Core Scientific, Inc./tx (CORZ) Risk Factors

Item 1A. Risk Factors

Investing in our securities involves a high degree of risk. You should carefully consider the risks and uncertainties described

below together with all of the other information contained in this Annual Report on Form 10-K, including our financial statements and

related notes elsewhere in this Annual Report on Form 10-K and in the section titled “Management’s Discussion and Analysis of

Financial Condition and Results of Operations,” before deciding to invest in our securities. Although we have organized risks

generally according to these categories in the discussion below, many of the risks may have ramifications in more than one

category. These categories, therefore, should be viewed as a starting point for understanding the significant risks we face and not as a

limitation on the potential impact of the matters discussed. If any of the events or developments described below were to occur, our

business, prospects, operating results and financial condition could suffer materially, the trading price of our securities could decline,

and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face.

Additional risks and uncertainties not presently known to us, or that we currently believe to be immaterial, may also adversely affect

our business.

Risks Related to our Businesses and Industries

Our success depends in large part on our ability to timely and successfully convert our existing facilities to support our high-

density colocation customers and to attract new high-density colocation customers. Delays in the expansion or modification of

existing facilities or the construction of new facilities or significant cost overruns could present significant risks to our business

and could have a material adverse effect on our business, financial condition and results of operations.

In 2024, we initiated a significant strategic transition in our operations from bitcoin mining to colocation services, which will

require the conversion of our existing infrastructure or development of new facilities to support our high-density colocation customers.

Our ability to timely and successfully convert our existing facilities or construct new facilities to support our high-density colocation

customers may be negatively impacted by:

•deficiencies, delays or failures in performance by construction firms retained to build, build-out or remodel our facilities;

•disruptions in the supply chain or excessive demand for construction materials, electrical transformers, generators and other

materials used in high performance data centers that delay receipt of, or make unavailable, required supplies, materials and

equipment;

•difficulties in generating sufficient cash flow or obtaining necessary financing that delay or prevent the completion of

planned facilities;

•failure on the part of our customers to timely pay or reimburse construction costs and expenses when due; or failure on our

part to timely pay construction costs and expenses;

•delays in obtaining necessary government approvals, receipt of power allocations, land acquisitions and easements, as well as

change orders, modification to designs and construction plans that delay construction, increase costs or that reduce the usable

electrical power footprint;

•customer-initiated changes in project design, specification, scope, or delivery sequencing; or

•severe weather events, natural disasters, or other force majeure conditions, including hurricanes, tornadoes, winter storms,

extreme heat, or flooding, that disrupt construction timelines, damage facilities or equipment, or limit the availability of

construction labor or materials.

Any failure to timely or successfully convert our existing facilities or construct new facilities to support our high-density

colocation customers could result in reputational damage and harm our ability to retain existing customers or attract new customers to

our business, any of which could impact our future growth and have a material adverse effect on our business, financial condition and

results of operations.

Currently our high-density colocation business is highly dependent on a single customer.

One customer, CoreWeave, currently accounts for 100% of our Colocation segment revenue. Our success in the Colocation

segment is highly dependent on the success of CoreWeave and the fulfillment by it of its obligations under our existing contractual

arrangements. Any failure to meet CoreWeave’s expectations, including, but not limited to, failure to fulfill our contractual

obligations, could result in cancellation or non-renewal of our business relationship, or harm to our business relationship that could

impact our future growth and which could have a material adverse effect on our business, financial condition and results of operations.

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Our increased focus on high-density colocation may not be successful and depends on the continuing development and

resource and computational requirements of high-density colocation applications such as cloud computing, machine learning and

artificial intelligence and continuing need for the infrastructure and services we provide.

Our success also depends in large part on our ability to attract additional customers and retain our existing customer for our

high-density colocation capabilities in a profitable manner, which we may not be able to do if:

•there is a reduction in the demand for high-density colocation applications such as cloud computing, machine learning and

artificial intelligence;

•rapid innovation and technological disruption in cloud computing, machine learning and artificial intelligence decrease

computational requirements and therefore lower demand for our high-density colocation offerings;

•high energy costs, supply chain disruptions (including labor availability), government regulation, and compliance costs

increase high-density colocation service costs, reduces potential demand for services and reduce revenue and profitability;

•we fail to provide competitive hosting terms or effectively market them to potential customers;

•we provide hosting services that are deemed by existing and potential customers or suppliers to be inferior to those of our

competitors, or that fail to meet customers’ or suppliers’ ongoing and evolving program qualification standards, based on a

range of factors, including available power, preferred design features, security considerations and connectivity;

•businesses decide to host internally as an alternative to the use of our services;

•we fail to successfully communicate the benefits of our services to potential customers;

•we are unable to strengthen awareness of our brand; or

•we are unable to provide services that our existing and potential customers desire.

If our target customer markets, which are new and still developing, do not grow or develop as expected or in a manner

consistent with our current business model, our business, financial condition and results of operation would be adversely affected.

Further, increases in power costs could negatively impact our hosting customers’ demand for services, harm our growth prospects and

could have a material adverse effect on our business, financial condition and results of operations.

Our success in our digital asset segments depends in large part on our ability to mine bitcoin in a profitable manner which

we may not be able to do if:

•there is a reduction in the demand for bitcoin causing the price of bitcoin to fall reducing revenue from our self-mining

operations;

•high energy costs, supply chain disruptions or government regulation compliance costs increase mining costs and reduce

revenue and profitability; or

•we do not secure or are unable to secure an adequate supply of new generation digital asset mining equipment.

In the past, increases in power costs have impacted our ability to earn digital assets efficiently and a reduction in bitcoin’s

market price has reduced our operating margins. Future increases in power costs and unfavorable prices for digital assets will harm our

growth prospects and could have a material adverse effect on our business, financial condition and results of operations.

We may not be able to maintain our competitive position as the Bitcoin network experiences increases in total network hash

rate.

As the relative market prices of a digital asset, such as bitcoin, increases, more companies are encouraged to mine for that

digital asset and as more miners are added to the network, its total hash rate increases. In order for us to maintain our competitive

position under such circumstances, we must increase our total hash rate by acquiring and deploying more mining machines, including

new miners with higher hash rates. There are currently only a few companies capable of producing a sufficient number of machines

with adequate quality to address the increased demand. If we are not able to acquire and deploy additional miners on a timely basis,

our proportion of the overall network hash rate will decrease and we will have a lower chance of solving new blocks and earning the

related mining rewards, which will have an adverse effect on our business and results of operations.

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As more processing power is added to a network, our relative percentage of total processing power on that network is

expected to decline absent significant capital investment, which has an adverse impact on our ability to generate revenue from

processing transactions on that network and could have a material adverse effect on our business, financial condition and results

of operations.

Processing power on networks has been increasing rapidly over time, while the rewards and transaction fees available on those

networks tends to decline over time. In order to grow or maintain the revenue we generate from processing transactions on such

networks, we are required to invest significant capital to acquire new computer servers, expand our power capacity and otherwise

increase our effective processing power on such networks. In the event we are unable to invest sufficient capital to grow or maintain

the level of our processing power on a network relative to the total processing power of such network, our revenue from the applicable

network will decline over time and as a result, it could have a material adverse effect on our business, financial condition and results

of operations.

In addition, a decrease in the price of computer servers may result in an increase in transaction processors, which may lead to

more competition for fees in a particular network. In the event we are unable to realize adequate fees on a network due to increased

competition, our revenue from the applicable network will decline over time and in turn, it could have a material adverse effect on our

business, financial condition and results of operations.

Our business is capital intensive, and failure to obtain the necessary capital when needed will force us to delay, limit or

terminate our expansion efforts or other operations, which would have a material adverse effect on our business, financial

condition and results of operations.

The costs of constructing, developing, operating and maintaining our high-density colocation and digital mining facilities, and

owning and operating a large fleet of the latest generation digital mining equipment, are substantial.

Our high-density colocation operations may be impacted by costs and expenses beyond our control or require capital

investment that neither we nor our customers are able to bear, reducing our revenue and profitability.

Our digital asset mining operation can only be successful and ultimately profitable if the costs, including hardware and

electricity costs, associated with earning digital assets are lower than the price of the digital assets we earn. Falling digital asset prices

or asset prices that do not keep pace with higher energy prices, significantly higher energy prices, inflation and supply chain

disruptions reduce our profitability. Our miners experience ordinary wear and tear from operation and may also face more significant

malfunctions caused by factors which may be beyond our control, increasing our costs and reducing our revenue and profitability. The

continual upgrade and refresh of mining machines requires substantial capital investment, and we may face challenges in doing so on a

timely basis based on availability of new miners and our access to adequate capital resources. If we are unable to obtain adequate

numbers of new and replacement miners at scale, we may be unable to remain competitive in our highly competitive and evolving

industry.

We may need to raise additional funds through equity or debt financings in order to meet our operating and capital needs.

Raising additional debt or equity financing may be difficult and may not be available when needed or, if available, may not be

available on satisfactory terms. An inability to generate sufficient cash from operations or to obtain additional debt or equity financing

have adversely affected our results of operations.

If we do not accurately predict our facility requirements, it could have a material adverse effect on our business, financial

condition and results of operations.

The costs of building out, leasing and maintaining our facilities constitute a significant portion of our capital and operating

expenses. In order to manage growth and ensure adequate capacity for our new and existing high-density colocation customers while

minimizing unnecessary excess capacity costs, we continuously evaluate our short- and long-term data center capacity requirements. If

we overestimate our business’ capacity requirements or the demand for our services and therefore secure excess data center capacity,

our operating margins could be materially reduced. If we underestimate our data center capacity requirements, we may not be able to

service the required or expanding needs of our existing customers and may be required to limit new customer acquisition, which could

have a material adverse effect on our business, financial condition and results of operations.

We are subject to risks associated with our need for significant electric power and the limited availability of electrical power

and resources, equipment and materials designed to provide usable electrical power within our facilities, which could have a

material adverse effect on our business, financial condition and results of operations. An inability to purchase and develop

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additional sources of low-cost sources of energy effectively or to obtain real estate, materials and equipment to operate our

facilities efficiently will have a material adverse effect on our business, financial condition and results of operations.

We require a significant electric power supply to conduct our mining activity and to provide many hosting services we offer,

such as powering and cooling our and our customers’ servers and network equipment and operating critical mining and facility and

equipment infrastructure. The costs of electric power therefore account for a significant portion of our cost of revenue.

The amount of power required by us and our customers will increase commensurate with the demand for our services and the

increase in miners we operate for ourselves and our hosting customers. Energy costs and availability are vulnerable to seasonality,

with increased costs primarily in the summer months and risks of outages and power grid damage as a result of inclement weather,

animal incursion, sabotage and other events out of our control. For example, higher than expected power rates in 2022 materially and

adversely impacted our operations.

We aim to build and operate energy efficient facilities, but such facilities may not be able to deliver sufficient power to meet the

growing needs of our business. The cost of power at our facilities is dependent on our ability to perform under the terms in the power

contracts we are a party to, which we may be unable to do successfully. Pursuant to power contracts that require curtailment, if we fail

to curtail our power usage when called upon or fail to satisfy certain eligibility requirements for monthly bill credits, our power costs

would increase. Further, governments and government regulators may potentially seek to restrict or prohibit the ability of electricity

suppliers to provide electricity to our facilities in times of electricity shortage or otherwise. To that end, public sentiment regarding

electrical power generation, usage and storage, high volume electrical use and climate change may limit our access to electrical power,

decrease available facility sites, and increase our costs and limit the demand for our high-density colocation services. Any system

downtime resulting from disruptions, curtailments, insufficient power resources or power outages could have a material adverse effect

on our business, financial condition and results of operations. Our high-density colocation operations run on back-up generators in the

event of a power outage or curtailment that may not be sufficient to support our operations for the magnitude or duration of the power

outage or curtailment. Increased power costs and limited availability and curtailment of power resources will reduce our revenue and

have a material and adverse effect on our cost of revenue and results of operations.

If we fail to accurately estimate the factors upon which we base our contract pricing, we may generate less profit than

expected or incur losses on those contracts, which could have a material adverse effect on our business, financial condition and

results of operations.

Our hosting contracts are generally priced on the basis of estimated power consumption by our clients and the other costs of

providing electrical power and other services. Our ability to earn a profit on such contracts requires that we accurately estimate the

costs involved and outcomes likely to be achieved, provide services efficiently and assess the probability of generating sufficient

hosting capacity within budgeted costs and expenses during the contracted time period. In addition, we may not be able to obtain all

expected benefits, including tax abatements or government incentives offered in opportunity zones. The inability to accurately

estimate the factors upon which we base our contract pricing could have a material adverse effect on our business, financial condition

and results of operations.

Any failure in our critical systems, facilities or services we provide could lead to disruptions in our and our customers’

businesses and could harm our reputation and result in financial penalty and legal liabilities, which would reduce our revenue and

have a material adverse effect on our business, financial condition and results of operations.

The critical systems of the facilities we operate and the services we provide are subject to failure. Any failure in the critical

systems of any facility we operate or services that we provide, including a breakdown in critical plant, equipment or services, routers,

switches or other equipment, power supplies or network connectivity, whether or not within our control, could result in service

interruptions impacting our operations as well as equipment damage, which could significantly disrupt our business operations and the

operations of our customers, harm our reputation and reduce our revenue. Any failure or downtime in one of the facilities that we

operate impact mining rewards generated by us and reduce the profitability of our customers.

