Bitmine Immersion Technologies, Inc S-1/A, filed May 27, 2025
Bitmine Immersion Technologies, Inc. (BMNR)
As filed with the United States Securities and Exchange Commission on May 27, 2025
Registration No. 333-284361
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________
FORM
(Amendment No. 3)
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_________________
(Exact name of registrant as specified in its charter)
| 7374 | ||||
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(State or other jurisdiction of incorporation or organization) |
(Primary Standard Industrial Classification Code Number) |
(I.R.S. Employer Identification No.) |
Telephone: (
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
_________________
Jonathan Bates
c/o Bitmine Immersion Technologies,
Inc.
10845 Griffith Peak Dr., #2
Las Vegas, Nevada 89135
Telephone: (404) 816-8240
(Name, address, including zip code, and telephone number, including area code, of agent for service)
_________________
Copies of all communications, including communications sent to agent for service, should be sent to:
Lynne Bolduc, Esq. FitzGerald Kreditor Bolduc Risbrough LLP 2 Park Plaza, Suite 850 Irvine, California 92614 Telephone: (949) 788-8900 |
David Huberman, Esq. 333 SE 2nd Avenue, Suite 4400 Miami, Florida 33131 Telephone: (305) 579-0500 |
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Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
| ☒ | Smaller reporting company | |||||
| Emerging growth company |
If an emerging growth company, indicate by
check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
| PRELIMINARY PROSPECTUS | SUBJECT TO COMPLETION | DATED MAY 27, 2025 |
1,875,000 Shares
Common Stock
BitMine Immersion Technologies, Inc.
We are offering 1,875,000 shares of our common stock (or 2,156,250 shares if the underwriters exercise the overallotment option described below), par value $0.0001 per share (the “common stock”), at an assumed public offering price per share of $8.00, based on the last reported sale price of our common stock on the OTCQX on May 16, 2025.
Our common stock is traded on the OTCQX operated by the OTC Markets Group, Inc. under the symbol “BMNRD.” On May 16, 2025, the latest reported sale price of our common stock on the OTCQX was $8.00 per share. The final public offering price of the shares of common stock in this offering will be determined through negotiation between us and the underwriters in the offering and the recent market price of our common stock used throughout this prospectus may not be indicative of the final public offering price. Once determined, the final public offering price will be fixed for the duration of this offering.
We have applied to have our common stock listed on the NYSE American under the proposed symbol “BMNR” which listing is a condition to this offering. Accordingly, we expect our common stock to begin trading on or around the date of this prospectus, at which point our common stock will cease to be traded on the OTCQX. No assurance can be given that our application will be approved or, if we receive approval, that a trading market will develop or, if developed, that it will be sustained or that the trading prices of our common stock on the OTCQX will be indicative of the prices of our common stock if traded on the NYSE American. We cannot assure you that our common stock will become eligible for trading on any exchange or market. We will not commence with this offering if our common stock is not approved for listing on the NYSE American.
The share and per share information in this prospectus, unless otherwise noted and other than in our financial statements and the notes thereto, reflect the reverse stock split of our outstanding shares of common stock at a 1-for-20 ratio pursuant to the filing of a Certificate of Amendment to our Amended and Restated Certificate of Incorporation on May 15, 2025.
We are an “emerging growth company” and a “smaller reporting company” as such terms are defined under federal securities laws, and, as such, have elected to take advantage of certain reduced public company reporting requirements.
Investing in our common stock involves a high degree of risk. Please read “Risk Factors” beginning on page 14 of this prospectus. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
| Per Share | Total | |||||||
| Public offering price | $ | $ | ||||||
| Underwriting discounts and commissions(1) | $ | $ | ||||||
| Proceeds, before expenses, to us | $ | $ | ||||||
| (1) | Underwriting discounts and commissions do not include a non-accountable expense allowance equal to 1.0% of the initial public offering price payable to the underwriters. We refer you to the section titled “Underwriting” beginning on page 121 of this prospectus for additional information regarding underwriting compensation. |
We have granted a 45-day option to the underwriters, exercisable one or more times in whole or in part, to purchase up to an additional 281,250 shares at the public offering price, less the underwriting discounts payable by us, in any combination solely to cover overallotments, if any (the “overallotment option”).
The underwriters expect to deliver the shares of common stock to purchasers on or about , 2025.
ThinkEquity
The date of this prospectus is , 2025.
TABLE OF CONTENTS
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ABOUT THIS PROSPECTUS
We incorporate by reference important information into this prospectus. You may obtain the information incorporated by reference without charge by following the instructions under “Where You Can Find More Information.” You should carefully read this prospectus as well as additional information described under “Information Incorporated by Reference,” before deciding to invest in our securities.
Neither we nor the underwriters have authorized anyone to provide you with additional information or information different from that contained or incorporated by reference in this prospectus filed with the Securities and Exchange Commission (the “SEC”), and you should rely only on the information contained in this prospectus or in any such free writing prospectus. We take no responsibility for and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriters are offering to sell, and seeking offers to buy, our securities only in jurisdictions where offers and sales are permitted. The information contained in this prospectus, or any document incorporated by reference in this prospectus, is accurate only as of the date of those respective documents, regardless of the time of delivery of this prospectus or any sale of our securities. Our business, financial condition, results of operations and prospects may have changed since that date.
The information incorporated by reference or provided in this prospectus contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other data about our industry. We obtained the industry and market data in this prospectus from our own research as well as from industry and general publications, surveys and studies conducted by third parties. This data involves several assumptions and limitations and contains projections and estimates of the future performance of the industries in which we operate that are subject to a high degree of uncertainty, including those discussed in “Risk Factors.” We caution you not to give undue weight to such projections, assumptions, and estimates. Further, industry and general publications, studies and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that these publications, studies, and surveys are reliable, we have not independently verified the data contained in them. In addition, while we believe that the results and estimates from our internal research are reliable, such results and estimates have not been verified by any independent source.
For investors outside the United States (“U.S.”): We and the underwriters have not done anything that would permit this offering or the possession or distribution of this prospectus in any jurisdiction where action for those purposes is required, other than in the U.S. Persons outside the U.S. who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the securities and the distribution of this prospectus outside of the U.S. We have not sought the consent of the sources to refer to their reports appearing or incorporated by reference in this prospectus.
All other trademarks, trade names and service marks appearing in this prospectus, or the documents incorporated by reference herein are the property of their respective owners. Use or display by us of other parties’ trademarks, trade dress or products is not intended to and does not imply a relationship with, or endorsements or sponsorship of, us by the trademark or trade dress owner. Solely for convenience, trademarks, tradenames and service marks referred to in this prospectus appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or that the applicable owner will not assert its rights, to these trademarks and trade names.
Unless the context indicates otherwise, the terms “Bitmine,” “Company,” “we,” “us” and “our” refer to Bitmine Immersion Technologies, Inc., a Delaware corporation, and its subsidiaries.
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INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve substantial risks and uncertainties. The forward-looking statements are contained principally in the sections titled “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” but are also contained elsewhere in this prospectus. In some cases, you can identify forward-looking statements by the words “may,” “might,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “objective,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue” and “ongoing,” or the negative of these terms, or other comparable terminology intended to identify statements about the future, although not all forward-looking statements contain these words. These statements relate to future events or our future financial performance or condition and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or achievement to differ materially from those expressed or implied by these forward-looking statements. These forward-looking statements include, but are not limited to, statements about:
| · | our projected financial position and estimated cash burn rate; | |
| · | our estimates regarding expenses, future revenues and capital requirements; | |
| · | the continued trading of digital currencies, and in particular bitcoin, at prices that make it profitable to mine new digital currencies; | |
| · | the availability of cost-efficient energy supplies available to mine digital currencies; | |
| · | our need to raise substantial additional capital to fund our operation and necessary capital investments in our infrastructure; | |
| · | our dependence on third party suppliers for key parts of our infrastructure; | |
| · | our ability to enter into strategic partnerships for the development and commercialization of our service offerings our proposed product candidates; | |
| · | the possibility that a third party may claim we or our third-party licensors have infringed, misappropriated or otherwise violated their intellectual property rights and that we may incur substantial costs and be required to devote substantial time defending against claims against us; | |
| · | our reliance on third parties; | |
| · | our ability to expand our organization to accommodate potential growth and our ability to retain and attract key personnel; | |
| · | market acceptance of our services, the size and growth of the potential markets for our current services and any future service offerings we may seek to develop, and our ability to serve those markets; and | |
| · | the successful development of our commercialization capabilities, including sales and marketing capabilities. |
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
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You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, none of us, the underwriters nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations.
This prospectus contains industry, market and competitive position data from our own internal estimates and research as well as independent industry publications, general publications and research surveys and studies conducted by third parties. This data involves a number of assumptions and limitations, and while we believe that the data from these industry publications that is included in this prospectus is reliable, we have not independently verified the data from third-party sources. In addition, while we believe that the results and estimates from our internal research are reliable, such results and estimates have not been verified by any independent source. The industry in which we operate is subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors” and elsewhere in this prospectus. These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us.
You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus forms a part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.
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PROSPECTUS SUMMARY
This summary highlights selected information contained elsewhere in this prospectus, and does not contain all of the information that you should consider before investing in our common stock. This summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information appearing elsewhere in this prospectus. You should read this entire prospectus carefully, including the information set forth in the sections titled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes thereto included elsewhere in this prospectus, before making an investment decision. Unless the context requires otherwise, references in this prospectus to “we,” “us,” “our,” “our company,” the “Company” or similar terminology refer to Bitmine Immersion Technologies, Inc.
Company Overview
Our business strategy generally involves the accumulation of bitcoin for long-term investment, whether acquired by our bitcoin mining operations or from the proceeds of capital raising transactions. From time to time, subject to market conditions, we intend to (i) issue debt or equity securities or engage in other capital raising transactions with the objective of using the proceeds to purchase bitcoin, and (ii) expand our bitcoin mining operations and retain any bitcoin we generate to the extent it exceeds our working capital requirements. We intend to fund further bitcoin acquisitions and mining expansion primarily through issuances of common stock and a variety of fixed-income instruments, including debt, convertible notes and preferred stock. We may also finance our mining expansion by conservatively leveraging our bitcoin holdings.
We view our bitcoin holdings as long-term holdings and expect to continue to accumulate bitcoin. We have not set any specific target for the amount of bitcoin we seek to hold and we will continue to monitor market conditions in determining whether to engage in additional financings to purchase additional bitcoin. This overall strategy also contemplates that we may (i) periodically sell bitcoin for general corporate purposes or in connection with strategies that generate tax benefits in accordance with applicable law, (ii) enter into additional capital raising transactions that are collateralized by our bitcoin holdings, and (iii) consider pursuing strategies to create income streams or otherwise generate funds using our bitcoin holdings.
Our bitcoin mining operations focus in the short-term on placing our new miners with third party hosting firms because we do not have the data center capacity to accommodate new miners. Hosting services include the provision of mining equipment and energized space and the monitoring, troubleshooting, and repair and maintenance of customer mining equipment. In the long-term, we plan to build data centers for our miners because we believe our total costs of operating the miners will be less. At present, we host approximately 9% of our fleet of miners and the remainder is hosted by third parties on a fee basis.
The data centers that we build use immersion cooling technology. Immersion cooling is the process of submerging computer components (or full servers) in a thermally, but not electrically, conductive liquid (dielectric coolant) allowing higher heat transfer performance than air and many other benefits. Manufacturers of immersion systems report that immersion cooling, as compared to air cooling, can reduce the energy costs associated with cooling a data center by up to 90% and can reduce the cost of operating servers by up to 10%. In addition, manufacturers of immersion systems report the cooler, dust-free environment provided by immersion cooling can extend the life of data center equipment when compared to an air-cooled environment.
Through our Mining-as-a-Service (“MaaS”) business model, we deliver end-to-end mining infrastructure and management to companies seeking direct bitcoin mining exposure without the operational burden. Our MaaS strategy includes (i) hardware and infrastructure: this involves the sale or lease of mining machines, as well as full deployment support; (ii) operational management: this involves full fleet oversight, uptime maximization, and mining pool payout optimization; and (iii) financial and compliance support: this involves providing GAAP-aligned reporting tools and treasury integration guidance.
We also offer bitcoin treasury consulting services which help companies strategically integrate bitcoin into their corporate treasury operations. This service provides guidance on how to acquire, store, manage, and account for bitcoin, as well as risk management and hedging strategies.
We also engage in synthetic bitcoin mining through a dual approach: (i) we act as buyers when public miners pre-sell at discounted rates, and (ii) we pre-sell our own future hashrate (as defined below) to buyers and use the proceeds to fund new mining equipment without large upfront costs. Synthetic bitcoin mining is a model that allows participants to gain exposure to bitcoin mining rewards without operating physical mining hardware. Participants or buyers purchase a miner’s hashrate via a contract where they make a one-time payment (in either fiat currency or bitcoin) and receive daily bitcoin rewards for the duration of the contract. Essentially, participants or buyers aim to purchase hashrate at a discount to the expected future bitcoin payout.
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Overview of Bitcoin Industry and Market
Bitcoin is a digital asset that is issued by and transmitted through an open-source protocol, known as the bitcoin protocol, collectively maintained by a peer-to-peer network of decentralized user nodes. This network hosts a public transaction ledger, known as the bitcoin blockchain, on which bitcoin holdings and all validated transactions that have ever taken place on the bitcoin network are recorded. Balances of bitcoin are stored in individual “wallet” functions, which associate network public addresses with one or more “private keys” that control the transfer of bitcoin. The bitcoin blockchain can be updated without any single entity owning or operating the network.
New bitcoin is created and allocated by the bitcoin protocol through a “mining” process that rewards users that validate transactions in the bitcoin blockchain. Validated transactions are added in “blocks” approximately every ten minutes. The mining process serves to validate transactions and secure the bitcoin network. Mining is a competitive and costly operation that requires a large amount of computational power to solve complex mathematical algorithms. This expenditure of computing power is known as “proof of work.” To incentivize miners to incur the costs of mining bitcoin, the bitcoin protocol rewards miners that successfully validate a block of transactions with newly generated bitcoin.
The bitcoin protocol limits the total number of bitcoin that can be generated over time to 21 million. As of the date of this prospectus, the reward for miners that successfully validate a block of transactions is 3.125 bitcoin per mined block. After every 210,000 blocks are mined, the reward from validating transactions is “halved.” A halving has historically occurred approximately every four years, and the next halving is expected to occur in April 2028.
Mining requires the use of specialized computers equipped with application-specific integrated circuit (ASIC) chips (known as “miners”) to solve complex cryptographic algorithms in support of the bitcoin blockchain (in a process known as “solving a block”) in exchange for digital asset rewards (to date, only bitcoin). The industry practice is for miners to participate in “mining pools” organized by “mining pool operators” in which all pool participants share mining power (known as “hashrate”) to earn digital asset rewards which are shared among pool members. The mining pool operator provides a service that coordinates the computing power of the independent mining enterprises participating in the mining pool. Fees are paid to the mining pool operator to cover the costs of maintaining the pool. We only use mining pools that pay rewards under the Full-Pay-Per-Share Method, which pays rewards to members based on the member’s hashing power contributed to the pool each day times the difficulty index.
Our Revenue Sources
We generate revenues primarily from proprietary mining of bitcoin, consisting of our share of rewards from solving a block and transaction fees. Our digital asset self-mining activity competes with a myriad of mining operations throughout the world to complete new blocks in the blockchain and earn the reward in the form of an established unit of a digital asset. The primary factors that impact proprietary mining revenues include: (i) the price of bitcoin; (ii) the efficiency of our miners relative to that of our competitors; (iii) the availability of attractive electricity prices since power usage is the primary marginal cost for any mining operation; (iv) the availability of mining and immersion hosting equipment at attractive prices; and (v) whether we have available capacity for mining in our data center facilities or are required to use third party hosting firms for our miners.
Our approach to synthetic bitcoin mining is also a source of revenue for us; we act as buyers when public miners pre-sell at discounted rates, and we pre-sell our own future hashrate to buyers. We entered into a Hashrate Purchase Agreement with a third party on April 22, 2025, wherein they presold the hashrate from their miners to us for approximately $104,670. The contract is for one month and we are expecting to receive between $110,000 to $115,000 worth of bitcoin throughout the duration of the contract. We expect to continue this arrangement with the third party on a month-to-month basis; however, there can be no assurance that we will continue this arrangement.
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We also generate revenues from the advantageous purchase and sale of equipment used for digital asset mining and hosting. We have verbal arrangements with some suppliers that enable us to acquire highly desired equipment at wholesale prices which we sometimes resell to third parties. The primary factors that impact resales of mining equipment include the availability of equipment at attractive prices and the number of participants willing to enter the mining business or expand their existing operations, which is highly correlated to the margin from mining as determined by the market price of bitcoin and prevailing energy costs. Also, we believe our resales of mining equipment will be impacted by the existence of hosting capacity with attractive electricity rates in our hosting operations, as hosting clients have historically been a major source of customers for this line of business.
We also earn revenue from our MaaS and bitcoin treasury consulting services. Through an agreement with KULR Technology Group, Inc. (“KULR”), we leased 3,000 bitcoin ASIC miners to KULR through December 30, 2025, for $3,200,000, with $1,600,000 paid upfront. KULR also engaged us for an $800,000 consulting agreement for one year, focused on bitcoin Mining-as-a-Service and bitcoin treasury strategy.
We have occasionally earned hosting revenues by hosting third party miners when we had spare capacity in our hosting facilities described below. The primary factors that impact future hosting revenues include: (i) the price of bitcoin, since hosting revenues are primarily a percentage of bitcoin mined by clients; (ii) the completion of operational hosting facilities as potential hosting clients have been reluctant to sign contracts prior to the date we have a fully operational hosting facility; and (iii) the availability of attractive electricity prices since power usage is the primary marginal cost for any mining operation. At the present time, we do not have any hosting clients and are not marketing our services to hosting clients.
Our Data Center Locations
Trinidad Operations
We have entered into an agreement with Telecommunications Services of Trinidad & Tobago Limited (“TSTT”), the largest and oldest telecom company in Trinidad, to co-locate up to 125 800 kilowatt (“kW”) containers for hosting digital asset miners. TSTT has numerous potential locations for co-location of our containers. Under the agreement, we have the option, but not the obligation, to co-locate containers at our own pace. We pay a fixed amount per container, plus the actual electricity costs incurred by our containers in the amount billed to TSTT by the local utility without any markup. The agreement provides that our hosting containers will be billed for electricity usage at the local utility’s standard rate which is the greater of 3.5 cents per kilowatt hour (“kWh”) or 75% of the declared reserve capacity, which is equal to the customer’s highest expected monthly kilovolt-ampere demand at $7.40. The term of the agreement expires on October 14, 2031. We have the right to terminate our agreement with TSTT at any time that the price for electricity consumption exceeds $0.05 per kWh. Also, both parties have the right to terminate the agreement on one month’s notice to the other party in either the third or sixth year of the term.
We have one site with two containers operational in Trinidad. As of the date of this prospectus, we had 465 miners located at the site, of which 315 were in operation. We have two additional unused containers in Trinidad and are evaluating other TSTT sites as a location for those containers which we expect to have installed in the first calendar quarter of 2025. We are also leasing space from a third party under an oral at-will agreement to co-host 60 miners for which we pay a flat rate of $0.06 per kWh each month. We ultimately intend to move all of our miners in Trinidad to our TSTT hosting facilities.
We are currently focusing our efforts on the development of hosting centers in the United States and Canada, both directly and in joint ventures with third parties. We are exploring situations where medium to long-term power agreements may be available at affordable prices, whether using traditional power sources such as coal or natural gas, as well as environmentally friendly sources such as hydroelectric, wind and solar-backed projects, which might allow us to generate collateral revenue from the sale of excess power to the local utility grid and from the generation of saleable carbon credits.
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Pecos, Texas Operations
In October 2022, we entered into a joint venture arrangement with ROC Digital Mining Manager LLC (“ROC Manager”) to jointly develop and operate a bitcoin mining operation in Pecos, Texas. Under the joint venture, we contributed one immersion container, six transformers and cash with an aggregate value of $987,429 as a capital contribution to ROC Digital Mining I, LLC (the “ROC Digital”). An affiliate of ROC Manager also contributed an immersion container. We simultaneously sold ROC Digital four immersion containers for $1,200,000, which is payable pursuant to monthly amortizing payments with interest at 5% per annum through May 31, 2026. The note is secured by the equipment that was sold. As of August 31, 2024 the principal amount due on the note receivable from ROC Digital was $655,277. We own approximately 30% of ROC Digital, and 33 1/3% of ROC Manager.
The site became fully electrified in June 2023 and has six containers owned by the joint venture. The joint venture initially filled its six immersion containers with ASIC miners provided by hosting clients, although most of the hosting clients’ agreements terminated in April 2024. Currently, approximately five of the hosting containers owned by the joint venture are fully or partially occupied by clients and the joint venture is aggressively trying to fill the remaining capacity with hosting clients. The joint venture also owns two immersion containers which are not installed which we expect the joint venture to install if hosting demand warrants.
We have entered into a hosting agreement with ROC Digital under which we have located one immersion at its Pecos, Texas data center. We pay $500 per month plus our pro rata share of electricity, internet and insurance for the site. The hosting agreement has a term of one year effective as of May 1, 2023, subject to our right to renew the agreement for two one year terms after receipt of notice of the renewal terms of the joint venture’s electricity supply agreement for the upcoming year. In April 2024, we renewed our hosting agreement for an additional year. As of the date of this prospectus, we had deployed 145 Antminer S-19 pro miners to our hosting container at the site.
Soluna Locations
On October 9, 2023, we entered into a hosting agreement with Soluna SW, LLC to host 1,095 ASIC miners at its data center in Murray, Kentucky. The hosting agreement had a term through April 8, 2025. The hosting agreement provides that we are obligated to reimburse Soluna for the actual cost of the electricity used by our machines and pay a hosting fee equal to 50% of the net profit generated by the machines each month. The hosting fee is payable in bitcoin under certain circumstances. As of the date of this prospectus, we had 1,095 miners at the site.
On April 8, 2025, Soluna SW, LLC, elected not to renew its hosting agreement with us on the existing terms, and on April 30, 2025, we terminated our engagement with Soluna SW, LLC. We sold 850 of the ASIC miners hosted by Soluna, SW LLC to a third party for $120,000 and plan to move the remaining 245 to the Silverton, Texas location.
On December 3, 2024, we entered into a hosting agreement with DVSL ComputeCo, LLC to host 2,900 ASIC miners at its location. The hosting agreement terminates on December 2, 2025, provided that the hosting agreement will continue after the termination date on a month-to-month basis if neither party sends a notice of termination at least 30 days before its scheduled termination date. The hosting agreement provides that we are obligated to reimburse DVSL for the actual cost of the electricity used by our machines plus 1.6 cents per kWh, and pay a hosting fee equal to 50% of the net profit generated by the machines each month. As of the date of this prospectus, we had 3,145 miners at the site.
Risk Factors Summary
Our business is subject to a number of risks and uncertainties that you should understand before making an investment decision. These risks are discussed more fully in the section entitled “Risk Factors,” following this prospectus summary. These include:
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Risks Related to Our Business
| · | We have a history of losses and expect significant increases in our costs, expenses, and losses, and we expect to incur losses for at least the foreseeable future. |
| · | The profitability of our proprietary mining operations is dependent on the price of bitcoin, over which we have no control. |
| · | Our assets are highly concentrated in a single asset which enhances the risk inherent in our strategy. |
| · | If we fail to grow our hashrate, we may be unable to compete and our results of operations could suffer. |
| · | We may not be able to obtain new hosting and transaction processing hardware or purchase such hardware at competitive prices during times of high demand. |
| · | Our business is capital intensive and we may not be able to obtain the necessary capital to expand our operations. |
| · | Significant disruptions in the crypto asset markets, such as those experienced in the second half of 2022, may cause material impairment of the value and use of our miners. |
| · | Adverse developments in the blockchain industry and in the blockchain hosting market could have a material adverse effect on our business, financial condition and results of operations. |
| · | We may experience difficulties in establishing relationships with banks, leasing companies, insurance companies and other financial institutions that are willing to provide us with customary financial products and services. |
| · | If a malicious actor or botnet obtains control in excess of 50% of the processing power active on any digital asset network, including the bitcoin network, it is possible that such actor or botnet could manipulate the blockchain in a manner that adversely affects our business. |
| · | The elimination of ordinals could have a material adverse effect on our results of operations and financial condition. |
| · | Our reliance on immersion-cooling exposes us to additional risks. |
| · | Any loss or destruction of a private key required to access a digital asset of ours is irreversible. |
| · | Digital asset transactions are irrevocable and stolen or incorrectly transferred digital assets may be irretrievable. |
| · | The profitability of our proprietary mining operations is dependent on the price of electricity needed to run miners. |
| · | The profitability of our proprietary mining operations is dependent on the difficulty index of mining bitcoin. |
| · | Until our operations become self-sustaining, we will be required to raise additional funds, which may not be available or available on favorable terms or at all, to remain in business. |
| · | Due to the unregulated nature and lack of transparency surrounding the operations of many bitcoin trading venues, they may experience fraud, security failures or operational problems, which may adversely affect the value of our bitcoin; |
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Risks Related to Governmental Regulation and Enforcement
| · | Regulatory changes may subject us to registration or compliance obligations that could impose substantial costs on us or prevent us from conducting our business as it is currently conducted. |
| · | It may become illegal to mine, acquire, own, hold, sell or use bitcoin or other cryptocurrencies in places where we do business. |
| · | Future developments regarding the treatment of digital assets for U.S. federal income and applicable state, local and non-U.S. tax purposes could adversely impact our business. |
Risks Related to Ownership of Our Common Stock
| · | An active trading market for our common stock may never develop or be sustained. |
| · | The price of our stock may be volatile and you could lose all or part of your investment. |
| · | We have the right to designate and issue additional shares of preferred stock. |
| · | We depend on key personnel and competition for qualified employees is fierce. |
| · | Anti-takeover provisions our governing documents and Delaware law could impair a takeover attempt. |
| · | We will indemnify and hold harmless our officers and directors to the maximum extent permitted by Delaware law. |
Risks Related to This Offering
| · | We have broad discretion in the use of our cash, including the net proceeds from this offering. |
| · | You will suffer immediate dilution of your investment. |
| · | If we are not able to comply with the applicable continued listing requirements or standards of the NYSE American, the NYSE American could delist our securities. |
| · | The sale or availability for sale of substantial amounts of our common stock could adversely affect its market price. |
Risks Related to the Reverse Stock Split
| · | The reverse stock split may decrease the liquidity of the shares of our common stock. |
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Implications of Being an Emerging Growth Company and a Smaller Reporting Company
We qualify as an “emerging growth company,” as defined in the JOBS Act. For as long as we remain an emerging growth company, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies. These provisions include, but are not limited to:
| · | being permitted to have only two years of audited financial statements and only two years of related selected financial data and management’s discussion and analysis of financial condition and results of operations disclosure; |
| · | an exemption from compliance with the auditor attestation requirement in the assessment of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act; |
| · | reduced disclosure about executive compensation arrangements in our periodic reports, registration statements and proxy statements; and |
| · | exemptions from the requirements to seek non-binding advisory votes on executive compensation or golden parachute arrangements. |
In addition, the JOBS Act permits emerging growth companies to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We are not choosing to “opt out” of this provision. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year following the fifth anniversary of the completion of our IPO, (ii) the last day of the first fiscal year in which our annual gross revenues exceed $1.07 billion, (iii) the date on which we have, during the immediately preceding three-year period, issued more than $1.0 billion in non-convertible debt securities and (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeds $700 million as of the end of the second quarter of that fiscal year. We have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this prospectus forms a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that we provide to our stockholders may be different than you might receive from other public reporting companies in which you hold equity interests.
We are also a “smaller reporting company” as defined in the Securities Exchange Act of 1934, as amended, or the Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as the market value of our voting and non-voting common stock held by non-affiliates is less than $250 million measured on the last business day of our second fiscal quarter, or our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our voting and non-voting common stock held by non-affiliates is more than $700 million measured on the last business day of our second fiscal quarter.
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Corporate Information
A predecessor to us was incorporated in the state of Nevada on August 16, 1995 as Interactive Lighting Showrooms, Inc., and redomiciled in the State of Delaware on April 6, 2020.
