Hut 8 Corp. (HUT) Risk Factors

Item 1A. Risk Factors

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A description of the risks and uncertainties associated with our business is set forth below. You should consider carefully the risks and uncertainties described below, together with the financial and other information contained in this Annual Report, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes. If any of the following risks or uncertainties actually occur, our business, financial condition, and results of operations could be materially and adversely affected. In that case, the market price of our common stock could decline and you may lose all or a part of your investment. The risks discussed below are not the only risks we face. Additional risks or uncertainties not currently known to us, or that we currently deem immaterial, may also have a material adverse effect on our business, financial condition, and results of operations.

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Risks Related to Our Growth

Our construction of new data centers, data center expansions, or data center redevelopment could involve significant risks to our business.

In order to sustain our growth in certain of our existing and new markets, we may have to expand existing data centers, lease new facilities, or acquire suitable land, with or without structures, to build new data centers. Expansions or new builds are currently underway, or being contemplated, in new and existing markets. For example, we recently entered into a 15-year, 245 MW IT build to suit data center lease at our River Bend campus. The construction of such projects exposes us to many risks that could have an adverse effect on our business, financial condition, and results of operations, including:

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We may experience liquidity constraints and may need to raise additional capital. We may be unable to raise the additional capital needed to operate and grow our business.

Liquidity risk is the risk that we will not be able to meet our financial obligations as they fall due. We currently settle our financial obligations out of cash and cash equivalents, including the net proceeds from the sale of common stock under our ATM program, and from any sales of Bitcoin. We have a planning and budgeting process to help determine the funds required to support our normal spending requirements on an ongoing basis and our expansionary plans. However, the capital required to operate our business and implement our growth initiatives is substantial. For example, the development of new data center campuses, including the River Bend campus, requires significant capital expenditures and long lead times before such projects may generate revenue, if at all. As a result, we expect to need to raise additional funds through equity or debt financings, which may be at the corporate level or the project level, in order to meet our operating and capital needs, fund our growth initiatives, and/or respond to competitive pressures or unanticipated working capital requirements.

Such financing may be secured by certain assets or cash flows, involve certain step-in, cure rights, or other remedies, impose certain financial maintenance covenants, operating covenants, or other limitations, or require certain guarantees or other credit enhancements, which may increase our overall risk exposure. Furthermore, we may be unable to secure such financing in a timely manner, in sufficient quantities, or on terms acceptable to us, if at all. Market conditions, including interest rate increases, declining equity valuations, volatility in credit markets, or tightening lending standards, as well as other external events, including impacts on the market’s perception of data center operators and their tenants, including hyperscalers and neoclouds, may further limit our ability to raise capital on favorable terms. In addition, debt financings, whether at the corporate level or the project level, may bear interest at floating rates, which could increase our interest expense in rising interest rate environments, even if a portion of such exposure is hedged.

If we are unable to raise the additional capital needed to maintain our operations and execute on our growth initiatives, we may be unable to fulfill our customer and third-party obligations and may be less competitive in our industry such that our business, financial condition, and results of operations may suffer, and the market price for our securities may be materially and adversely affected. If we were to raise additional equity financing, our stockholders may experience significant dilution of their ownership interest, and the value of their investment could decline. Furthermore, if we were to raise additional debt financing, our debtors would likely have priority over holders of equity with respect to order of payment preference. We may be required to accept terms that restrict our ability to incur additional indebtedness or take other actions, including terms that require us to maintain a specified level of liquidity or other balance sheet ratios that may restrict our business activities and ability to pursue certain growth opportunities and negatively impact our stockholders.

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 developing, leasing, operating, and maintaining our facilities may constitute a significant portion of our capital and operating expenses. In order to manage growth and ensure adequate capacity for our planned and existing projects while minimizing unnecessary excess capacity costs, we continuously evaluate our short- and long-term infrastructure requirements. There can be no assurance that we can accurately predict our short- and long-term facility requirements or that existing or future market demand will be sufficient to fully utilize the capacity we develop or secure.

In certain cases, we may develop or secure facility capacity in advance of obtaining customer commitments for all or a portion of such capacity. If we overestimate our facility requirements or the demand for our offerings and therefore secure excess capacity, our facilities may remain vacant or underutilized for extended periods. As a result, our operating margins could be materially reduced and we could experience operating losses, including due to fixed costs incurred regardless of utilization levels. In addition, we may be required to incur additional costs to reposition, retrofit, or otherwise market such capacity to attract customers. Conversely, if we underestimate our facility requirements, we may not be able to service our or our customers’ expanding needs, may be required to limit our growth opportunities or new customer acquisition, or we may lose existing or potential customers to competitors, any of which could have a material adverse effect on our business, financial condition, and results of operations.

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We face risks associated with the King Mountain JV and American Bitcoin, and may face similar risks in the future by entering into other joint ventures or launching or spinning out other consolidated businesses.

Joint ventures and majority-owned subsidiaries inherently involve operational, governance, and control risks that may differ from those associated with wholly owned operations, thereby potentially increasing the financial, legal, operational, regulatory, and/or compliance risks associated with them, and may require the diversion of financial and management resources from existing operations or alternative opportunities. We may be dependent on partners, other shareholders, management teams, or other persons or entities who control or influence the entity who may have business interests, strategies, or goals that are inconsistent or competitive with ours. Furthermore, these individuals may receive access to our intellectual property and other resources, which introduces the risk of theft and/or exploitation.

For example, we own a 50% membership interest in the King Mountain JV. Decision-making control over the King Mountain JV’s actions rests in a committee of four member managers, with two from Hut 8 and two from our partner. If the member managers from Hut 8 and our joint venture partner are not aligned with respect to business interests, strategies, or goals, or if the member managers from Hut 8 and our joint venture partner cannot reach agreement in decision-making processes, there is a risk that we may not be able to operate the King Mountain site optimally from a financial, legal, operational, regulatory, and/or compliance perspective. If this situation materializes, it may have a material adverse effect on our business, financial condition, and results of operations.

In addition, although we consolidate American Bitcoin’s results of operations in our financial statements, the presence of minority shareholders, separate management teams, contractual arrangements, fiduciary responsibilities, and regulatory constraints, among other things, limits our control over its operations, governance, and strategic decisions. Conflicts of interest may arise between us and minority shareholders or other stakeholders, and the resolution of such conflicts may not be favorable to us. Further, as we are the majority owner of American Bitcoin’s capital stock, we are also exposed to risks associated with the actual or perceived value of that equity interest. The market price of American Bitcoin’s Class A common stock has been, and may continue to be, volatile and subject to significant fluctuations due to a variety of factors, including changes in Bitcoin prices, market sentiment toward digital asset-related businesses, operating performance, regulatory developments, capital structure, liquidity, and broader equity market conditions. The value of our equity ownership in American Bitcoin may decline significantly, which could result in impairment charges or other adverse impacts to our financial statements, and we may not be able to monetize our ownership interest on favorable terms, or at all. In addition, market perception of American Bitcoin, including investor sentiment, media coverage, or developments affecting its business or industry, may also influence investor perception of Hut 8 and could adversely affect the market price and trading volatility of our common stock. Our investment in American Bitcoin is also subject to the risks described in American Bitcoin’s filings with the SEC, including the risk factors set forth therein, which, if realized, could adversely affect the value of our ownership interest. Any such decline in value, increased volatility, or adverse market perception could have a material adverse effect on our business, financial condition, results of operations, reputation, brand, and liquidity.

Although we expect that our interest in our joint ventures and consolidated businesses will result in benefits to us, we may not realize those benefits. If we fail to address the foregoing risks or other problems encountered in connection with current or future joint ventures or consolidated businesses, it could have a material adverse effect on our business, financial condition, and results of operations.

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We may acquire other businesses and/or assets or form strategic alliances or joint ventures that could negatively affect our operating results, dilute shareholder ownership, increase debt, or cause us to incur significant expenses.

We have previously engaged in strategic transactions, including completing the Business Combination and, more recently, launching and taking public American Bitcoin. As part of our growth strategy, in the future, we may pursue additional acquisitions of businesses and/or assets and/or enter into strategic alliances, joint ventures, or other strategic transactions. However, we cannot offer any assurance that any such strategic transaction will be successful. We may not be able to identify suitable partners or acquisition candidates and may not be able to complete such transactions on favorable terms, if at all. Any such strategic transaction also could result in the issuance of stock, incurrence of debt, contingent liabilities, write-offs of intangible assets or goodwill, restructuring and other related expenses, or litigation, any of which could have a negative impact on our business, financial condition, and results of operations. If we complete any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business. In addition, in the event that we acquire any existing businesses, we may assume unknown or contingent liabilities. Integration of an acquired company may also disrupt ongoing operations and carry substantial compliance burdens and costs, which may limit our ability to realize the anticipated benefits of such acquisitions, and which may require management resources that would otherwise be focused on developing and expanding our existing business. We may experience losses related to potential investments in other companies or other strategic transactions, which could materially and adversely affect our business, financial condition, and results of operations. Furthermore, the benefits of any acquisition, strategic alliance, joint venture or other strategic transaction may also take considerable time to develop, and we cannot be certain that any particular acquisition, strategic alliance, joint venture, or other strategic transaction will produce the intended benefits in a timely manner or to the extent anticipated or at all.

New offerings or lines of business may subject us to additional risks.

We are a growth stage company with a small management team and are subject to the strains of ongoing development and growth, which will place significant demands on our management and operational and financial infrastructure. To remain competitive with peers, we may need to modify aspects of our business model or we may implement new offerings or lines of business, from time to time. For example, we signed our first large scale single tenant AI data center lease and commenced construction of the site at our River Bend campus. There are substantial risks and uncertainties associated with the modification or augmentation of our business model, particularly in instances where the markets are not fully developed or where the operational requirements of new offerings or lines of business differ substantially from existing offerings or lines of business. We cannot offer any assurance that these or any other changes will be successful or will not result in harm to our business. In developing and marketing new offerings or lines of business or expanding our current offerings or lines of business, we may invest significant time and resources. Initial timetables for the introduction and development of new offerings or lines of business may not be achieved and profitability targets may not prove feasible. External factors, such as compliance with regulations, competition, and shifting market preferences, may also impact the successful implementation of a new offering or line of business.

In addition, our personnel and technology systems may fail to adapt to the changes or we may fail to effectively integrate new offerings or lines of business into our existing operations and we may lack experience in managing new offerings or lines of business. We may also be unable to proceed with the operations as planned or compete effectively due to different competitive landscapes. Even if we expand our businesses into new jurisdictions or areas, the expansion may not yield intended profitable results. Furthermore, any new offering or line of business could have a significant impact on the effectiveness of our internal control system. Failure to successfully manage these risks in the development and implementation of new offerings or lines of business could have a material adverse effect on our business, financial condition, and results of operations. Finally, we cannot provide any assurance that we will successfully identify all emerging trends and growth opportunities in a market. As a result, we may not capture those potential opportunities or such opportunities may be taken by our competitors. Such circumstances could have a material adverse effect on our business, financial condition, and results of operations.

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Risks Related to Our Business and Operations

Failure of critical systems related to our offerings and/or infrastructure could have a material adverse effect on our business, financial condition, and results of operations.

The critical systems related to our offerings and infrastructure are subject to failure. Failure of any of our critical systems, 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 to us or our customers and/or damage to equipment, which could significantly disrupt the normal business operations of our customers, harm our reputation, reduce our revenue, and subject us to liability claims. The destruction or severe impairment of any of the facilities operated by us could result in significant downtime. For certain of our business lines, our ability to attract and retain customers depends on our ability to provide a reliable service, so even minor interruptions in service could harm our reputation and negatively impact our business, financial condition, and results of operations.

Our infrastructure and offerings are subject to temporary or permanent interruption by factors that include but are not limited to:

The occurrence of any of these events may have a material adverse effect on our business, financial condition, and results of operations. Moreover, service interruptions and equipment failures may expose us to potential legal liability. As the services provided by us may be critical to our customers’ business operations, any disruption in services could result in lost profit or other indirect or consequential damages to our customers. Although customer contracts typically contain provisions limiting our liability, there can be no assurance that a court would 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 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 may be liable for substantial damage awards, 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 electrical power.

