteria to select
our data center sites. We actively target sub-20MW sites with proximity to metro areas and partial infrastructure in place, where we are
retrofitting rather than developing greenfield projects. A retrofit entails sourcing and acquiring an existing industrial building with
underutilized, in-place power connectivity. Our average build time for retrofits is six months, which we believe is approximately one-third
to one-half of the industry average development timeline for greenfield projects. We are also developing a proprietary software capability
that will link clusters across multiple sites, leveraging existing dark fiber networks connecting smaller data centers within a radius
of approximately 700 kilometers. By productizing cross-data center operation, we intend to create a single supercluster, enabling us to
sidestep potential fragmentation problems and dynamically “borrow” compute or storage resources from any site. We also prioritize
sites offering opportunities to increase site power over time, enabling our HPC data centers to grow with customer demand. In addition,
we selectively target certain larger opportunities with 50MW of power or more, subject to customer demand, to drive AI-driven compute
super-clusters. Finally, we target sites powered by sustainable, green energy sources.

Digital Asset Business

The digital asset business segment of the Digital Infrastructure Business (the “Digital Asset Business Segment”) is comprised
primarily of two distinct but highly complementary operations: (i) digital asset mining (the “Digital Asset Mining Operations”);
and (ii) ETH staking (the “ETH Staking Operations”).

Digital Asset Mining Business

We commenced our bitcoin (“BTC”) mining
business in February 2020. We initiated limited Ethereum mining operations in January 2022, however discontinued the operations by September
2022 due to Ethereum blockchain switching from proof-of-work (“PoW”) consensus mechanism to proof-of-stake (“PoS”)
validation. Our mining operations, hosted by third-party providers, use specialized computers, known as miners, to generate digital assets.
Our miners use application specific integrated circuit (“ASIC”) chips. These chips enable the miners to apply high computational
power, expressed as “hash rate”, to provide transaction verification services (generally known as “solving a block”)
which helps support the blockchain. For every block added, the blockchain provides an award equal to a set number of digital assets per
block. Miners with a greater hash rate generally have a higher chance of solving a block and receiving an award.

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We operate our mining assets with the primary
intent of accumulating digital assets which we may sell for fiat currency from time to time depending on market conditions and management’s
determination of our cash flow needs, and/or exchange into ETH or USD Coin (“USDC”). Our mining strategy has been to mine
bitcoins as quickly and as many as possible given the fixed supply of bitcoins. In view of historically long delivery lead times to purchase
miners from manufacturers like Bitmain Technologies Limited (“Bitmain”) and MicroBT Electronics Technology Co., Ltd (“MicroBT”),
and other considerations, we have chosen to acquire miners on the spot market, which can typically result in delivery within a relatively
short time.

We have signed service agreements with third-party
hosting partners in North America and Iceland. These partners operate specialized mining data centers, where they install and operate
the miners and provide IT consulting, maintenance, and repair work on site for us. Our mining facilities in New York are maintained by
Coinmint LLC (“Coinmint”) and Digihost Technologies Inc. (“Digihost”). Our mining facilities in Texas are maintained
by Dory Creek, LLC, a subsidiary of Bitdeer Technologies Group (“Bitdeer”) and A.R.T. Digital Holdings Corp (“KaboomRacks”).
Soluna Computing, Inc and DVSL ComputeCo, LLC (collectively “Soluna”) maintained our mining facilities in Kentucky and Texas.
Our mining facility in Iceland is maintained by GreenBlocks ehf, an Icelandic private limited company (“GreenBlocks”). We
have relocated our miners from our mining facility in Canada maintained by Blockbreakers Inc. (“Blockbreakers”) to Soluna
and Coinmint after our service agreement expired in November 2024. From time to time, the Company may change partnerships with hosting
facilities to recalibrate its bitcoin mining operations. These terminations are strategic, targeting reduced operational costs, enhanced
energy efficiency for a smaller carbon footprint, increased flexibility in operational control, and minimized geopolitical risks. While
a short-term decrease in mining output might occur, we expect these changes to yield long-term operational improvements.

We are a sustainability-focused digital asset
mining company. On June 24, 2021, we signed the Crypto Climate Accord, a private sector-led initiative that aims to decarbonize the crypto
and blockchain sectors. On December 7, 2021, we became a member of the Bitcoin Mining Council (“BMC”), joining MicroStrategy
and other founding members to promote transparency, share best practices, and educate the public on the benefits of bitcoin and bitcoin
mining.

ETH Staking Business

In the fourth quarter of 2022, we formally commenced
Ethereum staking operations. We intend to delegate or stake our ETH holdings to an Ethereum validator node to help secure and strengthen
the blockchain network. Stakers are compensated for this commitment in the form of a reward of the native network token.

Our native staking operations are enhanced by
a partnership with Blockdaemon, the leading institutional-grade blockchain infrastructure company for node management and staking. In
the fourth quarter of 2022, following a similar mechanism to native Ethereum staking, we also participated in liquid staking via Portara
protocol (formerly known as Harbour), the liquid staking protocol developed by Blockdaemon and StakeWise and the first of its kind tailored
to institutions. With the introduction of staked ETH withdrawals in April 2023, we have reassessed our Ethereum network staking approaches,
weighing the advantages of traditional staking against liquid staking solutions. The withdrawal feature in native staking, coupled with
yields that are on par with those of liquid staking, has encouraged us to expand our collaborations with other service providers in this
domain. As a result, we terminated all liquid staking activities with StakeWise in the third quarter of 2023, reclaiming all staked Ethereum
along with the accumulated rewards. In the fourth quarter of 2023, the Company terminated the native staking activities and reclaimed
all staked Ethereum with Blockdaemon.

Our native staking operations with MarsProtocol
Technologies Pte. Ltd. (“Marsprotocol”) commenced in the first quarter of 2023 and concluded in July 2023.  After ceasing
operations with Marsprotocol, we initiated our native staking with MarsLand Global Limited (“MarsLand”) in August 2023. Subsequently,
we have ceased our native staking with MarsLand in the first quarter of 2024 and initiated our native staking with Figment Inc.

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We started participating in liquid staking via
Liquid Collective protocol on the Coinbase platform in the first quarter of 2023. Liquid staking allows participants to achieve greater
capital efficiency by utilizing their staked ETH as collateral and trading their staked ETH tokens on the secondary market. In the first
quarter of 2024, we have reclaimed all the liquid staked ETH from Liquid Collective protocol.

Miner Deployments

During the year ended December 31, 2024, we continued
to work with our hosting partners to deploy our miners in North America and Iceland.

During the first quarter of 2024, the Company
deployed an additional 2,350 miners at one of Coinmint’s hosting facilities.

During the second quarter of 2024, the Company
deployed an additional 600 miners at Blockbreakers’ hosting facility.

During the third quarter of 2024, the Company
deployed an additional 546 miners at one of Soluna’s hosting facilities.

During the fourth quarter of 2024, the Company
reallocated a portion of its mining fleet across hosting facilities as part of its ongoing efforts to recalibrate its bitcoin mining operations.
This transition, driven by changes in hosting partnerships, including the transfer of some miners from Blockbreakers and Coinmint to Soluna’s
facilities.

As of December 31, 2024, the Company’s active
hash rate totals approximately 1.8 EH/s, with operations in North America and Iceland.

Power and Hosting Overview

During the year ended December 31, 2024, our hosting
partners continued to prepare sites to deliver our contracted hosting capacity, bringing additional power online for our miners.

The Company’s subsidiary, Bit Digital Canada,
Inc., entered into a Mining Services Agreement effective September 1, 2022, for Blockbreakers, Inc. to provide five (5) MW of incremental
hosting capacity at its facility in Canada. The facility utilizes an energy source that is primarily hydroelectric.

On May 8, 2023, the Company entered into a Master
Mining Services Agreement with Blockbreakers, pursuant to which Blockbreakers agreed to provide the Company with four (4) MW of additional
mining capacity at its hosting facility in Canada. The agreement is for two (2) years automatically renewable for additional one (1) year
terms unless either party gives at least sixty (60) days’ advance written notice. The performance fee is 15% of the net profit.
Additionally, Bit Digital has secured a side letter agreement with Blockbreakers, granting the Company the right of first refusal for
any future mining hosting services offered by Blockbreakers in Canada. This new agreement brought the Company’s total contracted
hosting capacity with Blockbreakers to approximately 9 MW. Our service agreement with Blockbreakers expired in November 2024. A portion
of the miners were transferred to other hosting facilities, and the inefficient units were sold.