On July 16, 2021, Jonathan Bates, Raymond Mow, Michael Maloney, and Seth Bayles were appointed to our board of directors, and Jonathan Bates, Raymond Mow, Seth Bayles, and Ryan Ramnath were appointed as officers. At the same time, such persons or their affiliates acquired approximately 62% of our issued and outstanding shares at the time in a private placement. Erik S. Nelson was previously the only member of the board and remained a director and chief executive officer. On May 26, 2022, our board of directors appointed Jonathan Bates as our chief executive officer and Erik Nelson as our president. The appointment of certain of the new officers and directors was done in connection with our entry into the business of creating hosting centers for bitcoin mining computers primarily utilizing immersion cooling technology, as well mining the bitcoin digital currency for our own account. Prior to such change of control, we were a shell company.
Our principal executive offices are located at 10845 Griffith Peak Dr., #2, Las Vegas, Nevada 89135, and our telephone number is (404) 816-8240. Our corporate website address is bitminetech.io. The information contained on or accessible through our website is not a part of this prospectus, and the inclusion of our website address in this prospectus is an inactive textual reference only.
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THE OFFERING
| Shares of Common Stock Offered by Us | 1,875,000 shares (or 2,156,250 shares if the underwriters exercise the option to purchase additional shares in full). | |
| Shares of Common Stock Outstanding before the Offering (1) | 2,053,380 shares. | |
| Shares of Common Stock Outstanding after the Offering (2) | 5,785,170 shares (or 6,066,420 shares if the underwriters exercise the option to purchase additional shares in full). | |
| Overallotment Option | We have granted a 45-day option to the underwriters to purchase from us, at the public offering price, less the underwriting discounts and commissions, up to 281,250 additional shares of common stock solely to cover overallotments, if any. | |
| Use of proceeds | We estimate that the net proceeds from this offering will be approximately $13,225,000 (or $15,284,250 if the underwriters exercise their option to purchase additional shares in full), based upon an assumed public offering price of $8.00 per share, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We currently intend to use all of the net proceeds from this offering in the short-term to purchase bitcoin. In the longer term, we expect to either sell bitcoin or leverage our bitcoin holdings for working capital and other general corporate purposes, including to expand our capacity to mine bitcoin by buying new miners and buying and installing new hosting equipment. (See “Use of Proceeds.”) | |
| Proposed Listing | Our shares of common stock are currently quoted on the OTCQX operated by the OTC Markets Group, Inc. under the symbol “BMNRD.” We have applied to have our common stock listed on the NYSE American under the proposed symbol “BMNR.” The listing of our common stock on NYSE American or another securities exchange is a condition of this offering. No assurance can be given that such listing will be approved or that a trading market will develop for our common stock. | |
| Lock-Up Agreements | Our executive officers and directors and any holder of 5% or more of the outstanding shares of our common stock have agreed with the underwriters not to sell, transfer, or dispose of any shares of common stock or similar securities for 180 days (or 90 days with respect to certain of the 5% or more stockholders) following the effective date of the registration statement for this offering. (See “Underwriting.”) | |
| Reverse Stock Split |
On May 15, 2025, we filed a Certificate of Amendment to our Amended and Restated Certificate of Incorporation to effect a reverse stock split of our issued and outstanding shares of common stock at a ratio of 1-for-20 (the “Reverse Stock Split”).
Following the Reverse Stock Split, every 20 shares of our issued and outstanding shares of common stock were automatically converted into one issued and outstanding share of common stock, without any change in par value per share. No fractional shares were issued in connection with the Reverse Stock Split, and any shareholders who would have received fractional shares of common stock, instead received cash equal to the market value of the fractional share at the closing price of our common stock on May 15, 2025. The Reverse Stock Split did not affect the number of shares of authorized stock. Our common stock began trading on a Reverse Stock Split-adjusted basis on May 16, 2025 and was assigned a new temporary ticker symbol “BMNRD” for the 20 business days following the reverse stock split and on the 21st day, it will change back to “BMNR.”
The purpose of the Reverse Stock Split was to allow us to meet the stock price threshold of the listing requirements of the NYSE American.
Except for our historical financial statements, all share and per share information in this prospectus gives effect to the Reverse Stock Split. | |
| Risk Factors | An investment in our common stock involves a high degree of risk. You should read this prospectus carefully, including the section titled “Risk Factors” and the combined and consolidated financial statements and the related notes to those statements included in this prospectus, before investing in our common stock. | |
| Transfer Agent | The transfer agent and registrar for our Common Stock is West Coast Stock Transfer, Inc. |
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| (1) | The number of shares of common stock outstanding immediately before this offering is based on 2,053,380 shares of common stock actually outstanding as of the date of this prospectus, and additionally gives effect to the Reverse Stock Split. | |
| (2) | The number of shares of common stock outstanding immediately after this offering is based on 2,053,380 shares of common stock actually outstanding as of the date of this prospectus, and additionally gives effect to: |
| · | the Reverse Stock Split; | |
| · | the issuance of 1,134,915 shares of common stock upon the conversion of outstanding Series A Convertible Preferred Stock in connection with the closing of this offering; | |
| · | the issuance of 625,000 shares of common stock (on a post-split basis) upon the conversion of outstanding Series B Convertible Preferred Stock in connection with the closing of this offering; and | |
| · | the issuance of 96,875 shares of common stock upon the conversion of approximately $775,000 of indebtedness due to an affiliate into common stock at the public offering price; |
| but excludes 1,280 shares of common stock issuable upon the exercise of outstanding Class C-3 Warrants with an exercise price of $25.00 (on a post-split basis), and 3,750,000 shares of common stock reserved for issuance pursuant to the 2025 Equity Incentive Plan (the “2025 Equity Incentive Plan”). |
Except as otherwise indicated, all information in this prospectus assumes:
| · | a public offering price of $8.00 per share, which is based on the last reported sale price of our common stock on the OTCQX on May 16, 2025; | |
| · | that all shares of Series A Convertible Preferred Stock and Series B Convertible Preferred Stock are converted into common stock immediately prior to the offering at their existing conversion prices of $4.00 per share (post-split) (see “Certain Relationships and Related Party Transactions—Letter Agreement with Jonathan Bates and IDI”); | |
| · | that no shares of common stock have been issued pursuant to any exercise of outstanding warrants; | |
| · | that no shares of common stock or warrants have been issued pursuant to the Underwriters’ overallotment option; and | |
| · | that no shares of common stock have been issued pursuant to the Representative’s Warrants. |
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SUMMARY FINANCIAL INFORMATION
The statement of operations data for the years ended August 31, 2024, and 2023 and the consolidated balance sheet data as of August 31, 2024, are derived from our audited consolidated financial statements included elsewhere in this prospectus. The statement of operations data for the six months ended February 28, 2025 and February 29, 2024 and the consolidated balance sheet data as of February 28, 2025 are derived from our unaudited consolidated financial statements included elsewhere in this prospectus.
The information below is only a summary and should be read in conjunction with the sections entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, and the notes and schedules related thereto, which are included elsewhere in this prospectus.
Consolidated Statement of Operations Data
| Fiscal Year Ended August 31, | Six Months Ended, | |||||||||||||||
| 2024 | 2023 | February 28, 2025 | February 29, 2024 | |||||||||||||
| Net Revenues | $ | 3,310,348 | $ | 645,278 | $ | 2,718,252 | $ | 1,402,921 | ||||||||
| Operating Loss | $ | (2,447,485 | ) | $ | (2,413,083 | ) | $ | (1,797,641 | ) | $ | (1,258,591 | ) | ||||
| Net Loss | $ | (3,292,503 | ) | $ | (2,464,884 | ) | $ | (2,131,629 | ) | $ | (1,830,522 | ) | ||||
| Deemed dividend on Series A Preferred Stock | $ | – | $ | – | $ | (2,960,648 | ) | $ | – | |||||||
| Net Loss Attributable to Common Stock | $ | (3,292,503 | ) | $ | (2,464,884 | ) | $ | (5,092,277 | ) | $ | (1,830,522 | ) | ||||
Consolidated Balance Sheet Data
| As of February 28, 2025 | ||||||||
| Actual | As Adjusted (1) | |||||||
| Cash and cash equivalents | $ | 482,951 | $ | 13,857,951 | ||||
| Total current assets | $ | 1,148,553 | $ | 14,273,924 | ||||
| Total assets | $ | 7,500,676 | $ | 20,275,676 | ||||
| Total liabilities | $ | 4,647,527 | $ | 3,273,527 | ||||
| Total stockholders’ equity | $ | 2,853,149 | $ | 17,003,149 | ||||
(1) On an as adjusted basis to give effect to (i) the sale by us of 1,875,000 shares of common stock based upon an assumed public offering price of $8.00 per share in this offering and assuming no exercise of the overallotment option, after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us in connection with this offering, (ii) the conversion of approximately $775,000 of debt due to an affiliate into shares of common stock at the public offering price, and (iii) the assignment of approximately $600,000 of notes receivable due to us in satisfaction of approximately $600,000 of debt due from us to an affiliate. (See “Certain Relationships and Related Party Transactions—Letter Agreement with Jonathan Bates and IDI.”)
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RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the following information about these risks, together with the other information appearing elsewhere in this prospectus, including our financial statements, the notes thereto and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding to invest in our common stock. The occurrence of any of the following risks could have a material adverse effect on our business, reputation, financial condition, results of operations and future growth prospects, as well as our ability to accomplish our strategic objectives. As a result, the trading price of our common stock could decline and you could lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations and the market price of our common stock.
Risks Related to Our Business
We have incurred significant net losses since our inception and may not be able to achieve or maintain profitability on an annual basis in the future.
We have incurred significant net losses since our inception. For the years ended August 31, 2024 and 2023, we incurred net losses of approximately $3.3 million and $2.5 million, respectively. For the six months ended February 28, 2025 and February 29, 2024, we incurred net losses of $2,131,629 and $1,830,522, respectively. We had accumulated losses of approximately $12.2 million through August 31, 2024. We cannot predict if we will achieve or maintain annual profitability in the near future or at all. Our expected growth may not be sustainable or may decrease, and we may not generate sufficient revenue to achieve or maintain annual profitability. Our ability to achieve and maintain annual profitability depends on a number of factors, including our ability to raise capital to increase our mining capacity, our ability to negotiate attractive power agreements, the future price of bitcoin and the future difficulty index of bitcoin. If we are unable to achieve or maintain annual profitability, we may not be able to execute our business plan, our prospects may be harmed, and our stock price could be materially and adversely affected.
Bitcoin prices are highly volatile, which may affect our ability to effectively manage growth plans and our profitability.
The price of bitcoin is extremely volatile. In 2023, the price range of bitcoin was approximately $16,600 to $42,800, and in 2024, the price range of bitcoin was approximately $40,000 to $108,000. From January 1, 2025 through the date of this prospectus, the price range of bitcoin has been $78,532 to $104,735. The cost to mine a bitcoin is independent of the then current price of bitcoin, so when prices are low, the cost per coin to mine may consume much of our available cash, which means that there is less capital with which to invest in future company growth. Similarly, when prices are low, our profitability is decreased on a dollar-for-dollar basis correlated to the then price of bitcoin. Given the volatility of bitcoin, these factors render us unable to accurately predict in advance what our growth plans may be and accurately forecast any revenue and profitability projections for any reporting period.
The price of bitcoin may be influenced by regulatory, commercial, and technical factors that are highly uncertain.
Bitcoin and other digital assets are relatively novel and are subject to various risks and uncertainties that may adversely impact their price. For example, the application of securities laws and other regulations to such assets is unclear in certain respects, and it is possible that regulators in the United States or foreign countries may create new regulations or interpret laws in a manner that adversely affects the price of bitcoin. The growth of the digital assets industry in general, and the use and acceptance of bitcoin in particular, may also impact the price of bitcoin and is subject to a high degree of uncertainty. The pace of worldwide growth in the adoption and use of bitcoin could depend on the following:
| · | public familiarity with digital assets; |
| · | ease of buying and accessing bitcoin; |
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| · | institutional demand for bitcoin as an investment asset; |
| · | consumer demand for bitcoin as a means of payment; and |
| · | the availability and popularity of alternatives to bitcoin. |
Even if growth in bitcoin adoption occurs in the near or medium-term, there is no assurance that bitcoin usage will continue to grow over the long-term. Because bitcoin has no physical existence beyond the record of transactions on the bitcoin blockchain, a variety of technical factors related to the bitcoin blockchain could also impact the price of bitcoin. For example, malicious attacks by “miners” who validate bitcoin transactions, inadequate mining fees to incentivize validating of bitcoin transactions, “hard forks” of the bitcoin blockchain, and advances in quantum computing could undercut the integrity of the bitcoin blockchain and negatively affect the price of bitcoin. The liquidity of bitcoin may also be reduced and damage to the public perception of bitcoin may occur, if financial institutions were to deny banking services to businesses that hold bitcoin, provide bitcoin-related services or accept bitcoin as payment, which could also decrease the price of bitcoin. Such circumstances could have a material adverse effect on our business, prospects, or operations.
Fluctuations in the price of bitcoin may significantly influence the market price of our bitcoin holdings and therefore, the price of our common stock.
To the extent investors view the value of our common stock as linked to the value or change in the value of our bitcoin, fluctuations in the price of bitcoin may significantly influence the market price of our common stock.
Our assets are highly concentrated in a single asset, which enhances the risk inherent in our strategy.
Concentration risk arises as a result of the concentration of exposures within the same category, whether it is geographical location, product type, industry sector, or counterparty type. Currently, we have our investment highly concentrated in a single asset, bitcoin. The concentration of our bitcoin holdings limits the risk mitigation that we could take advantage of by holding a more diversified portfolio of treasury assets. The price of bitcoin has recently experienced significant volatility, and this volatility has had, and any further significant volatility in the price of bitcoin would have, a more pronounced impact on our financial condition than if we held a more diverse portfolio of assets.
If we fail to grow our hashrate, we may be unable to compete, and our 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 greater adoption of bitcoin occurs, we expect the demand for bitcoin will increase further, drawing more mining companies into the industry and thereby 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 chance of earning bitcoin rewards will decline unless it deploys additional hashrate at pace with the industry. Compounding this feedback loop, the network difficulty of the bitcoin network (i.e., the amount of work (measured in hashes) necessary to solve a block) is periodically adjusted to maintain the pace of new block additions (with one new block added to the blockchain approximately every ten minutes), and thereby control the supply of bitcoin. As miners deploy more hashrate and the bitcoin network hashrate is increased, the bitcoin network difficulty is adjusted upwards by requiring more hashrate to be deployed to solve a block. Thus, miners are further incentivized to grow their hashrate to maintain their chance of earning new bitcoin rewards.
Accordingly, to maintain our chances of earning new bitcoin rewards and remaining competitive in our industry, we must seek to continually add new miners to grow our hashrate at pace with the growth in the bitcoin global network hashrate. However, as demand miners has increased sharply, and we expect this process to continue in the future as demand for bitcoin increases. Therefore, if the price of bitcoin is not sufficiently high to allow us to fund our hashrate growth through new miner acquisitions and if we are otherwise unable to access additional capital to acquire these miners, our hashrate may stagnate and we may fall behind our competitors. If this happens, our chances of earning new bitcoin rewards would decline and, as such, our results of operations and financial condition may suffer.
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We may not be able to obtain new hosting and transaction processing hardware or purchase such hardware at competitive prices during times of high demand.
Historically, an increase in interest and demand for digital assets has led to a shortage of hosting and transaction processing hardware and increased prices. As the price of digital assets increase, the profits that are generated from the mining those assets also increase, which causes more companies to enter the mining industry and existing companies to expand their mining operations. When that occurs, the demand for equipment may outpace supply and create mining machine equipment shortages. Currently, with the substantial increase in the price of bitcoin from its recent lows in late 2022, there is increased demand for new and used mining and hosting equipment. While we have not seen an uptick in the price of used mining equipment so far due to an overhang of supply on the market, we expect that prices will trend up in the near future if the bitcoin price of bitcoin remains constant or increases from its current level. In the short-term, a substantial increase in the price of bitcoin and associated equipment prices would improve the profitability of our existing operations, but in the long-term it could impair our ability to expand our operations or replace obsolete equipment, which could have a material adverse effect on our business, financial condition and results of operations.
Our business is capital intensive, and failure to obtain the necessary capital when needed may force us to delay, limit or terminate our expansion efforts or other operations.
Part of our business plan is to construct, develop and operate digital asset mining facilities, and to mine digital assets for our own account in those facilities by means of a fleet of the latest generation mining equipment. We may also use our mining facilities to host third-party miners. However, the costs of constructing, developing, operating and maintaining digital asset mining and hosting facilities, and owning and operating a large fleet of the latest generation mining equipment, are substantial. We have completed our initial hosting facility in Trinidad which recently became operational. We are also a partner in a joint venture that recently completed a facility with a capacity of 5-6 MW in Texas, which became operational in June 2023. We currently lack the capital to open material additional facilities or materially expand our additional facilities. Without capital to construct new mining facilities, we have focused our efforts on acquiring miners which are hosting in mining facilities owned by third parties.
We will need to raise additional funds through equity or debt financings in order to meet our capital needs. Additional debt or equity financing may not be available when needed or, if available, may not be available on satisfactory terms. If our stock price declines and/or our trading volume remains low, our ability to raise capital to expand our business will be impaired. We have retained investment bankers to assist in raising the necessary capital to expand our business, but they can provide no assurance that capital is available on attractive terms in the current market environment. An inability to obtain additional debt or equity financing would adversely affect our business, financial condition and results of operations.
To the extent we host third party miners, our success will depend in large part on our ability to provide a competitive hosting environment, which is necessary to attract and retain customers for our hosting services.
While our primary plan is to utilize our hosting facilities to mine bitcoin for our own account, we may utilize our hosting facilities to host third-party miners where we can do so on attractive terms. Our hosting success will depend our ability to attract hosting customers, which will depend our ability to offer competitive hosting terms and capabilities that enable our hosting clients to operate profitably. We may not be able to attract customers to our hosting capabilities for a number of reasons, including if:
| · | we are unable to find suitable locations for hosting facilities which have electricity at competitive rates; | |
| · | there is a reduction in the demand for our services due to macroeconomic factors in the markets in which we operate; | |
| · | we fail to provide competitive pricing terms or effectively market them to potential customers; |
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| · | we provide hosting services that are deemed by existing and potential customers or suppliers to be inferior to those of our competitors, or that fail to meet customers’ or suppliers’ ongoing and evolving program qualification standards, based on a range of factors, including available power, preferred design features, security considerations and connectivity; | |
| · | mining businesses decide to host internally as an alternative to the use of our services; | |
| · | we fail to successfully communicate the benefits of our services to potential customers; | |
| · | we are unable to strengthen awareness of our brand; | |
| · | we are unable to provide services that our existing and potential customers’ desire; | |
| · | our customers are unable to secure an adequate supply of new generation digital asset mining equipment to host with us; or | |
| · | we are unable to obtain deliveries of hosting equipment, including immersion containers and transformers, which have recently been in short supply. |
Furthermore, all of the risks that exist for our mining business would also exist for our third-party hosting clients. The inability of our hosting clients to operate profitably could adversely impact on our hosting business, which could have a material adverse effect on our business, financial condition and results of operations.
Significant disruptions in the crypto asset markets, such as those experienced in the second half of 2022, may cause material impairment of the value and use of our miners.
During the fourth quarter of 2022, the per coin price of bitcoin reached a low of approximately $15,500 from a high of almost $21,500 earlier in the quarter. This decrease in the price of bitcoin, combined with general market sentiment caused in large part by the collapse of FTX Trading Ltd. (“FTX”) in November 2022 and various bitcoin company-related bankruptcies and restructurings, led to a material decline in the fair value of our miners during that period. Any future decrease in the value of bitcoin could cause us to record additional impairments in the value of our current and future assets.
In addition, if bitcoin prices dropped to levels below that experienced in 2022 and held at those levels for a significant period of time, it could impact our profitability such that we would possibly need to consider whether it would be prudent to leave certain of our miners idle until the price of bitcoin recovered.
Theoretically, there is a minimum bitcoin price that is so low that we would be incentivized to cease our mining operations, particularly where our operating costs exceed our revenues. However, this is a complex projection involving multiple ever-changing, dynamic variables. We have multiple mining sites and hosting partners, all with different hosting prices, electricity prices, and contract structures. These costs would need to be compared to the current revenue being produced by our miners.
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Adverse developments in the blockchain industry and in the blockchain hosting market could have a material adverse effect on our business, financial condition and results of operations.
The blockchain industry faces a number of material risks, including those related to:
| · | a decline in the adoption and use of bitcoin and other similar digital assets within the technology industry or a decline in value of digital assets; | |
| · | increased costs of complying with existing or new government regulations applicable to digital assets and other factors; | |
| · | a downturn in the market for blockchain hosting space generally, which could be caused by an oversupply of or reduced demand for blockchain space; | |
| · | the rapid development of new technologies or the adoption of new industry standards that render the mining of digital assets unprofitable or obsolete, such as widespread adoption of “proof of stake” method of validating blockchain transactions instead of “proof of work;” | |
| · | a slowdown in the growth of the Internet generally as a medium for commerce and communication; | |
| · | availability of an adequate supply of new generation digital asset mining equipment to enable us to mine digital assets at scale; | |
| · | the degree of difficulty in mining digital assets and the trading price of such assets; | |
| · | an increase in political opposition to mining digital assets, for example due to concerns about its impact on climate change or its impact on the availability of affordable electricity to other consumers in the local market, the degree of difficulty in mining digital assets and the trading price of such assets; and | |
| · | a material increase in the cost of electricity needed to operate mining equipment. |
To the extent that any of these or other adverse conditions exist, they are likely to have an adverse impact on our mining rewards, which could have a material adverse effect on our business, financial condition and results of operations.
Geopolitical or economic crises may create increased uncertainty and price changes, or motivate large-scale sales of digital assets, which could result in a reduction in some or all digital assets’ values.
As an alternative to fiat currencies that are backed by central governments, digital assets such as bitcoin, which are relatively new, are subject to supply and demand forces based upon the desirability of an alternative, decentralized means of buying and selling goods and services. It is unclear how such supply and demand will be impacted by geopolitical events. Nevertheless, geopolitical or economic crises may motivate large-scale acquisitions or sales of digital assets either globally or locally. Large-scale sales of digital assets would result in a reduction in their value, which could adversely affect our business, financial condition and results of operations.
In addition, we are subject to price volatility and uncertainty due to geopolitical crises and economic downturns. Such geopolitical crises and global economic downturns may be a result of invasion, or possible invasion, by one nation of another, leading to increased inflation and supply chain volatility. Such crises, as well as inflation, could adversely affect our business, financial condition and results of operations.
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Adoption of a different method of validating transactions in bitcoin could materially impair the business of mining firms and could even make them obsolete.
Transactions in bitcoin are currently validated by a system called “proof of work,” where powerful computers run software that races to solve complex problems, verifying transactions in the process. The system is widely known as “mining” because the computers earn payments in cryptocurrency as rewards for the verification service. The system has been criticized by many because it requires substantial amounts of electricity to validate transactions. Recently, another type of digital currency, Ethereum, implemented a different system of validation called “proof of stake,” which is expected to require 99% less energy consumption. In the event bitcoin adopts a similar system, it could make bitcoin mining substantially less profitable and could even render the business obsolete, which would adversely affect our business, financial condition and results of operations.
The sale of our digital assets to pay expenses at a time of low digital asset prices could adversely affect an investment in our securities.
We may sell our digital assets to pay expenses on an as-needed basis, irrespective of then-current prices. Consequently, our digital assets may be sold at a time when the prices on the respective digital asset exchange market are low, which could adversely affect our business, financial condition and results of operations.
Supply chain and shipping disruptions have resulted in shipping delays, a significant increase in shipping costs, and could increase product costs and result in lost sales.
Supply chain disruptions, resulting from factors such as the COVID-19 pandemic, labor supply and shipping container shortages, have impacted us and our third-party manufacturers and suppliers in the past and may do so in the future. These disruptions have, at times, resulted in longer lead times and increased product costs and shipping expenses, including with respect to the delivery of miners that we have purchased. When supply chain disruptions have occurred, we have taken steps to minimize the impact of these increased costs by working closely with our suppliers and customers, but there can be no assurances that unforeseen events impacting the supply chain will not have a material adverse effect on us in the future. Additionally, the impacts supply chain disruptions have on our third-party manufacturers and suppliers are not within our control. When supply chain disruptions occur, it is often not possible to predict how long it will take for the supply chain disruptions to cease. Prolonged supply chain disruptions impacting us and our third-party manufacturers and suppliers could have a material adverse effect on our business, operating results and financial condition.
We may experience difficulties in establishing relationships with banks, leasing companies, insurance companies and other financial institutions that are willing to provide us with customary financial products and services.
As an early stage company with operations focused in the digital asset transaction processing industry, we may in the future experience difficulties in establishing relationships with banks, leasing companies, insurance companies and other financial institutions that are willing to provide us with customary leasing and financial products and services, such as bank accounts, lines of credit, insurance and other related services, which are necessary for our operations. In particular, a number of companies that engage in bitcoin and/or other cryptocurrency-related activities have been unable to find banks or financial institutions that are willing to provide them with bank accounts and other services. Similarly, a number of companies and individuals or businesses associated with cryptocurrencies may have had and may continue to have their existing bank accounts closed or services discontinued with financial institutions. To the extent that such events may happen to us, they could have a material adverse effect on our business, prospects or operations and potentially the value of any bitcoin or other cryptocurrencies we mine or otherwise acquire or hold for our own account.
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The development and acceptance of digital asset networks and other digital assets, which represent a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate.
Digital assets such as bitcoin, that may be used, among other things, to buy and sell goods and services are a new and rapidly evolving industry. The growth of the digital asset industry in general, and the digital asset networks of bitcoin in particular, are highly uncertain. The factors affecting the further development of the digital asset industry, as well as the digital asset networks, include:
| · | continued worldwide growth in the adoption and use of bitcoins and other digital assets; |
| · | government and quasi-government regulation of bitcoins and other digital assets and their use, or restrictions on or regulation of access to and operation of the digital asset network or similar digital assets systems; |
| · | the maintenance and development of the open-source software protocol of the bitcoin network; |
| · | changes in consumer demographics and public tastes and preferences; |
| · | the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies; |
| · | general economic conditions and the regulatory environment relating to digital assets; |
| · | the impact of regulators focusing on digital assets and digital securities and the costs associated with such regulatory oversight; and |
| · | a decline in the popularity or acceptance of the digital asset networks of bitcoin, or similar digital asset systems, could adversely affect an investment in our securities. |
The open-source structure of the bitcoin network protocol means the contributors to the protocol are generally not directly compensated for their contributions in maintaining and developing the protocol, which could result in a failure to properly monitor and upgrade the protocol which could damage the bitcoin network.
Digital asset networks are open-source projects and, although there is an influential group of leaders in, for example, the bitcoin network community known as the “Core Developers,” there is no official developer or group of developers that formally controls the bitcoin network. As an open-source project, bitcoin is not represented by an official organization or authority. The bitcoin network protocol is not sold and contributors are generally not compensated for maintaining and updating the bitcoin network protocol. The lack of guaranteed financial incentive 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. Changes to a digital asset network in which we are directing our mining efforts could adversely affect our business, financial condition and results of operations.
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The acceptance of digital asset network software patches or upgrades by a significant, but not overwhelming, percentage of the users and miners in any digital asset network could result in a “fork” in the respective blockchain, resulting in the operation of two separate networks until such time as the forked blockchains are merged.
Due to bitcoin’s open-source project, any individual can download the bitcoin network software and make any desired modifications, which are proposed to users and miners on the bitcoin network through software downloads and upgrades, and typically posted to the bitcoin development forum on GitHub.com. A substantial majority of miners and bitcoin users must consent to those software modifications by downloading the altered software or upgrade that implements the changes. If not, the changes do not become a part of the bitcoin network.