The total destruction or severe impairment of any of the facilities we operate could result in significant downtime of our

operations and services and loss of customer data. Since our ability to generate revenue depends on our ability to provide highly

reliable service, even minor interruptions in our operations could harm our reputation and negatively impact our revenue and

profitability. Our ability to generate revenue and the services we provide are subject to failures resulting from numerous factors,

including:

•power loss, curtailment and disruption;

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•equipment failure;

•human error or accidents;

•theft, sabotage and vandalism;

•failure by us or our suppliers to provide adequate service or maintain our equipment;

•network connectivity downtime and fiber cuts;

•service interruptions resulting from server relocation;

•security breaches of our infrastructure;

•improper building maintenance;

•physical, electronic and cybersecurity breaches;

•animal incursions;

•fire, earthquake, hurricane, tornado, flood and other natural disasters;

•extreme temperatures;

•water damage;

•public health emergencies;

•riots, protests and disorder; and

•terrorism, war and hostilities.

Moreover, service interruptions and equipment failures may expose us to potential legal liability. As our services are critical to

our customers’ business operations, any disruption in our services could result in lost profits of or other indirect or consequential

damages to our customers. Our customer contracts typically contain provisions limiting our liability for breach of such agreements, a

court may not enforce any contractual limitations on our liability in the event that one of our customers brings a lawsuit against us as

the result of a service interruption that they may ascribe to us. The outcome of any such lawsuit would depend on the specific facts of

the case and any legal and policy considerations that we may not be able to mitigate. In such cases, we could be liable for substantial

damage awards, which would as a result have a material adverse effect on our business, financial condition and results of operations.

We may be vulnerable to physical security breaches, which could disrupt our operations and have a material adverse effect

on our business, financial condition and results of operations.

A party who is able to compromise the physical security measures protecting our facilities could cause interruptions or

malfunctions in our operations and misappropriate our property or the property of our customers. As we provide assurances to our

customers that we provide the highest level of security, such a compromise could be particularly harmful to our brand and reputation.

We may be required to expend significant capital and resources to protect against such threats or to alleviate problems caused by

breaches in security. As techniques used to breach security change frequently and are often not recognized until launched against a

target, we may not be able to implement new security measures in a timely manner or, if and when implemented, we may not be

certain whether these measures could be circumvented. Any breaches that may occur could expose us to increased risk of lawsuits,

regulatory penalties, loss of existing or potential customers, harm to our reputation and increases in our security costs, which could

have a material adverse effect on our business, financial condition and results of operations.

Physical risks and regulatory changes relating to climate change may impact our costs, our access to materials and

resources and demand for cryptocurrencies, potentially adversely impacting our business, capital expenditures, results of

operations, financial condition and competitive position.

The physical risks of climate change may impact the availability and cost of materials and natural resources, sources and supply

of energy, demand for bitcoin and other cryptocurrencies, and could increase our insurance and other operating costs, including,

potentially, to repair damage incurred as a result of extreme weather events or to renovate or retrofit facilities to better withstand

extreme weather events.

In addition, efforts are being made by the United States and foreign governments to reduce greenhouse gas emissions,

particularly those from coal combustion power plants, some of which plants we may rely upon for power. The added cost of any

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environmental taxes, charges, assessments or penalties levied on such power plants could be passed on to us, increasing the cost to run

our facilities.

If our operations are disrupted due to physical impacts of climate change, or if environmental laws or regulations or industry

standards are either changed or adopted and impose significant operational restrictions and compliance requirements on our

operations, our business, capital expenditures, results of operations, financial condition and competitive position could be adversely

impacted.

If our information technology systems or those of the third parties with whom we work or our data, are or were

compromised, we could experience adverse consequences resulting from such compromise, including but not limited to regulatory

investigations or actions; litigations; fines and penalties; disruptions of our business operations; reputational harm; loss of

revenue or profits; and other adverse consequences.

Threats to network and data security are increasingly diverse and sophisticated. Security breaches, computer malware and

computer hacking attacks have been a prevalent concern in our businesses. Such threats are prevalent and continue to rise, are

increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors,

“hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-

state-supported actors. Despite our efforts and processes to prevent these, our computer servers and computer systems may be

vulnerable to cybersecurity risks.

We and the third parties with whom we work are subject to a variety of evolving threats, including, but not limited to, social-

engineering attacks (including through deepfakes, which may be increasingly more difficult to identify as fake, and phishing attacks),

malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service

attacks, credential stuffing attacks, credential harvesting, physical or electronic break-ins, employee misconduct or error , ransomware

attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware failures, loss of data or other information

technology assets, adware, attacks enhanced or facilitated by AI, and other similar disruptions.  In particular, severe ransomware

attacks are becoming increasingly prevalent and can lead to significant interruptions in our operations, ability to provide our services,

reputational harm, and diversion of funds. Extortion payments may alleviate the negative impact of ransomware attack, but we may be

unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.

It may be difficult and/or costly to detect, investigate, mitigate, contain, and remediate a security incident. Our efforts to do so

may not be successful. Actions taken by us or the third parties with whom we work to detect, investigate, mitigate, contain, and

remediate a security incident could result in outages, data losses, and disruptions of our business. Threat actors may also gain access to

other networks and systems after a compromise of our networks and systems. For example, threat actors may use an initial

compromise of one part of our environment to gain access to other parts of our environment, or leverage a compromise of our

networks or systems to gain access to the networks or systems of third parties with whom we work, such as through phishing or supply

chain attacks.

Additionally, future and past business transactions (such as acquisitions or integrations) could expose us to additional

cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated

entities’ systems and technologies. Furthermore, we may discover security issues that were not found during due diligence of such

acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and

security program.

We rely on third parties to operate critical business systems to process sensitive information in a variety of contexts. Our ability

to monitor these third parties’ information security practices is limited, and these third parties may not have adequate information

security measures in place. If the third parties with whom we work experience a security incident or other interruption, we could

experience adverse consequences. While we might be entitled to damages if the third parties with whom we work fail to satisfy their

privacy or security-related obligations to us, any award may be insufficient to cover our damages, or we may be unable to recover such

award. In addition, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties’

infrastructure in our supply chain or that of the third parties with whom we work have not been compromised.

Our digital infrastructure and systems may be breached due to the actions of outside parties, error or malfeasance of one of our

employees, or otherwise, and, as a result, an unauthorized party may obtain access to our digital asset accounts, private keys, data or

digital assets. Although we implement a number of security procedures with various elements such as two-factor verification,

segregated accounts and secured facilities and plan to implement the maintenance of data on computers and/or storage media that is

not directly connected to, or accessible from, the internet and/or networked with other computers (“cold storage”), to minimize the risk

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of loss, damage and theft, and we update such security procedures whenever reasonably practicable, there can be no assurance that

these measures will be effective and we may be unable to prevent such loss, damage or theft, whether caused intentionally,

accidentally or by an act of God. Further, we have and may in the future experience delays in deploying remedial measures and

patches designed to address identified vulnerabilities. Vulnerabilities could be exploited and result in security incidents.

Additionally, outside parties may attempt to fraudulently induce our employees to disclose sensitive information in order to

gain access to our infrastructure. As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems

change frequently, or may be designed to remain dormant until a predetermined event, and often are not recognized until launched

against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. As technological

change occurs, the security threats to our bitcoin will likely adapt and previously unknown threats may emerge. Our ability to adopt

technology in response to changing security needs or trends may pose a challenge to the safekeeping of our digital assets. To the

extent we are unable to identify and mitigate or stop new security threats, our digital assets may be subject to theft, loss, destruction or

other attack.

Any of the previously identified or similar threats have in the past and may in the future cause a security incident or other

interruption that have in the past and may in the future result in unauthorized, unlawful, or accidental acquisition, modification,

destruction, loss, alteration, encryption, disclosure of, or access to our sensitive information or our information technology systems, or

those of the third parties with whom we work. A security incident or other interruption could disrupt our ability (and that of third

parties with whom we work) to provide our services.

We may incur significant costs or modify our business activities to try to protect against security incidents. Certain data privacy

and security obligations have required us to implement and maintain specific security measures or industry-standard or reasonable

security measures to protect our digital assets, sensitive information, and information technology systems, Applicable data privacy and

security obligations may require us, or we may voluntarily choose, to notify relevant stakeholders, including affected individuals,

customers, regulators, and investors, of security incidents, or to take other actions, such as providing credit monitoring and identity

theft protection services. Such disclosures and related actions can be costly, and the disclosure or the failure to comply with such

applicable requirements could lead to adverse consequences.

Any of these events could expose us to liability, damage our reputation, reduce customer confidence in our services and

otherwise have a material adverse effect on our business, financial condition and results of operations. Furthermore, we believe that as

our assets grow, we may become a more appealing target for security threats, such as hackers and malware. If an actual or perceived

breach of our digital asset accounts occurs, the market perception of our effectiveness could be harmed.

Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of

liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security

obligations.

In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from

public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to

undermine our competitive advantage or market position. Additionally, sensitive information of the Company or our customers could

be leaked, disclosed, or revealed as a result of or in connection with our employees’, personnel’s, or vendors’ use of generative AI

technologies.

We are subject to stringent and evolving U.S. and foreign laws, regulations, and rules, contractual obligations, industry

standards, policies and other obligations related to data privacy and security. Our actual or perceived failure to comply with such

obligations could lead to regulatory investigations or actions; litigation (including class claims) and mass arbitration demands;

fines and penalties; a disruption of our business operations; reputational harm; loss of revenue or profits; loss of customers or

sales and other adverse business consequences.

The Company processes personal data and other sensitive and confidential information, which subjects it to various obligations

related to data privacy and security. In the ordinary course of business, we collect, receive, store, process, generate, use, transfer,

disclose, make accessible, protect, secure, dispose of, transmit, and share (collectively, process) personal data and other sensitive

information, including proprietary and confidential business data, trade secrets, intellectual property, and sensitive third-party data.

Our data processing activities subject us to numerous data privacy and security obligations, such as various laws, regulations,

guidance, industry standards, external and internal privacy and security policies, contractual requirements, and other obligations

relating to data privacy and security.

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In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data

breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act),

and other similar laws (e.g., wiretapping laws). Numerous U.S. states have enacted comprehensive privacy laws that impose certain

obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain

rights concerning their personal data. As applicable, such rights may include the right to access, correct, or delete certain personal

data, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making. The

exercise of these rights may impact our business and ability to provide our services. Certain states also impose stricter requirements

for processing certain personal data, including sensitive information, such as conducting data privacy impact assessments. These state

laws allow for statutory fines for noncompliance. For example, the California Consumer Privacy Act of 2018 (“CCPA”) applies to

personal data of consumers, business representatives, and employees who are California residents, and requires businesses to provide

specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights. The CCPA provides

for fines and allows private litigants affected by certain data breaches to recover significant statutory damages.

Our use of AI/ML technologies may be subject to certain privacy obligations. Other laws governing certain data or sectors may

apply to our operations. We may be unable to transfer personal data from Europe and other jurisdictions to the United States or other

countries due to data localization requirements or limitations on cross-border data flows. We are also subject to contractual obligations

and policies related to data privacy and security, and our efforts to comply with such obligations may not be successful. We publish

privacy policies, marketing materials, whitepapers, and other statements, concerning data privacy, and security. Regulators in the

United States are increasingly scrutinizing these statements, and if these policies, materials or statements are found to be deficient,

lacking in transparency, deceptive, unfair, misleading, or misrepresentative of our practices, we may be subject to investigation,

enforcement actions by regulators or other adverse consequences.

Obligations related to data privacy and security are quickly changing, becoming increasingly stringent, and creating uncertainty.

Additionally, these obligations may be subject to differing applications and interpretations, which may be inconsistent or conflict

among jurisdictions. Preparing for and complying with these obligations requires us to devote significant resources, which may

necessitate changes to our services, information technologies, systems, and practices and to those of any third parties that process

personal data on our behalf. We may at times fail (or perceived to have failed) in our efforts to comply with our data privacy and

security obligations. Moreover, despite our efforts, our personnel or third parties with whom we work may fail to comply with such

obligations, which could negatively impact our business operations. Any failure (or perceived failure) by us or a third party with

whom we work with to comply with applicable data privacy and security obligations could subject us to litigation (including class

claims), mass arbitration demands, proceedings, actions or investigations by governmental entities, authorities, private parties, or

regulators; additional reporting requirements and/or oversight; bans or restrictions on processing personal data; and orders to destroy

or not use personal data.

Our future success depends on our ability to keep pace with rapid technological changes that could make our current or

future technologies less competitive or obsolete.

Rapid, significant, and disruptive technological changes continue to impact our industry. The infrastructure at our facilities may

become less marketable due to demand for new processes and technologies, including, without limitation: (i) new processes to deliver

power to, or eliminate heat from, computer systems; (ii) customer demand for additional redundancy capacity; (iii) new technology

that permits higher levels of critical load and heat removal than our facilities are currently designed to provide; (iv) an inability of the

power supply to support new, updated or upgraded technology; and (v) a shift to more power-efficient transaction validation protocols.

In addition, the systems that connect our facilities to the internet and other external networks may become insufficient, including with

respect to latency, reliability and diversity of connectivity.

Even if we succeed in adapting to new processes and technologies, our use of such new processes or technology may not have a

positive impact on our financial performance. For example, we could incur substantial additional costs if we needed to materially

improve our hosting center infrastructure through the implementation of new systems or new server technologies that require levels of

critical load and heat removal that our facilities are not currently designed to provide. In addition, if one of our new offerings were

competitive to our prior offerings and represented an adequate or superior alternative, customers could decide to abandon prior

offerings that produce higher revenue or better margins for the new offering. Therefore, the adaptation to new processes and

technologies could result in lower revenue, lower margins and/or higher costs, which could have a material adverse effect on our

business, financial condition and results of operations.

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We may not be able to adequately protect our intellectual property rights and other proprietary rights, which could have a

material adverse effect on our business, financial condition and results of operations.