Our operations require significant amounts of electrical power and our business, financial condition, and results of operations may be impacted by the unavailability of power and/or price fluctuations in the power market. Market prices for power, capacity, and other ancillary services are unpredictable and tend to fluctuate substantially. Unlike most other commodities, electric power can only be stored on a very limited basis and generally must be produced concurrently with its use. As a result, power prices are subject to significant volatility due to supply and demand imbalances, especially in the day-ahead and spot markets. Power availability and prices may also be materially impacted by other factors outside of our control, including:

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Such factors and the associated fluctuations in power availability and prices could affect the cost, reliability, and availability of power supply for our operations.

As part of our growth strategy, we pursue a “power first” approach to site development, under which we prioritize identifying and securing access to sufficient and reliable power before committing significant capital to the development or expansion of data center or ASIC compute sites. This approach includes evaluating power availability, grid capacity, interconnection feasibility, permitting requirements, expected timelines, and the commercial terms under which power may be obtained. However, there is significant competition for suitable locations with access to power and the existence of a power pipeline or preliminary arrangements does not guarantee that power will ultimately be delivered on the anticipated timeline, in the expected quantities, on commercially acceptable terms, or at all. Delays or failures in securing interconnection approvals, completing grid upgrades, satisfying regulatory or utility requirements, or finalizing definitive power arrangements could limit our ability to develop sites as planned, increase costs, or result in projects being delayed, scaled back, or abandoned. For example, in many markets, the requirements to secure access to power have become increasingly onerous and may include substantial security obligations, such as large deposits, letters of credit, minimum payment commitments, or other financial assurances, which may be required before power is delivered or before a facility is developed or occupied. In certain cases, we may be required to make such commitments before securing a customer or entering into revenue-generating agreements, which could expose us to increased financial risk if expected customer demand does not materialize.

Furthermore, there can be no assurance that power suppliers will service our facilities or that once we have entered into a power purchase agreement, such supplier will continue to provide us with power for any period of time, which may delay or otherwise impact the satisfaction of lease conditions. Power purchase agreements may be terminated or delayed, or we may lose access to power under certain other circumstances, including as a result of re-studies or other regulatory or utility-driven processes, and we may not be able to find an adequate replacement at a reasonable cost, or at all, especially in light of the limited availability of power and grid constraints in many markets.

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Our reliance on power grids subjects us to a variety of risks, including the breakdown or failure of equipment, accidents, security breaches, viruses or outages affecting information technology systems, labor disputes, obsolescence, delivery/transportation problems, disruptions of fuel supply, and performance below expected levels. These events may impact our ability to conduct our businesses efficiently and lead to increased costs, expenses, or losses. Although we maintain limited backup power at certain sites, it may not be feasible to run our operations on back-up power generators in the event of a restriction on electricity or a power outage. Planned or unplanned outages at the power grids that we rely on may require us to purchase power at then-current market prices, either to continue our operations or satisfy our commitments, which could be expensive and therefore have a material impact on the cost structure of our operations. To the extent we are unable to receive or provide adequate power supply and are forced to reduce or cease our operations due to the unavailability or high cost of electrical power, our business, financial condition, and results of operations would be adversely affected.

For example, our customer lease agreements for data centers typically include specific power delivery requirements and lease commencement conditions. If sufficient power is not available at or prior to lease commencement, we may be unable to satisfy such conditions, which could delay the commencement of leases, defer or eliminate expected revenues, or result in the termination of customer agreements. In addition, unavailability of contracted levels of power or power-related services during the term of a lease may constitute a breach of customer agreements in certain circumstances and could give rise to termination rights, damages, or other contractual remedies, any of which could adversely affect our business, financial condition, and results of operations.

Our ASIC compute operations, conducted mainly through American Bitcoin, are also highly dependent on the availability and cost of power. ASIC compute profitability is directly impacted by power costs and availability. Reductions in power availability or increases in power prices may require us to curtail operations, either voluntarily or through our agreements with utility providers. We may also encounter other situations where utilities or government entities restrict or prohibit the provision of electricity to ASIC compute operations. In these cases, our and American Bitcoin’s ability to mine Bitcoin may be negatively affected.

We may not be able to attract, retain, or expand relationships with customers across our platform.

As we look to expand our large-scale data center development, we expect to generate a significant portion of our revenue from a limited number of customers. For example, we recently entered into a 15-year, 245 MW IT lease at our River Bend campus valued at $7.0 billion over the base term and up to $17.7 billion if all renewal options are exercised. However, there can be no assurances that we will be able to attract or retain such customers across our platform on favorable terms, or at all. Our success in doing so is impacted by a variety of factors, including:

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Furthermore, any event leading to the early termination of a customer contract, including customer bankruptcy or force majeure events that disrupt facility operations or damage customer infrastructure, could result in the loss of revenue associated with those contracts. In addition, customer contracts for large-scale data center developments typically include termination rights that may be triggered by specified events or breaches. For example, our lease agreement for the River Bend data center campus provides the customer with certain termination rights, including in connection with certain breaches of the lease or power contract, casualty events, or other circumstances beyond our control. If a customer were to exercise termination rights under such an agreement, we could lose a significant source of expected revenue and may be required to incur additional costs to remarket or redevelop the affected facility. If we were unable to offset lost revenue, it could have a material adverse effect on our business, financial condition, and results of operations.

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Our operations and growth may be adversely affected by geographic concentration and market-specific conditions.

Our results of operations and growth prospects may be disproportionately affected by conditions in the specific geographic markets in which our facilities are located or under development. While we operate across multiple locations, a significant portion of our data center capacity, capital investments, and development activities are presently concentrated in Texas and Louisiana, which increases our exposure to geographic and market-specific risks. Conditions in these and other markets may vary materially, including with respect to local demand and competing supply, permitting and zoning requirements, utility and grid practices, power availability, labor conditions, regulatory requirements, environmental or community considerations, and exposure to extreme weather or other natural events. Adverse developments arising from any of these geographic and market-specific factors could delay projects, increase costs, limit available capacity, reduce utilization, or adversely affect pricing and margins, which could 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.

The industries in which we operate are highly competitive and continuously evolving. We expect competition to further intensify as existing and new competitors introduce new offerings or enhance existing offerings and as the industries that we operate in continue to grow. As we continue to expand in our existing markets and enter new markets, we compete against an increasing number of companies operating, both within North America and abroad, that may be more established or have greater financial and other resources and/or expertise.

Driven by the proliferation of next-generation, energy-intensive technologies such as ASIC compute and HPC, demand for energy capacity continues to outpace supply. For example, HPC workloads require high-density infrastructure with capacity demands multiples greater than many legacy data centers can provide, while ASIC compute remains a competitive market that requires operational efficiency and low-cost energy at scale. At the same time, grid interconnection bottlenecks have further constrained access to power and digital infrastructure development, while supply chain disruptions and regulatory constraints have extended lead times for critical infrastructure, including GPUs, ASICs, turbines, generators, and transformers.

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In this evolving landscape, we compete directly with cloud services providers, digital infrastructure developers, and large-scale Bitcoin miners. The nature of competition varies across the layers of our platform:

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Taken as a whole, we believe success depends on the ability to secure, monetize, and optimize power capacity at scale. We believe we have established a defensible competitive advantage through our power-first, innovation-driven strategy, which is underpinned by a power-native team with deep access to power markets, an application-agnostic framework for digital infrastructure design, end-to-end greenfield development capabilities, and our ability to use ASIC compute infrastructure development to rapidly and cost-effectively secure and monetize power. However, these factors might not provide the competitive advantage we anticipate, or if they do, such competitive advantage might not endure. If we are unable to compete successfully, or if competing successfully requires us to take costly actions in response to the actions of our competitors, our business, financial condition, and results of operations could be adversely affected.

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Some of our infrastructure is located on leased premises and the termination or higher renewal rate of our leases could materially adversely affect our business, financial condition, and results of operations.

Some of our infrastructure is located on leased premises and there can be no assurance that we will remain in compliance with our leases, that our landlord will continue to support our operations, or that our leases will not be terminated despite negotiation for long term lease periods and renewal provisions. When the initial terms of our existing leases expire, in some instances, we have the right to extend the terms of our leases for one or more renewal periods. Upon the end of our initial term or, if applicable, the renewal periods, we would have to renegotiate our lease terms with the applicable landlords. If renewal rates are less favorable than those we currently have, we may be required to increase revenues to offset such increase in lease payments. Failure to increase revenues to sufficiently offset these projected higher costs could adversely impact our operating income. We may also not be able to renew such leases at all. The termination of a lease could have a material adverse effect on our business, financial condition, and results of operations.

We are required to obtain, maintain, and comply with the terms and conditions of government permits and approvals.

We are required to obtain, maintain, and comply with the terms and conditions of numerous permits, approvals, and licenses from federal, state, provincial, and local governmental agencies. The process of obtaining and renewing necessary permits and licenses can be lengthy and complex and can result in the establishment of conditions that make the project or activity for which the permit or license was sought unprofitable or otherwise unattractive. In addition, the permitting and approval process may be influenced by public input, community organizations, advocacy groups, or other local or regional stakeholders, as well as broader social, environmental, or political movements, which may increase scrutiny, result in additional conditions, delays, or challenges, or lead to opposition to our projects. Furthermore, such permits or licenses may be subject to denial, revocation, or modification under various circumstances and may be impacted by legal and regulatory changes. Failure to obtain or comply with the conditions of permits or licenses, or failure to comply with applicable laws or regulations, may result in the delay or temporary suspension of our development or operations, which could have a material adverse effect on our business, financial condition, and results of operations.

We are subject to many hazards and operational risks that can disrupt our business, some of which may not be insured or fully covered by insurance.

Our operations are subject to many hazards and operational risks inherent to our business, including:

The measures we take to protect against these risks may not be sufficient. For example, we maintain certain disaster recovery and business continuity plans that would be implemented in the event of severe weather events that interrupt our operations. While these plans are designed to allow us to recover from natural disasters or other events that can interrupt our business, we cannot be certain that our plans will work as intended to mitigate the impacts of such disasters or events. Failure to prevent impact from such events on our or our customers’ operations could adversely affect our business, financial condition, and results of operations.

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We maintain an amount of insurance protection that we consider adequate, but we cannot provide any assurance that our insurance will be sufficient or effective under all circumstances and against all hazards or liabilities to which we may be subject and, even if we do have insurance coverage for a particular circumstance, we may be subject to a large deductible and maximum cap. We carry liability, property, business interruption, construction-related, and other insurance policies to cover certain insurable risks to our company. We select the types of insurance, the limits, and the deductibles based on our specific risk profile, the cost of the insurance coverage versus its perceived benefit, and general industry standards. Our insurance policies contain certain industry standard exclusions for events such as war and nuclear disasters. A successful claim for which we are not fully insured could materially harm our business, financial condition, and results of operations. For example, we are currently party to a securities class action claim. To the extent that we are unsuccessful in defending against this claim, we may owe an amount in excess of our insurance coverage, which could have a material adverse effect on our business, financial condition, and results of operations. Further, due to rising insurance costs and changes in the insurance markets, we cannot provide any assurance that our insurance coverage will continue to be available at all or at rates or on terms similar to those presently available. Any losses not covered by insurance could have a material adverse effect on our business, financial condition, and results of operations.

We may be exposed to cybersecurity threats and breaches.

Threats to network and data security are increasingly diverse and sophisticated, such that security breaches, computer malware, and computer hacking attacks have been an increasing concern. Despite our efforts and processes in place to prevent them, our computer servers and systems may be vulnerable to cybersecurity risks, including denial-of-service attacks, physical or electronic break-ins, social engineering attacks, including phishing and business email compromise, employee theft or misuse and similar disruptions from unauthorized tampering. As techniques used to breach security change frequently and are generally not recognized until launched against a target, we may not be able to promptly detect that a cyber breach has occurred, implement security measures in a timely manner or, if and when implemented, we may not be able to determine the extent to which these measures could be circumvented.