Since the bitcoin network’s inception, changes to the bitcoin network have been accepted by the vast majority of users and miners, ensuring that the bitcoin network remains a coherent economic system. However, a developer or group of developers could potentially propose a modification to the bitcoin network that is not accepted by a vast majority of miners and users, but that is nonetheless accepted by a substantial population of participants in the bitcoin network. In such a case, and if the modification is material and/or not backwards compatible with the prior version of bitcoin network software, a fork in the blockchain could develop and two separate bitcoin networks could result with one running the pre-modification software program and the other running the modified version (i.e., a second “bitcoin” network).
Such a fork in the blockchain is typically addressed by community-led efforts to merge the forked blockchains, and several prior forks have been so merged. This kind of split in the bitcoin network could materially and adversely impact an investment in our securities and harm the sustainability of the bitcoin network’s economy.
Over time, the bitcoin network will need to transition to a system where miners are rewarded for solving blocks primarily or solely by transaction fees for processing bitcoin transactions instead of by bitcoin awards, and there is no assurance that such transition will be accepted by the marketplace.
In order to incentivize miners to record transactions by solving a block, the bitcoin network rewards miners with an award of bitcoin and any transaction fees each time they solve a block. However, the bitcoin network is designed to reduce the bitcoin rewards by half for every 210,000 blocks solved, which happens approximately every four years, until the maximum number of bitcoin has been created, which is scheduled to occur in 2040. Therefore, as the bitcoin rewards for solving a block are reduced over time until they are eliminated, miners will need to increasingly rely upon transaction fees to record bitcoin transactions. This transition could be accomplished either by miners independently electing to record in the blocks they solve only those transactions that include payment of a transaction fee or by the digital asset network adopting software upgrades that require the payment of a minimum transaction fee for all transactions. If transaction fees paid for digital asset transactions become too high, the marketplace for digital assets as a means of payment and a store of value may be reduced as existing users are motivated to switch from one digital asset to another digital asset or back to fiat currency. There is no guarantee that the bitcoin network will be able to transition to system where transaction fees constitute the primary or sole reward for mining without also reducing the attractiveness of bitcoin to end users. Decreased use and demand for bitcoins that we have accumulated may adversely affect its value and may adversely impact an investment in it, which in turn would harm our business, financial condition or results of operations. Furthermore, market participants may not be willing to pay transaction fees to process bitcoin transactions at levels equivalent to the revenue miners earn from bitcoin awards, which could substantially reduce the profitability of mining, which could have a material adverse effect on our business, operating results and financial condition.
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To the extent that any miners cease to record transactions in solved blocks, transactions that do not include the payment of a transaction fee will not be recorded on the blockchain until a block is solved by a miner who does not require the payment of transaction fees. Any widespread delays in the recording of transactions could result in a loss of confidence in that digital asset network.
To the extent that any miners cease to record transactions in solved blocks, such transactions will not be recorded on the blockchain. Currently, miners routinely record all transactions in solved blocks, including those for which no transaction fee is collected, because the bitcoin rewards from solving the block provide sufficient incentives. However, those bitcoin rewards are scheduled to reduce over time until they are eliminated entirely in 2040. The reduction and ultimate elimination of bitcoin rewards for solving a block may cause miners or mining pools to force bitcoin users to pay transaction fees as a substitute for or in addition to the award of new bitcoins upon the solving of a block. Those actions could delay the recording and confirmation of transactions on the blockchain. Any systemic delays in the recording and confirmation of transactions on the blockchain could result in greater exposure to double-spending transactions and a loss of confidence in certain or all digital asset networks, which could adversely affect our business, financial condition and results of operations.
If a malicious actor or botnet obtains control in excess of 50% of the processing power active on any digital asset network, including the bitcoin network, it is possible that such actor or botnet could manipulate the blockchain in a manner that adversely affects our business.
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, it may be able to alter the blockchain by constructing alternate blocks if it is able to solve for such blocks faster than the remainder of the miners on the blockchain can add valid blocks. Within the alternate blocks, the malicious actor or botnet could control, exclude or modify the ordering of transaction. However, it could not generate new digital assets or transactions using such control. Using alternate blocks, the malicious actor or botnet 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 majority control of the processing power or the digital asset community does not reject the fraudulent blocks as malicious, reversing any changes made to the blockchain may not be possible. Such changes could adversely our business, financial condition and results of operations.
The approach towards and possible crossing of the 50% threshold indicates a greater risk that a single mining pool could exert authority over the validation of digital asset transactions. To the extent that the digital assets ecosystems do not act to ensure greater decentralization of digital asset mining processing power, the feasibility of a malicious actor obtaining in excess of 50% of the processing power on any digital asset network (e.g., through control of a large mining pool or through hacking such a mining pool) will increase, which could adversely affect our business, financial condition and results of operations.
Our reliance on third-party mining pool service providers for our mining revenue payouts may have a negative impact on our operations.
We utilize one third party mining pool to receive our mining rewards from a given network. Mining pools allow mining participants to combine their processing power, which increases the chances of solving a block and getting paid by the network. The rewards are distributed by the pool operator, proportionally to our contribution to the pool’s overall mining power used to generate each block. We are dependent on the accuracy of the mining pool operator’s record keeping to accurately record the total processing power provided to the pool for a given bitcoin or other digital asset mining application in order to assess the proportion of that total processing power we provided. While we have internal methods of tracking both our power provided and the total power used by the pool, the mining pool operator uses its own record-keeping to determine our proportion of a given reward. We have little means of recourse against the mining pool operator if we determine the proportion of the reward paid out to us by a mining pool operator is incorrect, other than leaving the pool. If we are unable to consistently obtain accurate proportionate rewards from our mining pool operators, we may experience reduced reward for our efforts, which would have an adverse effect on our business, financial condition and results of operations.
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Bitcoin is subject to halving, and as such the reward for successfully solving a block will halve several times in the future and its value may not adjust to compensate us for the reduction in the rewards we receive from our mining efforts, which could cause us to cease our mining operations altogether and investors could suffer a complete loss of their investment.
Halving is a process designed to control the overall supply and reduce the risk of inflation in digital assets using a Proof-of-Work consensus algorithm. In an event referred to as bitcoin “halving,” the bitcoin reward for mining any block is cut in half. 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. It is estimated that bitcoin will next halve in April 2028 and then approximately every four years thereafter until the total amount of bitcoin rewards issued reaches 21 million, which is expected to occur around 2140. Once 21 million bitcoin are generated, the network will stop producing more. Currently, there are more than 19 million bitcoin in circulation. While bitcoin prices have had a history of price fluctuations around halving events, there is no guarantee that any such price change will be favorable or would compensate for the reduction in mining reward. If a corresponding and proportionate increase in the price of bitcoin does not follow these anticipated halving events, the revenue from our mining operations would decrease, and we may not have an adequate incentive to continue mining and may cease mining operations altogether, which could adversely affect our business, financial condition and results of operations.
A halving reduces the block rewards from mining by exactly 50%. However, a halving will not reduce revenues from mining by exactly 50% since part of the rewards consist of transaction fees which are not impacted by the halving. In recent periods, transaction fees have made up an ever-increasing share of mining revenue due to the impact of “ordinals,” which are increased transaction fees that are paid as parties have discovered ways to imbed data regarding other assets, such as art, in the bitcoin blockchain.
Furthermore, such reductions in bitcoin rewards for uncovering blocks may result in a reduction in the aggregate hashrate of the bitcoin network as the incentive for miners decreases. Miners ceasing operations would reduce the collective processing power on the network, which would adversely affect the confirmation process for transactions and make the bitcoin network more vulnerable to malicious actors or botnets obtaining control in excess of 50% of the processing power active on the blockchain. Such events may adversely affect our business, financial condition and results of operations.
The elimination of ordinals could have a material adverse effect on our results of operations and financial condition.
Since early January 2023, transaction fees have made up an ever-increasing share of mining revenue due to the impact of “ordinals,” which are increased transaction fees that are paid as parties have discovered ways to imbed data regarding other assets, such as art, in the bitcoin blockchain. There is some concern among the parties who manage the bitcoin blockchain as to whether ordinals should be permitted, since their inclusion tends to slow down validation of transactions on the blockchain. If the bitcoin blockchain managers decide to eliminate ordinals, we could lose an important source of revenue from our mining operations, which could have a material adverse effect on our results of operations and financial condition.
To the extent that the profit margins of digital asset mining operations are not high, operators of digital asset mining operations are more likely to immediately sell their digital assets earned by mining in the digital asset exchange market, resulting in a reduction in the price of digital assets.
Over the past two years, digital asset mining operations have evolved from individual users mining with computer processors, graphics processing units and first-generation miners. Currently, new processing power brought onto the digital asset networks is predominantly added by “professionalized” mining operations. Professionalized mining operations may use proprietary hardware or sophisticated machines.
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Professionalized mining operations require:
| · | the investment of significant capital for the acquisition of such hardware; |
| · | the leasing of operating space (often in data centers or warehousing facilities); |
| · | incurring of electricity costs; and |
| · | the employment of technicians to operate the mining farms. |
As a result, professionalized mining operations are of a greater scale than prior miners and have more defined, regular expenses and liabilities. These regular expenses and liabilities require professionalized mining operations to more immediately sell digital assets earned from mining operations on the digital asset exchange market. To the contrary, it is believed that past individual miners were more likely to hold mined digital assets for more extended periods. The immediate selling of newly mined digital assets greatly increases the supply of digital assets on the digital asset exchange market, creating downward pressure on the price of each digital asset.
The extent to which the value of digital assets mined by a professionalized mining operation exceeds the allocable capital and operating costs determines the profit margin of such operation. A professionalized mining operation may be more likely to sell a higher percentage of its newly mined digital assets rapidly if it is operating at a low profit margin - and it may partially or completely stop operations if its profit margin is negative.
In a low profit margin environment, a higher percentage could be sold into the digital asset exchange market more rapidly, potentially reducing digital asset prices. Lower digital asset prices may result in further tightening of profit margins, particularly for professionalized mining operations with higher costs and more limited capital reserves, creating a network effect that may further reduce the price of digital assets until mining operations with higher operating costs become unprofitable and remove mining power from the respective digital asset network. The network effect of reduced profit margins resulting in greater sales of newly mined digital assets could result in a reduction in the price of digital assets which could have a materially adversely effect on our business, financial condition, or results of operations.
Our reliance on immersion-cooling exposes us to additional risks.
Our business is also active in developing hosting sites that use immersion-cooling, an emerging technology in bitcoin mining, which is not in wide-spread use in the bitcoin mining industry, and has yet to be deployed in large scale. Immersion cooling is the process of submerging computer components (or full servers) in a thermally, but not electrically, conductive liquid (dielectric coolant) allowing higher heat transfer performance than air and many other benefits. Industry literature indicates that immersion cooling improves the performance of miners and extends their life by dissipating heat more efficiently than air-cooling. However, immersion-cooling is still an evolving industry, and the long-term benefits from immersion cooling over air-cooling may not be as great as promised. As such, there is a risk we may not succeed in deploying immersion-cooling at such a large scale to achieve sufficient cooling performance, which could adversely affect our business, financial condition and results of operations.
Potential that, in the event of a bankruptcy filing by a custodian, bitcoin held in custody could be determined to be property of a bankruptcy estate and we could be considered a general unsecured creditor thereof.
Substantially all of the bitcoin we hold is held in an account at BitGo Trust, a well-known custodian. The treatment of bitcoins held by custodians that file for bankruptcy protection is uncharted territory in U.S. Bankruptcy law. We cannot say with certainty whether our bitcoin held in custody by BitGo, should it declare bankruptcy, would be treated as property of the bankruptcy estate and, accordingly, whether we would be treated as a general unsecured creditor with respect of our bitcoin held in custody by BitGo. If we are treated as a general unsecured creditor, we may not be able to recover our bitcoin in the event of a BitGo bankruptcy or a bankruptcy of any other custodian we may use in the future. Historically, we have mitigated our risk of a bankruptcy by our custodian by routinely liquidating our bitcoin shortly after it is earned. When we liquidate bitcoin, we typically have the proceeds wired to our bank account a day or two later. However, we plan to invest substantially all of the net proceeds in this offering in bitcoin, which may increase our risk in the event of a failure of the custodian.
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Any loss or destruction of a private key required to access a digital asset of ours is irreversible. We also may temporarily lose access to any digital assets we hold in a cold wallet account.
Digital assets are each accessible and controllable only by the possessor of both the unique public key and private key associated with the digital asset, wherein the public and private keys are held in an offline or online digital wallet. To the extent a private key is lost, destroyed or otherwise compromised and no backup of the private key is available, we will be unable to access the applicable digital asset associated with that private key and the private key cannot be restored. As a result, any digital assets associated with such key could be irretrievably lost. Any loss of private keys relating to digital wallets used to store the applicable digital assets could have a material adverse effect on our business, financial condition and results of operations.
We do not currently hold any digital assets in an online wallet account. We hold substantially all of our digital assets at BitGo and a de minimis amount at Genesis. We have also onboarded Fidelity Digital Assets, with the intention of storing long-term digital assets held for investment and as collateral, with this custodian. There can be no assurances that any processes we have adopted or will adopt in the future are or will be secure or effective, and we would experience significant and immediate adverse effects if we suffered a loss of our digital currency due to an adverse software or cybersecurity event.
Security threats to our business could result in, a loss of our digital assets, or damage to our reputation and our brand.
Security breaches, computer malware and computer hacking attacks have been a prevalent concern in the digital asset exchange markets. A security breach caused by hacking, could include, but is not limited to:
| · | efforts to gain unauthorized access to information or systems; |
| · | efforts to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment; and |
| · | the inadvertent transmission of computer viruses. |
A security breach by hacking could harm our operations or result in loss of our digital assets. Any breach of our and our partners’ infrastructure could result in reputational harm and erode the trust of our partners and stockholders, which could adversely affect an investment in our securities. Furthermore, as our assets grow, we may become a more appealing target for security threats such as hackers and malware.
Our security system and operational infrastructure may be breached due to the actions of outside parties, error or malfeasance of an employee, or otherwise, and, as a result, an unauthorized party may obtain access to our private keys, data or bitcoins. Additionally, outside parties may attempt to fraudulently induce our employees to disclose sensitive information in order to gain access to our infrastructure.
Despite our efforts, we may be unable to anticipate these techniques or implement adequate preventative measures since the hacking techniques used are often not recognized until launched against a target. If an actual or perceived breach of our security system occurs, the market perception of the effectiveness of our controls could be harmed.
Further, in the event of a security breach, we may be subject to litigation forced to cease operations, or suffer a reduction in assets, the occurrence of each of which could adversely affect our business, financial condition, or results of operation.
Our ability to adopt technology in response to changing security needs or trends and our reliance on, third-party custody providers, poses a challenge to the safekeeping of our digital assets.
The history of digital asset exchanges has shown that exchanges and large holders of digital assets must adapt to technological change in order to secure and safeguard their digital assets. We rely on the security solutions of third-party custodians, who we believe have developed physically secure environment based on established, industry best practices, to safeguard our digital assets from theft, loss, destruction or other issues relating to hackers and technological attack.
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We believe we may become a more appealing target of security threats as the size of our bitcoin holdings grow. To the extent that we, or any of our third-party custody providers, are unable to identify, mitigate or stop new security threats, our digital assets may be subject to theft, loss, destruction or other attack, which could adversely affect an investment in our securities.
Digital asset transactions are irrevocable and stolen or incorrectly transferred digital assets may be irretrievable.
Digital asset transactions are not, from an administrative perspective, reversible without the consent and active participation of the recipient of the transaction or, in theory, control or consent of a majority of the processing power on that digital asset network. Once a transaction has been verified and recorded in a block that is added to the blockchain, an incorrect transfer of digital assets or a theft of digital assets generally will not be reversible, and we may not be capable of seeking compensation for any such transfer or theft.
In the course of our business operations, we regularly transfer digital assets to or from custodians, vendors, consultants, and services providers. As such, it is possible that, through computer or human error, or through theft or criminal action, such assets could be transferred in incorrect amounts or to unauthorized third parties.
To the extent we are unable to seek a corrective transaction to identify the third party which has received our digital assets through error or theft, we will be unable to revert or otherwise recover the impacted digital assets, and any such loss could adversely affect an investment in our securities.
The limited rights of legal recourse available to us, and our lack of insurance protection expose us and our stockholders to the risk of loss of our digital assets for which no person is liable.
Our digital assets are not insured. If our digital assets are lost, stolen or destroyed under circumstances rendering a party liable to us, the responsible party may not have the financial resources sufficient to satisfy our claim. For example, as to a particular event of loss, the only source of recovery for us might be limited to the extent identifiable, other responsible third parties (e.g., a thief or terrorist), any of which may not have the financial resources (including liability insurance coverage) to satisfy a valid claim. Furthermore, bitcoin is not subject to Federal Deposit Insurance Corporation (“FDIC”) or Securities Investor Protection Corporation protection, which is the protection afforded to depositors at banking institutions. Therefore, a loss may be suffered with respect to our digital assets for which no recourse is available, which could adversely affect our operations and, consequently, an investment in our securities.
If we or our third-party service providers experience a security breach or cyberattack and unauthorized parties obtain access to our bitcoin, we may lose some or all of our bitcoin and our financial condition and results of operations could be materially adversely affected.
Security breaches and cyberattacks are of particular concern with respect to our bitcoin. Bitcoin and other blockchain-based digital assets have been, and may in the future be, subject to security breaches, cyberattacks, or other malicious activities. A successful security breach or cyberattack could result in a partial or total loss of our bitcoin in a manner that may not be covered by insurance or indemnity provisions of the custody agreement with a custodian who holds our bitcoin. Such a loss could have a material adverse effect on our financial condition and results of operations.
We rely on third-party hosting for much of our mining activity, and as such, our operations could be adversely affected by the actions or inactions of such third-parties. Additionally, third-party hosting, among other things, often requires us to give the hosting company a first lien on the miners installed on the site and creates business risk for us.
We currently rely upon third-party hosting facilities to power most of our miners. As of the date of this prospectus, our third-party hosting operators host 3,752 of our bitcoin miners or approximately 90% of our miners. Our operations and ability to mine bitcoin could be adversely affected if operators we rely on to operate our bitcoin miners experience general incompetence in performing their duties, experience financial difficulties or bankruptcy, or otherwise cannot operate our bitcoin miners in accordance with their contractual obligations.
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We are dependent upon the financial viability of our third-party hosting operators, and in 2022, several large publicly traded hosting companies met severe financial issues, including bankruptcies. Currently, approximately 95% of our third-party hosting is operated by Soluna Holdings, Inc., the parent company DVSL ComputeCo, LLC. As a result, our operations are highly dependent on these third-parties and could be adversely affected by the actions or inactions of our third-party hosting operators.
Furthermore, in most hosting contracts, there is a requirement that the miner agrees to permit the hosting company to place a lien on the actual mining machines being hosted. If the hosting company files for bankruptcy, it may take months for the liens to be lifted, while the bankruptcy court and parties litigate these contracts and resolves issues as to ownership of assets and related areas. In these contracts, we may be required to make significant deposits against future mining fees. If the hosting party utilizes the deposits, we could risk loss of the deposits and be left with an unsecured claim in the bankruptcy. Lastly, as the bankruptcy process includes an automatic stay in favor of the debtor company, until the stay is lifted or a bankruptcy plan approved, we may not be able to move our miners to a different location, even if the debtor rejects our hosting contract.
The termination of our hosting agreement with Soluna SW, LLC, may cause a decrease in revenue.
On April 8, 2025, Soluna SW, LLC, which hosts 1,095 ASIC miners for us at its Murray, Kentucky location, elected not to renew its hosting agreement with us on the existing terms, and on April 30, 2025, we terminated our engagement with Soluna SW, LLC. We sold 850 of the ASIC miners hosted by Soluna, SW LLC to a third party and plan to move the remaining 245 to the Silverton, Texas location. Due to the sale of certain ASIC miners and transfer of the remaining to a new location, our future revenue will be reduced accordingly. In addition, revenue for the next two quarters may be adversely impacted by downtime associated with the transfer process.
We are subject to risk that key counterparties file bankruptcy, enter insolvency proceedings or otherwise default on their obligations to us.
We are subject to the risk that counterparties with whom we do business default on their obligations to us. While we may have rights to recover damages for breach of contract in the event of a default, our contractual remedies may not compensate us for all of our damages, including particularly legal fees or lost opportunity costs. Even if we receive a judgment or award that covers all of our damages, we may not be able to collect the judgment in full due to the insolvency of the counterparty. Furthermore, the counterparty or its assets may be in a legal system where it is difficult to receive a judgment or collect any judgment. At this time, we have two counterparties whose default could result in material losses for us. One is ROC Digital, which owed us $655,277 as of August 31, 2024 from the sale of equipment, and for which we have also made an equity investment of approximately $987,000 by the contribution of equipment. In the case of ROC Digital, a default could impair our ability to realize our investment in each entity. The other is Soluna Holdings, Inc., which hosts 3,145 miners for us (with 245 miners pending installation). A default by Soluna Holdings, Inc. could cause us to incur material costs to repossess our miners, a disruption in our revenues during the period that the miners are not operating, and increase our costs in the future if we are not able to enter into alternative hosting arrangements that are as attractive as of those offered by Soluna.
We do not own any intellectual property, which may limit our competitive position and increase operational risks.
We do not currently own any patents, trademarks, service marks or copyrights in connection with our existing and planned bitcoin mining-related operations. This lack of intellectual property ownership presents several challenges and risks to our business and financial condition.
Without proprietary intellectual property, we may be unable to establish a distinct competitive advantage in the market. The absence of registered trademarks exposes us to the possibility of competitors using similar branding, which could create market confusion, dilute our reputation, or undermine trust in our brand. Without adequate trademark protection, we may be unable to prevent third parties from leveraging our goodwill and misrepresenting their services as ours, potentially impacting public loyalty and our revenue.
Not owning patents limits our ability to protect any technological advancements, operational methods, or unique processes we may develop. Competitors with patented technologies may secure a competitive edge by achieving greater efficiency or performance, while we remain reliant on third-party solutions.
The absence of intellectual property also increases the likelihood of encountering legal disputes over the use of third-party technologies. If we inadvertently infringe on intellectual property rights owned by others, we could face costly litigation, damages, or interruptions to our operations. Furthermore, the need to license or purchase necessary tools and resources from external sources may lead to higher costs, reducing our overall profitability.
Without critical intellectual property protections, our ability to differentiate ourselves, build a strong market presence, and protect our operational advantages may be significantly constrained. These factors may negatively impact on our competitiveness and profitability.
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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 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 may adversely affect an investment in our securities. Additionally, a meritorious intellectual property claim could prevent us and other end-users from accessing some or all digital asset networks or holding or transferring our digital assets. As a result, an intellectual property claim against us or other large digital asset network participants could adversely affect our business operations and financial condition.
Our future success depends on our ability to keep pace with rapid technological changes that could make our current or future technologies less competitive or obsolete.
Rapid, significant and disruptive technological changes continue to impact our industry. The infrastructure at our hosting facilities may become less marketable due to demand for new processes and technologies, including, without limitation: (i) new processes to deliver power to, or eliminate heat from, computer systems; (ii) customer demand for additional redundancy capacity; (iii) new technology that permits higher levels of critical load and heat removal than our hosting facilities are currently designed to provide; (iv) an inability of the power supply to support new, updated or upgraded technology; and (v) a shift to more power-efficient transaction validation protocols. In addition, the systems that connect our hosting facilities to the Internet and other external networks may become insufficient, including with respect to latency, reliability and diversity of connectivity. We may not be able to adapt to changing technologies, identify and implement new alternatives successfully or meet customer demands for new processes or technologies in a timely and cost-effective manner, if at all, which would have a material adverse effect on our business, financial condition and results of operations.
Variability in intellectual property laws may adversely affect our intellectual property position.
Intellectual property laws, and patent laws and regulations in particular, have been subject to significant variability either through administrative or legislative changes to such laws or regulations or changes or differences in judicial interpretation, and it is expected that such variability will continue to occur. Additionally, intellectual property laws and regulations differ among states, and countries. Variations in patent laws and regulations or in interpretations of patent laws and regulations in the United States and other countries may diminish the value of our intellectual property and may change the impact of third-party intellectual property on our business. Accordingly, we cannot predict the scope of patents that may be granted to us, the extent to which we will be able to enforce our patents against third parties, or the extent to which third parties may be able to enforce their patents against us.
We may seek to internally develop new inventions and intellectual property, which would take time and be costly. Moreover, the failure to obtain or maintain intellectual property rights for such inventions would lead to the loss of our investments in such activities.
While we currently do not own any material intellectual property rights that are crucial to our business, we may in the future develop proprietary intellectual property rights that are essential to our business. These activities would require significant amounts of financial, managerial and other resources and would take time to achieve. Such activities could also distract our management team from our present business initiatives, which could have a material and adverse effect on our business. There is also the risk that such initiatives may not yield any viable new business or revenue, inventions or technology, which would lead to a loss of investment in such activities.
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In addition, even if we are able to internally develop new inventions, in order for those inventions to be viable and to compete effectively, we would need to develop and maintain a proprietary position with respect to such inventions and intellectual property. However, there are significant risks associated with any such intellectual property we may develop principally including the following:
| · | patent applications we may file may not result in issued patents or may take longer than we expect to result in issued patents; |
| · | we may be subject to interference proceedings; |
| · | we may be subject to opposition proceedings in the United States or foreign countries; |
| · | any patents that are issued to us may not provide meaningful protection; |
| · | we may not be able to develop additional proprietary technologies that are patentable; |
| · | other companies may challenge patents issued to us; |
| · | other companies may have independently developed and/or patented (or may in the future independently develop and patent) similar or alternative technologies, or duplicate our technologies; |
| · | other companies may design around technologies we have developed; and |
| · | enforcement of our patents would be complex, uncertain and very expensive. |
We cannot be certain that any patents, if issued, will provide us with adequate protection from competing products. For example, issued patents may be circumvented or challenged, declared invalid or unenforceable, or narrowed in scope. In addition, since publication of discoveries in scientific or patent literature often lags behind actual discoveries, we cannot be certain that we will be the first to make our additional new inventions or to file patent applications covering those inventions. It is also possible that others may have or may obtain issued patents that could prevent us from commercializing our products or require us to obtain licenses requiring the payment of significant fees or royalties in order to enable us to conduct our business. As to any patents that we may acquire, our continued rights would depend on meeting any obligations to the seller and we may be unable to do so. Our failure to obtain or maintain intellectual property rights for our inventions could lead to the loss of our investments in such activities, which would have a material adverse effect on our business, financial condition, or results of operation.
Moreover, patent application delays could cause delays in recognizing revenue from any internally generated patents and could cause us to miss opportunities to license patents before other competing technologies are developed or introduced into the market. We are not actively pursuing any commercialization opportunities or internally generated patents.
Our future success depends on our ability to expand our organization to match the growth of our activities.
As our operations grow, the administrative demands and scaling demands upon us will grow, and our success will depend upon our ability to meet those demands. We require certain financial, managerial and other resources, which could create challenges to our ability to successfully manage our subsidiaries and operations and impact our ability to assure compliance with our policies, practices and procedures. These demands include, but are not limited to, increased executive, accounting, management, legal services, staff support and general office services. Currently, we have limited personnel in our organization to meet our organizational and administrative demands. We may need to hire additional qualified personnel to meet these demands, the cost and quality of which is dependent in part upon market factors outside of our control. Further, we will need to effectively manage the training and growth of our staff to maintain an efficient and effective workforce, and our failure to do so could adversely affect our business and operating results.
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We are highly dependent on the continued services of our small team of executives.
We are dependent upon the efforts and services of our small executive team. Consequently, the loss of any one of our key executives could have an adverse effect on our operations.
Joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on the financial condition of co-venturers and disputes between us and our co-venturers.
In October 2022, we entered into a joint venture arrangement with ROC Manager to jointly develop and operate a bitcoin mining operation in Pecos, Texas and may continue to enter into joint ventures, partnerships and other co-ownership arrangements (including preferred equity investments) in the future. In such event, we may not be in a position to exercise sole decision-making authority regarding the joint venture. Investments in joint ventures may, under certain circumstances, involve risks not present were a third-party not involved, including the possibility that partners or co-venturers might become bankrupt or fail to fund their required capital contributions. Co-venturers may have economic or other business interests or goals which are inconsistent with our business interests or goals, and may be in a position to take actions contrary to our policies or objectives. These investments may also have the potential risk of impasses on decisions, such as a sale, because neither we nor the co-venturer would have full control over the joint venture. Disputes between us and co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers or directors from focusing their time and effort on our business. Consequently, actions by or disputes with co-venturers might result in subjecting properties owned by the joint venture to additional risk. In addition, we may in certain circumstances be liable for the actions of our co-venturers.