We may not be able to obtain broad protection in the United States or internationally for all of our existing and future

intellectual property and other proprietary rights, and we may not be able to obtain effective protection for our intellectual property

and other proprietary rights in any country where we may operate. Protecting our intellectual property rights and other proprietary

rights may require significant expenditure of our financial, managerial and operational resources. Moreover, the steps that we may

take to protect our intellectual property and other proprietary rights may not be adequate to protect such rights or prevent third parties

from infringing or misappropriating such rights. Any of our intellectual property rights and other proprietary rights, whether

registered, unregistered, issued or unissued, may be challenged by others or invalidated through administrative proceedings and/or

litigation.

We may be required to spend significant resources to secure, maintain, monitor and protect our intellectual property rights and

other proprietary rights. Despite our efforts, we may not be able to prevent third parties from infringing upon, misappropriating or

otherwise violating our intellectual property rights and other proprietary rights. We may initiate claims, administrative proceedings

and/or litigation against others for infringement, misappropriation or violation of our intellectual property rights or other proprietary

rights to enforce and/or maintain the validity of such rights. Any such action, if initiated, whether or not it is resolved in our favor,

could result in significant expense to us, and divert the efforts of our technical and management personnel, which may have a material

adverse effect on our business, financial condition and results of operations.

We may infringe on third-party intellectual property rights or other proprietary rights, which could have a material adverse

effect on our business, financial condition and results of operations.

Our commercial success depends on our ability to operate without infringing third-party intellectual property rights or other

proprietary rights. For example, there may be issued patents of which we are not aware that our services or products infringe on. Also,

there may be patents we believe we do not infringe on, but that we may ultimately be found to by a court of law or government

regulatory agency. Moreover, patent applications are in some cases maintained in secrecy until patents are issued. Because patents can

take many years to issue, there may be currently pending applications of which we are unaware that may later result in issued patents

that our services or products allegedly infringe on.

If a third party brings any claim against us based on third-party intellectual property rights and/or other proprietary rights, we

will be required to spend significant resources to defend and challenge such claim, as well as to invalidate any such rights. Any such

claim, if initiated against us, whether or not it is resolved in our favor, could result in significant expense to us, and divert the efforts of

our technical and management personnel, which could have a material adverse effect on our business, financial condition and results

of operations.

Our success is dependent on the ability of our management team and our ability to attract, develop, motivate and retain

other well-qualified employees, which may be more difficult, costly or time-consuming than expected.

Our success depends largely on the development and execution of our business strategy by our senior management team. We

cannot assure you that our management will work well together, work well with our other existing employees or successfully execute

our business strategy in the near-term or at all, which could have a material adverse effect on our business, financial condition and

results of operations.

Our future success also depends on our continuing ability to attract, develop, motivate and retain highly qualified and skilled

management and other employees. It is difficult to locate experienced executives in our industry. Further, competition for facility

design, construction management, operations, data processing, engineering, IT, risk management and sales and marketing and other

highly skilled personnel is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent

with our existing compensation and salary structure at this stage in our development. We may be unable to attract and retain our senior

executives and other key personnel, which could have a material adverse effect on our business, financial condition and results of

operations.

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A slowdown in market and economic conditions, particularly those impacting the cloud computing, machine learning and

AI industries, the demand for high-density colocation infrastructure and services, and the blockchain industry and the blockchain

hosting market, could have a material adverse effect on our business, financial condition and results of operations.

We and our customers are affected by general business and economic conditions in the United States and globally, particularly

those impacting the cloud computing, machine learning and AI industries. These conditions include short-term and long-term interest

rates, inflation, money supply, political issues, legislative and regulatory changes, including the imposition of new tariffs affecting our

or our customers’ products and services, fluctuations in both debt and equity capital markets and broad trends in industry and finance,

all of which are beyond our control. Macroeconomic conditions that affect the economy and the economic outlook of the United States

and the rest of the world could adversely affect our customers and vendors, which could have a material adverse effect on our

business, financial condition and results of operations.

Our business is heavily impacted by social, political, economic and other events and circumstances in the United States and

in countries outside of the United States, most particularly Asian and other non-Western countries.

Our business is heavily impacted by social, political, economic and other events and circumstances in the United States and in

countries outside of the United States, most particularly in Asian and other non-Western countries. These events and circumstances are

largely outside of our influence and control. We believe that nation states are actively mining bitcoin for their own treasuries,

increasing network hash rate, reducing our share of network hash rate, and thereby reducing our revenue, profitability and financial

results of operations.

Global conflict could negatively impact our business, results of operations and financial conditions.

Unforeseen global events, such as the armed conflict between Russia and Ukraine and the Israel-Hamas conflict, could

adversely affect our business and results of operations. These and similar conflicts, including any resulting sanctions, export controls

or other restrictive actions that may be imposed by the United States and/or other countries, have created global security concerns that

could result in a regional conflict and otherwise have a lasting impact on regional and global economies, any or all of which could

adversely affect our business and results of operations. To the extent that these conflicts have increased the global cost of energy and

disrupted the demand for and price of bitcoin, it has and could continue to have an impact on our business. Sanctions, bans or other

economic actions in response to conflicts could result in an increase in costs and disruptions to the Company. The extent of such items

is not presently known, and any of them could negatively impact our business, results of operations and financial condition.

Changes in tariffs or import restrictions could have a material adverse effect on our business, financial condition and

results of operations.

Much of the equipment necessary for high-density colocation and almost entirely all of the equipment necessary for digital asset

mining is manufactured outside of the United States. There is currently significant uncertainty about the future relationship between

the United States and various other countries, including China, the European Union, Canada, and Mexico, with respect to trade

policies, treaties, tariffs and customs duties, and taxes. For example, since 2019, the U.S. government has implemented significant

changes to U.S. trade policy with respect to China. These tariffs have subjected certain digital asset mining equipment manufactured

overseas to additional import duties of up to 25%. The amount of the additional tariffs and the number of products subject to them has

changed numerous times based on action by the U.S. government. These tariffs have increased costs of digital asset mining equipment,

and new or additional tariffs or other restrictions on the import of equipment necessary for digital asset mining could have a material

We have identified a material weakness in our internal control over financial reporting, which has resulted in the

ineffectiveness of our internal control over financial reporting and disclosure controls and procedures as of the end of the period

covered by this Annual Report on Form 10-K. While we are working to remediate the identified material weakness, we cannot

assure you whether or when we will be successful in remediating the identified material weakness or that additional material

weaknesses will not be identified in the future. Failure to maintain an effective system of internal control may result in material

misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations.

In connection with the preparation of our consolidated financial statements for the year ended December 31, 2025, management

identified the following material weakness in the Company’s internal control over financial reporting: the Company did not effectively

operate controls to account for intended demolition of building and infrastructure assets, including evaluation of impairment, related to

the conversion of facilities from digital asset mining operations to HPC colocation infrastructure due to insufficient complement of

trained personnel.

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A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there

is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected

on a timely basis. As described in Note 3 — Restatement of Previously Issued Financial Statements in Item 8 of Part II, to the

consolidated financial statements included in this Annual Report on Form 10-K, this material weakness resulted in the restatement of

our previously issued consolidated financial statements as of and for the three and six months ended June 30, 2024, the three and nine

months ended September 30, 2024, the year ended December 31, 2024, the three months ended March 31, 2025, the three and six

months ended June 30, 2025, and the three and nine months ended September 30, 2025.

With the oversight of our senior management and Audit Committee, we have instituted plans to remediate the material

weakness and will continue to take remediation steps, including (i) implementing additional training for accounting personnel on the

evaluation of novel transactions related to property, plant and equipment, and (ii) implementing additional levels of management

review and oversight, including consultation with external technical accounting resources as necessary, over significant accounting

conclusions related to property, plant and equipment, including those involving the application of accounting guidance to novel or

non-routine transactions.

While we believe the measures described above will remediate the material weakness identified and strengthen our internal

control over financial reporting, we cannot assure you that the measures we have taken to date, or any measures we may take in the

future, will be sufficient to remediate the control deficiencies that have led to a material weakness in our internal control over financial

reporting or that they will prevent or avoid potential future material weaknesses.

If our disclosure controls and procedures or our internal control over financial reporting are not effective, the reliability of our

financial reporting, investor confidence and the value of our securities could be materially and adversely affected. Any failure to

implement and maintain effective internal control over financial reporting could result in additional errors in our financial statements

that could require further restatement, cause us to fail to meet our reporting obligations, and cause investors to lose confidence in our

reported financial information, any of which could adversely affect the trading price of our securities.

For more information relating to our disclosure controls and procedures and internal control over financial reporting, the

material weakness and our remediation efforts, see Part II, Item 9A., Controls and Procedures of this Annual Report on Form 10-K.

We may be required to record long-lived asset impairment charges, which could result in a significant charge to earnings.

Under GAAP, we review our long-lived assets, such as fixed assets and intangible assets, for impairment when events or

changes in circumstances indicate the carrying value may not be recoverable. A significant portion of our total assets consists of fixed

assets. Factors that may be considered in assessing whether long-lived assets may not be recoverable include reduced estimates of

future cash flows and slower growth rates in our industry. We may experience unforeseen circumstances that adversely affect the

value of our fixed assets and trigger an evaluation of the recoverability of the recorded fixed assets. Our results of operations may be

materially impacted if we are required to record a significant charge due to an impairment of our fixed assets. See financial statement

Note 5 — Property, Plant, and Equipment and Note 2 - Summary of Significant Accounting Policies in the consolidated financial

statements for the year ended December 31, 2025, for discussions of recently recognized impairments.

Losses relating to our business may be uninsured, or insurance may be limited.

Our hosting operations are subject to hazards and risks normally associated with the daily operations of facilities. Currently, we

maintain various insurance policies for business interruption for lost profits, property and casualty, public liability, commercial

employee, workers’ compensation, personal property and auto liability. Our business interruption insurance for lost profits includes

coverage for business interruptions, our property and casualty insurance includes coverage for equipment breakdowns and our

commercial employee insurance includes employee group insurance. We believe our insurance coverage adequately covers the risks of

our daily business operations. However, our current insurance policies may be insufficient in the case of prolonged, catastrophic or

certain other events. Further, the digital assets held by us are not insured. The occurrence of any event that is not entirely covered by

our insurance policies may result in interruption of our operations, subject us to significant losses or liabilities and damage our

reputation as a provider of business continuity services.

Our business is highly dependent on a small number of digital asset mining equipment suppliers.

Our business is highly dependent upon a few digital asset mining equipment suppliers providing an adequate and timely supply

of new generation digital asset mining machines at economical prices. The growth in our business is dependent in large part on the

availability of new generation mining machines offered for sale at a price conducive to profitable digital asset mining, as well as the

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trading price of digital assets such as bitcoin. The market price and availability of new mining machines fluctuate with the price of

bitcoin and can be volatile. Higher bitcoin prices increase the demand and cost for mining equipment. In addition, as more companies

seek to enter the mining industry, the demand for machines may outpace supply and create mining machine equipment shortages.

Digital asset mining equipment suppliers, may not be able to keep pace with any surge in demand for mining equipment. Further,

manufacturing mining machine purchase contracts are not favorable to purchasers and we may have little or no recourse in the event a

mining machine manufacturer defaults on its mining machine delivery commitments. If we are not able to obtain a sufficient number

of digital asset mining machines at favorable prices, our growth expectations, liquidity, financial condition and results of operations

will be negatively impacted.

Miner manufacturers may continue requiring significant advance deposits before orders are fulfilled and delivered.

Historically, miner manufacturers have required advance deposits for miner purchases. These deposits tie up significant

amounts of cash several months before mining machines are received and operable to generate revenue. These advance deposits

further drive the financial burden of operating a capital-intensive business. Miner manufacturers holding a deposit from the Company

may go out of business before delivering purchased miners, or for other reasons fail to deliver the miners associated with the deposit.

There is no certainty that, in such circumstances, we would succeed in recovering any of our deposit, which could materially and

adversely affect its business, financial condition, and results of operations.

Our reliance on third-party mining pool service providers for our earned mining reward payouts may have a negative

impact on our operations.

We utilize third party mining pools to receive our earned mining rewards from a given network. Mining pools allow mining

participants to combine their processing power, which increases the chances of solving a block and the pool getting paid by the

network. Contractually determined rewards are distributed by the pool operator, proportionally to our contribution to the pool’s overall

mining power used to generate each block. We are dependent on the accuracy of the mining pool operator’s record keeping to

accurately record our proportion of the total processing power provided to the pool. While we have internal methods of tracking both

our power provided and the total power used by the pool, the mining pool operator uses its own method to determine our proportion of

the pool’s total rewards. We have little means of recourse against the mining pool operator if we determine the proportion of the

reward paid out to us by a mining pool operator is incorrect, other than leaving the pool. If we are unable to consistently obtain

accurate proportionate rewards from our mining pool operators, we may experience reduced reward for our efforts, which would have

an adverse effect on our business and operations.

If there are significant changes to the method of validating blockchain transactions, such changes could reduce demand for

digital assets like bitcoin.

New blockchain consensus protocols are continuously being deployed, and existing and new protocols are in a state of constant

change and development. While certain blockchains currently employ a “proof-of-work” consensus algorithm, whereby transaction

processors called “miners” are required to expend significant amounts of electrical and computing power to solve complex

mathematical problems in order to validate transactions and create new blocks in a blockchain, there may be a shift towards adopting

alternative consensus algorithms. These protocols may include a “proof-of-stake” algorithm or an algorithm based on a protocol other

than proof-of-work, which may decrease the reliance on computing power as an advantage to validating blocks. Our mining operations

are currently designed to primarily support Bitcoin and other protocols employing a proof-of-work consensus algorithm. Should the

Bitcoin consensus protocol shift from a proof-of-work consensus algorithm to a proof-of-stake consensus algorithm, or should new

blockchains employ a proof-of-stake consensus algorithm, mining would require less energy and may render any company that

maintains advantages in the current climate (for example, from lower priced electricity, processing, real estate or hosting) less

competitive.