Recent developments in the cyber threat landscape include use of AI and machine learning, as well as an increased number of cyber extortion and ransomware attacks, with the potential for higher ransom demand amounts and increasing sophistication, using a variety of ransomware techniques and methodology. Further, any adoption of AI by us or by third parties may pose new security challenges. A party who is able to compromise the security measures on our networks or the security of our infrastructure could misappropriate the proprietary or sensitive information of us, our customers, or our employees, or cause interruptions or malfunctions in our operations or our customers’ operations.

We also may be required to expend significant capital and resources to protect against such threats or to alleviate problems caused by cyber breaches in our physical or virtual security systems. The cybersecurity regulatory landscape continues to evolve and compliance with the proposed reporting requirements could further complicate our ability to resolve cyberattacks. Although we maintain insurance coverage for certain cyber risks, such coverage may be unavailable or insufficient to cover our losses. Any breaches that may occur in the future could expose us to increased risk of lawsuits, regulatory penalties, loss of existing or potential customers, damage relating to loss of proprietary information, 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. Furthermore, we hold our Bitcoin with third-party custodians. If our custodians are exposed to a cyberattack or breach, we may temporarily or permanently lose access to some or all of our Bitcoin, which would have a material adverse effect on our business, financial condition, and results of operations. See “Risks Related to Bitcoin—We may be subject to additional risks associated with holding Bitcoin for our and American Bitcoin’s account.” The cybersecurity regulatory landscape continues to evolve and compliance with the proposed reporting requirements could further complicate our ability to resolve cyberattacks. Although we maintain insurance coverage for certain cyber risks, such coverage may be unavailable or insufficient to cover our losses.

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We may face the risk of Internet-related disruptions.

Our digital infrastructure and compute offerings are dependent upon access to the Internet. We are not an Internet provider, and as such, we rely on third parties to provide us with access to the Internet. There can be no assurance that Internet providers will service our data centers or that once a provider has decided to deliver Internet connectivity to our data centers, it will continue to do so for any period of time. If we face a significant disruption in Internet connectivity, we may be required to reduce the impacted operations or cease them altogether. If this occurs, our business, financial condition, and results of operations may be materially and adversely affected.

Our business may be heavily impacted by political, social, economic, and other events and circumstances in the United States, Canada, or elsewhere.

Our business may be heavily impacted by political, social, economic, and other events and circumstances in the United States, Canada or elsewhere. These include natural disasters, pandemics (like the COVID-19 pandemic), political tensions, acts of terrorism, hostilities or the perception that hostilities may be imminent, military conflicts and acts of war (such as the Russia-Ukraine conflict) and related responses, including sanctions or other restrictive actions. In addition, shifts in political leadership, policy priorities, broader public sentiment relating to political matters, and any actual or perceived associations of our Company or certain of our business partners or affiliates with prominent political figures may, from time to time, subject us to heightened scrutiny, reputational risk, or adverse reactions from customers, investors, regulators, or other stakeholders. Further, interest rate fluctuations, inflationary issues and associated changes in monetary policy or potential economic recession, commodity prices, legislative and regulatory changes, foreign currency fluctuations, international tariffs, fluctuations in capital markets, and broad trends in industry and finance may also adversely affect our business. For example, equipment necessary for our operations and our offerings is manufactured in large part outside of the United States. There is currently significant uncertainty about the future relationship between the United States and other regions, including Canada, Mexico, China, the European Union, and others, with respect to trade policies, treaties, tariffs, and taxes. These events and circumstances are largely outside of our influence and control and, while the impact of such events or circumstances is not presently known, any of them could adversely affect our business, financial condition, and results of operations. See “Risks Related to Certain Regulations and Laws, Including Tax Laws—Our operations are subject to various regulatory, governmental, and technological uncertainties.”

We operate in the United States and Canada and may further expand our operations internationally, which may expose us to risks associated with doing business internationally.

We currently operate in the United States and Canada and may further expand our operations internationally. We also engage with third parties outside of the United States. As a result, we are and may become increasingly exposed to risks inherent in conducting business outside of the United States. These risks include the following:

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Our failure to successfully manage these risks could harm our operations and growth opportunities internationally. We may also incur significant expenses as a result of our international operations and potential expansion, and we may not be successful in converting those expenditures into increased profitability. For example, our functional currency is the U.S. dollar and most purchases are transacted in U.S. dollars; however, our Canadian operations use Canadian dollars as their functional currency, we incur costs in Canadian dollars, and we hold cash balances in Canadian dollars. We currently do not hedge our foreign exchange risk and as a result, we are, and may increasingly become, exposed to fluctuations in currency exchange rates, which could negatively affect our business, financial condition and results of operations.

Our success depends on key personnel whose continued service is not guaranteed.

We depend on the efforts of our key personnel, including our senior leadership, many of whom have strong technology, finance, real estate, and/or power expertise and industry reputations. They are important to our success for many reasons, including that they attract investors and business and investment opportunities and assist us in negotiations with investors, lenders, existing and potential customers, and industry personnel. If we lost their services, our business and investment opportunities and our relationships with lenders and other capital markets participants, existing and prospective customers, and industry personnel could suffer. As the number of our competitors increases, it becomes more likely that a competitor would attempt to hire certain of these individuals away from us. The loss of any of these key personnel would result in the loss of these and other benefits and could materially and adversely affect our business, financial condition, and results of operations.

We also depend on the talents and efforts of highly skilled technical individuals. Our success depends on our continuing ability to identify, hire, develop, motivate, and retain highly skilled technical personnel for all areas of our business. Competition in our industry for qualified technical employees is intense, and the availability of qualified technical personnel is not guaranteed or may be costly to hire. We cannot assure you that we will be able to attract or retain the personnel we require. If we are unable to identify, hire, develop, motivate, and retain such personnel, it could have a material adverse effect on our business, financial condition, and results of operations.

The pace of technological change continues to accelerate, and our inability to adapt to rapidly evolving technologies and price dynamics could adversely affect our competitiveness and results of operations.

The pace of technological change is accelerating, and the continued creation, development, and advancement of new technologies, such as AI, quantum computing, data analytics, data storage, and other emerging technologies, are transforming the industries in which we operate. These industries are characterized by rapid technological changes, new product introductions, enhancements, evolving industry standards, and price fluctuations. In order to remain competitive, we must continue to stay abreast of technological developments, invest in and deploy new hardware, equipment, and systems, require our employees to continuously learn and adapt, and integrate new technologies into our existing and future business models.

New technologies, techniques, or offerings may emerge that provide superior performance, efficiency, or cost advantages compared to the technologies we currently utilize, and we may be required to manage complex and costly transitions to such technologies to remain competitive. There can be no assurance that we will be successful, either generally or relative to our competitors, in implementing new technologies in a timely or cost-effective manner, or at all. The implementation of new technologies may result in system interruptions, failures, or operational inefficiencies, and there can be no assurance that we will realize the anticipated benefits of such investments, if any.

In addition, increased use of emerging technologies, including AI, may expose us to social, ethical, regulatory, and reputational risks, including potential liability. We must also compete for and retain skilled personnel with expertise in these technologies, including through workforce upskilling, in an increasingly competitive labor market. If we fail to effectively respond to technological change, evolving pricing dynamics, or competitive pressures, our business, financial condition, and results of operations could be materially adversely affected.

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We are a growth-stage company with an evolving business model and strategy.

We are a growth-stage company currently and although we have achieved profitable quarters in the past, we have not maintained consistent profitability from period to period, and no assurances can be made that we will achieve consistent profitability in the near future, if ever. As a result of our growth-stage profile, our operating results may fluctuate significantly from quarter to quarter due to the timing of capital expenditures, expansion initiatives, market conditions, and other factors inherent in scaling our business. Accordingly, you should consider our business prospects in light of the costs, uncertainties, delays, and difficulties frequently encountered by growth-stage companies. Potential investors should carefully consider the risks and uncertainties that growth-stage company will face, including the risk that we may be unable to successfully implement or execute our evolving business plan, adjust to changing conditions, keep pace with increased demand, or raise sufficient funds to effectuate our business plan.

We face risks associated with our current indebtedness, and our failure to service debt or remain in compliance with certain covenants may have a material adverse effect on our business, financial condition, and results of operations.

We and certain of our subsidiaries are party to various arrangements with lenders as described in more detail in this Annual Report, and we may become party to additional debt financing arrangements in the future. As of December 31, 2025, we had approximately $411.1 million of outstanding debt. Our level of indebtedness could have the effect of, among other things, reducing our flexibility to respond to changing business and economic conditions. In addition, the increased amount of liquidity and capital required to pay interest on our indebtedness could reduce funds available for capital expenditures, growth initiatives and other activities, which may create competitive disadvantages for us relative to other companies with lower debt levels.

Agreements governing our current debt obligations, and any debt we may incur in the future, may contain financial covenants and covenants that restrict our and our subsidiaries’ ability to take certain corporate and operational actions. As a result of these covenants, we can be limited in the manner in which we conduct our business, and we may be unable to engage in favorable business activities or finance future operations or capital needs. Any violation by us of any of these covenants could provide the lender with the ability to accelerate the maturity of the indebtedness and exercise a variety of remedies, including foreclosing on any collateral securing the debt.

Risks Related to Bitcoin, Including ASIC Compute

We and our consolidated subsidiary, American Bitcoin, are highly concentrated in Bitcoin. Bitcoin is a highly volatile asset, and fluctuations in the price of Bitcoin have in the past influenced, and are likely to continue to influence, our business, financial condition, and results of operations and the market price of our common stock.

Currently, our investments are highly concentrated in Bitcoin, including through the Bitcoin held in our strategic reserve and through our consolidated subsidiary, American Bitcoin, which is a Bitcoin accumulation platform with its own strategic Bitcoin reserve. We also generate revenue from Bitcoin rewards that are earned through mining in our facilities, primarily by American Bitcoin. American Bitcoin also acquires additional Bitcoin through at-market purchases and strategic transactions to build its Bitcoin reserve. However, Bitcoin is a highly volatile asset, and fluctuations in the price of Bitcoin have in the past influenced, and are likely to continue to influence, our and American Bitcoin’s business, financial condition, and results of operations and the market price of our common stock and American Bitcoin’s Class A common stock. Our and American Bitcoin’s business, financial condition, and results of operations and the market price of our common stock and American Bitcoin’s Class A common stock may be adversely affected if the price of Bitcoin decreased substantially, including as a result of:

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In addition, we and American Bitcoin have adopted ASU 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”). ASU 2023-08 requires us and American Bitcoin to measure our Bitcoin holdings at fair value in our balance sheets, with gains and losses in the fair value of our Bitcoin recognized in net income for each reporting period. Therefore, volatility and fluctuations in the price of Bitcoin has caused, and may in the future cause, our and American Bitcoin’s quarterly results to fluctuate significantly, which could have an adverse effect on our and American Bitcoin’s financial results and the value of our  and American Bitcoin’s securities.

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We may be subject to additional risks associated with holding Bitcoin for our and American Bitcoin’s account.

The Bitcoin we hold and that our consolidated subsidiary, American Bitcoin, holds, are not insured and or held at a banking institution or a member of the Federal Deposit Insurance Corporation (“FDIC”) or the Securities Investor Protection Corporation (“SIPC”). Therefore, such Bitcoin are not subject to the protections enjoyed by depositors with FDIC or SIPC member institutions. Instead, we and American Bitcoin safeguard and keep our Bitcoin private by utilizing storage solutions provided by custodians, including NYDIG Trust Company LLC (“NYDIG”), BitGo Trust Company Inc. (“BitGo”), and Coinbase Custody Trust Company, LLC (“Coinbase Custody”), and may also temporarily store Bitcoin on digital asset trading platforms or pledge Bitcoin to counterparties in connection with commercial arrangements.