We have engaged in, and in the future may engage in, strategic acquisitions and other arrangements that could disrupt our business, cause dilution to our stockholders, reduce our financial resources and harm our operating results.
In the future, we may seek additional opportunities to grow our mining operations through strategic acquisitions, including through purchases of miners, data centers and other facilities from other operating companies, including companies in financial distress. Our ability to grow through future acquisitions will depend on the availability of, and our ability to identify, suitable acquisition and investment opportunities at an acceptable cost, our ability to compete effectively to attract those opportunities and the availability of financing to complete acquisitions. Future acquisitions may require us to issue common stock that would dilute our current stockholders’ percentage ownership, assume or otherwise be subject to liabilities of an acquired company, record goodwill and non-amortizable intangible assets that will be subject to impairment testing on a regular basis and potential periodic impairment charges, incur amortization expenses related to certain intangible assets, incur large acquisition and integration costs, immediate write-offs, and restructuring and other related expenses and become subject to litigation.
The benefits of an acquisition or our expansion into may also take considerable time to develop, and we cannot be certain that any particular acquisition will produce the intended benefits in a timely manner or to the extent anticipated or at all. We may experience difficulties integrating the operations, technologies and personnel of an acquired company or be subjected to liability for the target’s pre-acquisition activities or operations as a successor in interest. Such integration may divert management’s attention from normal daily operations of our business. Future acquisitions may also expose us to potential risks, including risks associated with entering markets in which we have no or limited prior experience, especially when competitors in such markets have stronger market positions, the possibility of insufficient revenues to offset the expenses we incur in connection with an acquisition and the potential loss of, or harm to, our relationships with employees and suppliers as a result of integration of new businesses.
In addition to mining and holding bitcoin, we have explored, and we may in the future explore, opportunities to become more involved in businesses that expand or supplement those directly related to the self-mining of bitcoin as favorable market conditions and opportunities arise. We cannot be certain that such opportunities will produce the intended benefits in a timely manner or to the extent anticipated or at all. These opportunities could also expose us to similar risks associated with strategic acquisitions, as discussed above.
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Increased scrutiny and changing expectations from stockholders with respect to our environmental, social and governance (“ESG”) practices and the impacts of climate change may result in additional costs or risks.
Companies across many industries are facing increasing scrutiny related to their ESG practices. Investor advocacy groups, certain institutional investors, investment funds and other influential investors are also increasingly focused on ESG practices and in recent years have placed increasing importance on the non-financial impacts of their investments. In May 2021, the SEC proposed rule changes that would require public companies to include certain climate-related disclosures in their periodic reports, including information about climate-related risks that are reasonably likely to have a material impact on their business, results of operations, or financial condition, and certain climate-related financial statement metrics in a note to their audited financial statements noting that such rule changes were proposed in response to investor demands for consistent and comparable data on climate change. Furthermore, increased public awareness and concern regarding environmental risks, including global climate change, may result in increased public scrutiny of our business and our industry, and our management team may divert significant time and energy away from our operations and towards responding to such scrutiny and reassuring our employees. The implementation of the SEC’s proposed rule changes was stayed in April 2024 in response to consolidated legal challenges. However, should the rule changes ultimately become effective, in either their current or a revised form, we, as a public company, may also face increased oversight from the SEC with respect to our climate-related disclosures.
In addition, the physical risks of climate change may impact the availability and cost of materials and natural resources, sources and supplies of energy, and demand for bitcoin and other cryptocurrencies, and could increase our insurance and other operating costs, including, potentially, to repair damage incurred as a result of extreme weather events or to renovate or retrofit facilities to better withstand extreme weather events. If environmental laws or regulations or industry standards are either changed or adopted and impose significant operational restrictions and compliance requirements on our operations, or if our operations are disrupted due to physical impacts of climate change, our business, capital expenditures, results of operations, financial condition and competitive position could be negatively impacted.
Delays in the construction of our hosting facilities or significant cost overruns could present significant risks to our business.
The servers used for digital asset transaction processing and colocation hosting require the use of facilities (“hosting facilities”) with a highly specialized infrastructure and considerable, reliable power in order to compete effectively. Our growth strategy is to build mining capacity in locations that have reliable sources of low-cost power, and to utilize that capacity to host third-party miners and to host our own proprietary mining equipment. We have completed our initial hosting facility in Trinidad (which only commenced operations in October 2023 due to delays in the electrification of the facility). We are also a partner in a joint venture that recently completed a facility in Pecos, Texas. We continue to search for new locations for hosting facilities in the United States and Canada. We may face challenges in obtaining suitable land to build new hosting facilities, as we need to work closely with the local power suppliers and local governments of the places where our proposed hosting facilitates are located. Delays in actions that require the assistance of such third parties, in receiving required permits and approvals or in mediations with local communities, if any, may negatively impact our construction timelines and budget or result in any new hosting facilities not being completed at all. If we are unable to locate and complete on budget new hosting facilities in the future, our business, operating results and financial condition could be adversely affected.
We are subject to risks associated with our need for significant electrical power.
The operation of a bitcoin mining facility requires significant amounts of electrical power. Any mining site we currently operate or establish in the future can only be successful if we can continue to obtain sufficient electrical power for that site on a cost-effective basis. Our mining operations are conducted across a mix of leased properties and hosting agreements with third parties, each of which have unique power agreements. Geopolitical events including the war in Ukraine and inflationary impacts have caused power prices to increase worldwide; if power prices continue to increase while bitcoin prices decrease, our ability to profitability mine bitcoin would be negatively impacted.
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We may curtail the energy used by our mining operations in times of heightened energy prices or in the case of a grid-wide electricity shortage either voluntarily or by agreement with utility providers. We may also encounter other situations where utilities or government entities restrict or prohibit the provision of electricity to mining operations. In these cases, our ability to produce bitcoin may be negatively affected.
Because we also expect to expand to additional sites, there may be significant competition for suitable locations with access to affordable power.
Additionally, our facilities could be adversely affected by a power outage. Although there may be limited backup power at certain sites, it would not be feasible to run miners on back-up power generators in the event of a government restriction on electricity or a power outage. To the extent we are unable to receive adequate power supply and are forced to reduce or cease our operations due to the availability or cost of electrical power, our business would be adversely affected.
We may not be able to compete effectively against our current and future competitors.
The digital asset mining industry is highly innovative, rapidly evolving and characterized by healthy competition, experimentation, frequent introductions of new products and services and uncertain and evolving industry and regulatory requirements. We expect competition to further intensify in the future as existing and new competitors introduce new products or enhance existing products. We compete against a number of companies operating both within the United States and abroad, that have greater financial and other resources and that focus on digital asset mining, including businesses focused on developing substantial bitcoin mining operations. 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, operating results and financial condition could be adversely affected.
Risks Related to Governmental Regulation and Enforcement
We are subject to an extensive, highly evolving and uncertain regulatory and business landscape and any adverse changes to, or our failure to comply with, any laws and regulations, and adverse business reactions from counterparties could adversely affect our brand, reputation, business, operating results, and financial condition.
Our business is subject to:
| · | extensive laws; |
| · | rules, regulations; |
| · | policies; |
| · | orders; |
| · | determinations; |
| · | directives; |
| · | treaties; |
| · | legal and regulatory interpretations and guidance; and |
| · | counterparty risk in the markets in which we operate. |
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Counterparty risk in the markets in which we operate includes:
| · | regulatory aspects from financial services; |
| · | federal energy and other regulators; |
| · | the SEC; |
| · | the CFTC; |
| · | credit, crypto asset custody; |
| · | exchange, and transfer; |
| · | cross-border and domestic money and crypto asset transmission; |
| · | consumer and commercial lending; |
| · | usury; |
| · | foreign currency exchange; |
| · | privacy; |
| · | data governance; |
| · | data protection; |
| · | cybersecurity; |
| · | fraud detection; |
| · | antitrust and competition; |
| · | bankruptcy; |
| · | tax; |
| · | anti-bribery; |
| · | economic and trade sanctions; |
| · | anti-money laundering, and counter-terrorist financing; |
| · | the same regulatory risks applicable to counterparties which are most notably hosting businesses; and |
| · | the recent economic issues and bankruptcies befalling some in this industry. |
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Many of these legal and regulatory regimes were adopted prior to the advent of the internet, mobile technologies, crypto assets, and related technologies. As a result, some applicable laws and regulations do not contemplate or address unique issues associated with the crypto economy, are subject to significant uncertainty, and vary widely across U.S. federal, state, 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. Moreover, the complexity and evolving nature of our business and the significant uncertainty surrounding the regulation of the crypto economy requires us to exercise our 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 with such laws, rules, and regulations, we could be subject to significant fines, revocation of licenses, limitations on our products and services, reputational harm, and other regulatory consequences, each of which may be significant and could adversely affect our business, operating results, and financial condition.
Additionally, various governmental and regulatory bodies, including legislative and executive bodies, in the United States 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 crypto economy. For example, following the failure of several prominent crypto trading venues and lending platforms, such as FTX, Celsius Networks, Voyager and Three Arrows Capital in 2022 (even though these do not directly affect our business), the U.S. Congress expressed the need for both greater federal oversight of the crypto economy and comprehensive cryptocurrency legislation. In the near future, various governmental and regulatory bodies, including in the United States, may introduce new policies, laws, and regulations relating to crypto assets, the crypto economy, and crypto asset platforms. The failures of risk management and other control functions at other companies that played a role in these events could accelerate an existing regulatory trend toward stricter oversight of crypto asset platforms and the crypto economy.
Due to our business activities, we may be subject to ongoing examinations, oversight, and reviews and currently are, and expect to be, subject to investigations and inquiries, by U.S. federal and state regulators, many of which have broad discretion to audit and examine our business. Moreover, new laws, regulations, or interpretations could result in litigation, regulatory investigations, and enforcement or other actions, including preventing or delaying us from offering certain products or services offered by our competitors or could impact how we offer such products and services. Adverse changes to, or our failure to comply with, any laws and regulations have had, and may continue to have, an adverse effect on our reputation, brand, business, operating results, and financial condition.
Regulatory changes or actions may restrict the use of bitcoins or the operation of the bitcoin network.
Until recently, little or no regulatory attention has been directed toward bitcoin and the bitcoin network by U.S. federal and state governments, foreign governments and self-regulatory agencies. As bitcoin has grown in popularity and in market size, the Federal Reserve Board, U.S. Congress and certain U.S. agencies (e.g., the CFTC, the SEC, FinCEN and the Federal Bureau of Investigation) have begun to examine the operations of the bitcoin network, bitcoin users and the bitcoin exchange market.
Digital assets currently face an uncertain regulatory landscape in not only the United States but also in many foreign jurisdictions, such as the European Union, China, India and Russia. While certain governments have issued guidance as to how to treat bitcoin, most regulatory bodies have not yet issued official statements regarding intention to regulate or determinations on regulation of bitcoin, the bitcoin network and bitcoin users. The effect of any future regulatory change on us, bitcoins, or other digital assets is impossible to predict, but such change could be substantial and adverse to us and could adversely affect our business operations and financial condition.
Furthermore, one or more countries, such as China, India and Russia, may take regulatory actions in the future that severely restricts the right to acquire, own, hold, sell or use digital assets or to exchange digital assets for fiat currency. Such an action may also result in the restriction of ownership, holding or trading in our securities.
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If regulatory changes or interpretations require the regulation of bitcoins under the Securities Act and Investment Company Act by the SEC, we may be required to register and comply with such regulations. To the extent that we decide to continue operations, the required registrations and regulatory compliance steps may result in extraordinary, non-recurring expenses to us. We may also decide to cease certain operations. Any disruption of our operations in response to the changed regulatory circumstances may be at a time that is disadvantageous to investors.
Current and future legislation and the SEC rulemaking and other regulatory developments, including interpretations released by a regulatory authority, may impact the manner in which bitcoins are treated for classification and clearing purposes. The SEC’s July 25, 2017 Report expressed its view that digital assets may be securities depending on the facts and circumstances. As of the date of this Annual Report, we are not aware of any rules that have been proposed to regulate bitcoins as securities. We cannot be certain as to how future regulatory developments will impact the treatment of bitcoins under the law. Such additional registrations may result in extraordinary, non-recurring expenses, thereby materially and adversely impacting an investment in our common stock. If we determine not to comply with such additional regulatory and registration requirements, we may seek to cease certain of our operations. Any such action may adversely affect our business operations and financial condition.
To the extent that digital assets including bitcoins and other digital assets we own or may own are deemed by the SEC to fall within the definition of a security, we may be required to register and comply with additional regulation under the Investment Company Act, including additional periodic reporting and disclosure standards and requirements and our registration as an investment company.
Additionally, although we are not engaged in the business of investing, reinvesting, or trading in securities, and we do not hold ourselves out as being engaged in those activities, we could inadvertently be deemed an investment company under the Investment Company Act. If we inadvertently are deemed an investment company and cannot rely on one of the exclusions under the Investment Company Act, then we would be required to register with the SEC.
Furthermore, one or more states may conclude bitcoins and other digital assets we own or may own are a security under state securities laws which would require registration under state laws including merit review laws which would adversely impact us since we would likely not comply. As stated earlier in this Annual Report, some states including California define the term “investment contract” more strictly than the SEC.
Such additional registrations, whether from regulatory developments or an inadvertent classification as an investment company, may result in extraordinary, non-recurring expenses for us, thereby materially and adversely impacting an investment in our securities. If we determine not to comply with such additional regulatory and registration requirements, we may seek to cease all or certain parts of our operations. Any such action would likely adversely affect an investment in our securities and investors may suffer a complete loss of their investment.
If regulatory changes or interpretations of our activities require our registration as an MSB under the regulations promulgated by FinCEN under the authority of the BSA, or otherwise under state laws, we may incur significant compliance costs, which could be substantial or cost-prohibitive.
To the extent our bitcoin mining activities cause us to be deemed a money services business (an “MSB”) under the regulations promulgated by the Financial Crimes Enforcement Network (“FinCEN”) under the authority of the U.S. Bank Secrecy Act (the “BSA”), we may be required to comply with FinCEN regulations, including those that would mandate us to implement anti-money laundering programs, make certain reports to FinCEN and maintain certain records.
To the extent that our cryptocurrency activities cause us to be deemed a “money transmitter” (an “MT”) or be given an equivalent designation under state law in any state in which we operate, we may be required to seek a license or otherwise register with a state regulator and comply with state regulations that may include the implementation of anti-money laundering programs, maintenance of certain records and other operational requirements. Currently, the New York State Department of Financial Services maintains a comprehensive “BitLicense” framework for businesses that conduct “virtual currency business activity.” Effective August 2020, Louisiana enacted the Virtual Currency Businesses Act. The implementing regulations were formally adopted in late 2022. In October 2023, California enacted the Digital Financial Assets Law, which requires registration for certain digital financial asset business activities. We will continue to monitor for developments in state-level legislation, guidance or regulations applicable to us.
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Such additional federal or state regulatory obligations in the United States or obligations that could arise under the regulatory frameworks of other countries may cause us to incur significant expenses, possibly affecting our business and financial condition in a material and adverse manner. Furthermore, we and our service providers may not be capable of complying with certain federal or state regulatory obligations applicable to MSBs and MTs or similar obligations in other countries. If we are deemed to be subject to such additional regulatory oversight and registration or licensing requirements, we may be required to substantially alter our bitcoin mining activities and possibly cease engaging in such activities. Any such action may adversely affect our business operations and financial condition and an investment in our company.
Current regulation regarding the exchange of bitcoins under the CEA by the CFTC is unclear; to the extent we become subject to regulation by the CFTC in connection with our exchange of bitcoin, we may incur additional compliance costs, which may be significant.
The Commodity Exchange Act, as amended (the “CEA”), does not currently impose any direct obligations on us related to the mining or exchange of bitcoins. Generally, the CFTC, the federal agency that administers the CEA, regards bitcoin and other cryptocurrencies as commodities. This position has been supported by decisions of federal courts.
However, the CEA imposes requirements relative to certain transactions involving bitcoin and other digital assets that constitute a contract of sale of a commodity for future delivery (or an option on such a contract), a swap or a transaction involving margin, financing or leverage that does not result in actual delivery of the commodity within 28 days to persons not defined as “eligible contract participants” or “eligible commercial entities” under the CEA (e.g., retail persons). Changes in the CEA or the regulations promulgated by the CFTC thereunder, as well as interpretations thereof and official promulgations by the CFTC, may impact the classification of bitcoin and, therefore, may subject bitcoin to additional regulatory oversight by the agency. Although to date the CFTC has not enacted regulations governing non-derivative or non-financed, margined or leveraged transactions in bitcoin, it has authority to commence enforcement actions against persons who violate certain prohibitions under the CEA related to transactions in any contract of sale of any commodity, including bitcoin, in interstate commerce (e.g., manipulation and engaging in certain deceptive practices).
We cannot be certain as to how future regulatory developments will impact the treatment of bitcoin under the law. Any requirements imposed by the CFTC related to our mining activities or our transactions in bitcoin could cause us to incur additional extraordinary, non-recurring expenses, thereby potentially materially and adversely impacting an investment in us.
Moreover, if our mining activities or transactions in bitcoin were deemed by the CFTC to constitute a collective investment in derivatives for our stockholders, we may be required to register as a commodity pool operator with the CFTC through the National Futures Association. Such additional registrations may result in extraordinary, non-recurring expenses, thereby potentially materially and adversely impacting an investment in us. If we determine not to comply with such additional regulatory and registration requirements, we may seek to cease certain of our operations. Any such action may adversely affect an investment in us.
While no provision of the CEA or CFTC rules, orders or rulings (except as noted herein) appear to be currently applicable to our business, this is subject to change.
It may be illegal now, or in the future, to mine, acquire, own, hold, sell or use bitcoin or other cryptocurrencies, participate in blockchains or utilize similar cryptocurrency assets in one or more countries.
Although currently cryptocurrencies generally are not regulated or are lightly regulated in most countries, several countries, such as China, India and Russia, may continue taking regulatory actions in the future that could severely restrict the right to mine, acquire, own, hold, sell or use cryptocurrency assets or to exchange any such cryptocurrency assets for local currency. For example, in China and Russia (India is currently proposing new legislation), it is illegal to accept payment in bitcoin and other cryptocurrencies for consumer transactions and banking institutions are barred from accepting deposits of cryptocurrencies. In addition, in March 2021, the governmental authorities for the Chinese province of Inner Mongolia banned bitcoin mining in the province due to the industry’s intense electrical power demands and its negative environmental impacts. Later, China extended the ban on bitcoin mining to all of China. If other countries, including the U.S., implement similar restrictions, such restrictions may adversely affect us. For example, in New York State, a moratorium on certain bitcoin mining operations that run on carbon-based power sources was signed into law on November 22, 2022. Such circumstances could have a material adverse effect on us, which could have a material adverse effect on our business, prospects or operations and potentially the value of any bitcoin or other cryptocurrencies we mine or otherwise acquire or hold for our own account, and thus harm investors.
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Changing environmental regulation and public energy policy may expose our business to new risks.
Our bitcoin mining operations require a substantial amount of power and can only be successful, and ultimately profitable, if the costs we incur, including for electricity, are lower than the revenue we generate from our operations. As a result, any mine we establish can only be successful if we can obtain sufficient electrical power for that mine on a cost-effective basis, and our establishment of new mines requires us to find locations where that is the case. For instance, our plans and strategic initiatives for expansion are based, in part, on our understanding of current environmental and energy regulations, policies and initiatives enacted by federal and state regulators. If new regulations are imposed, or if existing regulations are modified, the assumptions we made underlying our plans and strategic initiatives may be inaccurate, and we may incur additional costs to adapt our planned business, if we are able to adapt at all, to such regulations.
In addition, there continues to be a lack of consistent climate legislation, which creates economic and regulatory uncertainty for our business because the bitcoin mining industry, with its high energy demand, may become a target for future environmental and energy regulation. New legislation and increased regulation regarding climate change could impose significant costs on us and our suppliers, including costs related to increased renewable energy requirements, capital equipment, environmental monitoring and reporting, and other costs to comply with such regulations. Further, any future climate change regulations could also negatively impact our ability to compete with companies situated in areas not subject to such limitations. For example, the recently passed legislation in the state of New York imposing a moratorium on certain bitcoin mining operations that run carbon-based power.
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 financial condition and results of operations. Further, even without such regulation, increased awareness and any adverse publicity in the global marketplace about potential impacts on climate change by us or other companies in our industry could harm our reputation. Any of the foregoing could result in a material adverse effect on our business and financial condition.
Future developments regarding the treatment of digital assets for U.S. federal income and applicable state, local and non-U.S. tax purposes could adversely impact our business.
Due to the new and evolving nature of digital assets and the absence of comprehensive legal guidance with respect to digital assets and related transactions, many significant aspects of the U.S. federal income and applicable state, local and non-U.S. tax treatment of transactions involving digital assets, 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 digital assets and related transactions.
Current Internal Revenue Service ("IRS") guidance indicates that for U.S. federal income tax purposes digital assets such as bitcoins should be treated and taxed as property, and that transactions involving the payment of bitcoins 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 of digital currencies are taxable events giving rise to taxable income and guidance with respect to the determination of the tax basis of digital currency. 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 forks, there continues to be uncertainty with respect to the timing and amount of income inclusions for various digital asset transactions, including, but not limited to, staking rewards and other digital asset incentives and rewards products. 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.
There can be no assurance that the IRS will not alter its existing position with respect to digital assets in the future or that other state, local and non-U.S. taxing authorities or courts will follow the approach of the IRS with respect to the treatment of digital assets such as bitcoin for income tax and sales tax purposes. Any such 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, generally, and potentially have a negative effect on the trading price of bitcoin or otherwise negatively impact our business. In addition, future technological and operational developments that may arise with respect to digital currencies may increase the uncertainty with respect to the treatment of digital currencies for U.S. federal income and applicable state, local and non-U.S. tax purposes.
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Our bitcoin holdings could subject us to regulatory scrutiny.
As digital assets, including bitcoin, have grown in popularity and market size, there has been increasing focus on the extent to which digital assets can be used to launder the proceeds of illegal activities or fund criminal or terrorist activities, or entities subject to sanctions regimes. If we are found to have purchased any of our bitcoin from bad actors that have used bitcoin to launder money or persons subject to sanctions, we may be subject to regulatory proceedings and further transactions or dealings in bitcoin may be restricted or prohibited.
Due to the unregulated nature and lack of transparency surrounding the operations of many bitcoin trading venues, they may experience fraud, security failures or operational problems, which may adversely affect the value of our bitcoin.
Bitcoin trading venues are relatively new and, in some cases, unregulated. Furthermore, there are many bitcoin trading venues which do not provide the public with significant information regarding their ownership structure, management teams, corporate practices and regulatory compliance. As a result, the marketplace may lose confidence in bitcoin trading venues, including prominent exchanges that handle a significant volume of bitcoin trading.
Negative perception, a lack of stability in the broader bitcoin markets and the closure or temporary shutdown of bitcoin trading venues due to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence in bitcoin and result in greater volatility in the prices of bitcoin. To the extent investors view our common stock as linked to the value of our bitcoin holdings, such a negative perception of bitcoin trading venues could have a material adverse effect on the market value of our common stock.
Our interactions with the bitcoin network may expose us to SDN or blocked persons or cause us to violate provisions of law that did not contemplate distributed ledger technology.
The Office of Financial Assets Control (“OFAC”) of the Treasury requires us to comply with its sanction program and not conduct business with persons named on its specially designated nationals (“SDN”) list. However, because of the pseudonymous nature of blockchain transactions, we may inadvertently and without our knowledge engage in transactions with persons named on OFAC’s SDN list. We also may not be adequately capable of determining the ultimate identity of the persons with whom we transact.
We have operations in Trinidad and may commence operations in other foreign countries. Foreign countries have differing degrees of political, legal and fiscal stability. This exposes us to a wide range of political developments that could result in changes to contractual terms, laws and regulations. In addition, we, and our joint arrangements and associates, face the risk of litigation and disputes worldwide.
Developments in politics, laws and regulations of foreign countries can and do affect our operations. Potential impacts include:
| · | forced divestment of assets; |
| · | expropriation of property; |
| · | cancellation or forced renegotiation of contract rights; |
| · | additional taxes including windfall taxes; |
| · | restrictions on deductions and retroactive tax claims; |
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| · | antitrust claims; |
| · | changes to trade compliance regulations; |
| · | price controls; |
| · | local content requirements; |
| · | foreign exchange controls; |
| · | changes to environmental regulations; |
| · | changes to regulatory interpretations and enforcement; and |
| · | changes to disclosure requirements. |
Any of these, individually or in aggregate, could have a material adverse effect on our earnings, cash flows and financial condition.
From time to time, social and political factors play a role in unprecedented and unanticipated judicial outcomes that could adversely affect our business. Non-compliance with policies and regulations could result in regulatory investigations, litigation and, ultimately, sanctions. Certain governments and regulatory bodies have, in our opinion, exceeded their constitutional authority by:
| · | attempting unilaterally to amend or cancel existing agreements or arrangements; |
| · | failing to honor existing contractual commitments; and |
| · | seeking to adjudicate disputes between private litigants. |
Additionally, certain governments have adopted laws and regulations that could potentially force us to violate other countries’ laws and regulations, therefore potentially subjecting us to both criminal and civil sanctions. Such developments and outcomes could have a material adverse effect on our earnings, cash flows and financial condition.
Risks Related to Ownership of Our Common Stock
An active trading market for our common stock may never develop or be sustained.
Prior to this offering, our common stock is quoted on the OTCQX under the symbol “BMNRD.” We have applied to list our common stock on the NYSE American, and this offering is contingent upon the approval of such listing. However, we cannot predict the extent to which investor interest in our company will lead to the development of an active trading market in our common stock or how liquid that market might become. If such a market does not develop or is not sustained, it may be difficult for you to sell your shares of common stock at the time you wish to sell them, at a price that is attractive to you, or at all.
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The trading price of our common stock may be volatile, and you could lose all or part of your investment.
The trading price of our common stock has been and is likely to continue to be volatile and could be subject to fluctuations in response to various factors, some of which are beyond our control. These fluctuations could cause you to lose all or part of your investment in our common stock as you might be unable to sell your shares at or above the price you paid for those shares. Factors that could cause fluctuations in the trading price of our common stock include the following:
| · | price and volume fluctuations in the overall stock market from time to time; | |
| · | volatility in the trading prices and trading volumes of technology stocks; | |
| · | volatility in the price of bitcoin and other digital assets; | |
| · | changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; | |
| · | sales of shares of our common stock by us or our stockholders; | |
| · | failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; | |
| · | the financial projections we may provide to the public, any changes in those projections, or our failure to meet those projections; | |
| · | announcements by us or our competitors of new products, features, or services; | |
| · | the public’s reaction to our press releases, other public announcements and filings with the SEC; | |
| · | rumors and market speculation involving us or other companies in our industry; | |
| · | actual or anticipated changes in our results of operations or fluctuations in our results of operations; | |
| · | actual or anticipated developments in our business, our competitors’ businesses or the competitive landscape generally; | |
| · | litigation involving us, our industry, or both, or investigations by regulators into our operations or those of our competitors; | |
| · | developments or disputes concerning our intellectual property or other proprietary rights; | |
| · | announced or completed acquisitions of businesses, products, services or technologies by us or our competitors; | |
| · | new laws or regulations or new interpretations of existing laws or regulations applicable to our business; | |
| · | changes in accounting standards, policies, guidelines, interpretations or principles; | |
| · | any significant change in our management; and | |
| · | general economic conditions and slow or negative growth of our markets. |
In addition, in the past, following periods of volatility in the overall market and in the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.
The concentration of our capital stock ownership with our management will likely limit your ability to influence corporate matters.