On June 7, 2022, we entered into a Master Mining
Services Agreement (the “MMSA”) with Coinmint LLC, pursuant to which Coinmint will provide the required mining colocation
services for a one-year period automatically renewing for three-month periods unless earlier terminated. The Company will pay Coinmint
electricity costs, plus operating costs required to operate the Company’s mining equipment, as well as a performance fee equal to
27.5% of the net profit, subject to a ten percent (10%) reduction if Coinmint fails to provide uptime of ninety-eight (98%) percent or
better for any period. We are not privy to the emissions rate at the Coinmint facility or at any other hosting facility. However, the
Coinmint facility operates in an upstate New York region that reportedly utilizes power that is 99% emissions-free, as determined based
on the 2023 Load & Capacity Data Report published by the New York Independent System Operator, Inc. (“NYISO”).

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On April 5, 2023, the Company entered into a letter
agreement and MMSA Amendment with Coinmint pursuant to which Coinmint agreed to provide the Company with up to ten (10) MW of additional
mining capacity to energize the Company’s mining equipment at Coinmint’s hosting facility in Plattsburgh, New York. The agreement
is for two (2) years automatically renewing for three (3) months unless terminated by either party on at least ninety (90) days prior
written notice. The performance fees under this letter agreement range from 30% to 33% of the net profit. This new agreement brings the
Company’s total contracted hosting capacity with Coinmint to approximately 30 MW at this facility.

On April 27, 2023, the Company entered into a
letter agreement and MMSA Amendment with Coinmint pursuant to which Coinmint agreed to provide the Company with up to ten (10) MW of additional
mining capacity to energize the Company’s mining equipment at Coinmint’s hosting facility in Massena, New York. The agreement
is for one (1) year automatically renewing for three (3) months unless terminated by either party on at least ninety (90) days prior written
notice. The performance fees under this letter agreement are 33% of the net profit. This new agreement brings the Company’s total
contracted hosting capacity with Coinmint to approximately 40 MW.

On January 26, 2024, the Company entered into
a letter agreement and MMSA Amendment with Coinmint pursuant to which Coinmint agreed to provide the Company with up to six (6) MW of
additional mining capacity to energize the Company’s mining equipment at Coinmint’s hosting facility in Massena, New York.
The agreement is for one (1) year automatically renewing for three (3) months unless terminated by either party on at least ninety (90)
days prior written notice. The performance fees under this letter agreement are 28% of the net profit. This new agreement brings the Company’s
total contracted hosting capacity with Coinmint to approximately 46 MW.

On September 5, 2024, the Company received a 90-days
notice of non-renewal of colocation mining services agreement from Coinmint, which informed the Company of its intent not to renew 27
MW of the 36 MW total contracted capacity at its Massena, New York site, effective December 7, 2024. Subsequently, on October 29, 2024,
the Company received an additional 90-days notice of non-renewal of colocation mining services agreement from Coinmint, which informed
the Company of its intent to not renew the remaining 9 MW of the 36 MW total contracted capacity at its Massena, New York site, effective
January 28, 2024. On January 3, 2025, the Company received an additional 90-days notice of non-renewal of colocation mining services agreement
from Coinmint, which informed the Company of its intent to not renew the 10 MW total contracted capacity at its Plattsburgh, New York
site, effective April 5, 2025.

After the contracts with Coinmint expire, we plan
on selling the inefficient units and replacing the hash rate with newer generation machines. By doing so we can replace the lost hash
rate with around 50% less MW. We have already signed contracts for more than enough hosting capacity to replace that hash rate. As of
December 31, 2024, Coinmint provided approximately 18.5 MW of capacity for our miners at their facilities.

In June 2021, we entered into a strategic co-mining
agreement with Digihost Technologies in North America. Pursuant to the terms of the agreement, Digihost provides certain premises to Bit
Digital for the purpose of the operation and storage of a twenty (20) MW bitcoin mining system to be delivered by Bit Digital. Digihost
provides services to maintain the premises for a term of two (2) years. Digihost shall also be entitled to 20% of the net profit generated
by the miners.

In April 2023, we renewed the co-mining agreement
with Digihost, previously executed in June 2021. Pursuant to the terms of the new agreement, Digihost provides certain premises to Bit
Digital for the purpose of the operation and storage of an up to twenty (20) MW bitcoin mining system to be delivered by Bit Digital.
Digihost also provides services to maintain the premises for a term of two (2) years, automatically renewing for a period of one (1) year.
Digihost shall also be entitled to 30% of the net profit generated by the miners. As of December 31, 2024, Digihost provided approximately
6.0 MW of capacity for our miners at their facility.

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On May 9, 2023 (“Effective Date”),
the Company entered into a Term Loan Facility and Security Agreement (the “Loan Agreement”) with GreenBlocks. Pursuant to
the Loan Agreement, GreenBlocks has requested the Company to extend one or more loans (“Advances”) under a senior secured
term loan facility in an aggregate outstanding principal amount not to exceed $5 million. The interest rate of the Loan Agreement is 0%
and Advances are to be repaid on the maturity date, which is the thirty-nine-month anniversary of the Effective Date. GreenBlocks will
exclusively use the Advances to buy miners that will be operated for the benefit of the Company at a facility in Iceland, with an overall
capacity of 8.25 MW. To secure the prompt payment of Advances, the Company has been granted a continuing first priority lien and security
interest in all of GreenBlocks’s rights, title and interest to the financed miners. The miners are the sole property of GreenBlocks,
of which they are responsible for the purchase, installation, operation, and maintenance.

On May 9, 2023, the Company entered into a Computation
Capacity Services Agreement (the “Services Agreement”) with GreenBlocks. Pursuant to the Agreement, GreenBlocks will provide
computational capacity services and other necessary ancillary services, such as operation, management, and maintenance, at the facility
in Iceland for a term of two (2) years. GreenBlocks will own and operate the miners financed through the Loan Agreement for the purpose
of providing computational capacity of up to 8.25 MW. The Company will pay power costs of five cents ($0.05) per kilowatt hour, a pod
fee of $22,000 per pod per month, and a depreciation fee equal to 1/36 of the facility size per month. The performance fees under this
agreement are 20% of the net profit. The Company submitted to Greenblocks a deposit in the amount of $1,052,100, which was exclusively
for the purpose of paying the landlord of the facility for hosting space.

On June 1, 2023, the Company and GreenBlocks entered
the Omnibus Amendment to Loan Documents and Other Agreements (“Omnibus Amendment”). This amendment revised both the Loan Agreement
and the Services Agreement previously entered on May 9, 2023. While the core terms remained consistent, notable modifications pertained
to the facility size and contracted capacity. Specifically, the facility size was increased from $5 million to $6.7 million. Moreover,
GreenBlocks agreed to expand the computation capacity to approximately 10.7 MW. Advances of $6.4 million have been financed by the Company
to GreenBlocks. As of December 31, 2024, GreenBlocks provided approximately 5.0 MW of capacity for our miners at their facility.

In October 2023, we entered into a strategic co-location
agreement with Soluna Computing, Inc. (“Soluna”) for a term of one (1) year automatically renewing on a month-to-month basis
unless terminated by either party. Pursuant to the terms of the agreement, Soluna provides certain required mining colocation services
to the Company for the purpose of the operation and storage of up to 4.4 MW bitcoin mining system to be delivered by Bit Digital. Soluna
shall also be entitled to 42.5% of the net profit generated by the miners. This agreement expired at the end of October 2024.

In October 2024, we entered into a co-location
agreement with Soluna to continue our business relationship. Under this agreement, Soluna provides certain required mining colocation
services to the Company at their hosting facility in Murray, Kentucky for the purpose of the operation and storage of bitcoin mining system
to be delivered by the Company up to 6.6 MW (3.3 MW for terms of nine (9) months and 3.3 MW for terms of one (1) year), automatically
renewing on a month-to-month basis unless terminated by either party. Soluna shall also be entitled to 35% of the net profit generated
by the miners.

In December 2024, we entered into two additional
co-location agreements with Soluna pursuant to which Soluna agreed to provide the Company with up to 11 MW (5.5 MW and 5.5 MW, respectively).
Both agreements are for one (1) year automatically renewing on a month-to-month basis unless terminated by either party on at least sixty
(60) days prior written notice. Soluna shall also be entitled to 35% and 27.5%, respectively, of the net profit generated by the miners.
These new agreements bring the Company’s total contracted hosting capacity with Soluna to approximately 17.6 MW. As of December
31, 2024, Soluna provided approximately 11.4 MW of capacity for our miners at their facility.