Although our and American Bitcoin’s custodians, digital asset trading platforms, counterparties, and other third-party providers employ various security measures to mitigate the risk of loss, damage, or theft, neither they nor we can guarantee that such events will not occur, whether as a result of cyberattacks, malicious activity, computer or human error, natural disasters, terrorist acts, or other events. Digital asset trading platforms and counterparties have experienced hacks, security breaches, insolvencies, and operational failures in the past, including instances where platforms were undercapitalized or over-exposed, such as FTX, and may lack adequate insurance or otherwise be unable or unwilling to compensate us or American Bitcoin for losses. In addition, malicious actors may be able to intercept or divert our or American Bitcoin’s Bitcoin during transactions, transfers, or pledging activities. Given the significant amount of Bitcoin we and American Bitcoin hold and expect to continue to hold, any actual or perceived loss, whether temporary or permanent, could adversely affect our and American Bitcoin’s business, financial condition, and results of operations. Furthermore, as Bitcoin transactions are generally irreversible, any Bitcoin that is stolen, lost, or incorrectly transferred may be irretrievable, leaving us or American Bitcoin with limited or no effective means of recovery.

Bitcoin may only be controlled by the possessor of both the unique public key and private key relating to the digital wallet in which such Bitcoin are held. While we and American Bitcoin rely on third-party providers to safeguard private keys, to the extent a private key is lost, destroyed, or otherwise compromised and no backup is accessible, we or American Bitcoin will be unable to access the related Bitcoin, and such private key cannot be restored by the Bitcoin network. Any loss of private keys relating to digital wallets used to store our or American Bitcoin’s Bitcoin could adversely affect our and American Bitcoin’s business, financial condition, and results of operations.

We and American Bitcoin also face credit and counterparty risk in connection with custodied, stored, or pledged Bitcoin. For example, we currently pledge Bitcoin to Coinbase in connection with our Coinbase credit facility and American Bitcoin currently pledges Bitcoin to BITMAIN in connection with the purchase of mining equipment. Our and American Bitcoin’s ability to monitor the financial condition and operational stability of counterparties such as Coinbase and BITMAIN is limited, and any recovery efforts could be time-consuming, costly, and uncertain. If any such counterparty were to fail to perform its obligations, experience financial distress, or become subject to insolvency or bankruptcy proceedings, we or American Bitcoin could face delays in, or losses associated with, the recovery of our or American Bitcoin custodied, stored, or pledged Bitcoin, which could have a material adverse effect on our and American Bitcoin’s business, financial condition, and results of operations.

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Although we and American Bitcoin believe that existing law and the terms and conditions of our custodial arrangements would not result in Bitcoin held by our custodians being considered part of a custodian’s bankruptcy estate, applicable insolvency law is not fully developed with respect to digital assets held in custodial accounts. If our or American Bitcoin’s custodially held Bitcoin were nevertheless considered property of a bankruptcy estate, we or American Bitcoin could be treated as a general unsecured creditor, which could inhibit our or American Bitcoin’s ability to exercise ownership rights with respect to such Bitcoin and have a material adverse effect on our and American Bitcoin’s business, financial condition and results of operations.

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We may be subject to risks associated with holding World Liberty Financial, Inc. tokens.

In addition to Bitcoin, we have acquired 100 million World Liberty Financial, Inc. tokens (the “WLFI Tokens”), which are subject to many of the same risks applicable to Bitcoin and other digital assets, including price volatility, limited liquidity, regulatory uncertainty, technological risks, cybersecurity risks, and changes in market sentiment. Unlike Bitcoin, our WLFI Tokens are subject to an indefinite lock-up, with a minimum of twelve months from the purchase date, and may not be freely transferable. The WLFI Tokens are also subject to the governance procedures of the World Liberty Financial, Inc. protocol, which may be amended or administered in the discretion of World Liberty Financial, Inc. or its affiliates. As a result, we may have limited ability to influence decisions affecting the WLFI Tokens or its underlying protocol, and the value, utility, or transferability of the WLFI Tokens could be adversely affected by governance actions or other decisions beyond our control.

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From time to time, we have entered, and we and American Bitcoin may continue to enter, into certain hedging transactions to generate income and partially offset volatility in Bitcoin prices, which may expose us and American Bitcoin to risks associated with such transactions.

From time to time, we have entered, and we and American Bitcoin may continue to enter, into certain hedging transactions, which may expose us or American Bitcoin to various risks, including counterparty risk. Hedging transactions may limit the opportunity for gains or result in realized losses, margin requirements, or liquidity constraints. For example, selling call options does not protect us from declines in the price of Bitcoin and may require us to deliver Bitcoin at a predetermined strike price if the market price exceeds such strike price, capping our participation in Bitcoin price appreciation above the applicable strike price. Moreover, it may not be possible to hedge against a particular fluctuation that is so generally anticipated by the markets that a hedging transaction at an acceptable price is unavailable. In light of these and other factors, we or American Bitcoin may not be successful in mitigating our exposure to volatile Bitcoin prices through any hedging transactions we or American Bitcoin undertake.

If our consolidated subsidiary, American Bitcoin, fails to grow its hashrate, it may be unable to compete, and our and American Bitcoin’s business, financial condition, and results of operations could suffer.

Generally, a Bitcoin miner’s chance of solving a block on the Bitcoin blockchain and earning a Bitcoin reward is a function of the miner’s hashrate (i.e., the amount of computing power devoted to supporting the Bitcoin blockchain), relative to the global network hashrate. As demand for Bitcoin has increased, the global network hashrate has increased, and to the extent more adoption of Bitcoin occurs, we would expect the demand for Bitcoin would increase, drawing more mining companies into the industry and further increasing the global network hashrate. As new and more powerful miners are deployed, the global network hashrate will continue to increase, meaning a miner’s percentage of the total daily rewards will decline unless it deploys additional hashrate at pace with the growth of global hashrate. Accordingly, to compete, we believe that American Bitcoin will need to continue to acquire new miners, both to replace those lost to ordinary wear-and-tear and other damage, and to increase hashrate to keep up with a growing global network hashrate. However, there can be no assurance that American Bitcoin will have the resources to acquire new miners and increase hashrate in order to maintain the profitability of its mining operations. See “—We may be unable to purchase miners at scale or face delays or difficulty in obtaining new miners at scale.”

Furthermore, predicting the growth in network hashrate is extremely difficult. Generally, we would expect hashrate increases to be correlated with increases in Bitcoin price, but that has not always been the case, including recently during 2022 and 2023. To the extent that hashrate increases but the price of Bitcoin does not, there can be no assurance that American Bitcoin would be able to recover its investment in the hardware and processing power required to expand or upgrade its mining operations, and the results of our ASIC compute operations will suffer.

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Our consolidated subsidiary, American Bitcoin, may be unable to purchase miners at scale or face delays or difficulty in obtaining new miners at scale.

The ASIC compute operations mainly conducted through our consolidated subsidiary, American Bitcoin, can only be profitable if the costs, inclusive of hardware and electricity costs, associated with mining Bitcoin are lower than the price of the Bitcoin mined at the time of sale. As the cost of obtaining new miners increases, the cost of producing Bitcoin also increases. For example, miners experience ordinary wear-and-tear from operation and may also face more significant malfunctions caused by factors which may be beyond American Bitcoin’s control. Additionally, as technology evolves, American Bitcoin may acquire newer models of miners to remain competitive in the market. The continual upgrade and refresh of mining machines requires substantial capital investment, and American Bitcoin may face challenges in doing so on a timely basis based on the price and availability of new miners and its access to adequate capital resources.

In the past, we have observed periods of shortage in new miners available for purchase and a delay in delivery schedules for new miner purchases. There is no assurance that miner manufacturers or any other equipment manufacturers will be able to keep pace with potential surges in demand for mining equipment. It is uncertain how manufacturers will respond to increased global demand and whether they fulfill purchase orders fully and in a timely manner. Supply chain issues or geopolitical matters, including the relationship of the United States and Canada between each other and with China and other countries may also impact equipment manufacturers’ ability to fully and timely fulfill purchase orders. In the event that miner manufacturers or other suppliers are not able to keep pace with, or fail to satisfy, demand, American Bitcoin may not be able to purchase miners or other equipment in sufficient quantities or on the delivery schedules required to meet its business needs. In the past, including for American Bitcoin’s recent purchase of BITMAIN Antminer S21+ miners, miner manufacturers have required advance deposits for miner purchases. If this continues in the future, American Bitcoin may need to tie up significant amounts of capital for prolonged periods before it receives and is able to deploy purchased miners to generate revenue. Should any suppliers default on purchase agreements with American Bitcoin, it may need to pursue recourse under international jurisdictions, which could be costly and time-consuming. The outcome of any actions initiated in such international jurisdictions, and American Bitcoin’s ability to enforce judgments (if any) issued in its favor on such jurisdictions is inherently uncertain given differences in legal systems, biases against foreign litigants in certain jurisdictions, and other factors outside our control.  Furthermore, there is no guarantee that American Bitcoin would succeed in recovering any of the deposits paid for such purchases, which could materially and adversely affect our and American Bitcoin’s business, financial condition, and results of operations.

Our and American Bitcoin’s reliance on third-party mining pool service providers, including Foundry and Luxor, for our mining revenue payouts may have a negative impact on our and American Bitcoin’s business, financial condition, and results of operations.

We and American Bitcoin receive Bitcoin rewards from our mining activity through third-party mining pool operators, including Foundry and Luxor. Mining pools allow miners to combine their processing power, increasing their chances of solving a block and getting paid by the network. We and American Bitcoin provide computing power to mining pools, which use this computing power to operate nodes and validate blocks on the blockchain. The pools then distribute our or American Bitcoin’s pro-rata share of Bitcoin mined based on the computing power we contribute. Under our and American Bitcoin’s mining pool agreements with Foundry and Luxor, our daily payout is calculated based on the hashrate contribution delivered to the pool in the applicable calculation period, after deducting the applicable pool fee, if any. Our and American Bitcoin’s pool fees in relation to these agreements is currently below 1.0% of our daily payout.

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Should one of our or American Bitcoin’s pool operator’s systems suffer downtime due to a cyberattack, software malfunction or other similar issues, it will negatively impact our or American Bitcoin’s ability to receive Bitcoin mining rewards. Furthermore, we and American Bitcoin are dependent on the accuracy of the mining pool operators’ record keeping and internal controls to prevent any fraud and to accurately record the total processing power provided by us, American Bitcoin, and other mining pool participants for a given Bitcoin mining application in order to assess the proportion of that total processing power we provided. While we and American Bitcoin have internal methods of tracking both our processing power provided and the total used by the pool, the mining pool operator uses its own recordkeeping to determine our proportion of a given reward. We and American Bitcoin have little means of recourse against mining pool operators if we determine the proportion of the reward paid out to us or American Bitcoin by the mining pool operator is incorrect, other than leaving the pool. If we or American Bitcoin are unable to consistently obtain accurate proportionate rewards from our mining pool operators, we or American Bitcoin may experience reduced reward for our efforts, which would have an adverse effect on our and American Bitcoin’s business, financial condition, and results of operations.

The further development and acceptance of the Bitcoin network and other digital assets is subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or acceptance of Bitcoin and other digital asset systems may adversely affect our and American Bitcoin’s business, financial condition, and results of operations.

The use of digital assets to, among other things, buy and sell goods and services and complete transactions, is part of a new and rapidly evolving industry that employs digital assets, including Bitcoin, based upon a computer-generated mathematical and/or cryptographic protocol. The growth of this industry in general, and the use of Bitcoin in particular, is subject to a high degree of uncertainty, and the slowing or stopping of the development or acceptance of developing protocols may occur unpredictably.

During 2022 and early 2023, some well-known digital asset market participants, including Celsius Network, Voyager Digital Ltd., Three Arrows Capital, and Genesis Global Holdco LLC, declared bankruptcy, resulting in a loss of confidence in participants of the digital asset ecosystem, negative publicity surrounding digital assets more broadly, decreased liquidity, and extreme price volatility. Even if there was no direct material impact on our business from such bankruptcies, we have been and may continue to be impacted indirectly, including through American Bitcoin.

Furthermore, the closure and temporary shutdown of major digital asset exchanges and trading platforms, such as FTX, due to fraud or business failure, has disrupted investor confidence in digital assets and led to a rapid escalation of oversight of the digital asset industry. Thus, the failures of key market participants and systemic contagion risk are expected to, as a consequence, invite stricter regulatory scrutiny. This could have a negative impact on further development and acceptance of digital asset networks and digital assets, including Bitcoin.