As a result of our efforts to optimize and improve the efficiency of our digital asset mining operations, we may be exposed to

the risk in the future of losing the benefit of our capital investments and the competitive advantage we hope to gain from this as a

result, and may be negatively impacted if a switch to proof-of-stake validation were to occur. Any such change to transaction

validating protocols could have a material adverse effect on our business, financial condition and results of operations.

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The further development and acceptance of consensus algorithms and other cryptographic and algorithmic protocols are

subject to a variety of factors that are difficult to evaluate. The slowing or stoppage of development or acceptance of blockchain

networks and digital assets would have an adverse material effect on the successful development of the mining operation and value

of earned digital assets.

The use of digital assets to, among other things, buy and sell goods and services, is part of a new and rapidly evolving industry

that employs digital assets based upon a computer-generated mathematical and/or cryptographic protocol. The future of this industry is

subject to a high degree of uncertainty. The factors affecting the further development of this industry include, but are not limited to:

•continued worldwide growth in the adoption and use of digital assets and blockchain technologies;

•government and quasi-government regulation of digital assets and their use, or restrictions on or regulation of access to and

operations of digital asset mining;

•changes in consumer demographics and public tastes and preferences;

•the maintenance and development of the open-source software protocols or similar digital asset systems;

•the availability and popularity of other forms or methods of buying and selling goods and services, or trading assets including

new means of using fiat currencies;

•general economic conditions and the regulatory environment relating to digital assets; and

•negative consumer perception of digital assets, including digital assets specifically and digital assets generally.

A decline in the popularity or acceptance of digital assets could have a material adverse effect on our business, financial

condition and results of operations.

Risks Related to our Limited Operating History

We operate in a rapidly developing industry and have an evolving business model with a limited history of generating

revenue from our services. In addition, our evolving business model increases the complexity of our business, which makes it

difficult to evaluate our future business prospects and could have a material adverse effect on our business, financial condition

and results of operations.

Our business model has evolved in the past and continues to do so. After originally being founded in order to engage in the

business of verifying and confirming transactions on a blockchain (also known as transaction processing, or “mining”), we have begun

the provision of digital infrastructure colocation services to a third party engaged in high performance computing and have announced

plans to convert most of our existing facilities to provide colocation services to other high-density colocation customers. We have

generated limited revenue from providing high-density colocation services, and we do not know whether our change in business model

will be successful. To date, our revenue has primarily come from digital asset mining for our own account and digital asset mining

hosting services. The evolution of and modifications to our business strategy will continue to increase the complexity of our business

and have placed significant strain on our management, personnel, operations, systems, technical performance and financial resources.

Future additions to or modifications of our business strategy are likely to have similar effects. Further, any new services that we offer

that are not favorably received by the market could damage our reputation or our brand. We may not ever generate sufficient revenues

or achieve profitably in the future or have adequate working capital to meet our obligations.

We cannot be certain that our current business strategy or any new or revised business strategies will be successful or that we

will successfully address the risks we face. In the event that we do not effectively evaluate future business prospects, successfully

implement new strategies or adapt to our evolving industry, it will have a material adverse effect on our business, financial condition

and results of operations.

We may not be able to compete effectively against our current and future competitors, which could have a material adverse

effect on our business, financial condition and results of operations.

The businesses in which we currently operate and the high-density colocation business in which we intend to grow are highly

innovative, rapidly evolving and characterized by healthy competition, experimentation, frequent introductions of new products and

services and uncertain and evolving industry and regulatory requirements. We expect competition to further intensify in the future as

existing and new competitors introduce new products or enhance existing products. We compete against a number of companies

operating both within the United States and abroad that have greater financial and other resources at their disposal. If we are unable to

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compete successfully, or if competing successfully requires us to take costly actions in response to the actions of our competitors, our

business, operating results and financial condition could be adversely affected.

We compete with other bitcoin miners and with a range of hosting providers and blockchain providers for some or all of the

services we offer. We face competition from numerous developers, owners and operators in the blockchain industry, including

technology companies, such as hyperscale cloud players, managed service providers and real estate investment trusts (“REITs”), some

of which own or lease properties similar to ours, or may do so in the future, in the same submarkets in which our properties are

located. Cloud offerings may also influence our customers to move workloads to cloud providers, which may reduce the services they

obtain from us. Our current and future competitors may vary from us in size, service offerings and geographic presence.

Competition is primarily centered on reputation and track record; design, size, quality, available power and geographic

coverage of hosting space; quality of installation and customer equipment repair services; relationships with equipment manufacturers

and ability to obtain replacement parts; technical and software expertise; and financial strength and price. Some of our current and

future competitors may have greater brand recognition, longer operating histories, stronger marketing, technical and financial

resources and access to greater and less expensive power than we do. In addition, many companies in the industry are consolidating,

which could further increase the market power of our competitors. Further, we also face significant competition from other users and/

or companies that are processing transactions on one or more digital asset networks, as well as other potential financial vehicles,

including securities, derivatives or futures backed by, or linked to, digital assets through entities similar to us, such as exchange-traded

funds. Market and financial conditions, and other conditions beyond our control, may make it more attractive to invest in other

financial vehicles, or to invest in digital assets directly. Such events could have a material adverse effect on our business, financial

condition and results of operations and potentially the value of any digital assets we hold or expect to acquire for our own account.

We have experienced difficulties in establishing relationships with banks, leasing companies, insurance companies and

other financial institutions to provide us with customary financial products and services, which could have a material adverse

effect on our business, financial condition and results of operations.

As an early stage company with operations focused in the digital asset mining industry, we have in the past experienced, and

may in the future experience, difficulties in establishing relationships with banks, leasing companies, insurance companies and other

financial institutions to provide us with customary leasing and financial products and services, such as bank accounts, lines of credit,

insurance and other related services, which are necessary for our operations. To the extent a significant portion of our business consists

of digital asset transaction mining, processing or hosting, we may in the future continue to experience difficulty obtaining additional

financial products and services on customary terms, which could have a material adverse effect on our business, financial condition

and results of operations.

Risks Related to Regulatory Framework

Our interactions with a blockchain may expose us to specially designated nationals (“SDN”) or blocked persons or cause us

to violate provisions of law that did not contemplate distributed ledger technology.

The Office of Financial Assets Control of the U.S. Department of Treasury (“OFAC”) requires us to comply with its sanction

program and not conduct business with persons named on its SDN list. However, because of the pseudonymous nature of blockchain

transactions, we may inadvertently engage in transactions with persons named on OFAC’s SDN list. Our internal policies prohibit any

transactions with such SDN individuals, but we may not adequately determine the ultimate identity of the individual with whom we

transact with respect to selling digital assets. In addition, in the future, OFAC or another regulator, may require us to screen

transactions for OFAC addresses or other bad actors before including such transactions in a block, which may increase our compliance

costs, decrease our anticipated transaction fees and lead to decreased traffic on our network. Any of these factors, consequently, could

have a material adverse effect on our business, prospects, financial condition, and operating results.

Moreover, federal law prohibits any U.S. person from knowingly or unknowingly possessing any visual depiction commonly

known as child pornography. Recent media reports have suggested that persons have imbedded such depictions on one or more

blockchains. Because our business requires us to download and retain one or more blockchains to effectuate our ongoing business, it is

possible that such digital ledgers contain prohibited depictions without our knowledge or consent. To the extent government

enforcement authorities literally enforce these and other laws and regulations that are impacted by decentralized distributed ledger

technology, we may be subject to investigation, administrative or court proceedings, and civil or criminal monetary fines and

penalties, all of which could harm our reputation and could have a material adverse effect on our business, prospects, financial

condition, and operating results.

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If regulatory changes or interpretations of our activities require our registration as a money services business (“MSB”)

under the regulations promulgated by the Financial Crimes Enforcement Network (“FinCEN”) under the authority of the U.S.

Bank Secrecy Act, or otherwise under state laws, we may incur significant compliance costs, which could be substantial or cost-

prohibitive. If we become subject to these regulations, our costs in complying with them may have a material negative effect on our

business and the results of our operations.

To the extent that our activities cause us to be deemed an MSB under the regulations promulgated by FinCEN under the

authority of the U.S. Bank Secrecy Act, we may be required to comply with FinCEN regulations, including those that would mandate

us to implement anti-money laundering programs, make certain reports to FinCEN and maintain certain records.

To the extent that our activities would cause us to be deemed a “money transmitter” (“MT”) or equivalent designation, under

state law in any state in which we may operate, we may be required to seek a license or otherwise register with a state regulator and

comply with state regulations that may include the implementation of anti-money laundering programs, maintenance of certain records

and other operational requirements. For example, in August 2015, the New York State Department of Financial Services enacted the

first U.S. regulatory framework for licensing participants in “virtual currency business activity.” The regulations, known as the

“BitLicense,” are intended to focus on consumer protection and regulate the conduct of businesses that are involved in “virtual

currencies” in New York or with New York customers and prohibit any person or entity involved in such activity to conduct activities

without a license.

Such additional federal or state regulatory obligations may cause us to incur extraordinary expenses. Furthermore, we may not

be capable of complying with certain federal or state regulatory obligations applicable to MSBs and MTs. If we are deemed to be

subject to and determine not to comply with such additional regulatory and registration requirements, we may act to dissolve and

liquidate.

If we were deemed an “investment company” under the Investment Company Act of 1940, as amended (the “1940 Act”),

applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse

effect on our business.

An issuer will generally be deemed to be an “investment company” for purposes of the 1940 Act if:

•it is an “orthodox” investment company because it is or holds itself out as being engaged primarily, or proposes to engage

primarily, in the business of investing, reinvesting or trading in securities; or

•it is an inadvertent investment company because, absent an applicable exemption, it owns or proposes to acquire “investment

securities” having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash

items) on an unconsolidated basis.

We believe that we are not and will not be primarily engaged in the business of investing, reinvesting or trading in securities,

and we do not hold ourselves out as being engaged in those activities. We intend to hold ourselves out as a digital asset mining

business. Accordingly, we do not believe that we are an “orthodox” investment company as described in the first bullet point above.

While certain digital assets may be deemed to be securities, we do not believe that certain other digital assets, in particular

bitcoin, are securities; therefore, we believe that less than 40% of our total assets (exclusive of U.S. government securities and cash

items) on an unconsolidated basis will comprise digital assets that could be considered investment securities. Accordingly, we do not

believe that we are an inadvertent investment company by virtue of the 40% inadvertent investment company test as described in the

second bullet point above. Although we do not believe any of the digital assets we may own, acquire, earn or mine are securities, there

is still some regulatory uncertainty on the subject, see “-There is no one unifying principle governing the regulatory status of digital

assets nor whether digital assets are securities in any particular context. Regulatory changes or actions in one or more countries may

alter the nature of an investment in us or restrict the use of digital assets in a manner that adversely affects our business, prospects or

operations.” If certain digital assets, including bitcoin, were to be deemed securities, and consequently, investment securities by the

SEC, we could be deemed an inadvertent investment company. Similarly, if we were to acquire digital assets deemed investment

securities to hold for our own account or to engage in certain transactions, such as loan or repurchase transactions, we could be

deemed an inadvertent investment company.

If we were to be deemed an inadvertent investment company, we may seek to rely on Rule 3a-2 under the 1940 Act, which

allows an inadvertent investment company a grace period of one year from the earlier of (a) the date on which the issuer owns

securities and/or cash having a value exceeding 50% of the issuer’s total assets on either a consolidated or unconsolidated basis or (b)

the date on which the issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such

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issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We are putting in place

policies that we expect will work to keep the investment securities held by us at less than 40% of our total assets, which may include

acquiring assets with our cash, liquidating our investment securities or seeking no-action relief or exemptive relief from the SEC if we

are unable to acquire sufficient assets or liquidate sufficient investment securities in a timely manner. As Rule 3a-2 is available to an

issuer no more than once every three years, and assuming no other exclusion were available to us, we would have to keep within the

40% limit for at least three years after we cease being an inadvertent investment company. This may limit our ability to make certain

investments or enter into joint ventures that could otherwise have a positive impact on our earnings. In any event, we do not intend to

become an investment company engaged in the business of investing and trading securities.

Finally, we believe we are not an investment company under Section 3(b)(1) of the 1940 Act because we are primarily engaged

in a non-investment company business.

The 1940 Act and the rules thereunder contain detailed parameters for the organization and operations of investment

companies. Among other things, the 1940 Act and the rules thereunder limit or prohibit transactions with affiliates, impose limitations

on the issuance of debt and equity securities, prohibit the issuance of stock options, and impose certain governance requirements. We

intend to continue to conduct our operations so that we will not be deemed to be an investment company under the 1940 Act.

However, if anything were to happen that would cause us to be deemed to be an investment company under the 1940 Act,

requirements imposed by the 1940 Act, including limitations on our capital structure, ability to transact business with affiliates and

ability to compensate key employees, could make it impractical for us to continue our business as currently conducted, impair the

agreements and arrangements between and among us and our senior management team and materially and adversely affect our

business, financial condition and results of operations.

Any change in the interpretive positions of the SEC or its staff with respect to digital asset mining firms could have a

material adverse effect on us.

We intend to conduct our operations so that we are not required to register as an investment company under the 1940 Act.

Specifically, we do not believe that bitcoin, are securities. The SEC Staff has not provided guidance with respect to the treatment of

these assets under the 1940 Act. To the extent the SEC Staff publishes new guidance with respect to these matters, we may be required

to adjust our strategy or assets accordingly. We may not be able to maintain our exclusion from registration as an investment company

under the 1940 Act. In addition, as a consequence of our seeking to avoid the need to register under the 1940 Act on an ongoing basis,

we may be limited in our ability to engage in digital asset mining operations or otherwise make certain investments or engage in

certain transactions, and these limitations could result in our holding assets we may wish to sell or selling assets we may wish to hold,

which could materially and adversely affect our business, financial condition and results of operations.