As of the date of this prospectus, our executive officers, directors, and affiliated persons and entities collectively, beneficially owned approximately 52.2% of our outstanding common stock and 100% of our Series A Convertible Preferred Stock and Series B Convertible Preferred Stock (both series of which will be converted into common stock upon closing of this offering, (see “Certain Relationships and Related Party Transactions—Letter Agreement with Jonathan Bates and IDI”)), and as a result control 74.4% of the votes on any matter submitted to a vote of shareholders prior to the issuance of any shares in this offering. Following this offering, our executive officers, directors, and affiliated persons and entities will, collectively, beneficially own approximately 50.8% of our outstanding common stock (or 48.5% of our outstanding common stock if the underwriters exercise their option to purchase our shares in full pursuant to the overallotment option). As a result, while we do not expect to be a “controlled company” within the meaning of the corporate governance rules of the NYSE American on which we intend to list our shares, these persons and entities have the ability to exercise significant influence over most matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions. This concentration of ownership might also have the effect of delaying or preventing a change in control of our company or another significant corporate transaction that other stockholders may view as beneficial.
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We have the right to designate and issue additional shares of preferred stock. If we were to designate and/or issue additional preferred stock, it is likely to have rights, preferences and privileges that may adversely affect the common stock.
We are authorized to issue 20,000,000 shares of blank-check preferred stock, with such rights, preferences and privileges as may be determined from time to time by our Board of Directors. Our Board of Directors is empowered, without stockholder approval, to issue preferred stock in one or more series, and to fix for any series the dividend rights, dissolution or liquidation preferences, redemption prices, conversion rights, voting rights and other rights, preferences and privileges for the preferred stock.
Currently, our Board of Directors has designated 500,000 shares as Series A Convertible Preferred Stock, of which 453,966 shares are outstanding, and 3,000 shares as Series B Convertible Preferred Stock, of which 2,500 shares are outstanding. The Series A Convertible Preferred Stock has a stated value of $10 per share and the Series B Convertible Preferred Stock has a stated value of $1,000 per share. Each of the series of preferred stock has a liquidation value senior to common stock an amount equal to their stated value, are convertible into common stock at a conversion price of $0.20 per share (pre-split), are entitled to dividends on an as-converted basis and to vote on an as-converted basis, grant the holders certain rights to compel a mandatory redemption of the shares, to participate in future offerings as well as anti-dilution protection, among other provisions.
The issuance of shares of preferred stock, depending on the rights, preferences and privileges attributable to the preferred stock, could reduce the voting rights and powers of our common stock and the portion of our assets allocated for distribution to common stockholders in a liquidation event, and could also result in dilution in the book value per share of our common stock. The preferred stock could also be utilized, under certain circumstances, as a method for raising additional capital or discouraging, delaying or preventing a change in control of us, to the detriment of the investors in our common stock. We cannot assure that we will not, under certain circumstances, issue additional shares of our preferred stock.
We incur significant costs and demands upon management and accounting and finance resources as a result of complying with the laws and regulations affecting public companies; any failure to establish and maintain adequate internal controls and/or disclosure controls or to recruit, train and retain necessary accounting and finance personnel could have an adverse effect on our ability to accurately and timely prepare our financial statements and otherwise make timely and accurate public disclosure.
As a public company quoted in the United States, we will incur significant additional legal, accounting and other expenses. In addition, changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations implemented by the SEC and any exchange on which we list our shares, may increase legal and financial compliance costs and make some activities more time consuming. These laws, regulations and standards are subject to varying interpretations, and as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If, notwithstanding our efforts, we fail to comply with new laws, regulations and standards, regulatory authorities may initiate legal proceedings against us, and our business may be harmed.
In particular, we have needed, and continue to need, to enhance and supplement our internal accounting resources with additional accounting and finance personnel with the requisite technical and public company experience and expertise to enable us to satisfy such reporting obligations. Failure to comply with these rules might also make it more difficult for us to obtain certain types of insurance, including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events would also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, on committees of our board of directors or as members of senior management.
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Section 404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and report on our system of internal controls and, if and when we are no longer a “smaller reporting company,” will require that we have such a system of internal controls audited. If we fail to maintain the adequacy of our internal controls, we could be subject to regulatory scrutiny, civil or criminal penalties and/or stockholder litigation. Any inability to provide reliable financial reports could harm our business. Furthermore, any failure to implement required new or improved controls, or difficulties encountered in the implementation of adequate controls over our financial processes and reporting in the future, could harm our operating results or cause us to fail to meet our reporting obligations. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our securities.
As a smaller reporting company we will be exempt from certain disclosure requirements, which could make our common stock less attractive to potential investors.
Rule 12b-2 of the Exchange Act defines a “smaller reporting company” as an issuer that is not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent that is not a smaller reporting company and that:
| · | had a public float of less than $250 million as of the last business day of its most recently completed second fiscal quarter, computed by multiplying the aggregate worldwide number of shares of its voting and non-voting common equity held by non-affiliates by the price at which the common equity was last sold, or the average of the bid and asked prices of common equity, in the principal market for the common equity | |
| · | in the case of an initial registration statement under the Securities Act, or the Exchange Act of 1934, as amended, which we refer to as the Exchange Act, for shares of its common equity, had a public float of less than $250 million as of a date within 30 days of the date of the filing of the registration statement, computed by multiplying the aggregate worldwide number of such shares held by non-affiliates before the registration plus, in the case of a Securities Act registration statement, the number of such shares included in the registration statement by the estimated public offering price of the shares; or | |
| · | in the case of an issuer whose public float as calculated under paragraph (1) or (2) of this definition was zero or whose public float was less than $700 million, had annual revenues of less than $100 million during the most recently completed fiscal year for which audited financial statements are available |
As a smaller reporting company, we are not required and may not include a Compensation Discussion and Analysis section in our proxy statements, and we will provide only two years of financial statements. We also have other “scaled” disclosure requirements that are less comprehensive than issuers that are not smaller reporting companies which could make our common stock less attractive to potential investors, which could make it more difficult for our stockholders to sell their shares.
We are an “emerging growth company,” and we cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:
| · | have an auditor report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act; | |
| · | comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditors’ report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis); | |
| · | submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay” and “say-on-frequency”; and | |
| · | disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation. |
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In addition, Section 102 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We will remain an emerging growth company until the earliest to occur of: (i) the end of the first fiscal year in which our annual gross revenue is $1.235 billion or more; (ii) the end of the fiscal year in which the market value of our common shares that are held by non-affiliates is at least $700.0 million as of the last business day of our most recently completed second fiscal quarter; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; and (iv) the end of the fiscal year during which the fifth anniversary of this offering occurs.
Because there has been limited precedent set for financial accounting of bitcoin and other cryptocurrency assets, the determination that we have made for how to account for cryptocurrency assets transactions may be subject to change.
Because there has been limited precedent set for the financial accounting of cryptocurrencies and related revenue recognition, it is unclear how companies may, in the future, be required to account for cryptocurrency transactions and assets and related revenue recognition. A change in regulatory or financial accounting standards could result in the necessity to change our accounting methods and restate our financial statements. Such a restatement could adversely affect the accounting for our newly mined cryptocurrency rewards and more generally negatively impact our business, prospects, financial condition and results of operations. Such circumstances would have a material adverse effect on our ability to continue as a going concern or to pursue our new strategy at all, which would have a material adverse effect on our business, prospects or operations as well as and potentially the value of any cryptocurrencies we hold or expect to acquire for our own account and harm our investors.
Exercise or conversion of warrants and other convertible securities, along with new issuances of our common stock, will dilute our stockholder’s percentage of ownership.
We have issued convertible securities and warrants to purchase shares of our common stock to our officers and certain investors. In the future, we may grant additional warrants and convertible securities. In particular, we have issued to our Chief Executive Officer and Innovative Digital Investors Emerging Technology, L.P. (“IDI”), an entity over which our CEO exercises voting power and control, an aggregate of 453,996 shares of Series A Convertible Preferred Stock, which are convertible into 1,134,915 shares of common stock (on a post-split basis), and 2,500 shares of Series B Convertible Preferred Stock, which are convertible into 625,000 shares of common stock (on a post-split basis), for a total of 1,759,915 shares of common stock (on a post-split basis). (See “Principal Stockholders.”) The holders of our outstanding preferred stock have agreed to convert such preferred stock into shares of common stock in connection with the consummation of this offering. (See “Certain Relationships and Related Party Transactions—Letter Agreement with Jonathan Bates and IDI.”) The exercise, conversion or exchange of any currently outstanding or future issued options, warrants or convertible securities, including for other securities, will substantially dilute the percentage ownership of our common stockholders. The dilutive effect of the exercise or conversion of these securities may adversely affect our ability to obtain additional capital. The holders of these securities may be expected to exercise or convert such warrants and convertible securities at a time when it would be able to obtain additional equity capital on terms more favorable than such securities or when our common stock is trading at a price higher than the exercise or conversion price of the securities. The exercise or conversion of outstanding warrants and convertible securities will have a dilutive effect on the securities held by our stockholders. We have in the past, and may in the future, exchange outstanding securities for other securities on terms that are dilutive to the securities held by other stockholders not participating in such exchange.
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A significant portion of our assets are pledged to an entity controlled by our Chairman and failure to repay obligations to such entity when due could result in foreclosure on our assets.
As of February 28, 2025, we owed $1,875,000 in principal, plus interest, to an investment fund controlled by our Chairman under a line of credit that permits draws by us of up to $2,300,000. As of the date of this prospectus, we had not made any payment of principal or accrued interest on the loan since its inception, and, as a result, the current outstanding principal and amount of accrued interest represents the largest aggregate amount outstanding since the date of the loan agreement. At maturity on December 1, 2024, the amount due under the line of credit along with accrued interest was payable in full. However, we have the right to extend the maturity for six monthly periods in consideration for $25,000 for each extension, which will be added to the loan balance. We exercised our right to extend the maturity date of the loan; however, the $25,000 extension fee was never accrued or paid. Consequently, we executed an amendment on May 21, 2025, pursuant to which the extension fee was waived and replaced with a payment of $150,000, payable by June 6, 2025, to the extent we do not complete our public offering. Pursuant to the amendment, the maturity date was also extended to August 15, 2025. Amounts due under the line of credit are secured by our assets.
It is necessary for us to grow our business in order to generate free cash flow necessary to repay the principal and interest on our indebtedness. If we were to default on the amounts owed or other terms and conditions of the convertible notes, the lender would have the right to exercise rights and remedies to collect, which would include obtaining judgement lien on our assets and selling them to pay the judgment. A default would have a material adverse effect on our business and our stockholders could lose their entire investment in us. We may need to raise capital in order to repay our amounts due under the line of credit at maturity. There is no assurance that we will be able to raise such capital on terms that will be favorable to common stockholders.
We may need capital in the future, and we may not be able to raise that capital on favorable terms.
Developing our business will require significant capital in the future. Historically, we have partially relied on financial support from insiders, including the under a line of credit with an entity controlled by our Chairman that permits draws by us of up to $2,300,000. After the completion of this offering, we do not expect to receive any additional capital contributions from insiders. To meet our capital needs, we expect to rely on cash flows from operations, the proceeds from this offering, future offerings and other third-party financing. Third-party financing in the future may not, however, be available on terms favorable to us, or at all. Our ability to obtain additional funding will be subject to various factors, including market conditions, our operating performance, lender sentiment and our ability to incur additional debt in compliance with other contractual restrictions such as financial covenants under term loans or other debt documents. These factors may make the timing, amount, or terms and conditions of additional financing unattractive. Our inability to raise capital could impede our growth and could materially adversely affect our business, financial condition or results of operations.
We depend on key personnel and could be harmed by the loss of their services because of the limited number of qualified people in our industry.
Because of our small size, we require the continued service and performance of our management team, all of whom we consider to be key employees. Competition for highly qualified employees in the data storage industry is intense. Our success will depend to a significant degree upon our ability to attract, train, and retain highly skilled directors, officers, management, business, financial, legal, marketing, sales, and technical personnel and upon the continued contributions of such people. In addition, we may not be able to retain our current key employees. The loss of the services of one or more of our key personnel and our failure to attract additional highly qualified personnel could impair our ability to expand our operations and provide service to our customers.
We currently do not have employment agreements with most of our management and are not currently paying them any compensation. As a result, management’s only incentive for continuing to work for us is due to their stock ownership in us. Our management will not be able to work for us indefinitely without being paid. We plan to enter into employment contracts with management, and begin paying them compensation, once we are able to raise capital to fund our business.
Competition for employees is intense, and we may not be able to attract and retain the qualified and skilled employees needed to support our business.
We believe our success depends on the efforts and talent of our employees, including hosting facility design, construction management, operations, data processing, engineering, IT, risk management and sales and marketing personnel. Our future success depends on our continued ability to attract, develop, motivate and retain qualified and skilled employees. Competition for highly skilled personnel is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Some of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment.
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In addition, if we fail to retain our employees, we could incur significant expenses in hiring and training their replacements, and the quality of our services and our ability to serve our customers could diminish, resulting in a material adverse effect on our business, financial condition and results of operations. At this time, we lack the resources to hire all of the skilled employees that we need to properly operate our business.
Our common stock market price and trading volume could decline if securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business.
The trading market for our common stock may depend in part on the research and reports that securities or industry analysts publish about us or our business. Currently, no analysts cover our common stock. A failure to obtain analyst coverage of our common stock may mean that our price may never achieve levels that we think are fair and that our trading volume never achieves levels that are sufficient to attract additional investor interest.
Even if one or more analysts begin to cover our common stock, analysts’ estimates are based upon their own opinions and are often different from the estimates or expectations of management. Analysts could downgrade our common stock or publish inaccurate or unfavorable research about our business, which would likely cause the price of our securities to decline. If few securities analysts commence coverage of us, or if one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our securities could decrease, which might cause the price and trading volume of our common stock to decline.
An inability to obtain analyst coverage for our common stock, and expected gains in our stock price and trading volume, will impair our ability to raise capital to finance the growth of our business, which could have a material adverse effect on our business and stock price.
Our amended and restated certificate of incorporation and amended and restated bylaws provide that state or federal court located within the state of Delaware will be the sole and exclusive forum for substantially all disputes between us and our shareholders, which could limit its stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
Our amended and restated certificate of incorporation provides that “[u]nless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware (the “Court of Chancery”) shall be the sole and exclusive forum for any stockholder (including a beneficial owner) to bring (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (c) any action asserting a claim against the Corporation, its directors, officers or employees arising pursuant to any provision of the DGCL or this Amended and Restated Certificate or the Bylaws or (d) any action asserting a claim against the Corporation, its directors, officers or employees governed by the internal affairs doctrine, except for, as to each of (a) through (d) above, any claim arising under the Securities Act of 1933, as amended, or the Exchange Act, any claim as to which the Court of Chancery determines that there is an indispensable party not subject to the jurisdiction of the Court of Chancery (and the indispensable party does not consent to the personal jurisdiction of the Court of Chancery within ten days following such determination), which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery, or for which the Court of Chancery does not have subject matter jurisdiction, in which case, any such claim shall be brought in any other court located in the State of Delaware possessing subject matter jurisdiction.”
This exclusive forum provision may limit a shareholder’s ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us or our directors, officers or other employees. In addition, shareholders who do bring a claim in the state or federal court in the State of Delaware could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near Delaware. The state or federal court of the State of Delaware may also reach different judgments or results than would other courts, including courts where a shareholder would otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our shareholders. However, the enforceability of similar exclusive forum provisions in other companies’ certificates of incorporation have been challenged in legal proceedings, and it is possible that a court could find this type of provision to be inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings. If a court were to find the exclusive forum provision contained in our amended and restated certificate of incorporation and our bylaws to be inapplicable or unenforceable in an action, we might incur additional costs associated with resolving such action in other jurisdictions.
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Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could have the effect of delaying or preventing changes in control or changes in our management without the consent of our board of directors. These provisions include:
| · | no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates; | |
| · | the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors; | |
| · | the ability of our board of directors to determine whether to issue shares of our preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; | |
| · | limiting the liability of, and providing indemnification to, our directors and officers; | |
| · | providing that a special meeting of the stockholders may only be called by the president or a majority of the board of directors; | |
| · | providing that the bylaws may be altered, amended or repealed by the board of directors by an affirmative vote of a majority of the board of directors at any regular meeting of the board of directors, or by the affirmative vote of at least 75% of the outstanding shares of capital stock entitled to vote on such amendment or repeal, voting together as a single class the board of directors does not recommend the amendment or repeal of the bylaws; and |
These provisions, alone or together, could delay hostile takeovers and changes in control of us or changes in our board of directors and management.
Any provision of our amended and restated certificate of incorporation or amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our security holders to receive a premium for their securities and could also affect the price that some investors are willing to pay for our securities.
We will indemnify and hold harmless our officers and directors to the maximum extent permitted by Delaware law.
Our certificate of incorporation, as amended in connection with the consummation of this offering, provides that we will indemnify and hold harmless our officers and directors against claims arising from our activities to the maximum extent permitted by Delaware law. If we were called upon to perform under our indemnification obligations, then the portion of our assets expended for such a purpose would reduce the amount otherwise available for our business.
Risks Related to This Offering
We have broad discretion in the use of our cash, cash equivalents and marketable securities, including the net proceeds from this offering, and may use them ineffectively, in ways with which you do not agree or in ways that do not increase the value of your investment.
Our management will have broad discretion in the application of our cash, cash equivalents and marketable securities, including the net proceeds from this offering, and could spend the proceeds in ways that do not improve our results of operations. The failure by our management to apply these funds effectively could result in additional operating losses that could have a negative impact on our business, cause the price of our common stock to decline and delay the development of our bitcoin mining business. Pending their use, we may invest our cash, cash equivalents and marketable securities, including the net proceeds from this offering, in a manner that does not produce income or that loses value. (See “Use of Proceeds.”)
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If you purchase our securities in this offering, you will suffer immediate dilution of your investment.
The public offering price of our common stock will be substantially higher than the pro forma as adjusted net tangible book value per share as of February 28, 2025. Therefore, if you purchase our common stock in this offering, you will pay a price per share of common stock that substantially exceeds our pro forma as adjusted net tangible book value per share immediately after this offering. Based on the assumed public offering price of $8.00 per share, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, you will experience immediate dilution of approximately $5.06 per share, representing the difference between our pro forma as adjusted net tangible book value per share after this offering and the assumed public offering price per share. (See “Dilution.”)
Our common stock is currently quoted on the OTCQX operated by OTC Markets Group, Inc. Our common stock will be listed on the NYSE American if this offering is consummated. If we are unable to maintain listing of our securities on the NYSE American or any stock exchange, our stock price could be adversely affected and the liquidity of our stock and our ability to obtain financing could be impaired and it may be more difficult for our stockholders to sell their securities.
Although our common stock will be listed on the NYSE American immediately after this offering, we may not be able to continue to meet the exchange’s minimum listing requirements or those of any other national exchange. If we are unable to maintain listing on the NYSE American or if a liquid market for our common stock does not develop or is sustained, our common stock may remain thinly traded.
The listing rules of the NYSE American require listing issuers to comply with certain standards in order to remain listed on its exchange. If, for any reason, we should fail to maintain compliance with these listing standards and the NYSE American should delist our securities from trading on its exchange and we are unable to obtain listing on another national securities exchange, a reduction in some or all of the following may occur, each of which could have a material adverse effect on our stockholders:
| · | the liquidity of our common stock; | |
| · | the market price of our common stock; | |
| · | our ability to obtain financing for the continuation of our operations; | |
| · | the number of institutional and general investors that will consider investing in our common stock; | |
| · | the number of investors in general that will consider investing in our common stock; | |
| · | the number of market makers in our common stock; | |
| · | the availability of information concerning the trading prices and volume of our common stock; and | |
| · | the number of broker-dealers willing to execute trades in shares of our common stock. |
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Because we do not anticipate paying any cash dividends on our common stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.
We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. As a result, capital appreciation, if any, of our common stock would be your sole source of gain on an investment in our common stock for the foreseeable future.
The sale or availability for sale of substantial amounts of common stock could adversely affect their market price.
We expect to raise capital to fund our business by issuing additional shares of common stock and/or securities convertible into common stock, and the sales of substantial amounts of the common stock in the public market after the completion of this offering, or the perception that these sales could occur, could adversely affect the market price of the common stock and could materially impair our ability to raise capital through equity offerings in the future. The common stock sold in this offering will be freely tradable without restriction or further registration under the Securities Act, and shares held by our existing shareholders may also be sold in the public market in the future subject to the restrictions in Rule 144 and Rule 701 under the Securities Act and the applicable lockup agreements. Future sales and issuances of our capital stock or rights to purchase our capital stock could result in substantial dilution to our existing stockholders. We may sell common stock, convertible securities and other equity securities in one or more transactions at prices and in a manner as we may determine from time to time. If we sell any such securities in subsequent transactions, investors may be materially diluted. New investors in such subsequent transactions could gain rights, preferences and privileges senior to those of holders of our common stock.
There will be 5,785,170 shares of common stock outstanding immediately after this offering, or 6,066,420 shares of common stock if the underwriters exercise their option to purchase additional shares in full pursuant to the overallotment option. In connection with this offering, we, our directors and executive officers and the holders of 5% or more of our outstanding common stock have agreed with the underwriter, subject to certain exceptions, not to sell, transfer or dispose of, directly or indirectly, any of common stock or securities convertible into or exercisable or exchangeable for the common stock for a period of 180 days (or 90 days with respect to us and certain of the 5% or more stockholders) respect to after the date of this prospectus. These outstanding shares that are subject to lock-up agreements are expected to become eligible for unrestricted sale upon expiration of the lockup period, as described in the sections of this prospectus entitled “Shares Eligible for Future Sale” and “Underwriting.” Sales of shares by these shareholders could have a material adverse effect on the trading price of our common stock.
The underwriters of this offering may waive or release parties to the lock-up agreements entered into in connection with this offering, which could adversely affect the price of our common stock.
We, our directors, executive officers and holders of 5% or more of our common stock have entered into lock-up agreements with respect to our and their respective shares of common stock. As restrictions on resale end, the market price of our common stock could decline if the holders of restricted shares sell them or are perceived by the market as intending to sell them. ThinkEquity, at any time and without notice, may release all or any portion of the shares of common stock subject to the foregoing lock-up agreements entered into in connection with this offering. If the restrictions under the lock-up agreements are waived, approximately 3,318,526 shares of common stock will be available for sale into the market, which could reduce the market value for our common stock. (See “Shares Eligible for Future Sale” and “Underwriting.”)
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If we are not able to comply with the applicable continued listing requirements or standards of the NYSE American, the NYSE American could delist our securities.
We intend to apply to have our common stock listed on the NYSE American under the proposed symbol “BMNR” and we anticipate that our common stock will begin trading on the NYSE American immediately following the completion of this offering. The listing of our common stock on NYSE American or another securities exchange is a condition of this offering. Although, after giving effect to this offering we expect to meet the minimum initial listing standards set forth in the NYSE American Listing Standards, we cannot assure you that our securities will be, or will continue to be, listed on the NYSE American in the future. In order to maintain that listing, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, minimum share price, and certain corporate governance requirements. We may not be able to comply with the applicable listing standards and the NYSE American could delist our securities as a result.
We cannot assure you that our common stock, if delisted from NYSE American, will be listed on another national securities exchange. If our common stock is delisted by the NYSE American, our common stock would likely trade on the OTC Markets where an investor may find it more difficult to sell our shares or obtain accurate quotations as to the market value of our common stock.
Techniques employed by short sellers may drive down the market price of our common stock.
Short selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale.
As it is in the short seller’s interest for the price of the security to decline, many short sellers publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its prospects to create negative market momentum and generate profits for themselves after selling a security short. These short attacks have, in the past, led to selling of shares in the market.
It is not clear what effect such negative publicity could have on us. If we were to become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we could have to expend significant resources to investigate such allegations and/or defend ourselves.
We may be constrained in the manner in which we can proceed against the relevant short seller by principles of freedom of speech, applicable state law or issues of commercial confidentiality. Such a situation could be costly and time-consuming, and could distract our management from growing our business. Even if such allegations are ultimately proven to be groundless, allegations against us could severely impact our business, and any investment in the common stock could be greatly reduced or even rendered worthless.
We may be subject to securities litigation, which is expensive and could divert our management’s attention.
The market price of our securities may be volatile, and in the past companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.
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Risks Related to the Reverse Stock Split
The Reverse Stock Split may decrease the liquidity of the shares of our common stock.
We effected the Reverse Stock Split on May 15, 2025. The liquidity of the shares of our common stock may be affected adversely by the Reverse Stock Split given the reduced number of shares that are outstanding as a result of the Reverse Stock Split, especially if the market price of our common stock does not increase proportionally as a result of the Reverse Stock Split. In addition, the Reverse Stock Split may have increased the number of stockholders who own odd lots (less than 100 shares) of our common stock and such stockholders may experience an increase in the cost of selling their shares of common stock and greater difficulty effecting such sales.
Following the Reverse Stock Split, the resulting market price of our common stock may not attract new investors, including institutional investors, and may not satisfy the investing requirements of those investors. Consequently, the trading liquidity of our common stock may not improve.
Although we believe that a higher market price of our common stock may help generate greater or broader investor interest, there can be no assurance that the Reverse Stock Split will result in a share price that will attract new investors, including institutional investors. In addition, there can be no assurance that the market price of our common stock will satisfy the investing requirements of those investors. As a result, the trading liquidity of our common stock may not necessarily improve.
Following the Reverse Stock Split, we cannot assure you that we will be able to continue to comply with listing standards of the NYSE American.
Following the Reverse Stock Split, we expect that our common stock will be eligible to be listed on the NYSE American. For our common stock to be so listed, we must meet the current listing standards of the NYSE American, including the minimum bid price requirement. There can be no assurance that the market price of our common stock following the Reverse Stock Split will remain at the level required for continuing compliance with the minimum bid price requirement of the NYSE American. It is not uncommon for the market price of a company’s common stock to decline in the period following a Reverse Stock Split. If the market price of our common stock declines following the effectuation of the Reverse Stock Split, the percentage decline may be greater than would occur in the absence of a reverse stock split. In addition, other factors unrelated to the number of shares of our common stock outstanding, such as negative financial or operational results, could adversely affect the market price of our common stock and jeopardize our ability to meet or maintain the minimum bid price requirement of the NYSE American. If we fail to comply with the minimum bid price requirement, our securities could be delisted.
If our shares of common stock were to be delisted from the NYSE American, our common stock could revert to trading on the OTC Markets. Any such delisting of our common stock could have an adverse effect on the market price of, and the efficiency of the trading market for, our common stock, not only in terms of the number of shares that can be bought and sold at a given price, but also through delays in the timing of transactions and less coverage of us by securities analysts, if any.
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MARKET FOR COMMON STOCK AND PRICE RANGE OF COMMON STOCK
Our common stock is quoted on the OTCQX, operated by OTC Markets, LLC, under the symbol, “BMNRD.” The OTCQX is a network of security dealers who buy and sell stock. The dealers are connected by a computer network that provides information on current “bids” and “asks,” as well as volume information.
The following post-split table retroactively applied sets forth trading information for our common stock for the periods indicated, as quoted on the OTCQX. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
| Price Range | ||||||||
| High | Low | |||||||
| Six months ended February 28, 2025 | $ | 11.60 | $ | 2.00 | ||||
| Year ended August 31, 2024 | ||||||||
| First Quarter | $ | 17.20 | $ | 8.00 | ||||
| Second Quarter | $ | 18.00 | $ | 9.80 | ||||
| Third Quarter | $ | 17.60 | $ | 10.20 | ||||
| Fourth Quarter | $ | 12.00 | $ | 8.80 | ||||
| Year ended August 31, 2023 | ||||||||
| First Quarter | $ | 26.00 | $ | 14.00 | ||||
| Second Quarter | $ | 24.00 | $ | 0.00 | ||||
| Third Quarter | $ | 23.00 | $ | 9.00 | ||||
| Fourth Quarter | $ | 63.80 | $ | 4.40 | ||||
*The over-the-counter market quotations of the bid prices reflect inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.
Dividends
We have never declared any dividends on our common stock and we do not anticipate paying any dividends on our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. Any future determination to declare dividends will be subject to the discretion of our Board of Directors and will depend on various factors, including applicable Delaware law, future earnings, capital requirements, results of operations and any other relevant factors. In general, as a Delaware corporation, we may pay dividends out of surplus capital or, if there is no surplus capital, out of net profits for the fiscal year in which a dividend is declared and/or the preceding fiscal year.