Other factors that could affect further development and acceptance of digital asset networks and other digital assets include:

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The outcome of these and other factors could have negative effects on our and American Bitcoin’s business, financial condition, and results of operations, as well as potentially negative effect on the value of any Bitcoin we or American Bitcoin mine or otherwise acquire or hold for our own accounts.

The Bitcoin reward for successfully uncovering a block will halve several times in the future and Bitcoin’s value may not adjust to compensate us or American Bitcoin for the reduction in the rewards we or American Bitcoin receive from our mining efforts, mainly through American Bitcoin.

Halving is a process incorporated into many proof-of-work consensus algorithms that reduces the coin reward paid to miners over time according to a pre-determined schedule. This reduction in reward spreads out the release of digital assets over a long period of time resulting in an ever smaller number of coins being mined. At a predetermined block, the mining reward is cut in half, hence the term “halving.” For example, the mining reward for Bitcoin declined from 6.25 to 3.125 bitcoin on April 19, 2024. This process is scheduled to occur once every 210,000 blocks, until the total amount of Bitcoin rewards issued reaches 21 million.

As the number of Bitcoin awarded for solving a block in a blockchain decreases, our and American Bitcoin’s ability to achieve profitability through our ASIC compute operations becomes more difficult. While the Bitcoin price has had a history of price fluctuations around the halving of its rewards, there is no guarantee that in future periods when a halving occurs the price change will be favorable or would compensate for the reduction in mining reward. If a corresponding and proportionate increase in the trading price of Bitcoin or a proportionate decrease in mining difficulty does not follow these anticipated halving events, the revenue we earn from our ASIC compute operations, mainly through American Bitcoin, would see a corresponding decrease, which would have a material adverse effect on our and American Bitcoin’s business, financial condition, and results of operations. If the award of Bitcoin rewards for solving blocks and transaction fees are not sufficiently high, we and American Bitcoin may not have an adequate incentive to continue mining and may decrease or cease our ASIC compute operations.

The development and acceptance of competing blockchain platforms or technologies may cause consumers to use alternative distributed ledgers or other alternatives.

The development and acceptance of competing blockchain platforms or technologies may cause industry participants and consumers to abandon Bitcoin. As Bitcoin is the only digital asset we and American Bitcoin mine, we and American Bitcoin could face difficulty adapting to emergent digital ledgers, blockchains or alternatives thereto. This could prevent us and American Bitcoin from realizing the anticipated profits from our investments. Such circumstances could have a material adverse effect on our and American Bitcoin’s business, financial condition, and results of operations and the value of any Bitcoin we or American Bitcoin mine or otherwise acquire or hold for our own accounts.

Our and American Bitcoin’s operations, investment strategies, and profitability may be adversely affected by competition from other methods of investing in Bitcoin.

Through American Bitcoin, we compete with other users and/or companies that are mining Bitcoin and 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 such as exchange-traded funds. For instance, on January 10, 2024, the SEC approved the listing and trading of spot Bitcoin, which offers investors another alternative to gain exposure to digital assets, which could result in a decline in the trading price of Bitcoin as well as a decline in the value of such securities relative to the value of Bitcoin holdings.

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Investors may view our common stock or American Bitcoin’s Class A common stock as an alternative to an investment in an exchange-traded products (“ETPs”), and choose to purchase shares of a spot Bitcoin ETP instead of such securities, which could impact the price of our common stock and/or American Bitcoin’s Class A common stock. They may do so for a variety of reasons, including if they believe that ETPs offer a “pure play” exposure to Bitcoin that is generally not subject to federal income tax at the entity level as we or American Bitocin will be, or the other risk factors applicable to an operating business. Additionally, unlike spot Bitcoin ETPs, we and American Bitcoin (i) do not seek for our securities to track the value of the underlying Bitcoin we hold before payment of expenses and liabilities, (ii) do not benefit from various exemptions and relief under the Exchange Act, including Regulation M, and other securities laws, which enable ETPs to continuously align the value of their shares to the price of the underlying assets they hold through share creation and redemption, (iii) are Delaware corporations rather than statutory trusts, and do not operate pursuant to a trust agreement that would require us to pursue one or more stated investment objectives, and (iv) are not required to provide daily transparency as to our Bitcoin holdings or our daily net asset value.

Market and financial conditions, and other conditions beyond our and American Bitcoin’s control, may make it more attractive to invest in other financial vehicles, or to invest in Bitcoin directly, which could limit the market for shares of our common stock and American Bitcoin’s Class A common stock and reduce the liquidity of these securities. The emergence of other financial vehicles and ETPs have been scrutinized by regulators and such scrutiny and the negative impressions or conclusions resulting from such scrutiny could be applicable to us or American Bitcoin and impact our and American Bitcoin’s ability to successfully pursue our respective strategies or American Bitcoin’s ability to operate at all, or to establish or maintain markets for our or American Bitcoin’s securities. Such circumstances could have a material adverse effect on our and American Bitcoin’s business, financial condition, and results of operations and potentially the value of any Bitcoin we or American Bitcoin mine or otherwise acquire or hold for our own accounts.

The characteristics of Bitcoin have been, and may in the future continue to be, exploited to facilitate illegal activity such as fraud, money laundering, tax evasion, and ransomware scams. Furthermore, the exchanges on which Bitcoin trades are relatively new and, in most cases, largely unregulated and may therefore be more exposed to fraud and failure than established, regulated exchanges for other assets. Such circumstances may result in a reduction in the price of Bitcoin and can adversely affect our and American Bitcoin’s business, financial condition, and results of operations.

Bitcoin and the exchanges on which Bitcoin trades are relatively new and, in most cases, largely unregulated. Certain characteristics, including the speed with which Bitcoin transactions can be conducted, the ability to conduct transactions without the involvement of regulated intermediaries, the ability to engage in transactions across multiple jurisdictions, the irreversible nature of certain Bitcoin transactions, and the encryption technology that anonymizes these transactions make Bitcoin, and digital currencies generally, particularly susceptible to use in illegal activity such as fraud, money laundering, tax evasion, and ransomware scams. Furthermore, many Bitcoin exchanges do not typically 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, Bitcoin exchanges, including prominent exchanges handling a significant portion of the volume of Bitcoin trading.

While we and American Bitcoin continue to maintain policies and procedures reasonably designed to promote compliance with applicable anti-money laundering and sanctions laws, if we or American Bitcoin are found to have transacted with bad actors that have used Bitcoin to launder money or persons subject to sanctions, we or American Bitcoin may be subject to regulatory proceedings and may be prohibited or restricted from engaging in further transactions or dealings in Bitcoin. Furthermore, negative perception, a lack of stability in the broader Bitcoin markets, and the closure or temporary shutdown of Bitcoin exchanges due to fraud, business failure, hackers, malware, or government-mandated regulation may reduce confidence in Bitcoin and result in greater volatility in the prices of Bitcoin. A number of Bitcoin exchanges have been closed due to fraud, failure, or security breaches. In many of these instances, the customers of such Bitcoin exchanges were not compensated or made whole for the partial or complete losses of their account balances in such Bitcoin exchanges. To the extent investors view our or American Bitcoin’s securities as linked to the value of our or American Bitcoin’s Bitcoin holdings, such a negative perception of Bitcoin exchanges could have a material adverse effect on the market price of our common stock, the market price of American Bitcoin’s Class A common stock, and/or our and American Bitcoin’s business, financial condition, and results of operations.

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It may be illegal now, or in the future, to acquire, own, hold, sell, or use Bitcoin or other digital assets, participate in blockchains or utilize similar digital assets in one or more countries.

Although currently digital assets generally are not regulated or are lightly regulated in most countries, countries such as China have taken harsh regulatory action to curb the use of digital assets and may continue to take regulatory action in the future that could severely restrict the right to acquire, own, hold, sell, or use these digital assets or to exchange them for fiat currency. For example, in 2021 China instituted a blanket ban on all digital asset mining and transactions, including overseas digital asset exchange services taking place in China, effectively making all digital asset-related activities illegal in China. In certain nations, it is illegal to accept payment in Bitcoin or other digital assets for consumer transactions, and banking institutions are barred from accepting deposits of Bitcoin. Such restrictions may adversely affect us and American Bitcoin as the large-scale use of Bitcoin as a means of exchange is presently confined to certain regions. Any of these circumstances could have a material adverse effect on our and American Bitcoin’s business, financial condition, results of operations and the value of any Bitcoin we or American Bitcoin mine or otherwise acquire or hold for our own accounts, ultimately harming our investors.

A failure to properly monitor and upgrade the Bitcoin network’s protocol could damage that network and an investment in our and American Bitcoin’s securities.

As an open-source project, Bitcoin does not generate revenues for its contributors, and contributors are generally not compensated for maintaining and updating the Bitcoin network protocol. The lack of guaranteed financial incentives for contributors to maintain or develop the Bitcoin network and the lack of guaranteed resources to adequately address emerging issues with the Bitcoin network may reduce incentives to address the issues adequately or in a timely manner. To the extent that contributors fail to adequately update and maintain the Bitcoin network protocol, there may be a material adverse effect on our or American Bitcoin’s business, financial condition, results of operations, and the value of any Bitcoin we or American Bitcoin mine or otherwise acquire or hold for our own accounts.

There is a possibility of Bitcoin mining algorithms transitioning to “proof of stake” validation, which could make us and American Bitcoin less competitive and adversely affect our and American Bitcoin’s business, financial condition, and results of operations.

“Proof of stake” is an alternative method in validating digital asset transactions. Should the Bitcoin network shift from the current “proof of work” validation method to a “proof of stake” validation method, mining would require less energy, which may render companies, such as us and American Bitcoin, less competitive. Furthermore, if American Bitcoin’s miners or our other mining infrastructure cannot be modified to accommodate changes in rule or protocol of the Bitcoin network, our and American Bitcoin’s business, financial condition, and results of operations will be significantly affected.

If a malicious actor or botnet obtains control of a majority of the processing power active on any digital asset network, including the Bitcoin network, the blockchain may be manipulated in a manner that adversely affects us and American Bitcoin.

Miners ceasing operations would reduce the collective processing power on the Bitcoin network, which would adversely affect the confirmation process for transactions (i.e., temporarily decreasing the speed at which blocks are added to the Bitcoin blockchain until the next scheduled adjustment in difficulty for block solutions). If a reduction in processing power occurs, the Bitcoin network may be more vulnerable to a malicious actor obtaining control in excess of 50% of the processing power on the Bitcoin network.

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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 any digital asset network, including the Bitcoin network, it may be able to alter the blockchain by constructing fraudulent blocks or preventing certain transactions from completing in a timely manner, or at all. In such alternate blocks, the malicious actor or botnet could control, exclude, or modify the ordering of transactions, though it could not generate new digital assets or transactions using such control. Using alternate blocks, the malicious actor could “double-spend” its own digital assets (i.e., spend the same digital assets in more than one transaction) and prevent the confirmation of other users’ transactions for so long as it maintains control. To the extent that such malicious actor or botnet does not yield its control of the processing power on the Bitcoin or other network, or the Bitcoin or other community does 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, and could exceed, 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 impact our and American Bitcoin’s business, financial condition, and results of operations.

Forks in the Bitcoin network may occur in the future, which may affect the value of Bitcoin held by us and American Bitcoin.

Contributors can propose refinements or improvements to the Bitcoin network’s source code that alter the protocols and software that govern the Bitcoin network and the properties of Bitcoin, including the irreversibility of transactions and limitations on the mining of new Bitcoin. This is known as a “fork.” In the event a developer or group of developers proposes modifications to the Bitcoin network that are not accepted by a majority of miners and users, but that are nonetheless accepted by a substantial plurality of miners and users, two or more competing and incompatible blockchain implementations could result running in parallel, yet lacking interchangeability and necessitating exchange-type transactions to convert currencies between the two forks. This is known as a “hard fork.”