In November 2023, we entered into a hosting services
agreement, which was amended on March 7, 2024, with Dory Creek, LLC, a subsidiary of Bitdeer Technologies Group (“Bitdeer”),
for a term of one (1) year automatically renewing on an annual basis unless terminated by either party by giving a 30-day prior notice
to the other Party in writing. Pursuant to the terms of the agreement, Bitdeer provides maintenance and operation services to Bit Digital
to support 17.5 MW of capacity. Bitdeer shall also be entitled to 30% of the net profit generated by the miners. Bit Digital shall have
the first right, but not obligation, to accept services for any extra capacity under the terms of this Agreement. As of December 31, 2024,
Bitdeer provided approximately 15.5 MW of capacity for our miners at their facility.

In February 2025, we entered into two hosting
services agreements with A.R.T. Digital Holdings Corp (“KaboomRacks”) for terms of nine (9) months and three (3) years automatically
renewing on an annual basis unless terminated by either party. Pursuant to the terms of the agreements, KaboomRacks provides maintenance
and operation services to Bit Digital to support 6 MW and 13 MW of capacity. KaboomRacks shall also be entitled to between 19.75% and
40% of the net profit generated by the miners. Deployment is expected to begin in the first quarter of 2025.

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In May 2022, our hosting partner Blockfusion advised
us that the substation at its Niagara Falls, New York facility was damaged by an explosion and fire, and power was cut off to approximately
2,515 of the Company’s bitcoin miners and approximately 710 ETH miners that had been operating at the site immediately prior to
the incident. The explosion and fire are believed to have been caused by faulty equipment owned by the power utility. Blockfusion and
the Company have entered into a common interest agreement to jointly pursue any claims evolving from the explosion and fire. Prior to
the incident, our facility with Blockfusion in Niagara Falls, provided approximately 9.4 MW to power our miners. Power was restored to
the facility in September 2022. However, we received a notice dated October 4, 2022 (the “Notice”), from the City of Niagara
Falls, which ordered the cease and desist from any cryptocurrency mining or related operations at the facility until such time as Blockfusion
complies with Section 1303.2.8 of the City of Niagara Falls Zoning Ordinance (the “Ordinance”), in addition to all other City
ordinances and codes. Blockfusion has advised us that the Ordinance came into effect on October 1, 2022, following the expiration of a
related moratorium on September 30, 2022. Blockfusion has further advised that it has submitted applications for new permits based on
the Ordinance’s new standards and that the permits may take several months to process. Pursuant to the Mining Services Agreement
between Bit Digital and Blockfusion dated August 25, 2021, Blockfusion represents, warrants and covenants that it “possesses, and
will maintain, all licenses, registrations, authorizations and approvals required by any governmental agency, regulatory authority or
other party necessary for it to operate its business and engage in the business relating to its provision of the Services.” On October
5, 2022, Bit Digital further advised Blockfusion that it expects it to comply with the directives of the Notice. Our service agreement
with Blockfusion ended in September 2023. On June 3, 2024, the Company filed suit in Delaware Superior Court against Blockfusion alleging
claims for breach of contract, conversion, and related claims in connection with, among other things, certain deposits and advances paid
to Blockfusion, the return of which is owed to the Company. The Company is seeking in excess of $4.3 million. On October 22, 2024, Blockfusion
denied the Company’s claims and brought reciprocal breach of contract and related counterclaims. Blockfusion is seeking at least
$158,000 in damages. A bench trial has been scheduled for June 29, 2026. Refer to Note 19. Contingencies for further details.

Miner Fleet Update and Overview

As of December 31, 2023, we had 46,548 miners
owned or operating (in Iceland) for bitcoin mining with a total maximum hash rate of 3.9 EH/s.

On January 25, 2024, we entered into a purchase
agreement with an unaffiliated seller of bitcoin mining computers, from whom we acquired 2,350 S19 Pro miners. As of the date of this
report, all miners have been delivered.

On April 15, 2024, we entered into a purchase
agreement with an unaffiliated seller of bitcoin mining computers, from whom we acquired 1,146 S19K Pro miners. As of the date of this
report, all miners have been delivered.

On December 10, 2024, we entered into an agreement
with an unaffiliated seller of bitcoin mining computers, from whom we acquired 191 S21 miners. As of the date of this report, none of
the miners were delivered.

On December 15, 2024, we entered into an agreement
with an unaffiliated seller of bitcoin mining computers, from whom we acquired 750 S21 miners. As of the date of this report, none of
the miners were delivered.

On December 23, 2024, we entered into an agreement
with an unaffiliated seller of bitcoin mining computers, from whom we acquired 4,300 S21+ miners. As of the date of this report, none
of the miners were delivered.

For the year ended December 31, 2024, the Company
disposed approximately 25,495 bitcoin miners.

As of December 31, 2024, we had 24,239 miners
owned or operating (in Iceland) for bitcoin mining with a total maximum hash rate of 2.6 EH/s.

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Bitcoin Production

From the inception of our bitcoin mining business
in February 2020 to December 31, 2024, we earned an aggregate of 7,280.1 bitcoins.

The following table presents our bitcoin mining
activities for the year ended December 31, 2024:

Results of Operations for the Years Ended December
31, 2024 and 2023

The following table summarizes the results of
our operations during the years ended December 31, 2024 and 2023, respectively, and provides information regarding the dollar increase
or (decrease) during period.

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Revenue

We generate revenues from cloud services, colocation
services, digital asset mining, and ETH staking businesses.

Revenue from cloud services

In the fourth quarter of 2023, we initiated WhiteFiber
AI, a new business line to provide cloud services to support generative AI workstreams. The Company commenced the cloud services in January
2024.

Our revenue from cloud services was $45.7 million for
the year ended December 31, 2024. During the three months ended March 31, 2024, the Company issued a service credit of $1.3 million to
the customer as compensation for decreased utilization during the initial deployment period, which included testing and optimization phases.
The Company issued another service credit of $0.6 million to the customer during the three months ended September 30, 2024, as compensation
for decreased utilization.

Revenue from colocation services

In the fourth quarter of 2024, we acquired Enovum which provides customers
with physical space, power, cooling within the data center facility.

Our revenue from colocation services was $1.4
million for the year ended December 31, 2024.

Revenue from digital asset mining

We provide computing power to digital asset mining
pools, and receive consideration in the form of digital assets, the value of which is determined using the market price of the related
digital asset at the time of receipt. By providing computing power to successfully add a block to the blockchain, the Company is entitled
to a fractional share of the digital assets award from the mining pool operator, which is based on the proportion of computing power the
Company contributed to the mining pool to the total computing power contributed by all mining pool participants in solving the current
algorithm.

For the year ended December 31, 2024, we received
949.9 bitcoins from the Foundry USA Pool (“Foundry”) mining pool. As of December 31, 2024, our maximum hash rate was at an
aggregate of 2.6 EH/s for our bitcoin miners. For the year ended December 31, 2024, we recognized revenue of $58.6 million from bitcoin
mining services.

For the year ended December 31, 2023, we received
1,507.3 bitcoins from Foundry USA Pool (“Foundry”) mining pool. As of December 31, 2023, our maximum hash rate was at
an aggregate of 3.9 EH/s for our bitcoin miners. For the year ended December 31, 2023, we recognized revenue of $44.2 million from bitcoin
mining services.

Our revenues from digital asset mining services
increased by $14.4 million, or 32.4%, to $58.6 million for the year ended December 31, 2024 from $44.2 million for the year ended December
31, 2023. The increase was primarily due to a higher average BTC price for the year ended December 31, 2024, compared to the year ended
December 31, 2023, partially offset by a decrease of 557.4 bitcoins generated from our mining business. The higher average BTC price was,
in part, a result of the halving of BTC, which occurred on April 19, 2024.

We expect to continue to opportunistically invest
in miners to increase our hash rate capacity.

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Revenue from ETH staking

During the fourth quarter of 2022, we commenced
ETH staking business, in both native staking and liquid staking.

For the ETH native staking business, we previously
partnered with Blockdaemon, Marsprotocol and MarsLand Global Limited (“MarsLand”). Currently, we stake ETH with Figment, using
network-based smart contracts, on a node for the purpose of validating transactions and adding blocks to the network. Through these contracts,
the Company stakes ETH on nodes for the purpose of validating transactions and adding blocks to the Ethereum blockchain network. The Company
is able to withdraw staked ETH under contracted staking since April 12, 2023 when the announced Shanghai upgrade was completed. In exchange
for staking the ETH and validating transactions on blockchain networks, the Company is entitled to block rewards and transaction fees
for successfully validating or adding a block to the blockchain. These rewards are received by the Company directly from the Ethereum
network and are calculated approximately based on the proportion of the Company’s stake to the total ETH staked by all validators.

In the fourth quarter of 2023, the Company terminated
the native staking activities and reclaimed all staked Ethereum with Blockdaemon. Our native staking operations with Marsprotocol commenced
in the first quarter of 2023 and concluded in July 2023. After ceasing operations with Marsprotocol, we initiated our native staking operations
with MarsLand in August 2023. In the first quarter of 2024, we concluded our operations with MarsLand and initiated our native staking
operations with Figment. As of December 31, 2024, all of native staking operations are with Figment.