U.S. federal and state laws and regulations of digital assets and digital asset intermediaries, such as digital asset exchanges

and custodians, may increase our compliance costs and adversely impact the market for digital assets.

Federal and state legislatures and regulatory agencies have already enacted and are expected to continue to introduce and enact

new laws and regulations to regulate digital asset issuers and intermediaries, such as digital asset exchanges and custodians. For

example, in July 2025, the Guiding and Establishing National Innovation for U.S. Stablecoins Act (“GENIUS Act”) was signed into

law, creating the first comprehensive regulatory framework for payment stablecoins.  The U.S. House of Representatives and the U.S.

Congress have also passed separate bills covering potential market structure legislation that would regulate digital asset issuers and

intermediaries, which are currently under consideration (the “Proposed Market Structure Legislation”). In addition, the Federal

Reserve Board and certain U.S. agencies (including the SEC, the U.S. Commodity Futures Trading Commission (the “CFTC”),

FinCEN, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Federal Bureau of

Investigation), among other regulators, as well as the White House, have issued reports and releases concerning digital assets,

including bitcoin and digital asset markets. For example, in January 2025, the Acting SEC Chairman announced the launch of a crypto

task force dedicated to developing a comprehensive and clear regulatory framework for crypto assets, in contrast to the SEC’s prior

reliance on enforcement actions to regulate cryptocurrencies. The announcement of the SEC crypto task force was followed by a string

of SEC staff guidance covering memecoins, stablecoins, staking and other crypto products, as well as a series of no action letters

issued to crypto industry participants.  More recently, SEC Chairman Paul Atkins gave a speech detailing the SEC’s “Project Crypto,”

including the potential of further exemptive relief.

However, the extent and content of any forthcoming laws and regulations are not yet ascertainable with certainty, and they may

not be ascertainable in the near future. It is possible that new laws and increased regulation and regulatory scrutiny may require the

Company to comply with certain regulatory regimes, which could result in new costs for the Company. In addition, new laws,

regulations, and regulatory actions could significantly restrict or eliminate the market for, or uses of, digital assets including bitcoin,

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which could have a negative effect on the value of bitcoin, which in turn would have a negative effect on the value of the Company’s

securities.

Uncertain and evolving regulation of digital assets—including the absence of a single unifying standard for determining

whether a digital asset is a “security”—could require significant changes to our business, subject us to enforcement or litigation,

restrict the use of digital assets, and adversely affect our business, financial condition, results of operations, and the market price

of our securities.

Digital assets exist within a fragmented and rapidly evolving global regulatory landscape. There is no single, uniform legal

principle that governs the regulatory status of digital assets across jurisdictions or even within a single jurisdiction, and the question of

whether, when, and under what facts a particular digital asset or activity constitutes a “security,” “commodity,” “money” or “property”

remains unsettled and highly fact-specific. U.S. federal and state regulators, foreign regulators, courts, and standards-setting bodies

have taken differing, and at times conflicting, positions on the characterization and regulation of digital assets and related activities.

For example, authorities have treated digital assets, depending on context, as securities, commodities, money or money equivalents,

property, or as a distinct class of digital financial assets subject to bespoke regimes. Some countries have imposed broad restrictions or

prohibitions on certain digital asset activities, while others have adopted comprehensive licensing frameworks specific to crypto asset

service providers. This patchwork of approaches results in overlapping, unclear, and changing obligations that can be difficult to

interpret and apply.

Within the United States, multiple regulatory regimes can apply to digital assets and related activities, including federal and

state securities laws, commodities and derivatives laws, money transmission and payments laws, banking and trust company laws,

consumer protection rules, anti-money laundering and sanctions requirements, and data and cybersecurity laws. U.S. federal regulators

and courts have reached differing conclusions regarding whether particular digital assets or transactions constitute securities or

commodities, and the scope of jurisdiction and applicable obligations may turn on nuanced and evolving interpretations. If a digital

asset that we hold, receive, or otherwise interact with were determined to be a security under U.S. federal or state law, the offer, sale,

custody, or secondary trading of that asset could become subject to extensive registration, disclosure, and conduct requirements, and

platforms or intermediaries facilitating related activity could be required to register under securities laws. Conversely, if a digital asset

or transaction is treated as a commodity or “retail commodity transaction,” additional regulation and oversight by commodities

regulators may apply. These determinations may occur through legislation, rulemaking, judicial decisions, or enforcement actions and

may be applied inconsistently across jurisdictions and over time.

As a result of this regulatory uncertainty, we face risks that include, among others, the need to modify, limit, or discontinue

certain activities; to obtain new licenses or registrations or comply with new standards and to enhance or redesign compliance,

surveillance, and reporting systems. New or revised rules—domestically or abroad—could, for example, require changes to how we

recognize, record, safeguard, transfer, or value digital assets; impose capital, reserve, segregation, or custody requirements; mandate

additional transaction monitoring, travel rule compliance, or sanctions screening; or alter permissible marketing, disclosures, and

consumer protections. Any of these developments could increase our costs, reduce operational flexibility, limit access to

counterparties or financial services, delay product development or market entry, or result in loss of revenue and market share.

Enforcement and supervisory activity add further uncertainty. U.S. and foreign authorities have pursued investigations and

actions alleging that certain digital assets are securities or otherwise subject to financial regulatory frameworks, that certain market

participants operated without required registrations or licenses, or that compliance programs were inadequate. Interpretive positions

can change, sometimes without clear transition periods or safe harbors, and adverse outcomes in litigation or enforcement against

industry participants could prompt us to reassess the regulatory status of digital assets with similar characteristics or to change our

business practices.

Legislative initiatives are also in flux. In the United States, Congress and state legislatures have considered proposals that could

redefine the allocation of jurisdiction between market regulators, create new registration categories for digital asset intermediaries, or

impose bespoke disclosure, market integrity, and customer protection requirements. Internationally, jurisdictions have adopted or are

implementing comprehensive regulatory frameworks for crypto asset service providers that may impose scope, licensing, prudential,

conduct, market abuse, and disclosure obligations different from or stricter than U.S. requirements. Divergent implementation

timelines and standards across countries can create conflicts of law, duplicative compliance burdens, and uncertainty regarding cross

border operations.

Tax and financial reporting requirements are likewise evolving. U.S. and foreign tax authorities continue to expand information

reporting and withholding regimes applicable to digital asset transactions and intermediaries. These requirements may be complex and

costly to implement, and failure to comply could result in penalties, enforcement actions, or customer attrition. Changes in tax,

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accounting, or financial reporting standards or interpretations applicable to digital assets may also require us to modify policies,

systems, disclosures, and controls, which could affect reported results and comparability.

We cannot predict the timing, scope, direction, or impact of regulatory or legislative changes, supervisory priorities,

enforcement approaches, judicial decisions, or tax and reporting rules relating to digital assets. Any new law, rule, guidance,

interpretation, administrative action, or court decision—domestically or abroad—could result in heightened compliance obligations,

licensing or registration requirements, restrictions on our operations or on the use, transferability, or liquidity of digital assets,

increased costs, loss of customers or business partners, reputational harm, and exposure to civil, criminal, or administrative penalties.

Any of these outcomes could materially and adversely affect our business, prospects, financial condition, results of operations, and the

market price of our securities.

Increasing scrutiny and changing expectations from government regulators, investors, lenders, customers, and other market

participants with respect to our Environmental, Social and Governance (“ESG”) policies may impose additional costs on us or

expose us to additional risks.

Companies across all industries and around the globe are facing increasing scrutiny relating to their ESG policies and

disclosures. Regulators, investors, lenders, customers and other market participants are increasingly focused on ESG practices and in

recent years have placed increasing importance on the implications and social cost of investments. The increased focus and activism

related to ESG may hinder our access to capital, as investors and lenders may reconsider their capital investment allocation as a result

of their assessment of our ESG practices. If our ESG practices do not meet evolving regulator, investor, lender, customer or other

industry stakeholder expectations and standards or if we do not adapt to or comply with regulator, investor, lender, customer or other

industry shareholder expectations and standards, our reputation, ability to attract and/or retain employees, financial condition and/or

share price could be negatively impacted. We may also incur additional costs if we do not adapt to or comply with stakeholder

expectations about our electricity usage and other ESG concerns. Our failure or perceived failure to adapt to or comply with existing

and potential government regulations, which are evolving but may relate to the suitable deployment of electric power, or which are

perceived to have not responded appropriately to the growing concern for ESG issues, our reputation would suffer which would have

similar negative impacts that could result in a material adverse effect on our business, financial condition and results of operations.

We may be subject to risks associated with misleading and/or fraudulent disclosure or use by the creators of digital assets.

Generally, we rely primarily on a combination of white papers and other disclosure documents prepared by the creators of

applicable digital assets, as well as on our management’s ability to obtain adequate information to evaluate the potential implications

of transacting in these digital assets. However, such white papers and other disclosure documents and information may contain

misleading and/or fraudulent statements (which may include statements concerning the creators’ ability to deliver in a timely fashion

the product and/or service disclosed in their white papers and other disclosure documents) and/or may not reveal any unlawful

activities by the creators. Recently, there has been an increasing number of investigations and lawsuits by the SEC and the CFTC

involving digital asset creators for fraud and misappropriation, among other charges. Additionally, FinCEN has increased its

enforcement efforts involving digital asset creators regarding compliance with anti-money laundering and Know-Your-Customer laws.

To the extent that any of these creators make misleading and/or fraudulent disclosures or do not comply with federal, state or

foreign laws, or if we are unable to uncover all material information about these digital assets and/or their creators, we may not be able

to make a fully informed business decision relating to our transacting in or otherwise involving such digital assets, which could have a

material adverse effect on our business, financial condition and results of operations.

Our compliance and risk management methods might not be effective and may result in outcomes that could adversely affect

our reputation, operating results, and financial condition.

Our ability to comply with applicable complex and evolving laws, regulations, and rules is largely dependent on the

establishment and maintenance of our compliance, audit, and reporting systems, as well as our ability to attract and retain qualified

compliance and other risk management personnel. While we plan to devote significant resources to develop policies and procedures to

identify, monitor and manage our risks, we cannot assure you that our policies and procedures will always be effective against all

types of risks, including unidentified or unanticipated risks, or that we will always be successful in monitoring or evaluating the risks

to which we are or may be exposed in all market environments.

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Changes in accounting standards and interpretations for crypto assets could materially affect our financial statements,

results of operations, and the carrying value of our digital asset holdings, and could adversely impact our business and the market

price of our securities.

The accounting rules governing crypto assets continue to evolve and are subject to further change and interpretation by standard

setters and regulators, including the Financial Accounting Standards Board (FASB) and the SEC.  Recent changes in accounting

standards have already resulted in significant changes to how entities measure, present, and disclose crypto assets, including the

requirement to subsequently measure certain crypto assets at fair value with changes recognized in net income each reporting period

and to separately present those assets and related gains and losses in the financial statements.  Additional amendments, interpretive

guidance, transition requirements, or clarifications could require us to change our accounting, revise our disclosures, and adjust prior

period presentations, as well as increase the volatility of our reported results. Any such changes could require substantial time and

resources to implement, and there can be no assurance that our future financial statements will be comparable to those in prior periods.

We cannot predict the timing or content of future changes to accounting standards or interpretations for crypto assets, nor can

we assure investors that we will not be required to make further changes to our accounting policies, reclassify prior‑period amounts, or

restate our financial statements. Any such actions could result in a loss of investor confidence in our reported results and could

materially and adversely affect our business and financial condition.

Risks Related to our Indebtedness and Liquidity

We may incur additional indebtedness to execute our long-term growth strategy, which may reduce our profitability.

Our business requires significant capital, and we may require additional capital in the future to execute our growth strategy. For

the years ended December 31, 2025 and 2024, we incurred approximately 729.0 million and $95.0 million in capital expenditures,

respectively. Historically, we have financed these investments through cash flows from operation and external borrowings. These

sources of capital may not be available to us in the future. Our ability to arrange new financing, either at the corporate level, a non-

recourse project-level subsidiary or otherwise, and the costs of such capital, are dependent on numerous factors, including credit

availability from banks and other financial institutions, investor confidence in us and the regional markets in which we operate,

maintenance of acceptable credit ratings or our financial performance and level of indebtedness. Other companies with which we

compete may have greater liquidity, more unencumbered assets, less indebtedness, greater access to credit and other financial

resources, lower cost structures, more effective risk management policies and procedures, greater ability to incur losses, longer-

standing relationships with customers, or greater flexibility in the timing of their sale of generation capacity and ancillary services than

we do. If we are unable to fund capital expenditures for any reason, we may not be able to capture available growth opportunities and

any such failure could have a material adverse effect on our results of operations and financial condition.

Our indebtedness and liabilities could limit the cash flow available for our operations, expose us to risks that could adversely

affect our business, financial condition and results of operations and impair our ability to satisfy our obligations under the notes.

As of December 31, 2025, we had approximately $1.09 billion aggregate principal amount of indebtedness for borrowed

money. We may also incur additional indebtedness to meet future financing needs. Our indebtedness could have significant negative

consequences for our security holders and our business, results of operations and financial condition by, among other things:

•increasing our vulnerability to adverse economic and industry conditions;

•limiting our ability to obtain additional financing;

•requiring the dedication of a substantial portion of our cash flow from operations to service our indebtedness, which will

reduce the amount of cash available for other purposes;

•limiting our flexibility to plan for, or react to, changes in our business;

•diluting the interests of our existing stockholders as a result of issuing shares of our common stock upon conversion of the

notes; and

•placing us at a possible competitive disadvantage with competitors that are less leveraged than us or have better access to

capital.