The value of Bitcoin after the creation of a fork is subject to many factors, including the value of the fork product, market reaction to the creation of the fork product, and the occurrence of additional forks in the future. It may be unclear following a fork which fork represents the original asset and which is the new asset. If we or American Bitcoin hold Bitcoin at the time of a hard fork into two digital assets, industry standards would dictate that we or American Bitcoin would be expected to hold an equivalent amount of the old and new assets following the fork. However, we or American Bitcoin may not be able, or it may not be practical, to secure or realize the economic benefit of the new asset for various reasons. For instance, we or American Bitcoin may determine that there is no safe or practical way to custody the new asset, that trying to do so may pose an unacceptable risk to our holdings in the old asset, or that the costs of taking possession and/or maintaining ownership of the new digital asset exceed the benefits of owning the new digital asset. Additionally, laws, regulations, or other factors may prevent us or American Bitcoin from benefiting from the new asset even if there is a safe and practical way to custody and secure the new asset. As such, we or American Bitcoin may not be able to realize the economic benefit of a fork, either immediately or ever, which could adversely affect the value of the Bitcoin we and American Bitcoin hold as well as our and American Bitcoin’s business, financial condition, and results of operations.

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Intellectual property rights claims may adversely affect the operation of some or all digital asset networks.

Third parties may assert intellectual property claims relating to the holding and transfer of digital assets, including Bitcoin, and their source code. Regardless of the merit of any intellectual property or other legal action, any threatened action that reduces confidence in some or all digital asset networks’ long-term viability or the ability of end-users to hold and transfer digital assets, including Bitcoin, may adversely affect the value of the Bitcoin we and American Bitcoin hold as well as our and American Bitcoin’s business, financial condition, and results of operations. Additionally, a meritorious intellectual property claim could prevent us, American Bitcoin, and other end-users from accessing some or all digital asset networks or holding or transferring their digital assets. As a result, an intellectual property claim against us, American Bitcoin, or other large digital asset network participants could adversely affect our and American Bitcoin’s business, financial condition, and results of operations.

Risks Related to Certain Regulations and Laws, Including Tax Laws

Our operations are subject to various complex legal, regulatory, governmental, and technological uncertainties.

As of December 31, 2025, our platform included 19 sites across Canada and the United States: five ASIC compute, hosting, and managed services sites in Alberta, New York, and Texas; five HPC data centers in British Columbia and Ontario; four power generation assets in Ontario; one non-operational site in Alberta; three sites under development in Texas and Illinois; and one site under construction in Louisiana. We also have Highrise AI, our AI Cloud business, and American Bitcoin, our Bitcoin accumulation platform. Our various lines of business operating across multiple jurisdictions subject us to extensive laws, rules, regulations, policies, orders, determinations, directives, and legal and regulatory interpretations and guidance.

Furthermore, many of these legal and regulatory regimes were adopted prior to the advent of the internet, mobile technologies, digital assets, AI, and/or related technologies. As a result, some applicable laws and regulations do not contemplate or address unique issues associated with the AI and crypto economies, are subject to significant uncertainty, and vary widely across U.S. and Canadian federal, state, provincial, and local and international jurisdictions. These legal and regulatory regimes, including the laws, rules, and regulations thereunder, evolve frequently and may be modified, interpreted, and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another. For example, the Digital Asset Market Clarity Act of 2025 (the “CLARITY Act”) was passed by the U.S. House of Representatives in July 2025, which would, if enacted, regulate digital asset markets and digital asset trading platforms in the United States. It is difficult to predict whether, or when, the CLARITY Act or another bill that would regulate digital asset markets and digital asset trading platforms may become law or whether any new law will lead to Congress granting additional authorities to the SEC or other regulators, what the nature of such additional authorities might be, how additional legislation and/or regulatory oversight might impact the ability of digital asset markets to function or how any new regulations or changes to existing regulations might impact the value of digital assets generally and bitcoin specifically. The consequences of increased federal regulation of digital assets and digital asset activities could have a material adverse effect on our business, financial condition, and results of operations.

Moreover, the complexity, volume, and evolving nature of our business and of the applicable laws and regulations increase the risk that we may inadvertently fail to comply with one or more requirements, even where we are acting in good faith, or that we are required to exercise judgment as to whether certain laws, rules, and regulations apply to us, and it is possible that governmental bodies and regulators may disagree with our conclusions. To the extent we have not complied, or are deemed to have not complied, with such laws, rules, and regulations, we could be subject to significant fines, revocation of licenses, limitations on our offerings, reputational harm, and other regulatory consequences, each of which may be significant and could adversely affect our business, financial condition, and results of operations.

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Additionally, various governmental and regulatory bodies, including legislative and executive bodies, in the United States, Canada, and in other countries may adopt new laws and regulations, the direction and timing of which may be influenced by changes in the governing administrations and major events in the economy. For example, tariffs that are, or may in the future be, imposed by the United States on imports from certain countries and current or potential counter-tariffs in response, could lead to increased costs and supply chain disruptions. Penalties for non-compliance with any of these laws or regulations may be significant. If we are not able to navigate these changes, it could have a material adverse effect on our business, financial condition, and results of operations.

Due to our business activities, we may be subject to examinations, oversight, reviews, investigations, and inquiries, many of which have broad discretion to audit and examine our business. Moreover, laws and regulations related to economic sanctions, export controls, anti-bribery and anti-corruption, and other international activities can restrict or limit our ability to engage in transactions or dealings with certain counterparties in, or with, certain countries or territories or in certain activities. We cannot guarantee compliance with all such laws and regulations and failure to comply with such laws and regulations could expose us to fines, penalties, and/or costly and extensive investigations. Any new laws, regulations, or interpretations may result in additional litigation, regulatory investigations, and enforcement or other actions, including preventing or delaying if and how we provide our offerings. Adverse changes to, or our failure to comply with, any laws and regulations may have an adverse effect on our business, financial condition, and results of operations.

We may be subject to substantial environmental or energy regulation and may be adversely affected by legislative or regulatory changes.

Our business is subject to extensive U.S. and Canadian federal, state, provincial, and local laws. Compliance with, or changes to, the requirements under these legal and regulatory regimes may cause us to incur significant additional costs or adversely impact our ability to compete on favorable terms with competitors. Our plans and strategic initiatives are based, in part, on our understanding of current environmental and energy regulations, policies, and initiatives. If new regulations are imposed, or if existing regulations are modified, the assumptions made underlying our plans and strategic initiatives may be inaccurate, and we may incur additional costs to adapt our plans, if we are able to adapt them at all, to such changes. Failure to comply with such requirements could result in the shutdown of a non-complying facility, the imposition of liens, fines, and/or civil or criminal liability, costly litigation, or substantial delays or modifications to our operations or strategic initiatives. Changes to these laws and regulations could result in temporary or permanent restrictions on the development or operation of our facilities or restrictions on their use. Compliance with, or opposing such regulation, may be costly. In addition, we may be responsible for any on-site liabilities associated with the environmental condition of facilities that we have acquired, leased, developed, or sold, regardless of when the liabilities arose and whether they are now known or unknown.

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In addition, there continues to be a lack of consistent environmental legislation, which creates economic and regulatory uncertainty for our business because AI and ASIC compute, with their energy demand, may become targets for future environmental and energy regulation. For example, governmental authorities in the past have sought to restrict data center development based on environmental considerations, citing concerns about energy usage and requiring new data centers to meet energy efficiency requirements. Recently, local regulators, public service commissions, and utility authorities have engaged in deeper analysis and assessment of risk to ratepayers and grid reliability in connection with large data center and high-load energy users, which may result in heightened scrutiny, additional approval requirements, cost-allocation conditions, or limitations on power availability for such projects. Rapid changes in legislation, increased regulation, or conflicting requirements in regulations could impose significant costs on us and our suppliers, including costs related to increased energy requirements, capital equipment, environmental monitoring and reporting, and other costs to comply with such regulations. In addition, certain customers, counterparties, or other third parties may adopt, promote, or commit to enhanced community engagement, sustainability, or local impact frameworks in connection with data center development, which may shift expectations, raise costs, increase permitting complexity, extend timelines, or require additional commitments or expenditures beyond those required by law. Further, any future climate change regulations could also negatively impact our ability to compete with companies situated in areas not subject to such limitations. Given the political significance and uncertainty around the impact of climate change and how it should be addressed, we cannot predict how legislation and regulation will affect our business, financial condition, and results of operations. Even without such regulation, adverse publicity, increased scrutiny, or changing expectations from stakeholders with respect to our practices and the impacts of climate change may result in additional costs or risks and could harm our reputation. Any of the foregoing could result in a material adverse effect on our business, financial condition, and results of operations.

Our interactions with a blockchain may expose us to specially designated nationals (“SDN”) or blocked persons and new legislation or regulation could adversely impact our business or the market for digital assets.

The Office of Financial Assets Control (“OFAC”) of the U.S. Department of Treasury 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 or American Bitcoin may inadvertently and without our knowledge engage in transactions with persons named on OFAC’s SDN list. We and American Bitcoin have procedures in place designed to prevent transactions with such individuals on the SDN list, and we and American Bitcoin take commercially reasonable steps to avoid such transactions, but we or American Bitcoin may not be adequately capable of determining the ultimate identity of the individual with whom we transact with respect to transacting in Bitcoin. Moreover, there is a risk that some bad actors will continue to attempt to use digital assets, including Bitcoin, as a potential means of avoiding federally imposed sanctions.

We and American Bitcoin are unable to predict the nature or extent of new and proposed legislation and regulation affecting the digital asset industry, or the potential impact of the use of Bitcoin or other digital assets by SDN or other blocked or sanctioned persons, which could have material adverse effects on our and American Bitcoin’s business, financial condition, and results of operations and our industry more broadly. Further, we or American Bitcoin may be subject to investigations, administrative or court proceedings, and civil or criminal monetary fines and penalties as a result of any enforcement actions, all of which could harm our and American Bitcoin’s business, financial condition, and results of operations.

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The application of the U.S. Commodities Exchange Act of 1936, as amended (the “CEA”) and the regulations promulgated thereunder to our business is unclear and is subject to change in a manner that is difficult to predict.

To the extent we become or are deemed to be subject to regulation by the U.S. Commodity Futures Trading Commission (“CFTC”) in connection with our or American Bitcoin’s business activities, we may incur additional regulatory obligations and compliance costs, which may be significant. The CFTC has stated, and judicial decisions involving CFTC enforcement actions have confirmed, that Bitcoin and other digital assets fall within the definition of a “commodity” under the CEA, and the regulations promulgated by the CFTC thereunder (“CFTC Rules”). As a result, the CFTC has general enforcement authority to police against manipulation and fraud in the spot markets for Bitcoin and other digital assets. From time to time, manipulation, fraud, and other forms of improper trading by other participants involved in the markets for Bitcoin and other digital assets have resulted in, and may in the future result in, CFTC investigations, inquiries, enforcement action, and similar actions by other regulators, government agencies, and civil litigation. Such investigations, inquiries, enforcement actions, and litigation may cause negative publicity for Bitcoin and other digital assets, which could adversely impact mining profitability, the value of such assets, and the price of our common stock and American Bitcoin’s Class A common stock.

In addition to the CFTC’s general enforcement authority, the CFTC has regulatory and supervisory authority with respect to commodity futures, options, and/or swaps (“Commodity Interests”) and certain transactions in commodities offered to retail purchasers on a leveraged, margined, or financed basis. Changes in our activities, the CEA, CFTC Rules, or the interpretations and guidance of the CFTC may subject us to additional regulatory requirements, licenses, and approvals, which could result in significant increased compliance and operational costs.

Furthermore, trusts, syndicates, and other collective investment vehicles operated for the purpose of trading in Commodity Interests may be subject to regulation and oversight by the CFTC and the National Futures Association as “commodity pools.” If our or American Bitcoin’s mining activities or transactions in Bitcoin were deemed by the CFTC to involve Commodity Interests and the operation of a commodity pool for our or American Bitcoin’s shareholders, we or American Bitcoin could be subject to regulation as a commodity pool operator and required to register as such. Such additional registrations may result in increased expenses, thereby materially and adversely impacting our and American Bitcoin’s business, financial condition, and results of operations. If we or American Bitcoin determine it is not possible or practicable to comply with such additional regulatory and registration requirements, we or American Bitcoin may seek to cease certain of our operations. Any such action may adversely affect an investment in us or American Bitcoin.