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CAPITALIZATION
The following table sets forth our cash and our capitalization as of February 28, 2025:
| · | on an actual basis; | |
| · | on a pro forma basis, giving effect to (i) the Reverse Stock Split, (ii) the conversion of all shares of Series A Convertible Preferred Stock and Series B Convertible Preferred Stock into 1,759,915 shares of common stock at a conversion price of $4.00 per share (post-split) (see “Certain Relationships and Related Party Transactions—Letter Agreement with Jonathan Bates and IDI”) (at an assumed public offering price of $8.00 per share, which is based on the last reported sale price of our common stock on the OTCQX on May 16, 2025); (iii) the conversion of approximately $775,000 of indebtedness due to an affiliate into common stock at the public offering price (at an assumed public offering price of $8.00 per share); and (iv) the exchange of approximately $600,000 of indebtedness due to us by an affiliate for $600,000 of debt due from us (see “Certain Relationships and Related Party Transactions—Letter Agreement with Jonathan Bates and IDI”); and | |
| · | on a pro forma as adjusted basis, giving effect to the pro forma adjustments set forth above and our issuance and sale of 1,875,000 shares of our common stock in this offering based on an assumed public offering price of $8.00 per share and assuming no exercise of the overallotment option, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, but not giving effect to the pay-off of the Loan Payable to Luxor which occurred on May 22, 2025. |
The pro forma as adjusted information set forth in the table below is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering as determined at pricing. You should read the information in this table together with our consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended August 31, 2024, incorporated by reference in this prospectus.
| February 28, 2025 | ||||||||||||
| Actual (1) | Pro Forma (2) | Pro Forma As Adjusted | ||||||||||
| Cash and cash equivalents | $ | 482,951 | $ | 482,951 | $ | 13,857,951 | ||||||
| Short-Term Debt | ||||||||||||
| Loan Payable to Luxor | 685,461 | 685,461 | 685,461 | |||||||||
| Note Payable and Accrued Interest – Related Party(3) | 2,319,540 | 944,540 | 944,540 | |||||||||
| Stockholder’s equity | ||||||||||||
| Series A Preferred Stock, $0.0001 par value, 500,000 shares authorized, 453,966 shares issued and outstanding as of February 28, 2025; 500,000 shares authorized and 0 outstanding, -0-pro forma and -0- pro forma as adjusted. | 45 | – | – | |||||||||
| Series B Preferred Stock, $0.0001 par value, 3,000 shares authorized, 2,500 shares issued and outstanding at February 28, 2025; 3,000 authorized and 0 outstanding, -0- pro forma and -0- pro forma as adjusted. | – | – | – | |||||||||
| Common stock, $0.0001 par value, 500,000,000 shares authorized; 39,667,607 (pre-split) issued and outstanding as of February 28, 2025; 2,080,255 outstanding pro forma, and 5,715,170 outstanding pro forma as adjusted. | 3,967 | 208 | 572 | |||||||||
| Additional paid-in capital | 16,165,284 | 16,944,089 | 30,318,725 | |||||||||
| Accumulated deficit | (13,316,148 | ) | (13,316,148 | ) | (13,316,148 | ) | ||||||
| Total Stockholder’s Equity | 2,853,149 | 3,628,149 | 17,003,149 | |||||||||
| Total Capitalization | $ | 6,341,101 | $ | 5,741,101 | $ | 32,491,101 | ||||||
| (1) | Pre-split share amounts. | |
| (2) | Reflects the Reverse Stock Split. | |
| (3) | Comprised of $1,875,000 in principal and $444,540 in accrued interest. |
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A $1.00 increase or decrease in the assumed public offering price of $8.00 per share would increase or decrease the pro forma as adjusted amount of each of total stockholders’ equity and total capitalization by approximately $1,734,375 assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase or decrease of 500,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase or decrease the pro forma as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $3,700,000 assuming no change in the assumed public offering price per share and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us and assuming no exercise of the underwriters’ overallotment option.
The table above excludes 1,280 shares of common stock issuable upon the exercise of outstanding Class C-3 Warrants (25,600 shares of common stock on a pre-split basis,) with an exercise price of $25.00 (on a post-split basis) ($1.25 on a pre-split basis), and 3,750,000 shares of common stock (on a post-split basis) reserved for issuance pursuant to the 2025 Equity Incentive Plan.
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DILUTION
If you invest in our shares of common stock in this offering, your interest will be diluted to the extent of the difference between the public offering price per share of common stock and the pro forma as adjusted net tangible book value per share of common stock immediately after this offering.
Our net tangible book value is the amount of our total tangible assets less our total liabilities. Our net tangible book value as of February 28, 2025 $2,853,149 or $1.44 per share (post-split) of common stock.
Pro forma net tangible book value post-split is our net tangible book value after taking into account the effect of (i) the conversion of all shares of Series A Convertible Preferred Stock and Series B Convertible Preferred Stock into common stock upon closing of the offering at their existing conversion prices of $4.00 per share (post-split) (see “Certain Relationships and Related Party Transactions—Letter Agreement with Jonathan Bates and IDI”), and (ii) the conversion of approximately $775,000 of indebtedness due to an affiliate into common stock at the public offering price (in each case, based upon an assumed public offering price of $8.00 per share). Our pro forma net tangible book value as of February 28, 2025 would have been approximately $3,628,149 or $1.74 per share.
Pro forma as adjusted net tangible book value is our pro forma net tangible book value after taking into account the sale of common stock in this offering, at an assumed public offering price of $8.00 per share, after deducting the underwriting discounts and commissions and other estimated offering expenses payable by us. Our pro forma as adjusted net tangible book value as of February 28, 2025, would have been approximately $17,003,149, or $2.94 per share. This amount represents an immediate increase in pro forma as adjusted net tangible book value of approximately $1.50 per share to our existing stockholders, and an immediate dilution of $5.06 per share to new investors participating in this offering. Dilution per share to new investors is determined by subtracting pro forma as adjusted net tangible book value per share after this offering from the assumed public offering price per share paid by new investors.
The following table illustrates this per share dilution(1):
| Assumed public offering price per share | $ | 8.00 | ||
| Historical net tangible book value per share as of February 28, 2025 | $ | 2,853,149 | ||
| Pro forma net tangible book value per share as of February 28 after pre-offering adjustments | $ | 3,628,149 | ||
| Increase in pro forma net tangible book value attributable to pre-offering adjustments | $ | 775,000 | ||
| Pro forma as adjusted net tangible book value per share after giving effect to this offering | $ | 2.94 | ||
| Increase in pro forma as adjusted pro forma net tangible book value per share attributable to the offering | $ | 1.50 | ||
| Dilution in net tangible book value per share to new investors | $ | 5.06 |
| (1) | Does not include 1,280 shares of common stock (on a post-split basis) issuable upon the exercise of outstanding Class C-3 Warrants (25,600 shares of common stock on a pre-split basis) with an exercise price of $25 (on a post-split basis)($1.25 on a pre-split basis), and 3,750,000 shares of common stock (on a post-split basis) reserved for issuance pursuant to the 2025 Equity Incentive Plan. |
A $1.00 increase in the assumed public offering price of $8.00 per share would increase our net tangible book value to $18,737,524 the net tangible book value per share after this offering to $3.24, and the dilution per share to new investors to $4.76 assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. A $1.00 decrease in the assumed public offering price of $8.00 per share would increase our net tangible book value to $15,268,774, the net tangible book value per share after this offering to $2.64, and the dilution per share to new investors to $5.36, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The information above assumes that the underwriters do not exercise their overallotment option. If the underwriters exercise the overallotment option in full, the pro forma as adjusted net tangible book value will increase to $2.55 per share, representing an immediate increase to existing stockholders of 1.11 per share and an immediate dilution of $5.45 per share to new investors.
To the extent that outstanding warrants are exercised, you will experience less dilution because the exercise price of all outstanding warrants will exceed the offering price. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of these securities may result in further dilution to our stockholders.
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USE OF PROCEEDS
We estimate that the net proceeds we will receive from the sale of our securities in this offering, based upon an assumed public offering price of $8.00, and after deducting underwriting discounts and commissions and estimated expenses payable by us, will be approximately $13,225,000 (or $15,284,250) if the underwriters exercise their option to purchase additional shares in full).
We currently expect to use all of the net proceeds from this offering in the short-term to purchase bitcoin. In the longer term, we expect to either sell bitcoin or leverage our bitcoin holdings for working capital and other general corporate purposes, including to expand our capacity to mine bitcoin by buying new miners and buying and installing new hosting equipment. The amounts and timing of these expenditures will depend on numerous factors, including the development of our current business initiatives. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds from this offering and our management will have discretion and flexibility in applying the net proceeds of this offering. (See “Risk Factors—Risks Related to this Offering—We have broad discretion in the opportunity to evaluate the economic, financial, or other information on which we base our decisions on how to use of our cash, cash equivalents and marketable securities, including the net proceeds from this offering, and may use them ineffectively, in ways with which you do not agree or in ways that do not increase the value of your investment.”)
A $1.00 increase or decrease in the assumed public offering price of $8.00 per share would increase or decrease the net proceeds from this offering by approximately $1,743,375, assuming that the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase or decrease of 500,000 in the number of shares of common stock offered by us would increase or decrease our net proceeds by approximately $3,700,000 assuming the assumed public offering price remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Based on our current projections, we believe the net proceeds of this offering will fund our operations through December 31, 2025.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our financial statements and related notes to those statements included elsewhere in this prospectus. This discussion and analysis and other parts of this prospectus contain forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under “Risk Factors” and elsewhere in this prospectus. You should carefully read the “Risk Factors” section of this prospectus to gain an understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section entitled “Information Regarding Forward-Looking Statements” in this prospectus.
Overview
Since July 2021, our business has been as a blockchain technology company that is building out industrial scale digital asset mining, equipment sales and hosting operations. Our primary business is hosting third-party equipment used in mining of digital asset coins and tokens, specifically bitcoin, as well as self-mining for our own account. Our state-of-the-art facilities will be specifically designed and constructed for housing advanced mining equipment. Our existing data centers provide power, racks, proprietary thermodynamic management (heat dissipation and airflow management), redundant connectivity, and security, as well as software which provides infrastructure management and custom firmware that boosts performance and energy efficiency.
We plan to operate our data centers using immersion cooling technology. Immersion cooling is the process of submerging computer components (or full servers) in a thermally, but not electrically, conductive liquid (dielectric coolant) allowing higher heat transfer performance than air and many other benefits. Manufacturers of immersion systems report that immersion cooling, as compared to air cooling, can reduce the energy costs associated with cooling a data center by up to 90% and can reduce the cost of operating servers by up to 10%. In addition, manufacturers of immersion systems report the cooler, dust-free environment provided by immersion cooling can extend the life of data center equipment when compared to an air-cooled environment.
Our digital asset mining operation is focused on the generation of digital assets by solving complex cryptographic algorithms to validate transactions on specific digital asset network blockchains, which is commonly referred to as “mining.” Mining requires the use of specialized computers equipped with application-specific integrated circuit (ASIC) chips (known as “miners”) to solve complex cryptographic algorithms in support of the bitcoin blockchain (in a process known as “solving a block”) in exchange for digital asset rewards (to date, only bitcoin). Whether we are hosting our client’s computers or mining for our own account with our own computers, the miners participate in “mining pools” organized by “mining pool operators” in which we or our clients share mining power (known as “hashrate”) with the hashrate generated by other miners participating in the pool to earn digital asset rewards. The mining pool operator provides a service that coordinates the computing power of the independent mining enterprises participating in the mining pool. Fees are paid to the mining pool operator to cover the costs of maintaining the pool. The pool uses software that coordinates the pool members’ mining power, identifies new block rewards, and records how much hashrate each participant contributes to the pool. We only use mining pools that pay rewards under the Full-Pay-Per-Share Method, which pays pool participants based on the hashing power contribution to the pool each day times the difficulty index (the “Full-Pay-Per-Share Method”). Even though we plan to effect our self-mining operations in data centers that we own, we reserve the right to operate miners in third-party data centers when we receive advantageous terms and/or do not have sufficient capacity in our own data centers.
Our digital asset self-mining activity competes with a myriad of mining operations throughout the world to complete new blocks in the blockchain and earn the reward in the form of an established unit of a digital asset. Revenue from digital asset mining and hosting third party digital asset miners is impacted by volatility in bitcoin prices, as well as increases in the bitcoin blockchain’s network hashrate resulting from the growth in the overall quantity and quality of miners working to solve blocks on the bitcoin blockchain and the difficulty index associated with the secure hashing algorithm employed in solving the blocks. Gross profits from digital asset mining are primarily impacted by the cost of electricity to operate the miners and to a lesser extent by other operating costs. While we expect to sell or exchange a portion of the digital assets we mine to fund our growth strategies or for general corporate purposes, we reserve the right to hold our digital assets as a long-term investment.
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As the demand for digital assets increases and digital assets become more widely accepted, there is an increasing demand for professional-grade, scalable infrastructure to support growth of the blockchain ecosystem. We expect to continually evaluate the performance of our data centers, including our ability to access additional megawatts of electric power and to expand our total self-mining and customer and related party hosting hashrates.
We also generate revenues from the advantageous purchase and sale of equipment used for digital asset mining and hosting. We have relationships with some suppliers that enable us to acquire highly desired equipment at attractive prices, which we sometimes resell to third parties. In most cases, resales of digital asset mining equipment would be to our hosting customers, which have the dual benefit of generating short-term gross profits from the equipment sale as well as growing the customer base of our hosting business.
The primary factors that will impact future hosting revenues include: (i) the price of bitcoin, since hosting revenues are primarily a percentage of bitcoin mined by clients; (ii) the completion of operational hosting facilities, as potential hosting clients have been reluctant to sign contracts prior to the date we have a fully operational hosting facility; and (iii) the availability of attractive electricity prices, since power usage is the primary marginal cost for any mining operation.
The primary factors that will impact proprietary mining revenues include: (i) the price of bitcoin; (ii) the completion of operational facilities to provide us with a cost-effective facility to operate in; (iii) the availability of attractive electricity prices, since power usage is the primary marginal cost for any mining operation; and (iv) the availability of mining equipment suitable for our immersion hosting environment at attractive prices and available capacity in our hosting facilities.
Revenues from cryptocurrency mining, whether derived from hosting clients or from proprietary mining, are impacted significantly by volatility in bitcoin prices, as well as increases in the bitcoin blockchain’s network hashrate resulting from the growth in the overall quantity and quality of miners working to solve blocks on the bitcoin blockchain and the difficulty index associated with the secure hashing algorithm employed in solving the blocks. Below are changes in key metrics effecting the profitability of mining bitcoin during the year ended August 31, 2024 and the three months ended February 28, 2025:
| As of August 31, 2024 | As of August 31, 2023 | Percent Change | |||
| Network hashrate | 620.355 EH/s | 368.924 EH/s | 68.15 % | ||
| Difficulty index | 89.47 trillion | 55.61 trillion | 60.89 % | ||
| Bitcoin market price | $58,969.90 | $25,931.47 | 127.41 % |
| As of February 28, 2025 | As of August 31, 2024 | Percent Change | |||
| Network hashrate | 797.818 | 620.355 EH/s | 28.61% | ||
| Difficulty index | 110.57 | 89.47 trillion | 23.58% | ||
| Bitcoin market price | $84,705.63 | $58,969.90 | 43.64% |
The primary factors that will impact resales of mining equipment include the availability of equipment at attractive prices and the number of participants willing to enter the mining business or expand their existing operations, which is highly correlated to the margin from mining, as determined by the market price of bitcoin and prevailing energy costs. Also, our resales of mining equipment will be impacted by the existence of hosting capacity with attractive electricity rates in our hosting operations.
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Trinidad Operations
We initially decided to locate our initial facilities in Trinidad, because it has some of the cheapest electricity in the world due to its abundant supplies of oil and gas and because some of our technical staff is located there. We have entered into an agreement with Telecommunications Services of Trinidad & Tobago Limited (“TSTT”), the largest and oldest telecom company in Trinidad, to co-locate up to 125 800 kW containers for hosting digital asset miners. TSTT has numerous potential locations for co-location of our containers. Under the agreement, we have the option, but not the obligation, to co-locate containers at our own pace. We pay a fixed amount per container, plus the actual electricity costs incurred by our containers in the amount billed to TSTT by the local utility without any markup. The term of the agreement expires on October 14, 2031. We have the right to terminate our agreement with TSTT at any time that the price for electricity consumption exceeds $0.05 per kWh.
In October 2022, we completed the installation of initial hosting containers under our agreement with TSTT. Our rate for electricity is TSTT’s existing rate of 3.5 cents per kWh or 75% of the declared reserve capacity, which is equal to the customer’s highest expected monthly kilovolt-ampere demand at $7.40. (See “Business—Company Overview—Trinidad Operations.”).
While our TSTT site was delayed pending electrification, we entered into a hosting agreement with a third party in Trinidad to host up to 192 miners in one immersion container until December 31, 2024. We had previously sold two containers to the third party under a long-term note secured by the containers. In July 2024, we foreclosed on the containers as a result of a default by the third party on the note. We moved our miners to our existing TSTT site, where we now have 465 miners, of which 315 were in operation. We are currently evaluating other TSTT sites as a location for the two repossessed immersion containers, and expect to install them in the third calendar quarter of 2025.
We are also leasing space from a third party on an at will basis to co-host 60 miners, for which we pay a flat rate of $0.06 per kWh for the electricity used by our miners. We ultimately intend to move all of our Trinidad miners to our TSTT hosting facilities.
We are currently focusing our efforts on the development of hosting centers in the United States and Canada, both directly and in joint ventures with third parties. We are exploring situations where medium to long-term power agreements may be available at affordable prices, whether using traditional power sources such as coal or natural gas, as well as environmentally friendly sources such as hydroelectric, wind and solar-backed projects, which might allow us to generate collateral revenue from the sale of excess power to the local utility grid and from the generation of saleable carbon credits.
Pecos, Texas Operations
In October 2022, we entered into a joint venture arrangement with ROC Manager to jointly develop and operate a bitcoin mining operation in Pecos, Texas. Under the joint venture, we contributed one immersion container, six transformers, and cash with an aggregate value of $987,429 as a capital contribution to ROC Digital. An affiliate of ROC Manager also contributed an immersion container. We simultaneously sold ROC Digital four immersion containers for $1,200,000, which is payable pursuant to a promissory note that bears interest at 5% per annum, and is payable through monthly payments of $31,203.64 per month until May 31, 2026. We own approximately 30% of ROC Digital, and 33 1/3% of ROC Manager. (See “Business—Company Overview—Pecos, Texas Operations.”)
The Texas site became fully electrified in June 2023 and has six containers owned by the joint venture. The joint venture initially filled its six immersion containers with ASIC miners provided by hosting clients, although most of the hosting clients’ agreements terminated in April 2024. Currently, approximately five of the hosting containers owned by the joint venture are fully or partially occupied by clients, and the joint venture is aggressively trying to fill the remaining capacity with hosting clients. The joint venture also owns two immersion containers which are not installed, which we expect the joint venture to install if hosting demand warrants.
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We have entered into a hosting agreement with ROC Digital under which we have located one immersion container at our Pecos, Texas data center. We pay $500 per month, plus our pro rata share of electricity, internet, and insurance for the site. The hosting agreement has a term of one year, subject to our right to renew the agreement for two one-year terms after receipt of notice of the renewal terms of ROC Digital’s electricity supply agreement for the upcoming year. In April 2024, we renewed the hosting agreement for an additional year. As of the date of this prospectus, we had deployed 145 Antminer S-19 pro miners to our hosting container at the site.
On April 29, 2024, ROC Digital executed an energy services agreement for the site that runs from May 1, 2024 to April 30, 2025. Under the current agreement, the site will receive electricity at the prevailing rate plus $0.0055 per kWh. ROC Digital is not obligated to purchase any specific quantity of electricity, and employs software which automatically discontinues mining operations when the prevailing rate exceeds certain levels.
Soluna Hosted Locations
On October 4, 2023, we purchased 1,050 used ASIC miners from Luxor Technology Corporation (“Luxor”) for $488,775, and on October 9, 2023 we entered into a Co-Location Services Agreement to host the miners at a hosting facility owned by Soluna SW, LLC (“Soluna”) in Murray, Kentucky. We subsequently added 45 ASIC miners in May 2024 that we purchased from Soluna for $10,000. The hosting agreement had a term through April 8, 2025. The hosting agreement provides that we are obligated to reimburse Soluna for the actual cost of the electricity used by our machines and pay a hosting fee equal to 50% of the net profit generated by the machines each month. The hosting fee is payable in bitcoin. The hosting facility has an electricity cost of $0.025 per kWh and guarantees uptime of 83% per week. On April 8, 2025, Soluna SW, LLC, elected not to renew its hosting agreement with us on the existing terms, and on April 30, 2025, we terminated our engagement with Soluna SW, LLC. We sold 850 of the ASIC miners hosted by Soluna, SW LLC to a third party for $120,000 and plan to move the remaining 245 to the Silverton, Texas location.
On November 14, 2024, we acquired 3,000 S-19j Pro computers from Luxor Technology Corporation for $1,035,000. On December 3, 2024, we entered into a hosting agreement with DVSL ComputeCo, LLC to host 2,900 miners at its location. The hosting agreement terminates on December 2, 2025, provided that the hosting agreement will continue after the termination date on a month-to-month basis if neither party sends a notice of termination at least 30 days before its scheduled termination date. The hosting agreement provides that we are obligated to reimburse the DVSL for the actual cost of the electricity used by our machines plus 1.6 cents per kWh, and pay a hosting fee equal to 50% of the net profit generated by the machines each month. All 3,000 computers were shipped to DVSL’s hosting site in Silverton, Texas, for warranty testing; 2,900 remained in Silverton, Texas and 100 were shipped to our Trinidad data center upon the completion of testing. As of the date of this prospectus, approximately 2,712 of the acquired miners were operating, while approximately 180 did not satisfy the warranty and will be replaced with comparable miners.
Miner Summary
Set forth below is a summary of our ASIC miner inventory as of February 28, 2025:
| Site | Present | Installed | In Transit | Needing Repair | Immersion/Air-cooled | |||||||||||||
| Trinidad | 500 | 367 | – | – | Immersion | |||||||||||||
| Pecos, Texas | 145 | 145 | – | – | Immersion | |||||||||||||
| Murray, Kentucky | 1,095 | 1,095 | – | – | Air Cooled | |||||||||||||
| Silverton, TX | 2,900 | 2,597 | – | – | Air Cooled | |||||||||||||
| Other | – | – | – | 85 | n/a | |||||||||||||
| Total | 4,640 | 4,204 | – | 85 | ||||||||||||||
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Results of Operations
Comparison of Results of Operations for Years Ended August 31, 2024 and 2023.
Revenues
During the year ended August 31, 2024, we generated $3,310,348 in revenue, compared to $645,278 in revenue in the year ended August 31, 2023.
During the year ended August 31, 2024, we generated $3,030,910 in bitcoin revenue from self-mining digital assets, compared to $389,222 in revenue in the year ended August 31, 2023. Mining revenues were impacted somewhat by miners that were offline due to maintenance issues. Mining revenue may be higher in future periods if we can continue to add miners. We expected mining revenues to be lower in 2024 as a result of a halving that occurred in April 2024. However, the impact of the halving was offset by a rise in the price of bitcoin due to fewer miners online after the halving event, as has historically occurred after a halving event, and by the positive impact of “ordinals,” which are increased transaction fees that occur as parties have discovered ways to imbed data regarding other assets, such as art, in the bitcoin blockchain. Mining revenues in the year ended August 31, 2024 were also positively impacted by the resolution of operating issues at our first hosting facilities in Trinidad and Pecos, Texas, and the commencement of operations at a facility in Murray, Kentucky that is hosted by a third-party.
Self-mining revenues were positively impacted by 4.70 bitcoin earned, with a value of $319,465, from operating 777 S-19 miners under a short-term lease from Luxor Technology Corporation (“LTC”) that began on March 8, 2024 and expired when the halving occurred on April 19, 2024.
During the year ended August 31, 2024, we generated $231,133 in revenue from equipment sales, compared to $244,036 in revenue in the year ended August 31, 2023. The revenue from equipment sales in the years ended August 31, 2024 and 2023 were primarily derived from the following transactions:
| · | In October 2022, we sold four hosting containers to ROC Digital, which was constructing a hosting facility in Texas, for $1,200,000. The purchase price is payable pursuant to a promissory note bearing interest at 5% per annum, and is paid by 41 equal monthly payments of $31,204 commencing December 30, 2022, with any remaining principal and interest payable in full on May 31, 2026. | |
| · | In August 2022, we sold two hosting containers to a private party in Trinidad for $960,000. After a down payment of $50,000, the balance of the purchase price is payable pursuant to a promissory note bearing interest at 7.5% per annum, and is paid by 24 equal monthly payments of $40,949.62 commencing September 30, 2022. On February 1, 2023, we modified this agreement in conjunction with its entry into a new hosting agreement with the party, under which we agreed that the remaining principal balance of the note was $731,472, and that the note would be converted into an interest only note until August 31, 2024, at which time all principal and interest due is payable in full. In addition, we agreed to allow the note obligor to repay the note principal at a 10% discount. In March 2024, the note was further amended to extend the maturity date to December 31, 2024. Due to defaults by the borrower, we repossessed the collateral in July 2024. | |
| · | In June 2023, we sold a total of 34 Antminer S-19 miners in two transactions for gross proceeds of $70,000 cash or bitcoin. | |
| · | In October 2023, we sold 100 new ASIC miners to a third party for $149,250. |
Under the guidelines of ASC 606, we determined that payments due under notes receivable arrangements from certain customers were not “probable” due to the start-up nature of the customer. As a result we reported revenue from equipment sales on October 2022 and August 2022, which were vendor financed by us, under the installment sale method, under which we reports our gross profit on the sales only after payments are received from the purchaser.
As of February 1, 2023, we reached an agreement with the obligor under the $910,000 note to convert the note into an interest only note commencing as of February 1, 2023, with a balloon payment being due at maturity on August 31, 2024, and an agreement that the principal balance on the note was $731,472. The maturity date was later extended to December 31, 2024. One effect of the agreement with the obligor is to materially reduce any deferred revenue associated with the sale, as the note is scheduled to receive interest only payments until December 31, 2024. In July 2024 we repossessed the collateral securing the August 2022 note as a result of a default by the obligor, and as a result we do not expect to report any further revenues under this note. (See “Note 5. Investments and Notes Receivable” in the accompanying financial statements.)
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During the fiscal year ended August 31, 2024, we recorded $6,824 in equipment sales on each of the 12 monthly payments of $31,204 received from ROC Digital, for a total of $81,883 in equipment sales.
During the years ended August 31, 2024 and 2023, we recorded $149,250 and $70,000, respectively, of revenue from isolated sales of equipment recorded under the “completed sale” method.
In future periods, we expect to generate additional revenues from the resale of certain hosting equipment, primarily containers and transformers, and of miners in “buy/host” transactions, in which we sell miners already installed in our hosting facilities to buyers that simultaneously execute a hosting agreement for the purchased miners, and in some cases additional miners.
During the year ended August 31, 2024, we generated $48,305 in revenue from hosting, compared to $12,022 in revenue from hosting in the year ended August 31, 2023. In October 2022, we reached an agreement to terminate our only hosting client at the time and repurchased the miners which we had previously sold to the hosting client. In June 2023, we signed two new hosting clients. However, we elected not to renew both hosting contracts in the summer of 2024, and therefore, as of August 31, 2024, we did not have any hosting clients. In the current market environment, we believe that self-mining is more profitable than hosting third party miners, however we will pursue hosting opportunities on a selective basis. While we still see good opportunities to acquire mining equipment at attractive prices, the price of mining equipment has recently increased with the recent increase in the price of bitcoin.
The primary factors that we expect to impact our revenues in subsequent periods are described in the “—Overview” above.