For the liquid staking business, the Company has
deployed ETH into Portara protocol (formerly known as Harbour) supported by liquid staking solution provider under the consortium of Blockdaemon
and Stakewise, and Liquid Collective protocol supported by Coinbase. By staking, we receive receipt tokens for the ETH staked which could
be redeemed to ETH or can be traded or collateralized elsewhere, at any time. In addition, we receive rETH-h for rewards earned from Portara
protocol. With the introduction of staked ETH withdrawals in April 2023, we have reassessed our Ethereum network staking approaches, weighing
the advantages of traditional staking against liquid staking solutions. The withdrawal feature in native staking, coupled with yields
that are on par with those of liquid staking, has encouraged us to expand our collaborations with other service providers in this domain.
As a result, we terminated all liquid staking activities with StakeWise in the third quarter of 2023, reclaiming all staked Ethereum along
with the accumulated rewards. In the first quarter of 2024, we ceased our liquid staking activities with Liquid Collective protocol and
reclaimed all our staked Ethereum. Since the first quarter of 2024, the Company has no liquid staking activities.

In the first quarter of 2024, the Company has
restaked 3,008 ETH into EigenLayer, a protocol built on Ethereum that enables restaking of the already-staked ETH, through Figment. To
mitigate potential risks, we restake our ETH without delegating to any operator. As of the date of this report, the reward earned from
this restaking activity is not significant.

For the year ended December 31, 2024, we earned
565.1 ETH in native staking and 1.3 ETH in liquid staking, respectively. For the year ended December 31, 2024, we recognized revenues
of $1,815,373 and $4,503 from native staking and liquid staking, respectively.

For the year ended December 31, 2023, we earned
287.0 ETH in native staking and 81.9 ETH/rETH-h in liquid staking, respectively. For the year ended December 31, 2023, we recognized
revenues of $531,702 and $144,011 from native staking and liquid staking, respectively.

Our revenues from ETH native staking increased
by $1,283,671, or 241.4%, to $1,815,373 for the year ended December 31, 2024 from $531,702 for the year ended December 31, 2023. The increase
was primarily due to an increase of 278.1 ETH earned from native staking service and an increase in the average price of ETH for the year
ended December 31, 2024 compared to the year ended December 31, 2023.

Our revenues from ETH liquid staking decreased
by $139,508, or 96.9%, to $4,503 for the year ended December 31, 2024 from $144,011 for the year ended December 31, 2023. The decrease
was due to the termination of liquid staking activities in the first quarter of 2024.

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Cost of revenue

We incur cost of revenue from our from digital
asset mining, cloud services, colocation services, and ETH staking businesses.

The Company’s cost of revenue consists primarily
of (i) direct production costs related to mining operations, including electricity costs, profit-sharing fees and other relevant costs,
but excluding depreciation and amortization, which are separately stated in the Company’s consolidated statements of operations,
(ii) direct production costs related to cloud services operations, including electricity costs, datacenter lease expense, GPU servers
lease expense, and other relevant costs, but excluding depreciation and amortization, which are separately stated in the Company’s
consolidated statements of operations, (iii) direct production costs related to colocation services, including electricity costs, lease
costs and other relevant costs and (iv) direct cost related to ETH staking business including service fee and reward-sharing fees to the
service providers.

Cost of revenue - cloud services

For the years ended December 31, 2024 and 2023,
the cost of revenue from cloud services was comprised of the following:

Electricity costs. These expenses were
incurred by the data center for the high performance computing equipment and were closely correlated with the number of deployed GPU servers.

For the year ended December 31, 2024 and 2023,
electricity costs totaled $1.0 million and $nil, respectively.

Data center lease expenses. In December
2023, we entered into a data center lease agreement for a fixed monthly recurring cost.

For the year ended December 31, 2024 and 2023,
data center lease expenses totaled $3.6 million and $nil, respectively.

GPU servers lease expenses. In 2023,
we entered into a GPU servers lease agreement to support our cloud services. The lease payment depends on the usage of the GPU servers.

For the year ended December 31, 2024 and 2023,
GPU servers lease expenses totaled $13.6 million and $nil, respectively.

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Cost of revenue - Colocation Services

For the years ended December 31, 2024 and 2023,
the cost of revenue from colocation services was comprised of the following:

Electricity costs. These expenses were
closely correlated with the number of deployed servers hosted by the data center.

For the year ended December 31, 2024 and 2023,
electricity costs totaled $0.2 million and $nil, respectively.

Lease expenses. These expenses were
incurred by the data center for lease agreement for a fixed monthly recurring cost.

For the year ended December 31, 2024 and 2023,
data center lease expenses totaled $0.1 million and $nil, respectively.

Cost of revenue - digital asset mining

For the years ended December 31, 2024 and 2023,
the cost of revenue from digital asset mining was comprised of the following:

Electricity costs. These expenses
were incurred by mining facilities for the miners in operation and were closely correlated with the number of deployed miners.

For the year ended December 31, 2024, electricity
costs increased by $8.3 million, or 37%, compared to the electricity costs incurred for the year ended December 31, 2023. The increase
primarily resulted from an increase in the number of deployed miners.

Profit-sharing fees. We enter into
hosting agreements with certain mining facilities, which included performance fees calculated as a fixed percentage of net profit generated
by the miners. We refer to these fees as profit-sharing fees.

For the year ended December 31, 2024, profit-sharing
fees increased by $3.3 million, or 55%, compared to profit-sharing fees incurred in the year ended December 31, 2023. The increase in
profit-sharing fees was primarily due to the higher average BTC price for the year ended December 31, 2024, partially offset by a lower
bitcoin production as a result of the halving of BTC, which occurred on April 19, 2024.

We expect a proportionate increase in the cost
of revenue as we continue to focus on the expansion and upgrade of our miner fleet.

Cost of revenue - ETH staking business

For the year ended December 31, 2024, cost of
revenue from ETH staking business increased by $21,265, or 42%, compared to the cost of revenue incurred for the year ended December 31,
2023. The increase primarily resulted from increased service costs due to the increased number of staked ETH.

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Depreciation and amortization expenses

For the years ended December 31, 2024 and 2023,
depreciation and amortization expenses were $32.3 million and $14.4 million, respectively based on an estimated useful life of property,
plant, and equipment as discussed in Note 2. Summary of Significant Accounting Policies.

General and administrative expenses

For the year ended December 31, 2024, our general
and administrative expenses, totaling $41.5 million, were primarily comprised of shared-based compensation expenses of $9.9 million, salary
and bonus expenses of $9.8 million, professional and consulting expenses of $13.5 million, directors and officers insurance expenses of
$0.9 million, marketing expenses of $1.8 million, and travel expenses of $1.0 million.

For the year ended December 31, 2023, our general
and administrative expenses, totaling $27.7 million, were primarily comprised of shared-based compensation expenses of $9.1 million, salary
and bonus expenses of $5.5 million, professional and consulting expenses of $5.4 million, directors and officers insurance expenses of
$1.7 million, marketing expenses of $1.2 million, travel expenses of $0.8 million, and transportation expenses of $0.2 million to relocate
miners.

Gains (losses) on digital assets

For the year ended December 31, 2024, a gain of
$55.7 million was recognized, primarily attributable to the increases in the prices of bitcoin and ETH as of December 31, 2024.

As a result of the adoption of ASU 2023-08 effective
January 1, 2024, digital assets are recorded at fair value, changes in fair value are recognized as part of net income. As described under
the heading “Realized gain on exchange of digital assets”, gains on digital assets for the year ended December 31,
2024 are not comparable to the year ended December 31, 2023.

Realized gain on exchange of digital assets

For the year ended December 31, 2023, we recorded
a gain of $18.8 million from the exchange of 1,811.2 bitcoins and 5,712.4 ETH.

Prior to the adoption of ASU 2023-08, digital
assets were classified as indefinite-lived intangible assets and were measured at cost less impairment. Subsequent increases in digital
asset prices are not allowed to be recorded unless the digital asset is sold, at which point the gain is recognized in “Realized
gain on exchange of digital assets” in the consolidated statements of operations. Accordingly, realized gains (losses) recognized
on digital asset transactions for the year ended December 31, 2024 are not comparable to the year ended December 31, 2023.

Impairment of digital assets

As a result of the adoption of ASU 2023-08 effective
January 1, 2024, impairment of digital assets was no longer recognized.