If regulatory changes or interpretations require our or American Bitcoin’s registration as a “money services business” under the regulations promulgated by FinCEN under the authority of the U.S. Bank Secrecy Act (the “BSA”), or otherwise under state laws, we and American Bitcoin may incur significant compliance costs.

FinCEN regulates providers of certain services with respect to “convertible virtual currency,” including Bitcoin. Businesses engaged in the transfer of convertible virtual currencies are subject to registration and licensure requirements at the U.S. federal level and also under U.S. state laws. While FinCEN has issued guidance that digital assets mining, without engagement in other activities, does not require registration and licensure with FinCEN, this could be subject to change as FinCEN and other regulatory agencies continue their scrutiny of the Bitcoin network and digital assets generally. To the extent that our or American Bitcoin’s business activities cause us to be deemed a “money services business” under the regulations promulgated by FinCEN under the authority of the BSA, we or American Bitcoin may be required to comply with FinCEN regulations, including those that would mandate us or American Bitcoin to implement anti-money laundering programs, make certain reports to FinCEN, and maintain certain records.

To the extent that our or American Bitcoin’s activities would cause us to be deemed a “money transmitter” or equivalent designation under state law in any state in which we or American Bitcoin may operate, we or American Bitcoin 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, including implementing a know-your-counterparty program and transaction monitoring, maintenance of certain records, and other operational requirements.

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Such additional federal or state regulatory obligations may cause us or American Bitcoin to incur extraordinary expenses. Furthermore, we or American Bitcoin may not be capable of complying with certain federal or state regulatory obligations applicable to “money services businesses” and “money transmitters,” such as monitoring transactions and blocking transactions, because of the nature of the Bitcoin blockchain. If we or American Bitcoin are deemed to be subject to and determine not to comply with such additional regulatory and registration requirements, we or American Bitcoin may cease or alter our activities and offerings.

Regulatory changes reclassifying Bitcoin as a security could lead to our or certain of our subsidiaries’ classification as an “investment company” under the Investment Company Act of 1940 (the “1940 Act”) and could adversely affect the market price of Bitcoin and the market price of our listed securities.

Our assets, and the assets of our consolidated subsidiary, American Bitcoin, are concentrated in Bitcoin holdings. While senior SEC officials have stated their view that Bitcoin is not a “security” for purposes of the federal securities laws, a contrary determination by the SEC could lead to our and/or American Bitcoin’s classification as an “investment company” under the 1940 Act. Such a change could require us and/or American Bitcoin (i) to register as an “investment company” under the 1940 Act, which would subject us and/or American Bitcoin to significant additional regulation that could have a material adverse effect on our business operations, financial condition, results of operations and stock price or (ii) to change our and/or American Bitcoin’s business or seek regulatory relief such that we and/or American Bitcoin are not required to register as an “investment company” under the 1940 Act, including by acquiring operating assets with cash and/or Bitcoin on hand or liquidating investment securities or Bitcoin or seeking a no-action letter from the SEC. Liquidating investment securities or Bitcoin could result in losses, and there is no guarantee that we or American Bitcoin could obtain a no-action letter from the SEC. In addition, if Bitcoin is determined to constitute a security for purposes of the federal securities laws, the additional regulatory restrictions imposed by such a determination could adversely affect the market price of Bitcoin and in turn adversely affect the market price of our listed securities.

We are involved in legal proceedings from time to time, which could adversely affect us.

From time to time, we have been, and may in the future be, a party to legal and regulatory proceedings, including matters involving governmental agencies or regulators, entities with whom we do business, and other proceedings, whether arising in the ordinary course of business or otherwise. We evaluate our exposure to legal and regulatory proceedings and establish reserves, if required, for the estimated liabilities in accordance with generally accepted accounting principles. Assessing and predicting the outcome of these matters involves substantial uncertainties and contingencies. Such matters can be time-consuming, divert management’s attention and resources, cause us to incur significant expenses or liabilities, or require us to change our business practices. The results of complex legal proceedings and governmental inquiries could adversely affect our business, financial condition, and results of operations, and we could incur substantial monetary liability and/or be required to change our business practices. In addition, the expenses and liabilities of litigation and other proceedings, and the timing of these expenses from period to period, are difficult to estimate, subject to change, and could adversely affect our business, financial condition, and results of operations. For a description of material legal proceedings in which we are involved, see Note 24. Commitments and contingencies to our Consolidated Financial Statements included elsewhere in this Annual Report.

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Prior to the closing of the Business Combination, USBTC had completed a rescission offer of privately issued securities (the “Rescission Offer”).

In July 2021, prior to the closing of the Business Combination, USBTC offered to repurchase all of the shares of USBTC common stock and USBTC Series A preferred stock sold during the various fundraising rounds, as well as promissory notes with an aggregate principal amount of $5.87 million (collectively, the “Rescission Securities”). The Rescission Securities were originally purchased in private transactions by certain persons who are or were residents of California, Florida, Illinois, Maryland, Massachusetts, Pennsylvania, Nevada, New Jersey, New York, Texas, Virginia, Washington, Puerto Rico, Canada, the Cayman Islands, Hong Kong, and the United Arab Emirates at the time such Rescission Securities were purchased.

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Management of USBTC became aware that (i) court orders against two of USBTC’s now-former stockholders, John Stetson and Mark Groussman, which, among other things, restrain and enjoin such stockholders from violating certain federal securities laws, may have precluded USBTC from relying on certain federal and state securities exemptions for the offerings since such stockholders may have been deemed “promoters” based on certain of their activities in one or more of the offerings, (ii) it is possible that payments made to certain persons may be deemed as a commission or finder’s fee in connection with one or more of the offerings, and (iii) given the fact that proper notification and/or other provisions for an exemption may not have been complied with, the sale of certain Rescission Securities may not have been in compliance with state securities, “blue sky” or other applicable laws. Because of the aforementioned items, it is possible that the disclosure provided to subscribers in the aforementioned offerings was incomplete. As a result, USBTC elected to conduct the Rescission Offer. All equity previously held by Messrs. Stetson and Groussman and any of their family members and/or affiliates has been sold to other equity holders of USBTC, and USBTC has taken all other actions necessary as of August 2021 so that Messrs. Stetson and Groussman no longer have any involvement with USBTC.

The Rescission Offer remained open until the earlier of (i) the date on which USBTC received written responses from all offerees and (ii) 30 days after delivery of the Rescission Offer. The Rescission Offer closed with only one holder of 126 shares of USBTC Series A Preferred Stock elected to have USBTC redeem his investment and rescind his purchase of the USBTC Series A Preferred Stock. If all securityholders were to have accepted the Rescission Offer, USBTC would have been required to pay approximately $41.2 million in the aggregate. USBTC has voluntarily paid off all of the promissory notes included within the Rescission Securities, and therefore those notes are no longer subject to potential rescission.

However, the Securities Act does not provide that a Rescission Offer will extinguish a holder’s right to rescind the purchase of a security that was not registered or exempt from the registration requirements under the Securities Act. Consequently, in the future, holders of Rescission Securities may choose to exercise their rescission rights. There is no guarantee that this will not happen, and, as such, we may remain liable under the Securities Act for the purchase price of the Rescission Securities subject to the Rescission Offer. Should additional holders of Rescission Securities seek to rescind their prior purchases or should the validity of the Rescission Offer be contested for any reason, we may not have enough cash or cash equivalents to pay any holders of Rescission Securities who may claim they continue to have a right to rescind their purchase of Rescission Securities.

We, through USBTC, are subject to orders in three states, Massachusetts, Maryland, and Virginia, and our failure to comply with federal and state securities laws and regulations in connection with the Rescission Offer could subject us to additional enforcement actions, monetary fines and penalties, disqualifications under federal securities laws, and impair our ability to raise capital in the future.

We are relying upon exemptions from the securities registration provisions of the federal and state securities laws and regulations in connection with the Rescission Offer. In relying upon such exemptions, we have the burden of ensuring compliance with such laws for the Rescission Offer, including the applicable state anti-fraud provisions. We have voluntarily disclosed the Rescission Offer and corresponded with the state securities regulators in the states of California, Maryland, New Jersey, Pennsylvania, Virginia, Massachusetts and Washington regarding the Rescission Offer and we have been advised by all such states that no further actions are necessary. Given that we believe that the Rescission Securities were exempt from registration under Section 4(a)(2) of the Securities Act, we do not believe there were any violations of federal securities laws, and as such, we have not notified any federal regulators regarding the Rescission Offer.

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In connection with the Rescission Offer, the Commonwealth of Massachusetts, Office of the Secretary of the Commonwealth, Securities Division (the “Massachusetts Division”) issued a Consent Order, Docket No. E-2022-0011, on March 22, 2022 (the “Massachusetts Order”) in lieu of a hearing. The Massachusetts Order recited that the Massachusetts Division had conducted an investigation of USBTC pursuant to the Massachusetts Uniform Act, Mass. Gen. Laws c. 110A the (“Massachusetts Securities Act”) and the regulations promulgated thereunder (the “Massachusetts Regulations”), and reviewed self-reported allegations of alleged sales of unregistered securities of USBTC in the State of Massachusetts in potential violation of the Massachusetts Securities Act and Massachusetts Regulations which securities had not been determined to be exempt from registration requirements. As had been agreed by and consented to by USBTC, the Massachusetts Order, in summary, required USBTC to (i) permanently cease and desist from committing violations of the Massachusetts Securities Act; (ii) offer to rescind securities purchase transactions with five Massachusetts residents; (iii) submit the necessary paperwork and pay the necessary fees in order to register the sales to the Massachusetts residents with the Massachusetts Division; and (iv) pay an administrative fine in the amount of $1.0 million. With respect to the requirement to offer rescission, USBTC resent the Rescission Offer provided in July 2021, with additional Massachusetts-specific disclaimers, to the five Massachusetts residents, who collectively held 4,335 shares of USBTC Series A Preferred Stock, in April 2022. The Massachusetts investors reconfirmed their declination of the offer to rescind. In April 2022, USBTC paid the $1.0 million administrative fine.

In connection with the Rescission Offer, USBTC entered into a Stipulation for Consent Order, Case No. 2021-0127, on November 5, 2021 (the “Maryland Order”) in lieu of a hearing, following receipt of a Consent Order from the Maryland Securities Division of the Office of the Attorney General Division (the “Division”). The Maryland Order recited that the Commissioner had reviewed allegations that unregistered securities of USBTC were sold by USBTC in the State of Maryland in violation of Section 11-101 et seq. of the Maryland Securities Act, Md. Code Ann., Corps. And Ass’ns. (the “Maryland Securities Act”) which securities had not been determined to be exempt from registration requirements. As had been agreed by USBTC, the Maryland Order, in summary, required USBTC to offer to rescind securities purchase transactions with three Maryland residents, admit to the jurisdiction of the Division as to substance and entry of the Maryland Order, and comply with the provisions of the Maryland Securities Act in any and all such future Maryland offers and sales of securities. With respect to the requirement to offer rescission, USBTC resent the Rescission Offer provided in July 2021, with additional Maryland-specific disclaimers, to the three Maryland residents, who collectively held 1,876 Seed Shares and 126 shares of USBTC Series A Preferred Stock, in November 2021. The Maryland investors reconfirmed their declination of the offer to rescind.

In connection with the Rescission Offer, USBTC entered into a Settlement Order, Case No. 2021-00029, on October 26, 2021 (the “Virginia Order”) in lieu of a hearing, following receipt and approval of the Settlement Order from the Commonwealth of Virginia, State Corporation Commission’s (the “Commission”) Division of Securities and Retail Franchising (Richmond) (the “Virginia Division”). The Virginia Order recited that the Virginia Division had conducted an investigation of USBTC pursuant to Section 13.1-518 of the Virginia Securities Act (the “Virginia Act”) and Section 13.1-501 et seq. of the Code of Virginia, and reviewed self-reported allegations of alleged sales of unregistered securities of USBTC in the State of Virginia in violation of Section 13.1-507 of the Virginia Act which securities had not been determined to be exempt from registration requirements. As had been agreed by and consented to by USBTC, the Virginia Order, in summary, required USBTC to (i) offer to rescind securities purchase transactions with four Virginia residents; (ii) pay to Virginia a monetary penalty and fees to defray the Division investigatory costs in the amounts of $5,000 and $1,000, respectively; (iii) admit to the jurisdiction and authority of the Commission as to substance and entry of the Virginia Order, and (iv) comply with the provisions of the Virginia Securities Act in any and all such future Virginia offers and sales of securities. With respect to the requirement to offer rescission, USBTC resent the Rescission Offer provided in July 2021, with additional Virginia-specific disclaimers, to the four Virginia residents, who collectively held 750 shares of USBTC Common Stock from the USBTC Founder’s Round, 1,875 shares of USBTC Common Stock from the USBTC Seed Round and 441 shares of USBTC Series A Preferred Stock, in October 2021. The Virginia investors reconfirmed their declination of the offer to rescind.