Our business may not generate sufficient funds, and we may otherwise be unable to maintain sufficient cash reserves, to pay

amounts due under our indebtedness, including the notes, and our cash needs may increase in the future. In addition, any future

indebtedness that we may incur may contain financial and other restrictive covenants that limit our ability to operate our business,

raise capital or make payments under our other indebtedness. If we fail to comply with these covenants or to make payments under our

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indebtedness when due, then we would be in default under that indebtedness, which could, in turn, result in that and our other

indebtedness becoming immediately payable in full.

We may be unable to raise the funds necessary to repurchase the 2029 Convertible Notes or the 2031 Convertible Notes for

cash following a fundamental change, the optional repurchase date, or during the free convertibility period, as applicable, or to

pay any cash amounts due upon conversion of 2029 Convertible Notes or the 2031 Convertible Notes, and our other indebtedness

may limit our ability to repurchase 2029 Convertible Notes or the 2031 Convertible Notes or pay cash upon their conversion.

Holders of the $460.0 million aggregate principal amount of our 3.00% Convertible Senior Notes due 2029 (the “2029

Convertible Notes”), subject to a limited exception, may require us to repurchase their notes for cash following certain corporate

events that constitute a “fundamental change” equal to the principal amount of the notes to be repurchased, plus accrued and unpaid

interest, if any, to, but excluding, the fundamental change repurchase date. From and after June 1, 2029, noteholders may convert their

notes at any time at their election until the close of business on the scheduled trading day immediately before September 1, 2029. The

Company will settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and

shares of its common stock, at its election.

Further, holders of the $625.0 million aggregate principal amount of our 0.00% convertible senior notes due 2031 (the “2031

Convertible Notes”), subject to a limited exception, may require us to repurchase their notes on December 15, 2027 or following

certain corporate events that constitute a “fundamental change” at a cash repurchase price equal to the principal amount of the notes to

be repurchased, plus accrued and unpaid special interest and additional interest, if any, to, but excluding, the optional repurchase date

or the fundamental change repurchase date, as applicable. From and after March 17, 2031, noteholders may convert their notes at any

time at their election until the close of business on the scheduled trading day immediately before June 15, 2031. The Company will

settle conversions by paying or delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its

common stock, at its election.

Both the 2029 Convertible Notes and 2031 Convertible Notes might also be converted by noteholders based on certain

triggering events based on the trading price of the Company’s common stock or the note, as applicable.

We may not have enough available cash or be able to obtain financing at the time we are required to repurchase the 2029

Convertible Notes or 2031 Convertible Notes or pay any cash amounts due upon conversion of the 2029 Convertible Notes or 2031

Convertible Notes. In addition, applicable law, regulatory authorities and the agreements governing our other indebtedness may

restrict our ability to repurchase the 2029 Convertible Notes or 2031 Convertible Notes or pay any cash amounts due upon conversion.

Our failure to repurchase the 2029 Convertible Notes or 2031 Convertible Notes or pay any cash amounts due upon conversion when

required under the indenture governing the 2029 Convertible Notes or the indenture governing the 2031 Convertible Notes, as

applicable, will constitute a default under the applicable indenture. A default under either indenture or the fundamental change itself

could also lead to a default under agreements governing our other indebtedness, which may result in that other indebtedness becoming

immediately payable in full. We may not have sufficient funds to satisfy all amounts due under the other indebtedness, the 2029

Convertible Notes or the 2031 Convertible Notes.

Provisions in our indentures could delay or prevent an otherwise beneficial takeover of us.

Certain provisions in the 2029 Convertible Notes or 2031 Convertible Notes, or any future notes, and the indentures governing

these notes could make a third-party attempt to acquire us more difficult or expensive. For example, if a takeover constitutes a

fundamental change, then, except as described in this offering memorandum, noteholders will have the right to require us to

repurchase their notes for cash. In addition, if a takeover constitutes a make-whole fundamental change, then we may be required to

temporarily increase the conversion rate. In either case, and in other cases, our obligations under the 2029 Convertible Notes or 2031

Convertible Notes, or any future notes, and the indentures governing these notes could increase the cost of acquiring us or otherwise

discourage a third party from acquiring us or removing incumbent management, including in a transaction that noteholders or holders

of our common stock may view as favorable.

The conditional conversion feature of the notes, if triggered, may adversely affect our financial condition and results of

operations.

In the event the conditional conversion feature of the 2029 Convertible Notes or 2031 Convertible Notes is triggered,

noteholders will be entitled to convert the notes at any time during specified periods at their option. If one or more noteholders elect to

convert their notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than

paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation

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through the payment of cash, which could adversely affect our liquidity. In addition, even if noteholders do not elect to convert their

notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the notes as a

current rather than long-term liability, which would result in a material reduction of our net working capital.

Risks Related to Taxes

Our ability to use some or all of our net operating loss and capital loss carryforwards and other tax attributes to offset future

income may be limited.

As of December 31, 2025, we had U.S. federal and state net operating loss (“NOL”) carryforwards of approximately

$727.8 million and $184.2 million, respectively, U.S. federal and state capital loss carryforwards of approximately $220.7 million and

$47.8 million, respectively, and certain other tax attributes, including disallowed business interest expense carryforwards under

Section 163(j) of the Internal Revenue Code of 1986 (the “Internal Revenue Code”), that could be utilized to offset future taxable

income. The amount of our tax attributes are subject to examination and adjustment by applicable taxing authorities. Our federal

NOLs can be carried forward indefinitely, our state NOL carryforwards begin to expire in 2033 and our capital loss carryforwards

begin to expire in 2027.

Under Sections 382 and 383 of the Internal Revenue Code, if a corporation (or a consolidated group) undergoes an “ownership

change,” its ability to utilize certain of its federal tax attributes (including NOL and capital loss carryforwards) to offset certain of its

taxable income may be subject to certain limitations. In general, an ownership change occurs if the aggregate stock ownership of

certain shareholders (generally 5% shareholders, applying certain look-through and aggregation rules) increases by more than 50%

over such shareholders’ lowest percentage ownership during the testing period (generally three years). Similar rules may apply under

applicable state tax law.

Certain equity trading activity and other actions prior to the Effective Date of the Plan of Reorganization could have resulted in

an ownership change for purposes of Sections 382 and 383 of the Internal Revenue Code independent of the Plan of Reorganization,

which could adversely affect our ability to utilize our tax attributes to a greater extent than an ownership change occurring as a result

of the consummation of the Plan of Reorganization. In an attempt to minimize the likelihood of such an ownership change occurring,

we obtained a final order from the Bankruptcy Court authorizing certain protective equity trading procedures.

Based upon the evaluation of ownership changes occurring upon the Company’s emergence from bankruptcy on January 23,

2024, an ownership change likely occurred, which may limit our ability to utilize our federal NOL and capital loss carryforwards and

certain other tax attributes.

Limitations imposed by the Internal Revenue Code (or applicable state tax law) on our ability to utilize our NOL or capital loss

carryforwards or other tax attributes (whether by reason of an ownership change or otherwise) could significantly increase our future

tax liabilities, in each case reducing or eliminating the benefit of such tax attributes, which may impair the value of an investment in

our securities.

The IRS and certain states have taken the position that digital assets are “property” for income tax purposes.

In early 2014, the IRS issued basic guidance on the tax treatment of digital assets. The IRS has taken the position that a digital

asset is “property” instead of “currency” for income tax purposes. As such, general tax principles applicable to property transactions

apply to the acquisition, ownership, use, and disposition of digital assets. This overall treatment creates a potential tax liability for, and

potential tax reporting requirements applicable to, us in any circumstance where we earn or otherwise acquire, mine, own, use, or

dispose of a digital asset. In 2019, the IRS issued additional guidance specifically relating to the income tax consequences that could

arise from a digital asset hard fork event in which a new unit of digital asset may or may not be received, and released frequently

asked questions to address certain digital asset topics such as tax basis, gain, or loss on the sale or exchange of certain kinds of digital

assets and how to determine the fair market value of such digital assets.

There is no guarantee that the IRS will not alter its position with respect to the taxation of digital assets, or that legislation or

judicial determinations in the future will not result in a tax treatment of digital assets and transactions in digital assets for tax purposes

that differs from the treatment described above. You are urged to consult your own tax advisor as to the tax implications of our

acquisition, ownership, use, and disposition of digital assets. The taxation of digital assets for state, local, or non-U.S. tax purposes

may not be the same as the taxation of digital assets for U.S. federal income tax purposes.

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In addition, under the Tax Cuts and Jobs Act of 2017, as of January 1, 2018, “like-kind exchange” treatment does not apply to

digital assets. This means that gain from the sale or exchange of digital assets cannot be deferred by undertaking an exchange of one

type of virtual currency for another.

Certain states, including New York and New Jersey, generally follow IRS guidance with respect to the treatment of digital

assets for state income tax purposes, but it is unclear if other states will do so. Transactions involving digital assets for other goods and

services may also be subject to sales and use or similar taxes under barter transaction treatment or otherwise. The treatment of digital

assets for state income tax and sales tax purposes may have negative consequences, including the imposition of a greater tax burden on

investors in digital assets or a higher cost with respect to the acquisition, ownership, use, and disposition of digital assets generally. In

either case, this could have a negative effect on prices in the relevant digital asset exchange market and could have a material adverse

effect on our business, financial condition and results of operations.

Non-U.S. jurisdictions may also elect to treat digital assets in a manner that results in adverse tax consequences. To the extent a

non-U.S. jurisdiction with a significant share of the market of digital asset owners or users imposes onerous tax burdens on such

owners or users, or imposes sales, use, or value added tax on acquisitions and dispositions of digital assets for fiat currency, such

actions could result in decreased demand for digital assets in such jurisdiction, which could impact the price of digital assets and have

a material adverse effect on our business, financial condition and results of operations.

Changes to, or changes to interpretations of, the U.S. federal, state, local or other jurisdictional tax laws could have a

material adverse effect on our business, financial condition and results of operations.

All statements contained herein concerning U.S. federal income tax (or other tax) consequences are based on existing law and

interpretations thereof. The tax regimes to which we are subject or under which we operate, including income and non-income taxes,

are unsettled and may be subject to significant change. While some of these changes could be beneficial, others could negatively affect

our after-tax returns. In the future, the currently anticipated tax treatment may be modified by legislative, judicial or administrative

changes, possibly with retroactive effect. In addition, a tax authority or court may not agree with any particular interpretation of the

relevant laws.

State, local or other jurisdictions could impose, levy or otherwise enforce tax laws against us. Tax laws and regulations at the

state and local levels frequently change, especially in relation to the interpretation of existing tax laws for new and emerging

industries, and we cannot always reasonably predict the impact from, or the ultimate cost of compliance with, current or future taxes,

which could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Ownership of Our Securities

An investment in our securities is highly speculative. The trading price of our securities may be volatile, and you could lose

all or part of your investment.

The trading price of our securities is likely to be volatile and could be subject to fluctuations in response to various factors,

some of which are beyond our control. These fluctuations could cause you to lose all or part of your investment in our securities as

you might be unable to sell your shares at or above the price you paid for those shares. Factors that could cause fluctuations in the

trading price of our securities include the following:

•price and volume fluctuations in the overall stock market from time to time;

•volatility in the trading prices and trading volumes of technology stocks;

•volatility in the price of bitcoin and other digital assets;

•changes in operating performance and stock market valuations of other technology companies generally, or those in our

industry in particular;

•sales of shares of our securities by us or our stockholders;

•failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our

company, or our failure to meet these estimates or the expectations of investors;

•the financial projections we may provide to the public, any changes in those projections, or our failure to meet those

projections;

•announcements by us or our competitors of new products, features, or services;

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•the public’s reaction to our press releases, other public announcements and filings with the SEC;

•rumors and market speculation involving us or other companies in our industry;

•actual or anticipated changes in our results of operations or fluctuations in our results of operations;

•actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally;

•litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors;

•developments or disputes concerning our intellectual property or other proprietary rights;

•announced or completed acquisitions of businesses, products, services or technologies by us or our competitors;

•new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

•changes in accounting standards, policies, guidelines, interpretations or principles;

•any significant change in our management; and

•general economic conditions and slow or negative growth of our markets.

In addition, in the past, following periods of volatility in the overall market and in the market price of a particular company’s

securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us,

could result in substantial costs and a diversion of our management’s attention and resources.

Future sales and issuances of our capital stock or rights to purchase capital stock could result in additional dilution of the

percentage ownership of our stockholders and could cause our stock price to decline.

We may issue additional securities from time to time, including shares of common stock as a result of the exercise or vesting, as

applicable, of options or restricted stock units (“RSUs”). In addition, we may choose to issue shares of common stock pursuant to the

CVRs. Future sales and issuances of our capital stock or rights to purchase our capital stock could result in substantial dilution to our

existing stockholders. We may issue and sell common stock, convertible securities, warrants and other equity securities in one or more

transactions at prices and in a manner as we may determine from time to time. If we sell any such securities in subsequent

transactions, investors may be materially diluted. New investors in such subsequent transactions could gain rights, preferences and

privileges senior to those of holders of our common stock.

The market price and trading volume of our securities could decline if securities or industry analysts do not publish research

or publish inaccurate or unfavorable research about our business.

The trading market for our securities will depend in part on the research and reports that securities or industry analysts publish

about us or our business. The analysts’ estimates are based upon their own opinions and are often different from our estimates or

expectations. If one or more of the analysts who cover us downgrade our securities or publish inaccurate or unfavorable research about

our business, the price of our securities would likely decline. If few securities analysts commence coverage of us, or if one or more of

these analysts cease coverage of us or fail to publish reports on us regularly, demand for our securities could decrease, which might

cause the price and trading volume of our securities to decline.