Impairment of digital assets was $6.6 million
for the year ended December 31, 2023. We utilized the intraday low price of digital assets in the calculation of impairment of digital
assets. For the year ended December 31, 2023, the impairment of $6.6 million was comprised of impairment of $4.5 million and $2.1 million
on bitcoins and ETH, respectively.

Net (loss) gain from disposal of property and
equipment

For the year ended December 31, 2024, the Company
sold 5,606 bitcoin miners for a total consideration of $ 1.2 million. On the dates of the transaction, the total original cost and accumulated
depreciation of these miners were $7.4 million and $5.3 million, respectively. The Company recognized a loss of $850,120 from the sale
of miners which was recorded in the account of “net (loss) gain from disposal of property. As of the date of this report, the Company
has collected the cash consideration of $0.8 million.

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For the year ended December 31, 2024, the Company
wrote off 19,889 BTC miners during the year, and the Company recorded a loss of $nil resulting from the writing off in the account of
“net (loss) gain from disposal of property and equipment”.

For the year ended December 31, 2023, the Company
wrote off 5,238 BTC miners and 730 ETH miner during the year, and the Company recorded a loss of $0.2 million resulting from the write-off
in the account of “net (loss) gain from disposal of property and equipment”.

Income tax expenses

The following table provides details of income
taxes:

Tax expense was higher as a percentage of income
before taxes during the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily due to the impact of tax expense
increases by $1.9 million and $1.9 million in year ended December 31, 2024 due to profitable business operations in Iceland and Canada,
respectively.

Our future effective income tax rate depends on
various factors, such as tax legislation, the geographic composition of our pre-tax income, the amount of our pre-tax income as business
activities fluctuate, non-deductible expenses, non-taxable capital gain in certain jurisdictions, change of valuation allowance and the
effectiveness of our tax planning strategies. We also continue to monitor the adoption of Pillar Two relating to the global minimum tax
in each of our tax jurisdictions to evaluate its impact on our effective income tax rate. For the year ended December 31, 2024, we are
not subject to Pillar Two global minimum tax. For more details on the Company’s tax profile, see Note 15. Income Taxes to our consolidated
financial statements.

Net income (loss) and earnings (loss) per share

For the year ended December 31, 2024, our net
income was $28.3 million, representing a change of $42.2 million from a net loss of $13.9 million for the year ended December 31, 2023.

Basic and diluted earnings per share was $0.20
and $0.19 for the year ended December 31, 2024, respectively. Basic and diluted loss per share was $0.16 and $0.16 for the year ended
December 31, 2023, respectively.

Basic and diluted weighted average number of shares
was 140,346,322 and 141,507,497 for the year ended December 31, 2024, respectively. Basic and diluted weighted average number of
shares was 87,534,052 and 87,534,052 for the year ended December 31, 2023, respectively.

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Results of Operations for the Year Ended December
31, 2023 and 2022

The following table summarizes the results of
our operations during the year ended December 31, 2023 and 2022, respectively, and provides information regarding the dollar increase
or (decrease) during the period.

Revenue

We generate revenues from digital asset mining
and ETH staking.

Revenue from digital asset mining

We provide computing power to digital asset mining
pools, and receive consideration in the form of digital assets, the value of which is determined using the market price of the related
digital asset at the time of receipt. By providing computing power to successfully add a block to the blockchain, the Company is entitled
to a fractional share of the digital assets award from the mining pool operator, which is based on the proportion of computing power the
Company contributed to the mining pool to the total computing power contributed by all mining pool participants in solving the current
algorithm.

For the year ended December 31, 2023, we received
1,507.3 bitcoins from Foundry mining pool. As of December 31, 2023, our maximum hash rate was at an aggregate of 3.9 EH/s for our bitcoin
miners. For the year ended December 31, 2023, we recognized revenue of $44.2 million from bitcoin mining services.

For the year ended December 31, 2022, we received
1,247.5 bitcoins from Foundry mining pool and 294.3 ETHs from Ethermine mining pool(“Ethermine”) operated by Bitfly Gmbh.
We discontinued the ETH mining operations in September 2022 due to the Ethereum blockchain switching from proof-of-work (“PoW”)
consensus mechanism to proof-of-stake (“PoS”) validation. For the year ended December 31, 2022, we recognized revenue of $31.4
million and $0.9 million from bitcoin mining services and ETH mining services, respectively.

Our revenues from digital asset mining services
increased by $12.0 million, or 37.1%, to $44.2 million for the year ended December 31, 2023 from $32.3 million for the year ended December
31, 2022. The increase was primarily due to an increase of 259.8 in the number of BTC earned from mining services and an increase in the
average price of BTC for the year ended December 31, 2023 compared to the year ended December 31, 2022.

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We expect to continue to opportunistically invest
in miners to increase our hash rate capacity.

Revenue from ETH staking

During the fourth quarter of 2022, we commenced
ETH staking business, in both native staking and liquid staking.

For the ETH native staking business with Blockdaemon,
Marsprotocol and MarsLand, we stake ETH, through network-based smart contracts, on a node for the purpose of validating transactions and
adding blocks to the network. Through these contracts, the Company stakes ETH on nodes for the purpose of validating transactions and
adding blocks to the Ethereum blockchain network. The Company is able to withdraw staked ETH under contracted staking since April 12,
2023 when the announced Shanghai upgrade was completed. In exchange for staking the ETH and validating transactions on blockchain networks,
the Company is entitled to block rewards and transaction fees for successfully validating or adding a block to the blockchain. These rewards
are received by the Company directly from the Ethereum network and are calculated approximately based on the proportion of the Company’s
stake to the total ETH staked by all validators. In the fourth quarter of 2023, the Company terminated the native staking activities and
reclaimed all staked Ethereum with Blockdaemon.

Our native staking operations with Marsprotocol
commenced in the first quarter of 2023 and concluded in July of the same year. After ceasing operations with Marsprotocol, we initiated
our native staking with MarsLand Global Limited in August 2023. As of December 31,2023, we had all of our native staking activities with
MarsLand.

For the liquid staking business, the Company has
deployed ETH into Portara protocol (formerly known as Harbour) supported by liquid staking solution provider under the consortium of Blockdaemon
and Stakewise, and Liquid Collective protocol supported by Coinbase. By staking, we receive receipt tokens for the ETH staked which could
be redeemed to ETH or can be traded or collateralized elsewhere, at any time. In addition, we receive rETH-H for rewards earned from Portara
protocol. With the introduction of staked ETH withdrawals in April 2023, we have reassessed our Ethereum network staking approaches, weighing
the advantages of traditional staking against liquid staking solutions. The withdrawal feature in native staking, coupled with yields
that are on par with those of liquid staking, has encouraged us to expand our collaborations with other service providers in this domain.
As a result, we terminated all liquid staking activities with StakeWise in the third quarter of 2023, reclaiming all staked Ethereum along
with the accumulated rewards. As of December 31,2023, we had all of our liquid staking activities with Liquid Collective protocol which
began in the first quarter of 2023.

For the year ended December 31, 2023, we earned
287.0 ETH in native staking and 81.9 ETH/rETH-h in liquid staking, respectively. For the year ended December 31, 2023, we recognized revenues
of $531,702 and $144,011 from native staking and liquid staking, respectively.

For the year ended December 31, 2022, we earned
3.7 ETH in native staking and 16.2 rETH-h in liquid staking, respectively. For the year ended December 31, 2022, we recognized revenues
of $5,722 and $20,182 from native staking and liquid staking, respectively.

Our revenues from ETH staking increased by $0.6
million or 2,508.5%, to $0.7 million for the year ended December 31, 2023 from $25,904 for the year ended December 31, 2022. The increase
was primarily due to an increase of 349.0 ETH earned from staking services partially offset by a decrease in the average price of ETH
for the year ended December 31, 2023 compared to the year ended December 31, 2022.

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Cost of revenue

The Company’s cost of revenue consists primarily
of i) direct production costs related to mining operations, including electricity costs, profit-sharing fees and other relevant costs,
but excluding depreciation and amortization, which are separately stated in the Company’s consolidated statements of operations,
and ii) direct costs related to specialized cloud-infrastructure services for artificial intelligence applications and ETH staking business
including service fee and profit-sharing fees to the service providers, which were immaterial during the year ended December 31, 2023.

For the years ended December 31, 2023 and 2022,
the cost of revenue were comprised of the following:

Electricity costs. These expenses were incurred by mining
facilities for the miners in operation and were closely correlated with the number of deployed miners.

In the year ended December 31, 2023, electricity costs increased by
$7.2 million, or 47%, compared to the electricity costs incurred in the year of 2022. The increase primarily resulted from an increased
number of deployed miners.

Profit-sharing fees. In 2021, we entered into hosting
agreements with certain mining facilities, which included performance fees calculated as a fixed percentage of net profit generated by
the miners. We refer to these fees as profit-sharing fees.