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If, for any reason, we fail to comply with the applicable state securities exemptions, or we have failed in the past to comply, we may, among other things, be subject to both investigations and administrative actions by federal and/or state regulatory agencies, administrative fines and penalties, disqualifications from use of exemptions under federal securities laws, or actions for rescission or for damages. There is no guarantee that we will not become subject to such actions in the future. Such actions, if commenced, could have a material adverse effect on our ability to raise necessary capital in the future. While we have always endeavored to fully comply with all such laws, there is no assurance that any non-compliance will not have a material adverse effect on us.

Changes in tax laws or unanticipated tax liabilities could adversely affect our effective income tax rate and profitability.

We are subject to income taxes in various jurisdictions in the United States and Canada, and may become subject to taxation in additional jurisdictions as we expand. Our effective tax rate could be adversely affected in the future by several factors, including changes in the valuation of deferred tax assets and liabilities, changes in tax laws and regulations or their interpretations and application, changes in the geographic mix of our earnings, and the outcome of income tax audits in any of the jurisdictions in which we operate or are otherwise subject to tax.

A significant change in U.S. or Canadian tax laws and regulations may materially and adversely impact our income tax liability, provision for income taxes, and effective tax rate. We regularly assess these matters to determine the adequacy of our income tax provision, which is subject to significant judgment.

In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. Although we believe our tax estimates are reasonable, the outcome of income tax audits and related litigation could be materially different than that reflected in our historical income tax provisions and accruals. There can be no assurance that the resolution of any audits or litigation will not have an adverse effect on our business, financial condition, and results of operations.

Developments regarding the treatment of Bitcoin for applicable U.S. and Canadian federal, state, provincial, local, and other tax purposes could adversely impact our business.

Our assets, and the assets of our consolidated subsidiary, American Bitcoin, are concentrated in Bitcoin holdings. Due to the new and evolving nature of Bitcoin and the absence of comprehensive guidance with respect to Bitcoin and related transactions, many significant aspects of the applicable U.S. and Canadian federal, state, provincial, local, and other tax treatment of transactions involving Bitcoin, such as the purchase and sale of Bitcoin and the receipt of staking rewards and other digital asset incentives and rewards products, are uncertain, and it is unclear what guidance may be issued in the future with respect to the tax treatment of Bitcoin and related transactions.

Current Internal Revenue Service (“IRS”) guidance indicates that for U.S. federal income tax purposes digital assets, including Bitcoin, should be treated and taxed as property and transactions involving the payment of Bitcoin for goods and services should be treated in effect as barter transactions. The IRS has also released guidance to the effect that, under certain circumstances, hard forks and airdrops of digital currencies may give rise to taxable events and guidance with respect to the determination of the tax basis of digital currencies. However, current IRS guidance does not address other significant aspects of the U.S. federal income tax treatment of digital assets and related transactions. Moreover, although current IRS guidance addresses the treatment of certain hard forks and airdrops, there continues to be uncertainty with respect to the timing and amount of income inclusions for various crypto asset transactions, including staking rewards, other digital asset incentives, and reward products. Generally, while current IRS guidance creates a potential tax reporting requirement for any circumstance where the ownership of a Bitcoin passes from one person to another, it preserves the right to apply capital gains treatment to those transactions, which may be favorable for investors in Bitcoin.

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There can be no assurance that the IRS will not alter its existing position with respect to digital assets in the future or that Canadian federal, or applicable state, provincial, local, and other taxing authorities or courts will follow, or continue to follow, the approach of the IRS with respect to the treatment of digital assets, including Bitcoin. Generally, any alteration of existing guidance or issuance of new or different guidance may have negative consequences, including the imposition of a greater tax burden on investors in Bitcoin or imposing a greater cost on the acquisition and disposition of Bitcoin. In either case, this may have a negative effect on the trading price of Bitcoin or otherwise negatively impact our and American Bitcoin’s business, financial condition, and results of operations. In addition, future technological and operational developments that may arise with respect to digital currencies may increase the uncertainty of its treatment for applicable U.S. and Canadian federal, state, provincial, local, and other tax purposes.

We may not protect our intellectual property rights and other proprietary rights effectively, which would allow competitors to duplicate our offerings.

Our success and ability to compete in our markets depends, in part, upon our proprietary technology. We may not be able to obtain broad protection in the United States, Canada, or elsewhere for our existing and future intellectual property and other proprietary rights. Protecting our intellectual property rights and other proprietary rights may require significant expenditure of our financial, managerial, and operational resources. 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. 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. A third party might try to reverse engineer or otherwise obtain and use our technology without our permission, allowing competitors to duplicate our products. We cannot guarantee that others will not readily ascertain by proper means the proprietary technology used in or embodied by our products, services or technology or that others will not independently develop substantially equivalent products, services, or technology or that we can meaningfully protect the rights to unpatented products, services, or technology. We cannot guarantee that our agreements with our employees, consultants, advisors, sublicensees, and strategic partners restricting the disclosure and use of trade secrets, inventions, and confidential information relating to our products, services, or technology will provide meaningful protection for our intellectual property and other proprietary rights.

Our products, services, or technology may infringe claims of third-party intellectual property rights or other proprietary rights, which could adversely affect our business and profitability.

Our commercial success depends, in part, 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 products, services, or technology infringe on. Also, there may be patents that 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, in some cases, are 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 any third party asserts a claim against us based on third-party intellectual property rights and/or other proprietary rights, we may be required to spend significant resources to defend and challenge such claim, as well as to invalidate any such rights. Any claims against us, with or without merit, would likely be time-consuming, requiring our management team and technical personnel to dedicate substantial time to addressing the issues presented. Furthermore, the party bringing the claim may have greater resources than we do. In lieu of expensive intellectual property litigation, we may seek one or more patent or other intellectual property licenses, but we cannot assure you that we could secure a license on reasonable terms. Accordingly, any of these claims, whether or not it is resolved in our favor, could result in significant expense to us and divert management’s attention, which could have a material adverse effect on our business, financial condition, and results of operations.

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Risks Related to Ownership of Our Common Stock

The market price of our common stock may be volatile and subject to wide fluctuations in response to numerous factors, many of which are beyond our control.

The trading price of our common stock has been, and is likely to continue to be, volatile, and may be influenced by market conditions, including the risks, uncertainties, and factors described in this Annual Report and our other filings with the SEC, as well as other factors beyond our control or of which we may be unaware. As a result, investment in our common stock is inherently risky and as a holder, you might not be able to sell your shares of our common stock at or above the price that you paid for them.

If the markets related to AI infrastructure, data center investments, Bitcoin, the broader digital asset ecosystem, or capital markets in general, experience a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition, or results of operations. That is, the trading price of our common stock is subject to arbitrary pricing factors that are not necessarily associated with traditional factors that influence share prices or the value of non-digital assets such as revenue, cash flows, profitability, growth prospects, or business activity levels since the value and price, as determined by the investing public, may be influenced by future anticipated adoption or appreciation in value of high-performance computing or AI workloads, AI-driven data centers, Bitcoin, other digital assets, or other factors over which we have little or no influence or control.

Factors that may contribute to market price fluctuations of our common stock include the following:

Securities class action litigation has often been brought against companies following periods of volatility in the market price of their securities. We have been, and may continue to be, the target of similar litigation in the future. Securities litigation could result in substantial costs and damages and divert management’s attention and resources.

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Future issuances of our capital stock or rights to purchase capital stock could result in dilution to our stockholders and could cause our stock price to decline.

We have in the past, and may in the future, whether in the ordinary course of business or otherwise, issue shares of our common stock or securities convertible into or exchangeable for shares of our common stock, including as a result of the conversion or exercise, as applicable, of restricted stock units, performance stock units, or options. We have issued shares of common stock under our ATM program and may do so in the future. We may also issue shares of our common stock upon the possible conversion of our outstanding convertible note issued to Coatue Tactical Solutions Lending Holdings AIV 3 LP or in satisfaction of certain required payments or other obligations under an acquisition agreement, joint venture agreement, or other agreement. Any additional issuance of our common stock will dilute the ownership of our stockholders and may adversely affect prevailing market prices for our common stock.

We do not intend to pay dividends on our common stock for the foreseeable future.

We currently intend to retain all available funds and any future earnings to fund the development and growth of our business and execute our strategic initiatives. As a result, we do not anticipate declaring or paying any cash dividends on our common stock in the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our Board and will depend on, among other things, our business, financial condition, results of operations, cash requirements and availability, industry trends, and other factors that the Board may deem relevant. Any such decision also will be subject to compliance with contractual restrictions and covenants in the agreements governing our indebtedness. We may also incur additional indebtedness, the terms of which may further restrict or prevent us from paying dividends on our common stock. As a result, you may have to sell some or all of your shares of our common stock after price appreciation in order to generate cash flow from your investment, which you may not be able to do. Our inability or decision not to pay dividends could also adversely affect the market price of our common stock.

We may issue shares of preferred stock in the future, which could make it difficult for another company to acquire us or could otherwise adversely affect holders of our common stock, which could depress the price of our common stock.

Under the terms of the Amended and Restated Certificate of Incorporation of Hut 8 Corp. (our “Certificate of Incorporation”), our Board has the authority, without further action by our stockholders (except as required by Nasdaq or TSX listing standards or applicable law), to issue up to 25,000,000 shares of preferred stock in one or more series with such designations, powers, preferences, special rights, qualifications, limitations, and restrictions as our Board may determine from time to time. The potential issuance of preferred stock may delay or prevent a change in control of us, discouraging bids for our common stock at a premium to the market price, and materially and adversely affect the market price and the voting and other rights of the holders of our common stock.

Anti-takeover provisions in our governing documents and under Delaware law could make an acquisition of our company more difficult, limit attempts by our stockholders to replace or remove our current management and directors and depress the market price of our common stock.

Our Certificate of Incorporation, our amended and restated bylaws (our “Bylaws”), and Delaware law contain provisions that could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our Board. Among others, our Certificate of Incorporation and Bylaws include the following provisions:

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These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management. As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law (the “DGCL”), which prevents interested stockholders, such as certain stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations unless (i) prior to the time such stockholder became an interested stockholder, the board approved the transaction that resulted in such stockholder becoming an interested stockholder, (ii) upon consummation of the transaction that resulted in such stockholder becoming an interested stockholder, the interested stockholder owned 85% of the common stock, or (iii) following board approval, the business combination receives the approval of the holders of at least two-thirds of our outstanding common stock not held by such interested stockholder.

Any provision of our Certificate of Incorporation, our Bylaws, or Delaware law that has the effect of delaying, preventing or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.

Our Certificate of Incorporation and our Bylaws include a forum selection clause, which could limit stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, or other employees.

Our Certificate of Incorporation and our Bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for any derivative action or proceeding brought on Hut 8’s behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to any provisions of the DGCL, our Certificate of Incorporation, or our Bylaws; or any action asserting a claim against us that is governed by the internal affairs doctrine. Our Certificate of Incorporation and our Bylaws also provide that the federal district courts of the United States of America is the exclusive forum for the resolution of any complaint asserting a cause of action under the Securities Act. The exclusive forum provision does not apply to the resolution of any complaint asserting a cause of action arising under the Exchange Act. To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. The provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, or other employees, which may discourage such lawsuits against us and our directors, officers, and other employees. Alternatively, if a court were to find the choice of forum provision contained in our Certificate of Incorporation and our Bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially and adversely affect our business, financial condition, and results of operations.

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