We do not intend to pay dividends for the foreseeable future.

We have never declared nor paid cash dividends on our capital stock. We currently intend to retain any future earnings to

finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future.

As a result, stockholders must rely on sales of their securities after price appreciation as the only way to realize any future gains on

their investment.

Risks Related to our Restructuring

Our actual financial results after emergence from bankruptcy may not be comparable to our projections filed with the

Bankruptcy Court or otherwise made public in the course of the Chapter 11 Cases.

In connection with the Disclosure Statement and Plan of Reorganization that we filed with the Bankruptcy Court and the

hearing to consider confirmation of our Plan of Reorganization (as well as in certain other filings), we prepared projected financial

information for various reasons, including to demonstrate to the Bankruptcy Court the feasibility of the Plan of Reorganization and our

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ability to continue operations upon our emergence from Chapter 11. Those projections were prepared solely for the purposes stated

therein and have not been, and will not be, updated on an ongoing basis and should not be relied upon by investors. At the time they

were prepared, the projections reflected numerous assumptions concerning our anticipated future performance with respect to then

prevailing and anticipated market and economic conditions that were and remain beyond our control and that may not materialize.

Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant business, economic

and competitive risks and the assumptions underlying the projections or valuation estimates may prove to be wrong in material

respects. Actual results may vary significantly from those contemplated by the projections. As a result, investors should not rely on

those projections.

The ability to attract and retain key personnel is critical to the success of our business and may be affected by our emergence

from bankruptcy.

The success of our business depends on key personnel. The ability to attract and retain these key personnel may be affected by

our emergence from bankruptcy, the uncertainties currently facing the business and changes we may make to the organizational

structure to adjust to changing circumstances. Any potential delays in adopting our management incentive plan and other executive

benefits and compensation may make it difficult to retain key personnel and we may need to enter into retention or other arrangements

that could be costly to maintain. If executives, managers or other key personnel resign, retire or are terminated, or their service is

otherwise interrupted, we may not be able to replace them in a timely manner and we could experience significant declines in

productivity.

Risks Related to the Price of Bitcoin

Digital assets, and bitcoin in particular, are subject to price volatility. The value of bitcoin is dependent on a number of

factors, any of which could have a material adverse effect on our business, financial condition and results of operations.

Beginning in the fourth quarter of 2025, digital asset prices experienced a significant drop, with bitcoin prices falling over 30%

from its highs and certain other digital assets experiencing larger price declines. These price declines and volatility may lead to

disruptions in the digital asset markets and financial difficulties for industry participants, including digital asset trading platforms,

hedge funds and lending platforms. We currently generate almost all of our revenue from bitcoin rewards that we earn through self-

mining in our facilities. Investing in bitcoin and other digital assets is speculative. Bitcoin and other digital assets have historically

experienced significant intraday and long-term price volatility, significantly impacted by momentum pricing. Momentum pricing

typically is associated with growth stocks and other assets whose valuation, as determined by the investing public, accounts for

anticipated future appreciation in value. We believe that momentum pricing may have resulted, and may continue to result, in

significant and rampant speculation regarding future appreciation (or depreciation) in the value of digital assets, inflating and making

their market prices more volatile. In addition, there is currently growing but limited acceptance of digital assets in the retail and

commercial marketplace, as compared to the demand generated by investors seeking a long-term value retention or by speculators

seeking to profit from the short- or long-term holding of such digital assets, which may contribute to their levels of price volatility.

We believe the value of digital assets related to our business is dependent on a number of factors, including, but not limited to:

•global digital asset supply;

•global digital asset demand, which can be influenced by the growth of retail merchants’ and commercial businesses’

acceptance of digital assets as payment for goods and services, the security of online digital asset exchanges and digital

wallets that hold digital assets, the perception that the use and holding of digital assets is safe and secure, transaction fees, and

the regulatory restrictions on their use;

•investors’ expectations with respect to the rate of inflation of fiat currencies;

•investors’ expectations with respect to the rate of deflation of digital assets;

•cyber theft of digital assets from online wallet providers, or news of such theft from such providers or from individuals’

online wallets;

•the availability and popularity of businesses that provide digital asset-related services;

•fees associated with processing a digital asset transaction;

•changes in the software, software requirements or hardware requirements underlying digital assets;

•changes in the rights, obligations, incentives, or rewards for the various participants in digital asset mining;

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•interest rates;

•currency exchange rates, including the rates at which digital assets may be exchanged for fiat currencies;

•fiat currency withdrawal and deposit policies on digital asset exchanges and liquidity on such exchanges;

•interruptions in service or failures of major digital asset exchanges;

•investment and trading activities of large investors and holders, including private and registered funds, that may directly or

indirectly invest in or hold digital assets;

•momentum pricing;

•monetary policies of governments, trade restrictions, currency devaluations and revaluations;

•regulatory measures, if any, that affect the use of digital assets, restrict digital assets as a form of payment, or limit the

purchase of digital assets;

•global or regional political, economic or financial events and conditions;

•expectations that the value of digital assets will change in the near or long term. A decrease in the price of a single digital

asset may cause volatility in the entire digital asset industry and may affect other digital assets. For example, a security

breach that affects investor or user confidence in bitcoin, Ethereum, litecoin or another digital asset may affect the industry as

a whole and may also cause the price of other digital assets to fluctuate; or

•with respect to bitcoin, increased competition from other forms of digital assets or payments services.

Even if shareholders are able to hold their securities for the long-term, their securities may never generate a profit, since digital

asset markets have historically experienced extended periods of flat or declining prices, in addition to sharp fluctuations. Investors

should be aware that bitcoin and other digital assets may not maintain their long-term value in terms of future purchasing power and

that the acceptance of digital asset payments by mainstream retail merchants and commercial businesses may not continue to grow. If

the price of bitcoin or other digital assets declines, our profitability will decline.

The “halving” of rewards available on the Bitcoin network, or the reduction of rewards on other networks, has had and in

the future could have a negative impact on our ability to generate revenue as our customers may not have an adequate incentive to

continue mining and customers may cease mining operations altogether, which could have a material adverse effect on our

business, financial condition and results of operations.

Under the current protocols governing the Bitcoin network, the reward for validating a new block on that network is cut in half

from time to time, which has been referred to in our industry as the “halving.” When the Bitcoin network was first launched, the

reward for validating a new block was 50 bitcoin. In 2012, the reward for validating a new block was reduced to 25 bitcoin. In July

2016, the reward for validating a new block was reduced to 12.5 bitcoin, and in May 2020, the reward was further reduced to 6.25

bitcoin. In April 2024, the Bitcoin protocol executed its fourth planned halving, wherein the bitcoin rewards issued for each solved

block declined from 6.25 bitcoin to 3.125 bitcoin. The next halving for the bitcoin blockchain is anticipated to occur sometime in

2028. In addition, other networks may operate under rules that, or may alter their rules to, limit the distribution of new digital assets.

We, and to our knowledge, our potential hosting customers, currently rely on these rewards to generate a significant portion of our

total revenue. If the award of digital assets for solving blocks and transaction fees are not sufficiently high, neither we nor our

customers may have an adequate incentive to continue mining and may cease mining operations altogether, which as a result may

significantly reduce demand for our hosting services. As a result, the halving of available rewards on the Bitcoin network, or any

reduction of rewards on other networks, would have a negative impact on our revenues and may have a material adverse effect on our

business, financial condition and results of operations.

If the award of bitcoin and/or transaction fees for solving blocks is not sufficiently high to incentivize transaction

processors, such processors may reduce or cease expending processing power on a particular network, which could negatively

impact the utility of the network, reduce the value of its bitcoin and have a material adverse effect on our business, financial

condition and results of operations.

As the number of bitcoin rewarded to transaction processors for validating blocks in the Bitcoin network decreases, the

incentive for transaction processors to continue contributing processing power to the network may shift toward transaction fees. Such

a shift may increase the transaction fees on a network. Higher transaction fees may reduce the utility of a network for an end user,

which may cause end users to reduce or stop their use of that network. Existing users may be motivated to switch from one digital

asset to another or back to fiat currency. In such case, the price of the relevant digital asset may decline substantially and could go to

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zero. Such reduced price and demand for, and use of, the relevant digital asset and network, either as it applies to our mining services

or to those of our potential hosting customers, may have a material adverse effect on our business, financial condition and results of

operations.

To the extent that the profit margins of digital asset mining operations are not high, mining participants are more likely to

sell their earned bitcoin, which could constrain bitcoin prices.

Over the past few years, digital asset mining operations have evolved from individual users mining with computer processors,

GPUs and first-generation ASIC servers. Currently, new processing power is predominantly added by incorporated and

unincorporated “professionalized” mining operations. Professionalized mining operations may use proprietary hardware or

sophisticated ASIC machines acquired from ASIC manufacturers. They require the investment of significant capital to acquire this

hardware, to lease operating space (often in data centers or warehousing facilities), and to pay the costs of electricity and labor to

operate the mining farms. As a result, professionalized mining operations are of a greater scale than prior mining operations and have

more defined and regular expenses and liabilities. These regular expenses and liabilities require professionalized mining operations to

maintain profit margins on the sale of digital assets. To the extent the price of digital assets decline and such profit margin is

constrained, professionalized mining participants are incentivized to more immediately sell digital assets earned from mining

operations, whereas it is believed that individual mining participants in past years were more likely to hold newly mined digital assets

for more extended periods. The immediate selling of newly earned digital assets greatly increases the trading volume of the digital

assets, creating downward pressure on the market price of digital asset rewards. The extent to which the value of digital assets earned

by a professionalized mining operation exceeds the allocable capital and operating costs determines the profit margin of such

operation. A professionalized mining operation may be more likely to sell a higher percentage of its newly earned digital assets rapidly

if it is operating at a low profit margin and it may partially or completely cease operations if its profit margin is negative. In a low

profit margin environment, a higher percentage could be sold more rapidly, thereby potentially depressing digital asset prices. Lower

digital asset prices could result in further tightening of profit margins for professionalized mining operations creating a network effect

that may further reduce the price of digital assets until mining operations with higher operating costs become unprofitable forcing

them to reduce mining power or cease mining operations temporarily. Such circumstances could have a material adverse effect on our

business, prospects or operations and potentially the value of bitcoin and any other digital assets we earn through self-mining or

otherwise acquire or hold for our own account.

Mining requires the investment of significant capital for the acquisition of hardware, leasing or purchasing space, involves

substantial electricity costs and requires the employment of personnel to operate the data facilities, which may lead mining operators

to liquidate their positions in digital assets to fund these capital requirements. In addition, if the reward of new digital assets for mining

declines, and/or if transaction fees are not sufficiently high, profit margins for mining operators may be reduced, and such operators

may be more likely to sell a higher percentage of their digital assets.

Whereas it is believed that individual operators in past years were more likely to hold digital assets for more extended periods,

the immediate selling of newly transacted digital assets by operators may increase the supply of such digital assets on the applicable

exchange market, which could create downward pressure on the price of the digital assets and, in turn, could have a material adverse

effect on our business, financial condition and results of operations.

The cash needs of our high-density colocation growth initiatives will limit the amount of digital assets we hold, thus

preventing us from recognizing any gain from the appreciation in value of the digital assets we have sold and may sell in the

future.

We are no longer required to sell our digital assets, including bitcoin, as we receive them under our existing debt agreements.

However, the significant cash required by our expected high-density colocation growth initiatives will require us to sell the digital

assets we earn periodically as cash needs and our treasury management policies dictate. When we sell a digital asset, we are unable to

benefit from any future appreciation in the underlying value of that digital asset.

Consequently, our bitcoin may be sold at a time when the price is lower than it otherwise might be in the future, which could

reduce the gain we might have realized on the sale of that digital asset at a different time.

Risks Related to Digital Assets

Digital asset exchanges and other trading venues are relatively new and, in some cases, unregulated and some have

experienced fraud and failure.

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To the extent that digital asset exchanges or other trading venues are involved in fraud or experience security failures or other

operational issues, a reduction in digital asset prices could occur. Digital asset market prices depend, directly or indirectly, on the

prices set on exchanges and other trading venues, which are new and, in most cases, largely unregulated as compared to established,

regulated exchanges for securities, derivatives and other currencies. For example, during the past three years, a number of bitcoin

exchanges have been closed due to fraud, business failure or security breaches. In many of these instances, the customers of the closed

bitcoin exchanges were not compensated or made whole for the partial or complete losses of their account balances in such bitcoin

exchanges. While smaller exchanges are less likely to have the infrastructure and capitalization that provide larger exchanges with

additional stability, larger exchanges may be more likely to be appealing targets for hackers and “malware” (i.e., software used or

programmed by attackers to disrupt computer operation, gather sensitive information, or gain access to private computer systems) and

may be more likely to be targets of regulatory enforcement action.

Many digital asset exchanges currently do not provide the public with significant information regarding their ownership

structure, management teams, corporate practices or regulatory compliance. As a result, the marketplace may lose confidence in, or

may experience problems relating to, digital asset exchanges, which may cause the price of bitcoin to decline. For example, in the first

half of 2022, each of Celsius Mining, LLC, Voyager Digital Ltd., and Three Arrows Capital Ltd. declared bankruptcy, resulting in a

loss of confidence among participants in the digital asset ecosystem and negative publicity surrounding digital assets more broadly. In

November 2022, BlockFi Inc. and FTX Trading Ltd (“FTX”), the third largest digital asset exchange by volume at the time, halted

customer withdrawals, and, shortly thereafter, FTX and its subsidiaries filed for bankruptcy. Most recently, in January 2023, Genesis

Global Holdco. LLC and certain affiliates filed for bankruptcy.