In the year ended December 31, 2023, profit-sharing fees increased
by $1.9 million, or 47%, compared to profit-sharing fees incurred in the year of 2022. This increase was primarily due to an increase
in the number of digital assets generated and the comparatively higher average price of bitcoin during 2023.

We expect a proportionate increase in cost of
revenue as we continue to focus on the expansion and upgrade of our miner fleet.

Depreciation and amortization expenses

For the years ended December 31, 2023 and 2022,
depreciation and amortization expenses were $14.4 million and $27.8 million, respectively, primarily based on an estimated useful life
of three years for the miners.

General and administrative expenses

For the year ended December 31, 2023, our general
and administrative expenses, totaling $27.7 million, were primarily comprised of shared-based compensation expenses of $9.1 million, salary
and bonus expenses of $5.5 million, professional and consulting expenses of $5.4 million, directors and officers insurance expenses of
$1.7 million, marketing expenses of $1.2 million, travel expenses of $0.8 million, and transportation expenses of $0.2 million to relocate
miners.

For the year ended December 31, 2022, our general
and administrative expenses, totaling $23.0 million, were primarily comprised of professional and consulting expenses of $7.7 million,
transportation expenses of $0.7 million to relocate miners, salary and bonus expenses of $2.7 million, shared-based compensation expenses
of $2.3 million related to RSUs and share options granted to our employees, consultants and director, directors and officers liability
insurance expenses of $3.3 million, marketing expenses of $1.1 million, and litigation settlement costs of $2.1 million.

Realized gain on exchange of digital assets

Digital assets are recorded at cost less impairment.
Any gains or losses from sales of digital assets are recorded as “Realized gain on exchange of digital assets” in the consolidated
statements of operations. For the year ended December 31, 2023, we recorded a gain of $18.8 million from the exchange of 1,811.2 bitcoins
and 5,712.4 ETH. For the year ended December 31, 2022, we recorded a gain of $6.5 million from the exchange of 1,109.3 bitcoins and 87.2
ETH.

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Impairment of digital assets

Impairment of digital assets was $6.6 million
and $24.7 million for the years ended December 31, 2023 and 2022, respectively. We utilized the intraday low price of digital assets in
calculation of impairment of digital assets.

For the year ended December 31, 2023, the impairment
of $6.6 million was comprised of impairment of $4.5 million and $2.1 million on bitcoins and ETH, respectively. For the year ended December
31, 2022, the impairment of $24.7 million was comprised of impairment of $21.2 million and $3.5 million on bitcoins and ETH, respectively.

Loss on write-off of deposit to hosting facility

For the year ended December 31, 2023, the Company
wrote off $2.0 million relating to hosting facility deposits.

For the year ended December 31, 2022, the Company
wrote off $0.1 million relating to hosting facility deposits.

Net (loss) gain from disposal of property and
equipment.

For the year ended December 31, 2023, the Company
wrote off 5,238 BTC miners and 730 ETH miner during the year, and the Company recorded a loss of $0.2 million resulting from the write-off
in the account of “net (loss) gain from disposal of property and equipment”.

During the year ended December 31, 2022, we sold
1,115 bitcoin miners to certain third-party purchasers for a total consideration of $1.8 million. The Company recognized a gain of $1.5
million from the sale of miners which was recorded in the account of “net gain from disposal of property and equipment”. In
addition, the Company wrote off 917BTC miners and 1 ETH miner during the year, and the Company recorded a loss of $0.2 million resulting
from the write-off in the account of “net (loss) gain from disposal of property and equipment”.

Gain from sale of investment security

For the year ended December 31, 2023, we sold
our investment in one privately held company with a cost of $81,299 for consideration of $89,519. We recognized a gain of$8,220 from the
sale which was recorded in the account of “gain from sale of investment security”.

For the year ended December 31, 2022, we sold
a portion of our investment in one privately held company with a cost of $0.7 million for consideration of $1.7 million. We recognized
a gain of $1.0 million from the sale which was recorded in the account of “gain from sale of investment security”.

Income tax expenses

The following table provides details of income
taxes:

Tax expense changed as a percentage of income
before taxes during the year ended December 31, 2023 compared to the year ended December 31, 2022 primarily due to the impact of tax expense
increases by $0.9 million in year ended December 31, 2023 due to the overall higher foreign income taxes expenses.

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Our future effective income tax rate depends on
various factors, such as tax legislation, the geographic composition of our pre-tax income, the amount of our pre-tax income as business
activities fluctuate, non-deductible expenses, non-taxable capital gain in certain jurisdictions, change of valuation allowance and the
effectiveness of our tax planning strategies. We also continue to monitor the adoption of Pillar Two relating to the global minimum tax
in each of our tax jurisdictions to evaluate its impact on our effective income tax rate. For the year ended December 31, 2023, we are
not subject to Pillar Two global minimum tax. For more details on the Company’s tax profile, see Note 15. Income Taxes to our consolidated
financial statements.

Net income (loss) and earnings (loss) per share

For the year ended December 31, 2023, our net
loss was $13.9 million, representing a change of $91.4 million from a net loss of $105.3 million for the year ended December 31, 2022.

Basic and diluted loss per share was $0.16 and $1.34 for the years
ended December 31, 2023 and 2022, respectively. Weighted average number of shares was 87,534,052 and 78,614,174 for the years ended December
31, 2023 and 2022, respectively.

Discussion of Certain Balance Sheet Items

The following table sets forth selected information
from our consolidated balance sheets as of December 31, 2024 and December 31, 2023. This information should be read together with our
consolidated financial statements and related notes included elsewhere in this report.

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Cash and cash equivalents

Cash and cash equivalents primarily consist of
funds deposited with banks, which are highly liquid and are unrestricted to withdrawal or use. The total balance of cash and cash equivalents
were $95.2 million and $16.9 million as of December 31, 2024 and December 31, 2023, respectively. The increase in the balance of cash
and cash equivalents was a result of net cash of $242.9 million provided by financing activities, partially offset by net cash of $13.0
million used in operating activities, and net cash of $149.0 million used in investing activities.

Accounts receivable, net

Accounts receivable consists of amounts due from
our customer. The total balance of accounts receivable was $5.3 million and $nil as of December 31, 2024 and December 31, 2023, respectively.
The increase in the balance of accounts receivable is attributable to unpaid invoices from our cloud services customers and colocation
services customers.

USDC

USD Coin (“USDC”) is accounted for
as a financial instrument; one USDC can be redeemed for one U.S. dollar on demand from the issuer. The balance of USDC was $0.4 million
and $0.4 million as of December 31, 2024 and December 31, 2023, respectively. The small increase in the balance of USDC was primarily
due to receipt of USDC of $2.4 million from sales of other digital assets, partially offset by the payment of USDC for other expenses
of $2.3 million, and payment of USDC for service charges from mining facilities of $0.1 million.

Digital assets

Digital assets primarily consist of BTC and ETH.
For the year ended December 31, 2024, we earned digital assets from mining services and ETH staking services. We exchanged BTC into ETH
or USDC, exchanged BTC and ETH into cash, or used BTC and ETH to pay certain operating costs and other expenses. Digital assets held are
accounted for as intangible assets measured at fair value, with changes in fair value recorded in net income in each reporting period.

As compared with the balance as of December 31,
2023, the balance of digital assets as of December 31, 2024 increased by $120.9 million, which was primarily attributable to the cumulative
effect of the adoption of ASU 2023-08 of $21.2 million, change in fair value of $56.4 million, and generation of bitcoins of $58.6 million
from our mining business, partially offset by exchange of bitcoins of $9.4 million into cash, exchange of bitcoins of $1.8 million into
USDC, and payment of bitcoin for service charges of $5.8 million.

Digital assets held in fund

Digital assets held in fund consists of an investment
made by the Company in Bit Digital Innovation Master Fund SPC Ltd and included in current assets in the consolidated balance sheets under
the caption “Digital assets held in Fund” as of June 30, 2024. On July 1, 2024, the Company disposed its BVI entities associated
with the previous fund operation (See Note 21, Disposition of Bit Digital Investment Management Limited and Bit Digital Innovation
Master Fund SPC Limited, for more information). As a result, the Company no longer consolidates the fund, and the investment is now
classified under investment securities as Investment in Innovation Fund. Refer to Note 10 – Investment Securities for more information.

As of December 31, 2024, the total balance of
this investment was $nil million, compared to $6.1 million as of December 31, 2023.

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Loans Receivable

Loans receivable consist of a loan issued by the
Company to a third party. The total balance of loans receivable was $0.4 million and $0.4 million as of December 31, 2024 and December
31, 2023, respectively.