Cost of Sales
Cost of sales related to bitcoin hosting and mining revenue was $37,678 for hosting and $2,330,752 for mining, respectively in the year ended August 31, 2024, compared to $9,098 for hosting and $326,630 for mining, respectively, in the year ended August 31, 2023. Cost of sales normally includes electricity, utilities, facilities costs, and supplies where we perform mining from our own facilities. Major components of cost of sales include rent to house mining and hosting equipment, electricity, and supplies. Where our miners are hosted by third parties, major components of cost of sales include hosting fees and/or electricity costs. Cost of sales for both owned and hosted facilities does not include depreciation, which is stated separately. We believe that cost of sales as a percentage of revenues may be less in future periods as compared to prior periods if the market price of bitcoin remains at its current level or increases.
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The table below describes the average cost of mining each bitcoin for the years ended August 31, 2024 and 2023, and the total energy usage and cost per each kilowatt hour (“kWh”) utilized within both of our facilities.
| For the Year Ended | ||||||||
| Cost of Revenues - Analysis of costs to mine one bitcoin (per bitcoin amounts are actual) | August 31, 2024 | August 31, 2023 | ||||||
| Cost of Mining - owned facilities | ||||||||
| Cost of energy per bitcoin mined | $ | 23,417.85 | $ | 47,157.74 | ||||
| Other direct costs of mining per bitcoin mined (1) | $ | 17,057.26 | $ | 8,175.10 | ||||
| Depreciation expense per bitcoin mined (2) | $ | 34,083.94 | $ | 30,158.13 | ||||
| Financing expense per bitcoin mined (3) | $ | -0- | $ | -0- | ||||
| Cost to mine one bitcoin - owned | $ | 74,559.05 | $ | 85,491.00 | ||||
| Cost of Mining - hosted facilities | ||||||||
| Cost of energy per bitcoin mined | $ | 19,346.84 | $ | 14,980.78 | ||||
| Other direct costs of mining per bitcoin mined (1) | $ | 13,578.03 | $ | 2,517.01 | ||||
| Depreciation expense per bitcoin mined (2) | $ | 15,038.95 | $ | 30,158.13 | ||||
| Financing expense per bitcoin mined (3) | $ | 1,257.30 | $ | -0- | ||||
| Cost to mine one bitcoin - hosted | $ | 49,221.12 | $ | 47,655.92 | ||||
| Average revenue of each bitcoin mined (4) | $ | 50,911.20 | $ | 24,937.49 | ||||
| Cost of mining one bitcoin as % of average bitcoin mining revenue (5) | 96.68% | 191.10% | ||||||
| Statistics - owned facilities | ||||||||
| Total bitcoin mined | 9.398856297 | 0.36491909 | ||||||
| Bitcoin mining revenue | $ | 482,936.12 | $ | 10,109.56 | ||||
| Total miners - as of the periods ended | 485 | 72 | ||||||
| Total kWhs utilized | 5,287,881.49 | 276915.49 | ||||||
| Total energy expense | $ | 220,101.04 | $ | 17,208.76 | ||||
| Cost per kWh | $ | 0.042 | $ | 0.062 | ||||
| Energy expense as % of bitcoin mining revenue, net | 45.58% | 170.22% | ||||||
| Other direct costs of mining (1) | $ | 160,318.78 | $ | 2,983.25 | ||||
| Total depreciation expense (2) | $ | 320,348.11 | $ | 11,004.75 | ||||
| Total financing costs (3) | $ | -0- | $ | -0- | ||||
| Statistics - hosted facilities | ||||||||
| Total bitcoin mined | 40.10897465 | 15.24350171 | ||||||
| Bitcoin mining revenue | $ | 2,037,564.911 | $ | 379,112.41 | ||||
| Total miners - as of the periods ended | 1,155 | 208 | ||||||
| Total kWhs utilized | 23,010,940.56 | 4,307,982.87 | ||||||
| Total energy expense | 775,981.99 | 228,359.54 | ||||||
| Cost per kWh | $ | 0.034 | $ | 0.053 | ||||
| Energy expense as % of bitcoin mining revenue, net | 38.08% | 60.24% | ||||||
| Other direct costs of mining (1) | $ | 544,601.04 | $ | 38,368.00 | ||||
| Total depreciation expense (2) | $ | 603,196.89 | $ | 459,700.30 | ||||
| Total financing costs (3) | $ | 50,429 | $ | -0- | ||||
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(1) Other direct costs of mining for owned facilities consists mostly of rent for the facility, as well as minor costs such as supplies and internet. Other direct costs of mining for hosted miners consist of hosting fees.
(2) Depreciation expense includes depreciation of miners used in mining. For owned facilities, it also includes depreciation of the hosting containers and corollary equipment such as transformers and switches.
(3) Financing costs include the cost of purchase money financing for miners, but do not include any financing costs for miners or hosting equipment acquired with general working capital, nor the cost of hedging the price of bitcoin.
(4) Average revenue of each bitcoin mined is calculated by dividing the sum of bitcoin mining revenue for both owned and hosted facilities by the total number of bitcoin mined during the respective periods. We have determined that Coinbase is the principal market for valuing bitcoin transactions and uses the daily closing prices as the source of recording revenue.
(5) Weighted average cost of mining one bitcoin is calculated by dividing the sum of total energy expense, hosting expenses, other direct costs of mining, depreciation and financing costs by the total bitcoin mined during the respective periods.
Power prices are the most significant cost driver for our locations, and energy costs represented 38.08% and 60.24% expressed as a percentage of bitcoin mining revenues during the years ended August 31, 2024 and 2023, respectively.
Energy prices can be highly volatile and global events (including wars in Ukraine and the Middle East) may cause fuel prices, and to a lesser extent power prices, to fluctuate widely. All of our sites are currently subject to variable prices and market rate fluctuations with respect to wholesale power costs over the long-term, but not over the short-term where there is a fixed price power purchase agreement in place. While this renders energy prices less predictable, it also gives us greater ability and flexibility to actively manage the energy we consume with an eye towards increasing profitability and energy efficiency. Energy prices are also highly sensitive to weather events, such as winter storms and polar vortices, which increase the demand for power regionally. When such events occur, we may curtail our operations to avoid using power at increased rates. The average power prices we paid in our facilities for the years ended August 31, 2024 and 2023 was $0.0340 and $0.0530 per kilowatt hour, respectively.
Cost of sales related to sales of mining equipment was $180,891 for the year ended August 31, 2024, compared to $87,080 for the year ended August 31, 2023. Cost of sales consisted of the purchase price of equipment sold, plus shipping and value added tax on the equipment for equipment sales reported under the “completed sale” method.
Since we are in the early stages of setting up our infrastructure to generate higher levels of revenues, we expect that our cost of sales as a percentage of revenue from hosting or mining for our own account will be higher than we expect to incur when we achieve sufficient economies of scale by deploying more miners. In future periods, the largest component of our cost of sales will consist of electricity costs.
Operating Expenses
During the year ended August 31, 2024, we incurred $3,208,513 in operating expenses, compared to $2,635,553 in operating expenses during the year ended August 31, 2023. Major components of operating expenses for the 2024 period as compared to the 2023 period were:
| Year ended | Year ended | Percentage | ||||||||||
| August 31, 2024 | August 31, 2023 | Change % | ||||||||||
| General and administrative expenses | $ | 164,228 | $ | 45,008 | 264.9% | |||||||
| Marketing fees | – | 214,550 | N/A | |||||||||
| Investor relations | 178,190 | – | N/A | |||||||||
| Travel expenses | 27,746 | 34,431 | (19.4% | ) | ||||||||
| Depreciation | 923,545 | 470,705 | 96.2% | |||||||||
| Professional fees | 615,256 | 456,322 | 34.8% | |||||||||
| Officer’s compensation | 841,106 | 951,106 | (11.6% | ) | ||||||||
| Director’s compensation | 52,800 | 13,200 | 300.0% | |||||||||
| Employee shareholder’s compensation | 399,447 | 345,440 | 15.6% | |||||||||
| Impairment of fixed assets | 120,000 | 122,950 | (2.4% | ) | ||||||||
| Gain from sale of digital currencies | (113,803 | (21,682 | ) | 424.9% | ||||||||
| Impairment of cryptocurrency | – | 3,523 | N/A | |||||||||
| Total operating expenses | $ | 3,208,513 | $ | 2,635,470 | 21.7% | |||||||
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The increase in operating expenses in the fiscal year ended August 31, 2024 as compared to the fiscal year ended August 31, 2023 is primarily attributable to increased general and administrative expenses, investor relations, depreciation, and professional fees in 2024 as compared to 2023, partially offset by a decrease in compensation categories over the 2023 period. Included in operating expenses in the year ended August 31, 2024 was $1,123,138 in non-cash expenses due to the issuance of common stock for professional services and to related parties as compensation, as compared to $1,318,044 in the year ended August 31, 2023. The Company expects that operating expenses will trend materially higher in future periods as the Company begins paying regular compensation to existing officers and directors, hires additional employees, and incurs other costs associated with the expansion of its operations.
Other Income (Expense)
During the year ended August 31, 2024, we incurred ($845,018) in other expenses, as compared to other expenses of ($51,801) in the year ended August 31, 2023. Other income (expense) in the year ended August 31, 2024 was comprised of interest expense of ($268,578) and interest income of $54,617, as compared to ($97,460) of interest expenses, $16,939 of other income and $28,720 of interest income during the year ended August 31, 2023. The increase in interest expense and interest income in fiscal 2024 is due to an increase in the average amount borrowed by us under our line of credit in fiscal 2024 compared to fiscal 2023, as well as increased interest collected on our notes receivable. Other income (expense) was materially impacted in the fiscal year ending August 31, 2024 by a loss on extinguishment of debt of ($355,123) on a bitcoin debt arrangement with Luxor in which we borrowed bitcoin and were required to repay the bitcoin debt only in bitcoin, during a period when bitcoin significantly appreciated in value, as well as a loss on the ROC Digital joint venture investment of ($311,313), offset by gain on note settlement of $35,379.
Net Income (Loss)
As a result of the foregoing, during the year ended August 31, 2024, we incurred a net loss of ($3,292,503), or ($0.07) per share, as compared to a net loss of ($2,464,884) or ($0.05) per share during the year ended August 31, 2023. The increase in our net loss in the year ended August 31, 2024, compared to the year ended August 31, 2023, is attributable to the factors discussed above.
Comparison of Results of Operations for the Three Months Ended February 28, 2025, and February 29, 2024
Revenues
During the three months ended February 28, 2025, we generated $1,517,422 of revenue compared to $891,613 of revenue in the three months ended February 29, 2024.
During the three months ended February 28, 2025, we generated $1,517,422 in bitcoin revenue from self-mining digital assets compared to $861,026 of revenue from self-mining in the three months ended February 29, 2024. As of February 28, 2025, we owned 4,640 miners that were operable, of which 4,204 were deployed for self-mining. Of the remaining 436 miners, 403 have been delivered to our Trinidad and Silverton, Texas locations for installation and the remaining 33 were offline due to maintenance issues. The number of undeployed miners was mainly impacted by 403 miners that were purchased in November 2024 but were not installed immediately when they failed initial warranty testing and had to be replaced with conforming miners or repaired. Mining revenue should be higher in future periods as we begin to receive revenues from the miners that were not operating as of February 28, 2025. On the other hand, mining revenues will be impacted by fluctuations in the price of bitcoin and the difficulty index, which could either cause revenues to decrease or increase.
On April 8, 2025, Soluna SW, LLC, which hosts 1,095 ASIC miners for us at its Murray, Kentucky location, elected not to renew its hosting agreement with us on the existing terms. The scheduled termination date is April 30, 2025, and on April 30, 2025, we terminated our engagement with Soluna SW, LLC. We sold 850 of the ASIC miners hosted by Soluna, SW LLC to a third party for $120,000 and plan to move the remaining 245 to the Silverton, Texas location. Due to the sale of certain ASIC miners and transfer of the remaining to a new location, our future revenue will be reduced accordingly. In addition, revenue for the next two quarters may be adversely impacted by downtime associated with the transfer process.
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During the three months ended February 28, 2025, we generated $-0- in revenue from equipment sales compared to $20,471 in revenue from equipment sales in the three months ended February 29, 2024.
Our revenue from equipment sales in the three months ended February 28, 2025 and February 29, 2024 were derived from the following transactions:
| · | In October 2022, we sold four hosting containers to ROC Digital for $1,200,000. The purchase price is payable pursuant to a promissory note bearing interest at 5% per annum and is paid by 41 equal monthly payments of $31,204 commencing December 30, 2022, with any remaining principal and interest payable in full on May 31, 2026. | |
| · | In August 2022, we sold two hosting containers to a private party in Trinidad for $960,000. After a down payment of $50,000, the balance of the purchase price, pursuant to a promissory note bearing interest at 7.5% per annum, was payable by 24 equal monthly payments of $40,950 commencing September 30, 2022. On February 1, 2023, we modified this agreement in conjunction with our entry into a new hosting agreement with the party under which we agreed that the remaining principal balance of the note was $731,472 and that the note would be converted into an interest only note until August 31, 2024, at which time all principal and interest due was payable in full. In addition, we agreed to allow the note obligor to repay the note principal at a 10% discount if it was repaid prior to February 28, 2023. The maturity date of the note was also extended to December 31, 2024. |
Under the guidelines of ASC 606, we determined that payments due under notes receivable from ROC Digital and the Trinidad borrower were not “probable” due to the start-up nature of the customers and their lack of capitalization. As a result, we report revenue from the equipment sales to both parties under the installment sale method, under which we report our gross profit on the sale as payments are received from the purchaser. With regard to the note receivable from ROC Digital, we recorded revenues of $20,471 in the three months ended February 29, 2024 based on the receipt of three monthly payments, but did not record any revenues in the three months ended February 28, 2025 because we did not receive any payments on the note in that period. With regard to the note receivable from the Trinidad borrower, we did not record any revenues in the three months ended February 29, 2024 because the borrower only made interest only payments in that period, and we did not record any revenues in the three months ended February 28, 2025 because we accelerated and foreclosed on the note in the fourth quarter of 2024.
During the three months ended February 28, 2025, and February 29, 2024, we did not record any revenues from sales of equipment recorded under the “completed sale” method.
In future periods, we expect to generate additional revenues from the resale of certain hosting equipment, primarily containers and transformers, and of miners in “buy/host” transactions, in which we sell miners already installed in our hosting facilities to buyers that simultaneously execute a hosting agreement for the purchased miners, and in some cases additional miners.
We generated $-0- in revenues from hosting in the three months ended February 28, 2025 as compared to $10,116 in hosting revenues in the three months ended February 29, 2024. We terminated all of our hosting clients in the fourth quarter of fiscal 2024 and did not have any hosting clients during the three months ended February 28, 2025. In the current market environment, we believe self-mining is more profitable than hosting third party miners, however we may pursue hosting opportunities on a selective basis. While we still see good opportunities to acquire mining equipment at attractive prices, the price of mining equipment has recently increased with the recent increase in the price of bitcoin.
The primary factors that will impact our revenues in subsequent periods are described in the “-Overview” above.
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Cost of Sales
Cost of sales were $1,212,706 in the three months ended February 28, 2025 compared to $567,991 in the three months ended February 29, 2024.
Cost of sales related to mining was $1,212,706 in the three months ended February 28, 2025 compared to $556,849 in the three months ended February 29, 2024. Cost of sales normally includes electricity, utilities, facilities costs, and supplies where we perform mining from our own facilities. Major components of cost of sales include rent to house mining and hosting equipment, electricity, and supplies. Where our miners are hosted by third parties, major components of cost of sales include hosting fees and/or electricity costs. Cost of sales for both owned and hosted facilities does not include depreciation which is stated separately.
Energy prices can be highly volatile and global events (including the wars in Ukraine and the Middle East) and political events (including the U.S. government’s regulation of cryptocurrencies or its imposition of tariffs on foreign trade) may cause fuel prices, and to a lesser extent power prices, to fluctuate widely. All of our sites are currently subject to relatively fixed rates during the term of their current power supply agreements, but variable prices and market rate fluctuations with respect to wholesale power costs over the long-term. While this renders energy prices less predictable, it also gives us greater ability and flexibility to actively manage the energy we consume with an eye towards increasing profitability and energy efficiency. Energy prices are also highly sensitive to weather events, such as winter storms and polar vortices, which increase the demand for power regionally. When such events occur, we may curtail our operations to avoid using power at increased rates.
Cost of sales related to hosting was $-0- in the three months ended February 28, 2025 compared to $11,142 in the three months ended February 29, 2024. Cost of sales normally includes utilities, facilities costs, and supplies. Unlike the cost of sales from mining, cost of sales from hosting does not include electricity costs, as such costs are passed on to the hosting client.
Cost of sales related to sales of mining equipment was $-0- for both the three months ended February 28, 2025 and the three months ended February 29, 2024 because all sales of mining equipment during both periods were reported under the installment sales method. Cost of sales from equipment sales includes the purchase price of equipment sold, plus shipping and value added tax on the equipment for sales reported under the completed sales method. There is no cost of sales associated with equipment sales reported under the installment sales method.
Operating Expenses
During the three months ended February 28, 2025, we incurred $1,218,339 in operating expenses compared to $972,362 in operating expenses during the three months ended February 29, 2024. Major components of operating expenses for the 2025 period as compared to the 2024 period were:
| Three months ended | Three months ended | Percentage | ||||||||||
| February 28, 2025 | February 29, 2024 | Change % | ||||||||||
| General and administrative expenses | $ | 102,273 | $ | 69,827 | 46% | |||||||
| Depreciation | 227,694 | 235,370 | (3% | ) | ||||||||
| Professional fees | 215,569 | 227,530 | (5% | ) | ||||||||
| Investor relations | 11,000 | 128,309 | (91% | ) | ||||||||
| Insurance | 36,930 | 30,912 | 19% | |||||||||
| Officers compensation | 365,881 | 210,276 | 74% | |||||||||
| Directors compensation | 56,355 | 13,200 | 327% | |||||||||
| Employee shareholder compensation | 176,467 | 133,530 | 32% | |||||||||
| Change in fair value of cryptocurrency | 26,170 | (76,591 | ) | N/A | ||||||||
| Total operating expenses | $ | 1,218,339 | $ | 972,362 | 25% | |||||||
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The higher level of operating expenses in the 2025 period as compared to the 2024 period is primarily attributable to increased officer, director, and employee/shareholder compensation that we began accruing as of September 1, 2024. Specifically, we issued two of our officers 500,000 shares of common stock on September 1, 2024, each as partial compensation for fiscal 2025 officer services, and we began accruing additional cash and share compensation for our officers as of September 1, 2024, the cash portion of which is not payable until we have sufficient liquidity. The total cash accrual to officers and employee/shareholders is $195,000 per quarter. We also adopted a stock compensation package, beginning September 1, 2024, under which we accrue 615,000 shares per quarter for compensation to officers and employees, including for board and board committee service. All shares issued during the 2025 period were valued at $0.289 per share based on a third party valuation of our shares.
Operating expenses were also adversely impacted in the 2025 period by increased general and administrative expenses and a loss from changes in the fair value of cryptocurrency as compared to a gain in the 2024 period. Operating expenses were positively impacted by decreased depreciation expense, investor relations expenses, and professional fees.
We expect that operating expenses will trend materially higher in future periods as we begin paying regular compensation to existing officers and directors, hire additional employees, and incur other costs, such as increased depreciation expense due to the addition of new mining equipment.
Other Income (Expense)
During the three months ended February 28, 2025, we incurred ($243,269) in other expenses, net, as compared to ($253,941) of other expenses, net, in the three months ended February 29, 2024. Interest expense was $60,496 in the three months ended February 28, 2025 as compared to $54,279 in the three months ended February 29, 2024. Other expenses in the 2025 period were impacted by a bad debt expense of $124,815 taken in regard to our note receivable from ROC Digital during the 2025 period and a loss on extinguishment of debt of $57,958 taken in regard to our Hashrate Sale Agreement (‘HSA”) with Luxor. Other expenses in the 2024 period were impacted by a loss on extinguishment of debt of $183,670 relating to a different financing with Luxor, a loss of $68,559 from our investment in ROC Digital in the 2024 period as compared to $-0- in the 2025 period and income of $37,777 from a change in derivative liability in 2024 as compared to $-0- in 2025.
On May 22, 2025, we entered into a Master Hashrate Purchase and Sale Agreement (the “Master Agreement”) with Luxor, pursuant to which we agreed to purchase the daily hashrate for the remaining duration of the HSA; thereby effectively discharging our obligation to Luxor under the HSA. Pursuant to the Master Agreement, we paid Luxor $706,833, representing 8.1576 bitcoins, less the margin held by Luxor on our behalf, which reflects the transaction value of the remaining hashrate we were obligated to deliver to Luxor under the HSA.
Net (Loss) Attributable to Common Stockholders
As a result of the foregoing, during the three months ended February 28, 2025, we incurred a net loss attributable to common stockholders of $1,156,891, or $(0.03) per share, as compared to a net loss attributable to common stockholders of $902,682, or $(0.02) per share, during the three months ended February 29, 2024. The increase in our net loss in the three months ended February 28, 2025 compared to the three months ended February 29, 2024 is attributable to the factors discussed above.
Comparison of Results of Operations for the Six Months Ended February 28, 2025 and February 29, 2024.
Revenues
During the six months ended February 28, 2025, we generated $2,718,252 of revenue, compared to $1,402,921 of revenue in the six months ended February 29, 2024.
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During the six months ended February 28, 2025, we generated $2,001,105 in bitcoin revenue from self-mining digital assets, compared to $1,190,749 of revenue from self-mining in the six months ended February 29, 2024. As of February 28, 2025, we owned 4,640 miners that were operable, of which 4,204 were deployed for self-mining. Of the remaining 436 miners, 403 have been delivered to our Trinidad and Silverton, Texas locations for installation and the remaining 33 were offline due to maintenance issues. The number of undeployed miners was mainly impacted by 403 miners that were purchased in November 2024 but were not installed immediately when they failed initial warranty testing and had to be replaced with conforming miners or repaired. Mining revenue should be higher in future periods as we begin to receive revenues from the miners that were not operating as of February 28, 2025. On the other hand, mining revenues will be impacted by fluctuations in the price of bitcoin and the difficulty index, which could either cause revenues to decrease or increase.
On April 8, 2025, Soluna SW, LLC, which hosts 1,095 ASIC miners for us at its Murray, Kentucky location, elected not to renew its hosting agreement with us on the existing terms, and on April 30, 2025, we terminated our engagement with Soluna SW, LLC. We sold 850 of the ASIC miners hosted by Soluna, SW LLC to a third party for $120,000 and plan to move the remaining 245 to the Silverton, Texas location. Due to the sale of certain ASIC miners and transfer of the remaining to a new location, our future revenue will be reduced accordingly. In addition, revenue for the next two quarters may be adversely impacted by downtime associated with the transfer process.
During the six months ended February 28, 2025, we generated $717,147 in revenue from equipment sales compared to $190,192 in revenue from equipment sales in the six months ended February 29, 2024.
Our revenue from equipment sales in the six months ended February 28, 2025 and February 29, 2024 were derived from the following transactions:
| · | In October 2022, we sold four hosting containers to ROC Digital for $1,200,000. The purchase price is payable pursuant to a promissory note bearing interest at 5% per annum, and is paid by 41 equal monthly payments of $31,204 commencing December 30, 2022, with any remaining principal and interest payable in full on May 31, 2026. | |
| · | In August 2022, we sold two hosting containers to a private party in Trinidad for $960,000. After a down payment of $50,000, the balance of the purchase price, pursuant to a promissory note bearing interest at 7.5% per annum, was payable by 24 equal monthly payments of $40,950 commencing September 30, 2022. On February 1, 2023, we modified this agreement in conjunction with our entry into a new hosting agreement with the party, under which we agreed that the remaining principal balance of the note was $731,472, and that the note would be converted into an interest only note until August 31, 2024, at which time all principal and interest due is payable in full. In addition, we agreed to allow the note obligor to repay the note principal at a 10% discount if it was repaid prior to February 28, 2023. The maturity date of the note was also extended to December 31, 2024. | |
| · | During the six months ended February 28, 2025, we recorded $703,500 of revenue from a brokered transaction of ten transformers. | |
| · | During the six months ended February 29, 2024, we recorded $149,250 of revenue from the sale of 100 ASIC miners to a third party. |
Under the guidelines of ASC 606, we determined that payments due under notes receivable from ROC Digital and the Trinidad borrower were not “probable” due to the start-up nature of the customers and their lack of capitalization. As a result, we report revenue from the equipment sales to both parties under the installment sale method, under which we report our gross profit on the sale as payments are received from the purchaser. With regard to the note receivable from ROC Digital, we recorded revenues of $13,6471 in the six months ended February 28, 2025 from two monthly payments received on the note as compared to revenues of $40,942 in the six months ended February 29, 2024 from six monthly payments received on the note. With regard to the note receivable from the Trinidad borrower, we did not record any revenues in the six months ended February 29, 2024 because the borrower only made interest only payments in that period, and we did not record any revenues in the six months ended February 28, 2025 because we accelerated and foreclosed on the note in the fourth quarter of 2024.
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During the six months ended February 28, 2025 and February 29, 2024, we recorded $703,500 and $149,250, respectively, from sales of equipment recorded under the “completed sale” method from the transactions described above.
In future periods, we expect to generate additional revenues from the resale of certain hosting equipment, primarily containers and transformers, and of miners in “buy/host” transactions, in which we sell miners already installed in our hosting facilities to buyers that simultaneously execute a hosting agreement for the purchased miners and in some cases additional miners.
We generated $-0- in revenues from hosting in the six months ended February 28, 2025 as compared to $21,980 in hosting revenues in the six months ended February 29, 2024. We terminated all of our hosting clients in the fourth quarter of fiscal 2024 and did not have any hosting clients during the six months ended February 28, 2025. In the current market environment, we believe self-mining is more profitable than hosting third party miners, however we may pursue hosting opportunities on a selective basis. While we still see good opportunities to acquire mining equipment at attractive prices, the price of mining equipment has recently increased with the recent increase in the price of bitcoin.
The primary factors that will impact our revenues in subsequent periods are described in the “—Overview” above.
Cost of Sales
Cost of sales were $2,293,331 in the six months ended February 28, 2025 compared to $975,217 in the six months ended February 29, 2024.
Cost of sales related to mining was $1,623,331 in the six months ended February 28, 2025 compared to $779,791 in the six months ended February 29, 2024. Cost of sales normally includes electricity, utilities, facilities costs, and supplies where we perform mining from our own facilities. Major components of cost of sales include rent to house mining and hosting equipment, electricity, and supplies. Where our miners are hosted by third parties, major components of cost of sales include hosting fees and/or electricity costs. Cost of sales for both owned and hosted facilities does not include depreciation, which is stated separately.