In response to these events, the digital asset markets, including the market for bitcoin specifically, have experienced price

volatility and several other entities in the digital asset industry have been, and may continue to be, negatively affected, further

undermining confidence in the digital asset market and in bitcoin. These events have also negatively impacted the liquidity of the

digital asset market as certain entities affiliated with FTX engaged in significant trading activity. If the liquidity of the digital asset

market continues to be negatively impacted by these events, digital asset prices, including the price of bitcoin, may continue to

experience significant volatility and confidence in the digital asset markets may be further undermined. A perceived lack of stability in

the digital asset exchange market and the closure or temporary shutdown of digital asset exchanges due to business failure, hackers or

malware, government-mandated regulation, or fraud, may reduce confidence at least in part in digital asset networks and result in

greater volatility in bitcoin’s value. Because the value of bitcoin is derived from the continued willingness of market participants to

exchange government-issued currency that is designated as legal tender in its country of issuance through government decree,

regulation, or law (“fiat” currency) for bitcoin, should the marketplace for bitcoin be jeopardized or disappear entirely, permanent and

total loss of the value of bitcoin may result.

Digital asset transactions are irrevocable and, if incorrectly transferred, digital assets may be irretrievable. As a result, any

incorrectly executed digital asset transactions could have a material adverse effect on our business, financial condition and results

of operations.

Typically, digital asset transactions are not, from an administrative perspective, reversible without the consent and active

participation of the recipient of the transaction or, in theory, control or consent of a majority of the processing power on the applicable

network. Once a transaction has been confirmed and verified in a block that is added to the network blockchain, an incorrect transfer

of a digital asset or a theft of a digital asset generally will not be reversible and we may not be capable of seeking compensation for

any such transfer or theft. Although transfers of any digital assets we hold will not regularly be made to or from vendors, consultants,

services providers, etc., it is possible that, through computer or human error, or through theft or criminal action, digital assets held by

us could be transferred from us in incorrect amounts or to unauthorized third parties. To the extent that we are unable to seek a

corrective transaction with such third party or are incapable of identifying the third party that has received our digital assets through

error or theft, we will be unable to revert or otherwise recover our incorrectly transferred digital assets. To the extent that we are

unable to seek redress for such error or theft, such loss could have a material adverse effect on our business, financial condition and

results of operations.

We may not have adequate sources of recovery if the bitcoin held by us are lost, stolen or destroyed due to third-party digital

asset services, which could have a material adverse effect on our business, financial condition and results of operations.

Certain digital assets held by us are stored using Coinbase Global, Inc. (“Coinbase”), a third-party digital asset service. We

believe that the security procedures that Coinbase utilizes, such as dual authentication security, secured facilities, segregated accounts

and cold storage, are reasonably designed to safeguard our bitcoin and other digital assets from theft, loss, destruction or other issues

relating to hackers and technological attack. Nevertheless, the security procedures cannot guarantee the prevention of any loss due to a

security breach, software defect or act of God that may be borne by us. In addition, Coinbase’s limited liability under its services

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agreement with us may limit our ability to recover losses relating to our bitcoin. If such digital assets are lost, stolen or destroyed

under circumstances rendering a third party liable to us, it is possible that the responsible third party may not have the financial

resources or insurance sufficient to satisfy any or all of our claims against the third party, or have the ability to retrieve, restore or

replace the lost, stolen or destroyed digital assets due to governing network protocols and the strength of the cryptographic systems

associated with such digital assets. To the extent that we are unable to recover on any of our claims against any such third party, such

loss could have a material adverse effect on our business, financial condition and results of operations.

Any loss or destruction of a private key required to access a digital asset is irreversible. Loss of access to digital assets may

be permanent.

Digital assets are each accessible and controllable only by the possessor of both the unique public key and private key

associated with the digital asset. Although we utilize the services of third-party holders of digital assets and sell digital assets as soon

as practicable after receiving them, it is possible that digital assets in our possession can be lost or stolen and irretrievable which could

have a material adverse effect on our business, financial condition and results of operations.

The digital assets held by us are not subject to FDIC or SIPC protections.

We do not hold our digital assets with a banking institution or a member of the Federal Deposit Insurance Corporation

(“FDIC”) or the Securities Investor Protection Corporation (“SIPC”), and to date, neither the FDIC nor the SIPC has extended any

such protections to depositors of digital assets. Accordingly, our digital assets are not subject to the protections by FDIC or SIPC

member institutions and any loss of our digital assets could have a material adverse effect on our business, financial condition and

results of operations.

Digital assets, including bitcoin, face significant scaling obstacles that can lead to high fees or slow transaction settlement

times and any mechanisms of increasing the scale of digital asset settlement may significantly alter the competitive dynamics in the

market.

Digital assets face significant obstacles scaling transaction throughput, including high fees or slow transaction settlement times,

and attempts to increase the volume of transactions may not be effective. Scaling digital asset transaction volumes, and particularly

bitcoin, is essential to the widespread acceptance of digital assets as a means of payment, which is necessary to the growth and

development of our business.

Many digital asset networks face significant scaling challenges. For example, digital assets are limited with respect to how

many transactions can occur per second. In this respect, bitcoin may be particularly affected as it relies on the “proof-of-work”

validation, which due to its inherent characteristics may be particularly hard to scale to allow simultaneous processing of multiple

daily transactions by users. Participants in the digital asset ecosystem debate potential approaches to increasing the average number of

transactions per second that the network can handle and have implemented mechanisms or are researching ways to increase scale, such

as “sharding,” which is a term for a horizontal partition of data in a database or search engine, which would not require every single

transaction to be included in every single miner’s or validator’s block.

There is no guarantee that any of the mechanisms in place or being explored for increasing the scale of settlement of digital

asset transactions will be effective, how long they will take to become effective or whether such mechanisms will be effective for all

digital assets. There is also a risk that any mechanisms of increasing the scale of digital asset settlements, such as the ongoing

upgrades as part of Ethereum 2.0, may significantly alter the competitive dynamics in the digital asset market and may adversely affect

the value of bitcoin and the price of our securities. Any of which could have a material adverse effect on our business, prospects,

financial condition, and operating results.

Latency in confirming transactions on a network could result in a loss of confidence in the network, which could have a

material adverse effect on our business, financial condition and results of operations.

Latency in confirming transactions on a network can be caused by a number of factors, such as transaction processors ceasing

to support the network and/or supporting a different network. To the extent that any transaction processors cease to record transactions

on a network, such transactions will not be recorded on the blockchain of the network until a block is solved by a transaction processor

that does not require the payment of transaction fees or other incentives. Currently, there are no known incentives for transaction

processors to elect to exclude the recording of transactions in solved blocks. However, to the extent that any such incentives arise (for

example, with respect to bitcoin, a collective movement among transaction processors or one or more mining pools forcing bitcoin

users to pay transaction fees as a substitute for, or in addition to, the award of new bitcoin upon the solving of a block), transaction

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processors could delay the recording and verification of a significant number of transactions on a network’s blockchain. If such

latency became systemic, and sustained, it could result in greater exposure to double-spending transactions and a loss of confidence in

the applicable network, which could have a material adverse effect on our business, financial condition and results of operations.

In addition, increasing growth and popularity of digital assets, ICOs and security token offerings, as well as non-digital asset

related applications that utilize blockchain technology on certain networks, can cause congestion and backlog, and as result, increase

latency on such networks. An increase in congestion and backlogs could result in longer transaction confirmation times, an increase in

unconfirmed transactions (that is, transactions that have yet to be included in a block on a network and therefore are not yet completed

transactions), higher transaction fees and an overall decrease in confidence in a particular network, which could ultimately affect our

ability to transact on that particular network and, in turn, could have a material adverse effect on our business, financial condition and

results of operations.

Malicious actors or botnet may obtain control of more than 50% of the processing power on the bitcoin or other network.

If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the

actions of the computers) obtains a majority of the processing power dedicated to mining on the bitcoin or other network, it may be

able to alter the blockchain on which the bitcoin or other network and most bitcoin or other digital asset transactions rely by

constructing fraudulent blocks or preventing certain transactions from completing in a timely manner, or at all. The malicious actor or

botnet could control, exclude, or modify the ordering of transactions, though it could not generate new bitcoin or digital assets or

transactions using such control. The malicious actor could “double-spend” its own bitcoin or digital assets (i.e., spend the same bitcoin

or digital assets in more than one transaction) and prevent the confirmation of other users’ transactions for so long as it maintained

control. To the extent that such malicious actor or botnet did not yield its control of the processing power on the bitcoin or other

network, or the bitcoin or other community did not reject the fraudulent blocks as malicious, reversing any changes made to the

blockchain may not be possible.

Although there are no known reports of malicious activity or control of the bitcoin blockchain achieved through controlling

over 50% of the processing power on the network, it is believed that certain mining pools may have exceeded the 50% threshold. The

possible crossing of the 50% threshold indicates a greater risk in that a single mining pool could exert authority over the validation of

bitcoin transactions. To the extent that the Bitcoin or other digital asset ecosystems, including developers and administrators of mining

pools, do not act to ensure greater decentralization of bitcoin or other digital asset mining processing power, the feasibility of a

malicious actor obtaining control of the processing power on the bitcoin or other network will increase, which may adversely affect an

investment in us.

Intellectual property rights claims may adversely affect the operation of any or all networks.

Third parties may assert intellectual property rights claims relating to the operation of digital assets and the holding and transfer

of such assets. Regardless of the merit of any intellectual property rights claims or other legal action, any threatened action that

reduces confidence in the long-term viability of any or all of the networks or other similar peer-to-peer networks, or in the ability of

end-users to hold and transfer digital assets, may have a material adverse effect on our business, financial condition and results of

operations. Additionally, a meritorious intellectual property rights claim could prevent us and other end-users from holding or

transferring the digital assets, which could have a material adverse effect on our business, financial condition and results of operations.

A soft or hard fork on a network could have a material adverse effect on our business, financial condition and results of

operations.

The rules governing a network’s protocol are subject to constant change and, at any given time, there may be different groups

of developers that can modify a network’s protocol. As network protocols are not sold and their use does not generate revenues for

their development teams, the core developers are generally not compensated for maintaining and updating the network protocols.

Consequently, there may be a lack of financial incentive for developers to maintain or develop networks and the core developers may

lack the resources to adequately address emerging issues with network protocols. Although the bitcoin and other leading networks are

currently supported by core developers, such support may not continue or be sufficient in the future. To the extent that material issues

arise with Bitcoin or another network and the core developers and open-source contributors are unable to address the issues adequately

or in a timely manner, the networks may be adversely affected.

Any individual can download the applicable network software and make any desired modifications that alter the protocols and

software of the network, which are proposed to developers, users and transaction processors on the applicable network through

software downloads and upgrades, typically posted to development forums such as GitHub.com. Such proposed modifications can be

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agreed upon, developed, adopted and implemented by a substantial majority of transaction processors, which, in such event, results in

a “soft fork” or “hard fork” on the relevant network. A “soft fork” occurs when an updated version of the validating protocol is still

“backwards compatible” with previous versions of the protocol. As a result, non-upgraded network participants with an older version

of the validating protocol will still recognize new blocks or transactions and may be able to confirm and validate a transaction;

however, the functionality of the non-upgraded network participant may be limited. Thus, non-upgraded network participants are

incentivized to adopt the updated version of the protocol. The occurrence of a soft fork could potentially destabilize mining and

increase transaction and development costs and decrease trustworthiness of a network.

A “hard fork” occurs when the updated version of the validating protocol is not “backwards compatible” with previous versions

of the protocol, and therefore, requires forward adoption by network participants in order to recognize new blocks, validate and verify

transactions and maintain consensus on the relevant blockchain. Since the updated version of the protocol is not backwards

compatible, a hard fork can cause the relevant blockchain to permanently diverge into two separate blockchains on a network. For

example, in the case of bitcoin, a hard fork created two new digital assets: Bitcoin Cash and Bitcoin Gold. The value of a newly

created digital asset from a hard fork (“forked digital asset”) may or may not have value in the long-run and may affect the price of

other digital assets if interest and resources are shifted away from previously existing digital assets to the forked digital asset. The

value of a previously existing digital asset after a hard fork is subject to many factors, including the market reaction and value of the

forked digital asset and the occurrence of other soft or hard forks in the future. As such, the value of certain digital assets could be

materially reduced if existing and future hard forks have a negative effect on their value.

If a soft fork or hard fork occurs on a network, which we or our hosting customers are processing transactions or hold digital

assets in, we may be required to upgrade our hardware or software in order to continue our mining operations, and we may not be able

to make such upgrades. A soft fork or hard fork in a particular digital asset that we process could have a negative effect on the value of

that digital asset and could have a material adverse effect on our business, financial condition and results of operations.

To the extent that any miners cease to record transactions in solved blocks, transactions that do not include the payment of a

transaction fee will not be recorded on the blockchain until a block is solved by a miner who does not require the payment of

transaction fees. Any widespread delays in the recording of transactions could result in a loss of confidence in that digital asset

network, which could adversely impact an investment in us.

To the extent that any miners cease to record transactions in solved blocks, such transactions will not be recorded on the

blockchain. Currently, there are no known incentives for miners to elect to exclude the recording of transactions in solved blocks;

however, to the extent that any such incentives arise (e.g., a collective movement among miners or one or more mining pools forcing

bitcoin users to pay transaction fees as a substitute for or in addition to the award of new bitcoins upon the solving of a block), actions

of miners solving a significant number of blocks could delay the recording and confirmation of transactions on the blockchain.

Any systemic delays in the recording and confirmation of transactions on the blockchain could result in greater exposure to

double-spending transactions and a loss of confidence in certain or all digital asset networks, which could have a material adverse

effect on our business, prospects, financial condition, and operating results.