Net investment in lease

Net investment in lease represents the present
value of the lease payments not yet received from lessee. The current and non-current balance of net investment in lease was $2.5 million
and $6.8 million, respectively as of December 31, 2024. The current and non-current balance of net investment in lease was $nil and $nil,
respectively as of December 31, 2023.

Deposits for property and equipment

The deposits for property and equipment consists
of advance payments for property and equipment. The balance was derecognized once the control of the property and equipment was transferred
to and obtained by us.

Compared with December 31, 2023, the balance as
of December 31, 2024 increased $34.8 million, mainly due to prepayment of $64.0 million, offset by the receipt of property and equipment
of $28.1 million.

Property, plant, and equipment, net

Property, plant, and equipment primarily consisted
of equipment used in our HPC and digital asset businesses as well as construction in progress representing assets received but not yet
put into service.

As of December 31, 2024, we had 24,239 bitcoin
miners with net book value of $17.9 million, cloud service computing equipment with a net book value of $47.2 million, property, plant,
and equipment acquired as part of the acquisition of Enovum with a net book value of $36.4 million for colocation service, and construction
in progress of $5.1 million.

As of December 31, 2023, we had 46,548 bitcoin
miners with net book value of $30.2 million and construction in progress of $51.0 million.

Operating lease right-of-use assets and operating
lease liability

As of December 31, 2024, the Company’s operating
lease right-of-use assets and total operating lease liability were $15.0 million and $13.8 million respectively. As of December 31, 2023,
the Company’s operating lease right-of-use assets and total operating lease liability were $6.2 million and $6.2 million, respectively.

The increase in operating lease right-of-use assets
and total operating lease liability of $8.8 million and $7.6 million respectively, were due to the additional leases for $11.5 million
and 10.3 million, respectively, partially offset by the amortization of the operating lease right-of-use assets totaling $2.8 million
and $2.7 million, respectively, for the year ended December 31, 2024.

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Investment Securities

As of December 31, 2024, our portfolio consists
of investments in three funds, a privately held company via a simple agreement for future equity (“SAFE”), and four privately
held companies over which the Company neither has control nor significant influence. The total balance of investment securities was $30.8
million and $4.4 million as of December 31, 2024, and December 31, 2023, respectively. The increase of $26.4 million in the value of our
investment securities was mainly driven by investment of $15.8 million in AI Fund, investment of $6.7 million in Innovation Fund, investment
of $1.0 million in a SAFE, investment of $0.1 million in one equity investee, upward fair value adjustments of $0.9 million for the Nine
Blocks investment, and upward fair value adjustments of $2.6 million for the Innovation Fund.

Goodwill

Goodwill represents the excess of the purchase
price over the fair value of the net assets acquired in relation of in Enovum Acquisition. Refer to Note 14. Goodwill And Intangible
Assets for further information. As of December 31, 2024, the Company recorded goodwill in in the amount of $19.4 million.

Intangible Assets

Intangible assets pertain to customer relationships
acquired in connection with the acquisition of Enovum. Refer to Note 14. Goodwill and Intangible Assets for further information.
As of December 31, 2024, the total balance of intangible assets was $13.0 million.

Accounts payable

Accounts payable primarily consists of amounts
due for maintenance costs related to our digital asset mining, cloud services, and colocation services. Compared with December 31, 2023,
the balance of accounts payable increased by $1.1 million, largely due to the unpaid bills for our digital asset mining, cloud services,
and colocation services in the year ended December 31, 2024.

Deferred revenue

Deferred revenue pertains to prepayments received
from a customer for high performance computing services.

As of December 31, 2024, the Company’s current
and non-current portion of deferred revenue was $30.7 million and $0.1 million, respectively, compared to $13.1 million and $nil, respectively,
as of December 31, 2023. The increase in the total deferred revenue of $17.7 million reflects a $32.1 million of prepayments from our
cloud and colocation services customers, partially offset by the recognition of $14.4 million
in revenue related to the successful fulfillment of performance obligations from our cloud and colocation services in 2024.

Long-term income tax payable

Compared with December 31, 2023, the balance as
of December 31, 2024 did not change as no incremental penalty was accrued on the existing unrecognized tax benefits for the year ended
December 31, 2024. Refer to Note 15. Income Taxes, for more information.

Non-GAAP Financial Measures

In addition to consolidated U.S. GAAP financial
measures, we consistently evaluate our use of and calculation of the non-GAAP financial measures, such as “Adjusted EBITDA”.

EBITDA is computed as net income before interest,
taxes, depreciation, and amortization. Adjusted EBITDA is a financial measure defined as our EBITDA adjusted to eliminate the effects
of certain non-cash and / or non-recurring items that do not reflect our ongoing strategic business operations, which management believes
results in a performance measurement that represents a key indicator of the Company’s core business operations. The adjustments
currently include fair value adjustments such as investment securities value changes and non-cash share-based compensation expenses, in
addition to other income and expense items.

We believe Adjusted EBITDA can be an important
financial measure because it allows management, investors, and our board of directors to evaluate and compare our operating results, including
our return on capital and operating efficiencies, from period-to-period by making such adjustments.

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Adjusted EBITDA is provided in addition to and
should not be considered to be a substitute for, or superior to net income, the comparable measures under U.S. GAAP. Further, Adjusted
EBITDA should not be considered as an alternative to revenue growth, net income, diluted earnings per share or any other performance measure
derived in accordance with U.S. GAAP, or as an alternative to cash flow from operating activities as a measure of our liquidity. Adjusted
EBITDA has limitations as an analytical tool, and you should not consider such measures either in isolation or as substitutes for analyzing
our results as reported under U.S. GAAP.

Reconciliations of Adjusted EBITDA to the most
comparable U.S. GAAP financial metric for historical periods are presented in the table below:

Liquidity and capital resources

As of December 31, 2024, we had working capital
of $241.8 million which includes USDC of $0.4 million and digital assets of $161.4 million as compared with working capital of $56.3 million
as of December 31, 2023. Working capital is the difference between the Company’s current assets and current liabilities.

To date, we have financed our operations primarily
through cash flows from operations, and equity financing through public and private offerings of our securities. We plan to support our
future operations primarily from cash generated from our operations and equity financings. We may also consider debt, preferred and convertible
financing on favorable terms.

We have sold and intend to continue to offer and
sell equity securities from time to time in one or more offerings at the market (ATM) at prices and on terms which the Company will then
determine for an initial aggregate offering price of $500 million pursuant to a registration statement on Form F-3 declared effective
by the SEC on May 4, 2022. As of March 7, 2025, we had an available balance of approximately $202.5 million under this ATM registration
statement.

Under the Company’s Purchase Agreement with
Ionic Ventures LLC, the Company had the right, but not the obligation, to sell to Ionic up to $22 million of registered Ordinary Shares.

Between May and August 2023, the Company issued
an aggregate of 6,747,663 ordinary shares to Ionic Ventures LLC for gross proceeds of $22.0 million. The Company received net proceeds
of approximately $21.0 million after deducting commissions payable to the placement agent.

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Between August and December 31, 2023, the Company
sold an aggregate of 14,744,026 ordinary shares in connection with the at-the-market offering. The Company received net proceeds of $45.2
million, net of offering costs.

In the first quarter of 2024, the Company sold
an aggregate of 12,871,934 ordinary shares in connection with the at-the-market offering. The Company received net proceeds of $38.7 million,
net of offering costs.

In the second quarter of 2024, the Company sold
an aggregate of 16,237,292 ordinary shares in connection with the at-the-market offering. The Company received net proceeds of $41.6 million,
net of offering costs.

In the third quarter of 2024, the Company sold
an aggregate of 14,025,827 ordinary shares in connection with the at-the-market offering. The Company received net proceeds of $51.4 million,
net of offering costs.

In the fourth quarter of 2024, the Company sold
an aggregate of 24,111,575 ordinary shares in connection with the at-the-market offering. The Company received net proceeds of $111.1
million, net of offering costs.

On October 11, 2024, the Company acquired all
of the issued and outstanding capital stock of Enovum Data Centers Corp. in a transaction valued at approximately CAD 62.8 million (approximately
$46.0 million).

Revenue from Operations

Funding our operations on a going-forward basis
will rely significantly on the revenue earned from our high performance computing business, our ability to continue to mine digital assets
and the spot or market price of the digital assets we mine, as well as our ability to earn ETH rewards from ETH staking business and the
spot or market price of ETH.

In November 2023, as amended on December 12, 2023,
the Company finalized a service agreement to supply its initial cloud services customer with services over a three-year period. On January
10, 2024, the Company announced it had increased the size of its contract for up to an aggregate of 2,048 GPUs worth more than $50 million
of annualized revenues to the Company. On January 23, 2024 the Company announced that its WhiteFiber AI business commenced generating
revenue.

On June 25, 2024, the Company announced that it
had finalized an agreement to supply its first customer with an additional 2,048 GPUs over a three-year term commencing upon deployment.
With this agreement, the Company will supply this customer with a total of 4,096 GPUs for the respective three-year periods, amounting
to total revenue of approximately $275 million, or $92 million on an annualized basis. In late July, at the customer’s request,
the Company and the customer agreed to temporarily delay the purchase order so the customer could evaluate an upgrade to newer generation
Nvidia GPUs. Consequently, the Company and manufacturer postponed the purchase order. In early August 2024, the customer made a non-refundable
prepayment of $30.0 million for the services to be rendered under this agreement.

In January 2025, the Company entered into a new
agreement to supply its first customer for an additional 464 GPUs for a period of eighteen months. This new agreement replaces the prior
agreement whereby the Company was to provide the customer with an incremental 2,048 H100 GPUs. The contract represents approximately $15
million of annualized revenue and features a two-month prepayment from the customer.

On November 4, 2024, the Company announced it
had executed a Master Services and Lease Agreement (“MSA”) with Boosteroid Inc. (“Boosteroid”), a global cloud
gaming provider and new customer of WhiteFiber’s HPC Services Business Segment. Bit Digital previously announced that it had signed
a binding term sheet with Boosteroid on August 19, 2024. Bit Digital had finalized a purchase order for the starting quantity of GPUs.
The initial order of 300 GPUs is expected to generate approximately $4.6 million in revenue to Bit Digital over the five-year term, or
approximately $0.9 million per year. Bit Digital expects the GPUs to be delivered to respective data centers across the U.S. and begin
earning revenue by the end of November 2024. The MSA provides Boosteroid with the option to expand in increments of 100 servers, up to
50,000 servers, representing a potential $700 million revenue opportunity for Bit Digital over the five-year term, contingent on deployment
plans and market conditions.

On December 30, 2024, we entered into a Master
Services Agreement (“MSA”) with a minimum purchase commitment of 32 GPUs, along with an associated purchase order, from a
new customer, an AI Compute Fund managed by DNA Holdings Venture Inc. The purchase order provides for services utilizing a total of 576
H200 GPUs over a twenty-five month period, terminable by either party upon at least 90 days’ written notice prior to any renewal
date. It represents an aggregate revenue opportunity of approximately $20.2 million. Concurrently, we placed a purchase order for 130
H200 servers for approximately $30 million. The deployment commenced in February 2025.

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We expect to also generate ongoing revenues from
the production of digital assets, primarily bitcoin. Our ability to liquidate digital assets at future values will be evaluated from time
to time to generate cash for operations. Generating digital assets, for example, with spot market values which exceed our production and
other costs, will determine our ability to report profit margins related to such mining operations. Furthermore, regardless of our ability
to generate revenue from our high performance computing business, or our digital asset business, we may need to raise additional capital
in the form of equity or debt to fund our operations and pursue our business strategy, including purchases in order to fund our high performance
computing business.

The ability to raise funds such as equity, debt
or conversion of digital assets to maintain our operations is subject to many risks and uncertainties and, even if we are successful,
future equity issuances would result in dilution to our existing stockholders and any future debt or debt securities may contain covenants
that limit our operations or ability to enter into certain transactions. Our ability to realize revenue through digital asset production
and successfully convert digital assets into cash or fund overhead with digital assets is subject to a number of risks, including
regulatory, financial and business risks, many of which are beyond our control. Additionally, the value of digital asset rewards has historically
been extremely volatile, and future prices cannot be predicted.

If we are unable to generate sufficient revenue
when needed or secure additional funding, it may become necessary to significantly reduce our current rate of expansion or to explore
other strategic alternatives.

Cash flows

Operating Activities

Net cash used in operating activities was $13.0
million for the year ended December 31, 2024, derived mainly from (i) a net income of $28.3 million for the year ended December 31, 2024
adjusted for digital assets mined of $58.6 million from our mining services, depreciation expenses of property and equipment of $32.3
million, and gains on digital assets of $55.7 million, share based compensation expenses of $9.9 million, realized and unrealized gains
on digital assets held within Investment Fund of $2.6 million, and (ii) net changes in our operating assets and liabilities, principally
comprising of an increase in deferred revenue of $17.2 million, an increase in accounts receivable of $4.7 million, an increase in other
payable and accrued liabilities of $4.0 million, a decrease in net investment in lease of $1.3 million, an increase in accounts payable
of $3.5 million, an increase in other current assets of $1.6 million, and an increase in other non-current assets of $0.3 million.

Net cash provided by operating activities was
$1.1 million for the year ended December 31, 2023, derived mainly from (i) net loss of $13.9 million for the year ended December 31, 2023
adjusted for digital assets mined of $44.2 million from our mining services, depreciation expenses of property and equipment of $14.4
million, gain from exchange of digital assets of $18.8 million, impairment of digital assets of $6.6 million, and share-based compensation
expenses of $9.1 million, and (ii) net changes in our operating assets and liabilities, principally comprising of a decrease in digital
assets and stable coins of $46.9 million as net proceeds from sales of and payments of digital assets and stable coins.

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Net cash provided by operating activities was
$8.5 million for the year ended December 31, 2022, derived mainly from (i) net loss of $105.3 million for the year ended December 31,
2022, adjusted for digital assets mined of $32.3 million from our mining services, depreciation expenses of miners of $27.8 million, gain
from exchange of digital assets of $6.5 million, impairment of digital assets of $24.7 million, impairment of property and equipment of
$50.0 million, and share-based compensation expenses of $2.3 million, and (ii) net changes in our operating assets and liabilities, principally
comprising of a decrease in digital assets and stable coins of $25.1 million as net proceeds from sales of digital assets and stable coins,
and an increase in accounts payable of $3.2 million.

Investing Activities

Net cash used in investing activities was $149.0
million for the year ended December 31, 2024, primarily attributable to purchases of and deposits made for property, plant and equipment
of $94.0 million, cash paid for acquisition of subsidiary of $39.0 million, investment in a SAFE of $1.0 million and investment in two
equity investees of $16.0 million.

Net cash used in investing activities was $69.2
million for the year ended December 31, 2023, primarily attributable to purchases of and deposits made for property and equipment of $66.7
million, investment of $2.2 million in three equity investments, and loans of $0.4 million made to one third party, partially offset by
proceeds of $90 thousand from the divestment of an equity investment.

Net cash used in investing activities was $18.6
million for the year ended December 31, 2022, primarily attributable to purchases of bitcoin miners of $19.3 million, investment of $2.0
million in one investment fund, and loss of cash of $59,695 from sale of an inactive subsidiary, partially offset by proceeds of $1.1
million from sales of bitcoin miners, and proceeds of $1.7 million from sale of a portion of long-term investment.

Financing Activities

Net cash provided by financing activities was
$242.9 million for the year ended December 31, 2024, attributable to net proceeds of $242.9 million from the at-the-market offering.

Net cash provided by financing activities was
$52.2 million for the year ended December 31, 2023, primarily attributable to the net proceeds of $45.3 million from a direct offering
with Ionic Ventures, an institutional investor, and the net proceeds of $8.6 million from at-the-market offering, partially offset by
the payment of dividends of $1.6 million to a related party preferred shareholder.

Net cash provided by financing activities was
$18.7 million for the year ended December 31, 2022, primarily attributable to the net proceeds of $21.0 million from a direct offering
with Ionic Ventures, an institutional investor, and partially offset by the payment of liquidated damage fees of $2.2 million as the registration
statement for resale of shares issued in one of our private placements was declared effective by the SEC late on January 25, 2022.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition
and results of operations are based upon our unaudited condensed consolidated financial statements. These financial statements are prepared
in accordance with U.S. GAAP, which requires the Company to make estimates and assumptions that affect the reported amounts of our assets,
liabilities, revenues, and expenses, to disclose contingent assets and liabilities on the dates of the unaudited condensed consolidated
financial statements, and to disclose the reported amounts of revenues and expenses incurred during the financial reporting periods. The
most significant estimates and assumptions include the valuation of digital assets and other current assets, useful lives of property
and equipment, the recoverability of long-lived assets, provision necessary for contingent liabilities and realization of deferred tax
assets. We continue to evaluate these estimates and assumptions that we believe to be reasonable under the circumstances. We rely on these
evaluations as the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from those
estimates as a result of changes in our estimates. Some of our accounting policies require higher degrees of judgment than others in their
application. We believe critical accounting policies as disclosed in this release reflect the more significant judgments and estimates
used in preparation of our unaudited condensed consolidated financial statements.