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The table below describes the average cost of mining each bitcoin for the six months ended February 28, 2025 and February 29, 2024, and the total energy usage and cost per each kilowatt hour (“KWH”) utilized within both of our facilities.
| For the 6 Months Ended | ||||||||
| Cost of Revenues - Analysis of costs to mine one bitcoin (per bitcoin amounts are actual) | February 28, 2025 | February 29, 2024 | ||||||
| Cost of Mining - owned facilities | ||||||||
| Cost of energy per bitcoin mined | $ | 26,494.61 | $ | 17,692.46 | ||||
| Other direct costs of mining - non energy utilities per bitcoin mined (1) | $ | 26,125.32 | $ | 11,557.28 | ||||
| Depreciation expense per bitcoin mined (2) | $ | 24,910.36 | $ | 13,309.08 | ||||
| Financing expense per bitcoin mined (3) | $ | 0.00 | 0.00 | |||||
| Cost to mine one bitcoin | $ | 77,530.29 | $ | 42,558.81 | ||||
| Average revenue of each bitcoin mined | $ | 83,237.56 | $ | 40,311.19 | ||||
| Cost of mining one bitcoin as % of average bitcoin mining revenue | 93.14% | 105.58% | ||||||
| Cost of Mining - hosted facilities | ||||||||
| Cost of energy per bitcoin mined | $ | 53,536.25 | $ | 14,719.23 | ||||
| Other direct costs of mining - non energy utilities per bitcoin mined (1) | $ | 18,388.42 | $ | 10,273.17 | ||||
| Depreciation expense per bitcoin mined (2) | 14,136.72 | 16,210.81 | ||||||
| Financing expense per bitcoin mined (3) | $ | 0.00 | 2,102.47 | |||||
| Cost to mine one bitcoin - Hosted | $ | 86,061.40 | $ | 43,305.69 | ||||
| Average revenue of each bitcoin mined (4) | $ | 90,305.19 | $ | 41,096.51 | ||||
| Cost of mining one bitcoin as % of average bitcoin mining revenue (5) | 95.30% | 105.38% | ||||||
| Statistics - owned facilities | ||||||||
| Total bitcoin mined | 3.792639025 | 5.18946646 | ||||||
| Bitcoin mining revenue | $ | 315,690.00 | $ | 209,193.58 | ||||
| Total miners - as of the periods ended | 485 | 285 | ||||||
| Total KWHs utilized | 4,996,814.49 | 1931643.337 | ||||||
| Total energy expense | $ | 100,484.48 | $ | 91,814.42 | ||||
| Cost per KWH | $ | 0.0201 | $ | 0.0475 | ||||
| Energy expense as % of bitcoin mining revenue, net | 31.83% | 43.89% | ||||||
| Other direct costs of mining - non energy utilities (1) | $ | 99,083.91 | $ | 59,976.10 | ||||
| Total depreciation expense (2) | $ | 99,476.00 | 69,057.00 | |||||
| Total financing costs (3) | $ | 0.00 | 0.00 | |||||
| Statistics - hosted facilities | ||||||||
| Total bitcoin mined | 18.66358293 | 23.98608769 | ||||||
| Bitcoin mining revenue | 1,685,418.37 | 985744.5178 | ||||||
| Total miners - as of the periods ended | 3,752 | 1,241 | ||||||
| Total KWHs utilized | 23,182,469.36 | 9,872,954.10 | ||||||
| Total energy expense | $ | 999,178.26 | $ | 353,056.74 | ||||
| Cost per KWH | $ | 0.0431 | $ | 0.0358 | ||||
| Energy expense as % of bitcoin mining revenue, net | 59.28% | 35.82% | ||||||
| Other direct costs of mining - non energy utilities (1) | 343,193.79 | 246,413.23 | ||||||
| Total depreciation expense (2) | 263,842 | 388,834.00 | ||||||
| Total financing costs (3) | $ | 0.00 | $ | 50,429 | ||||
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(1) Other direct costs of mining for owned facilities consists mostly of rent for the facility as well as minor costs such as supplies and internet. Other direct costs of mining for hosted miners consist of hosting fees.
(2) Depreciation expense includes depreciation of miners used in mining. For owned facilities, it also includes depreciation of the hosting containers and corollary equipment such as transformers and switches.
(3) Financing costs include the cost of purchase money financing for miners, but do not include any financing costs for miners or hosting equipment acquired with general working capital nor the cost of hedging the price of bitcoin.
(4) Average revenue of each bitcoin mined is calculated by dividing the sum of bitcoin mining revenue for both owned and hosted facilities by the total number of bitcoin mined during the respective periods. We have determined that Coinbase is the principal market for valuing bitcoin transactions and uses the daily closing prices as the source of recording revenue.
(5) Weighted average cost of mining one bitcoin is calculated by dividing the sum of total energy expense, hosting expenses, other direct costs of mining, depreciation and financing costs by the total bitcoin mined during the respective periods.
Energy prices can be highly volatile and global events (including the wars in Ukraine and the Middle East) and political events (including the U.S. government’s regulation of cryptocurrencies or its imposition of tariffs on foreign trade) may cause fuel prices, and to a lesser extent, power prices, to fluctuate widely. All of our sites are currently subject to relatively fixed rates during the term of their current power supply agreements, but variable prices and market rate fluctuations with respect to wholesale power costs over the long-term. While this renders energy prices less predictable, it also gives us greater ability and flexibility to actively manage the energy we consume with an eye towards increasing profitability and energy efficiency. Energy prices are also highly sensitive to weather events, such as winter storms and polar vortices, which increase the demand for power regionally. When such events occur, we may curtail our operations to avoid using power at increased rates.
Cost of sales related to hosting was $-0- in the six months ended February 28, 2025 compared to $14,534 in the six months ended February 29, 2024. Cost of sales normally includes utilities, facilities costs, and supplies. Unlike the cost of sales from mining, cost of sales from hosting does not include electricity costs, as such costs are passed on to the hosting client.
Cost of sales related to sales of mining equipment was $670,000 for the six months ended February 28, 2025 as compared to $180,891 for the six months ended February 29, 2024. Cost of sales from equipment sales includes the purchase price of equipment sold, plus shipping and value added tax on the equipment for sales reported under the completed sales method. There is no cost of sales associated with equipment sales reported under the installment sales method.
Operating Expenses
During the six months ended February 28, 2025, we incurred $2,222,563 in operating expenses compared to $1,686,295 in operating expenses during the six months ended February 29, 2024. Major components of operating expenses for the 2025 period as compared to the 2024 period were:
| Six months ended | Six months ended | Percentage | ||||||||||
| February 28, 2025 | February 29, 2024 | Change % | ||||||||||
| General and administrative expenses | $ | 150,730 | $ | 77,057 | 96% | |||||||
| Depreciation | 358,319 | 457,901 | (22% | ) | ||||||||
| Professional fees | 318,969 | 303,390 | 5% | |||||||||
| Investor relations | 26,400 | 141,560 | (81% | ) | ||||||||
| Insurance | 55,395 | 78,828 | (30% | ) | ||||||||
| Officers compensation | 878,778 | 420,533 | 109% | |||||||||
| Directors compensation | 125,910 | 26,400 | 377% | |||||||||
| Employee shareholder compensation | 367,108 | 257,196 | 43% | |||||||||
| Change in fair value of cryptocurrency | (59,046 | ) | (76,591 | ) | (23% | ) | ||||||
| Total operating expenses | $ | 2,222,563 | $ | 1,686,295 | 32% | |||||||
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The higher level of operating expenses in the 2025 period as compared to the 2024 period is primarily attributable to increased officer, director, and employee/shareholder compensation that we began accruing as of September 1, 2024. Specifically, we issued two of our officers 500,000 shares of common stock (pre-split) on September 1, 2024, each as partial compensation for fiscal 2025 officer services, and we began accruing additional cash and share compensation for our officers as of September 1, 2024, the cash portion of which is not payable until we have sufficient liquidity. The total cash accrual to officers and employee/shareholders is $195,000 per quarter. We also adopted a stock compensation package, beginning September 1, 2024, under which we accrue 615,000 shares (pre-split) per quarter for compensation to officers and employees, including for board and board committee service (the “Stock Compensation Package”). All shares issued during the 2025 period were valued at $0.289 per share based on a third party valuation of our shares.
Operating expenses were also adversely impacted in the 2025 period by increased general and administrative expenses and a lower gain from changes in the fair value of cryptocurrency. Operating expenses were positively impacted by decreased depreciation expense, investor relations expenses, and insurance.
We expect that operating expenses will trend materially higher in future periods as we begin paying regular compensation to existing officers and directors, hire additional employees, and incur other costs, such as increased depreciation expense due to the addition of new mining equipment.
Other Income (Expense)
During the six months ended February 28, 2025, we incurred ($333,988) in other expenses, net, as compared to ($571,931) of other expenses, net, in the six months ended February 29, 2024. Interest expense was $128,931 in the six months ended February 28, 2025, as compared to $153,699 in the six months ended February 29, 2024. Other expenses in the 2025 period were impacted by a bad debt expense of $124,815 taken in regard to our note receivable from ROC Digital during the 2025 period and a loss on extinguishment of debt of $80,961 taken in regard to our Hashrate Sale Agreement (“HSA”) with Luxor. Other expenses in the 2024 period were impacted by a loss on extinguishment of debt of $221,208 relating to a different financing with Luxor, a loss of $111,773 from our investment in ROC Digital in the 2024 period as compared to $-0- in the 2025 period, and loss on change in derivative liability of $114,835 in 2024 as compared to $-0- in 2025.
On May 22, 2025, we entered into a Master Hashrate Purchase and Sale Agreement (the “Master Agreement”) with Luxor, pursuant to which we agreed to purchase the daily hashrate for the remaining duration of the HSA; thereby effectively discharging our obligation to Luxor under the HSA. Pursuant to the Master Agreement, we paid Luxor $706,833, representing 8.1576 bitcoins, less the margin held by Luxor on our behalf, which reflects the transaction value of the remaining hashrate we were obligated to deliver to Luxor under the HSA.
Net (Loss) Attributable to Common Stockholders
As a result of the foregoing, during the six months ended February 28, 2025, we incurred a net loss attributable to common stockholders of $5,092,277, or $(0.12) per share, as compared to a net loss attributable to common stockholders of $1,830,522, or $(0.04) per share, during the six months ended February 29, 2024. The increase in our net loss in the six months ended February 28, 2025 compared to the six months ended February 29, 2024 is attributable to the factors discussed above, as well as a one-time deemed dividend that we incurred during the six months ended February 28, 2025 as a result of the reduction in the conversion price of the Series A Convertible Preferred Stock to $0.20 per share from $0.575 per share. The reduction of the conversion price of the Series A Preferred resulted in the holders thereof being entitled to an additional 14,803,239 shares of common stock if all of the Series A Preferred were converted into common stock. As a result, under the guidelines of ASC 470 we recorded a one-time deemed dividend charge of $2,960,648 for the value of the extra shares issuable under the Series A Preferred, all of which were valued at $0.20 per share based upon a valuation study performed by an accredited third party valuation firm.
Non-GAAP Financial Measures
We have included in some of our press releases, measures of financial performance that are not defined by GAAP. We believe that these measures provide useful information to investors. For each of these non-GAAP financial measures, we provide a reconciliation of the difference between the non-GAAP measure and the comparable GAAP measure and an explanation of why we believe the non-GAAP measure provides useful information to investors.
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Liquidity and Capital Resources
Liquidity: As of February 28, 2025, we had $482,951 in cash on hand. During the six months ended February 28, 2025, we had a net loss of ($2,131,629) and a net loss attributable to common stockholders of ($5,092,277) due to a one-time deemed dividend of $2,960,648 to our Series A Convertible Preferred Stockholders as a result of a resetting of its conversion terms. Our primary requirements for liquidity and capital are working capital, capital expenditures, loan payments, public company costs, and general corporate needs. We expect these needs to continue as we further develop and grow our business. For the year ended August 31, 2024, and the six months ended February 28, 2025, our primary sources of liquidity came from existing cash and cash equivalents, bitcoin and proceeds, loans received under two equipment financing transactions with Luxor, and loans received under a line of credit with IDI, as described below in “—Related Party Transactions – Line of Credit from IDI.”
As amended, the LOC Agreement allows us to borrow up to $2,300,000 thereunder until December 1, 2024. Each draw request is subject to the approval of IDI in its sole discretion. As amended, all principal and interest due under the LOC Agreement was due and payable on December 1, 2024, provided that we have the right to extend the maturity date for six monthly periods in consideration for an extension fee of $25,000 per extension. We exercised our right to extend the maturity date of the loan on December 1, 2024, January 1, 2025, February 1 2025, March 1, 2025, and April 1 2025. However, the $25,000 extension fee was never accrued or paid; consequently, we executed an amendment with IDI on May 21, 2025, pursuant to which the extension fee was waived and replaced with a payment of $150,000, payable by June 6, 2025, to the extent we do not complete our public offering. Pursuant to the amendment, the maturity date was also extended to August 15, 2025. As of the date of this prospectus, the amount due under the LOC Agreement was $1,875,000 in principal and approximately $444,540 in interest and extension fees. If this offering is successful, we have reached an agreement with IDI to restructure the loan as follows:
| · | $1,000,000 of the debt will be converted into an unsecured term loan that bears interest at 12.5% per annum, provides for monthly payments of interest only until December 1, 2026 at which time all principal and unpaid interest are due; |
| · | approximately $600,000 of the debt will be exchanged for equal amount of loan receivable from ROC Digital; and |
| · | the balance of the debt will be converted into common stock at the public offering price. (See “Certain Relationships and Related Party Transactions—Letter Agreement with Jonathan Bates and IDI.”) |
We have also reached an agreement with IDI and Jonathan Bates, our chief executive officer, under which they would convert all of their shares of Series A and B Convertible Preferred Stock into common stock at their existing conversion prices upon consummation of this offering. (See “Certain Relationships and Related Party Transactions—Letter Agreement with Jonathan Bates and IDI.”)
We believe that cash on hand, expected receipts from the sale of equipment, and revenue from self-mining will provide us with sufficient liquidity to fund our operations for the next 12 months. As of the date of this prospectus, we owned approximately 4,700 miners, which includes 3,000 miners acquired during the first quarter of fiscal 2025, and which should significantly boost revenues in fiscal 2025 over 2024 levels. Other potential sources of revenue that we may receive include equity distributions from the ROC Digital joint venture.
Nevertheless, while we do not believe we need additional capital to maintain operations as they currently exist, we will need additional capital to begin paying market compensation to our officers and employees, and expand our digital asset hosting and mining business and take advantage of opportunities in the marketplace that currently exist due to the recent decline in digital asset prices. Therefore, we are also exploring alternatives, including the potential issuance of common stock in a private placement, and the issuance of convertible notes or preferred stock. There is no assurance that we will be able to raise additional capital or that the terms of any capital raise are not dilutive to current shareholders or carry other terms that are unfavorable to us and our shareholders.
Cash Flow: The following table sets forth the major sources and uses of cash for the two fiscal years ended August 31, 2024 and 2023, and for the six months ended February 28, 2025 and February 29, 2024:
| Six Months ended | Year ended August 31, | |||||||||||||||
| February 28, 2025 | February 29, 2024 | 2024 | 2023 | |||||||||||||
| Net Loss | $ | (2,131,629 | ) | $ | (1,830,522 | ) | $ | (3,292,503 | ) | $ | (2,464,884 | ) | ||||
| Net cash used in operating activities | (310,144 | ) | (204,304 | ) | (28,753 | ) | (809,715 | ) | ||||||||
| Net cash used in investing activities | (18,000 | ) | (48,946 | ) | (67,525 | ) | (612,288 | ) | ||||||||
| Net cash provided by financing activities | 482,951 | 325,000 | 325,00 | 1,300,000 | ||||||||||||
| Net increase in cash | $ | (16,319 | ) | $ | 71,749 | $ | 228,723 | $ | (122,003 | ) | ||||||
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Operating Activities
Our mining and hosting operations generate non-cash revenue in the form of bitcoin, which we have historically sold to pay operating expenses or conveyed in kind to certain vendors to pay expenses. For the years ended August 31, 2024 and 2023, cash flows used in operating activities were $28,753 and $809,715, respectively. The substantial decrease in cash used in operating activities for fiscal 2024 compared to fiscal 2023 is primarily attributable to a material decrease in the operating loss in 2024 compared to 2023 after excluding non-cash items in both periods, which include depreciation, stock based compensation and impairment of fixed assets and changes in balance sheet accounts, such as accounts payable, accrued expenses, accrued interest, and notes receivable.
Cash flows used in operating activities were $310,144 for the six months ended February 28, 2025 compared to cash flows used in operating activities of $204,304 for the six months ended February 29, 2024. The increase in cash flows used in operating activities for the six months ended February 28, 2025 was primarily attributable a change in various balance sheet accounts in 2025 compared to 2024. Major factors that positively impacted our cash flow from operations in 2025 as compared to 2024 included an increase in non-cash stock-based compensation to $671,779 in the 2025 period as compared to $554,931 in the 2024 period; an increase in accrued officer compensation of $745,470 in the 2025 period, as compared to $-0- in the 2024 period; a bad debt expense of $124,815 relating to our note receivable from ROC Digital in the 2025 period, as compared to $-0- in the 2024 period; and an increase in accounts payable and accrued expenses of $360,000 in the 2025 period as compared to an increase in accounts payable and accrued expenses of $328,835 in the 2024 period. Major factors that negatively impacted our cash flow from operations in 2025 as compared to 2024 included a reduction in depreciation to $358,319 in the 2025 period from $457,901 in the 2024 period; non-cash charges taken in 2024 for a change in a derivative liability of $114,835; and a loss on our investment in ROC Digital of $111,773 which did not occur in the 2025 period.
Investing Activities
Cash flows used in investing activities were $67,525 for the year ended August 31, 2024 compared to cash flows used in investing activities of $612,288 for the year ended August 31, 2023. Cash flows used in investing activities consisted mostly of purchases of equipment in the 2024 and 2023 periods.
Cash flows used in investing activities were $18,000 for the six months ended February 28, 2025 compared to cash flows used in investing activities of $48,946 for the six months ended February 29, 2024. Cash flows used in investing activities primarily consisted of purchases of equipment in the 2025 and 2024 periods, offset by a distribution of $8,408 received from ROC Digital in the 2024 period.
Financing Activities
Cash flows provided by financing activities were $325,000 for the year ended August 31, 2024 compared to cash flows provided by financing activities of $1,300,000 for the year ended August 31, 2023. All of the financing cash flows in both 2023 and 2024 were provided by related party loans from IDI.
Cash flows provided by financing activities were $311,825 for the six months ended February 28, 2025 compared to cash flows provided by financing activities of $325,000 for the six months ended February 29, 2024. The cash flows provided by financing activities in both the 2025 and 2024 periods included $250,000 and $325,000, respectively, of advances under a line of credit with Innovative Digital Investors Emerging Technology, L.P. (“IDI”), a limited partnership controlled by Jonathan Bates, our Chairman, and Raymond Mow, our chief financial officer. In the six months ended February 28, 2025, we also received $200,000 from an investment by IDI in our Series B Convertible Preferred Stock and a $25,000 payment made to accelerate the vesting date of 150,000 shares of Series A Convertible Preferred Stock that had been issued for officer services. In the six months ended February 28, 2025, cash flows from financing activities were negatively impacted by loan repayments of $163,175 under a financing agreement with Luxor.
On May 22, 2025, we entered into a Master Hashrate Purchase and Sale Agreement (the “Master Agreement”) with Luxor, pursuant to which we agreed to purchase the daily hashrate for the remaining duration of our HSA with Luxor; thereby effectively discharging our obligation to Luxor under the HSA. Pursuant to the Master Agreement, we paid Luxor $706,833, representing 8.1576 bitcoins, less the margin held by Luxor on our behalf, which reflects the transaction value of the remaining hashrate we were obligated to deliver to Luxor under the HSA.
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Bitcoin Holdings
At August 31, 2024, we held approximately .25731 bitcoin with a fair market value of $14,966 on the balance sheet. All of the bitcoin were classified as “Cryptocurrencies” on the balance sheet. The quoted market value of a single bitcoin as of August 31, 2024 was approximately $58,989. During the year ended August 31, 2023, we incurred an impairment charge on cryptocurrency of $3,523 due to the decline in the market price of cryptocurrency.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, and results of operations, liquidity or capital resources.
Related Party Transactions
Line of Credit from IDI
On October 19, 2022, we entered into a Line of Credit Agreement (as amended, the “LOC Agreement”) with IDI, a limited partnership controlled by Jonathan Bates, our Chief Executive Officer and Chairman, and Raymond Mow, our Chief Financial Officer and a Director. The LOC Agreement provided for loans of up to $1,000,000 at our request to finance the purchase of equipment necessary for the operation of our business, and related working capital. Loans under the LOC Agreement accrue interest at 12% per annum, compounded on a 30/360 monthly basis until the loans have been repaid in full. We had the right to submit draw requests under the LOC Agreement until April 15, 2023. Each draw request is subject to the approval of IDI in its sole discretion. The amount drawn, plus all accrued interest therein, was originally repayable in full on December 1, 2023.
Effective May 13, 2023, we and IDI amended and restated the LOC Agreement to increase the amount that we may borrow thereunder to $1,750,000, extended the date by which we could borrow funds thereunder to December 1, 2023, and extended the maturity date to December 1, 2024. Simultaneously with the extension, we borrowed an additional $500,000, primarily to fund the purchase of ASIC miners. Effective November 4, 2024, we and IDI amended the LOC Agreement to increase the amount that we may borrow thereunder to $2,300,000. In addition, IDI agreed that we have the right to extend the maturity date for six monthly periods in consideration for an extension fee of $25,000 for each monthly extension, which will be added to the balance due thereunder. In addition, IDI was granted the right to convert 11,500,000 shares of common stock it owns into 2,300 shares of Series B Convertible Preferred Stock. In consideration for the above the amendments, IDI agreed to approve a new draw under the line of credit of $250,000 and to purchase an additional 200 shares of Series B Convertible Preferred Stock for $200,000, for net new financing to us of $450,000.
As of the date of this prospectus, the principal amount due IDI under the LOC Agreement was $1,875,000, and we had exercised our right to extend the maturity date of the loan. As of the date of this prospectus, we had not made any payment of principal or accrued interest under the LOC Agreement since its inception, and, as a result, the current outstanding principal and amount of accrued interest represents the largest aggregate amount outstanding since our entry into the LOC Agreement. The $25,000 extension fee was also never accrued or paid; consequently, we executed an amendment with IDI on May 21, 2025, pursuant to which the extension fee was waived and replaced with a payment of $150,000, payable by June 6, 2025, to the extent we do not complete our public offering. Pursuant to the amendment, the maturity date was also extended to August 15, 2025.
Mr. Bates directly and indirectly owns approximately 10% of IDI and therefore has an indirect interest in 10% of the amount due under the LOC Agreement. In addition, Mr. Bates and Mr. Mow are officers of the general partner of IDI, which is entitled to an annual management fee of 0% on the net assets of IDI and an annual performance allocation of 30% on the increase in the net asset value of IDI.
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Transactions with ROC Digital Mining I, LLC
In October 2022, we entered into a joint venture arrangement with ROC Digital to jointly develop and operate a bitcoin mining operation in Pecos, Texas. Under the joint venture, we contributed one immersion container, six transformers, and cash with an aggregate value of $987,429 as a capital contribution to ROC Digital. We simultaneously sold ROC Digital four immersion containers for $1,200,000, which is payable pursuant to a promissory note that bears interest at 5% per annum, and is payable pursuant to monthly payments of $31,203.64 per month until May 31, 2026. The note is secured by the equipment that was sold. As of August 31, 2023 and August 31, 2024, the note receivable from ROC Digital amounted to $1,029,721 and $655,277, respectively. We own approximately 30% of ROC Digital and 33 1/3% of ROC Manager, the manager of ROC Digital.
We also obtained the right to locate one container at the location that we would be able to use for self-mining. Under our hosting agreement with ROC Digital, we located one immersion container at the site for $500 per month, plus payment of our pro rata share of electricity, internet and insurance for the site. Under the hosting agreement, we also agreed to contribute $100,000 toward the electricity deposit for the site, which is refundable to us at the earlier of the date the electricity provider releases the deposit or 90 days after the expiration or termination of the hosting agreement. The hosting agreement has a term of one year, subject to our right to renew the agreement for two one year terms after receipt of notice of the renewal terms of the joint venture’s electricity supply agreement for the upcoming year. In April 2024, we exercised our right to extend the hosting agreement for an additional year running from May 2024 to April 30, 2025. As of the date of this prospectus, the hosting agreement with ROC Digital has not been extended, and we are currently operating on a month-to-month basis.
John Kelly, a director, owns approximately 49% of ROC Digital. Mr. Kelly also owns 33 1/3% of ROC Manager, and serves as a manager of ROC Manager.
Transactions with Rykor Energy Solutions, LLC
In May 2024, we brokered the sale of 20 transformers to Rykor Energy Solutions, LLC (“Rykor”). The total sales price of the transformers is approximately $1,407,000 and our total cost is expected to be $1,340,000. Rykor owns 133,600 shares of our common stock and as a result is the beneficial owner of approximately 6.7% of our common stock. Subsequent to August 31, 2024, by mutual agreement, the order was reduced to ten transformers instead of 20 transformers. These units were delivered and we recorded revenue of $703,500 with a cost of sales of $670,000 resulting in a profit of $33,500.
John Kelly, a director, is also a shareholder and officer of Rykor.
Critical Accounting Estimates
General
Management’s Discussion and Analysis of Financial Condition and Results of Operations is based upon our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of our financial statements requires management to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, net sales and expenses and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
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We describe in this section certain critical accounting policies that require us to make significant estimates, assumptions and judgments. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are uncertain at the time the estimate is made and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the financial statements. Management believes the following critical accounting policies reflect its most significant estimates and assumptions used in the preparation of the financial statements. For further information on the critical accounting policies, see Note 1 of the Financial Statements.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”), which is the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The most significant estimates relate to the calculation of stock-based compensation, collectability of notes receivable, useful lives and recoverability of long-lived assets, depreciation methods, income taxes and contingencies. We base our estimates on historical experience, known or expected trends, and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates. There have been no material changes to our accounting estimates since our financial statements for the fiscal year ended August 31, 2024.
Revenue Recognition
On July 1, 2018, we adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). Results for reporting periods beginning after January 1, 2018, are presented under ASC 606.
Revenues from digital currency mining – General
We recognize revenue under ASC 606, Revenue from Contracts with Customers. The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
| · | Step 1: Identify the contract with the customer; | |
| · | Step 2: Identify the performance obligations in the contract; | |
| · | Step 3: Determine the transaction price; | |
| · | Step 4: Allocate the transaction price to the performance obligations in the contract; and | |
| · | Step 5: Recognize revenue when we satisfy a performance obligation. |
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Step 1: We enter into a contract with a bitcoin mining pool operator (i.e., the customer) to provide hash calculation services to the mining pool. We only utilize pool operators that determine awards under the Full Pay-Per-Share method (the “FPPS method”). The contracts are terminable at any time by either party without penalty and our enforceable right to compensation only begins when we start providing hash calculation services to the mining pool operator (which occurs daily at midnight Universal Time Coordinated (UTC)). In general, mining revenue for industry participants consists of two parts, (1) the block reward (current bitcoin block reward is 3.125 bitcoin) paid by the network to the miner for successfully mining a block, and (2) the transaction fees paid by the users to the miner for successfully mining a block. When a mining pool successfully finds a block, it is awarded all of the transaction fees in that block and the reward from the network. Under the FPPS method utilized by us, we are entitled to an award of bitcoin equal to the expected reward per block over the measurement period of midnight-to-midnight UTC time based on the hash calculation services provided to the pool during the measurement period. We are also entitled to an aware of transaction fees per block based on the average of the transaction fees over the latest 144 blocks, each of which is about 10 minutes, and the total of 144 blocks equals one day. At the end of each day that runs from midnight-to-midnight UTC time, the pool operator calculates the pool participant’s expected block reward and transaction fees for the day based on the hash calculation services provided by the pool participant that day, less net digital asset fees due to the mining pool operator over the measurement period. The actual reward to us each day is based on the number of blocks we should have hypothetically mined during the measurement period based on the hash calculation services provided to the pool by us during the measurement period and the prevailing difficulty index, and is not based on the actual rewards received by the pool during the measurement period, which may be higher or lower than the expected rewards during such period. Applying the criteria per ASC 606-10-25-1, the contract arises at the point that we provide hash calculation services to the mining pool operator, which is the beginning of each contract day at midnight UTC (contract inception), because customer consumption is in tandem with daily delivery of the hash calculation services. Providing hash calculation services to mining pools is an output of our ordinary activities, and an enforceable right to compensation begins when, and continues as long as, such services are provided.
Step 2: In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:
| · | The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct); and | |
| · | The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract). |
Based on these criteria, we have a single performance obligation in providing hash calculation services (i.e., hashrate) to the mining pool operator (i.e., customer). The performance obligation of hash calculation services is fulfilled daily over-time, as opposed to a point in time, because we provide the hashrate throughout the day and the customer simultaneously obtains control of it and uses the asset to produce bitcoin. We have full control of the mining equipment utilized in the mining pool and if we determine it will increase or decrease the processing power of its machines and/or fleet (i.e., for repairs or when power costs are excessive) the hash calculation services provided to the customer will be reduced.
Step 3: The transaction consideration we earn is non-cash digital consideration in the form of bitcoin, which is based on the Full-Pay-Per-Share (“FPPS”) payout method under the contract with the pool operator. According to the customer contract, daily settlements are calculated from midnight-to-midnight UTC time, and the amount due in bitcoin is credited to our account shortly thereafter on the following day. The amount of bitcoin we are entitled to for providing hash calculations to the Customer's mining pool under the FPPS payout method is made up of block rewards and transaction fees less mining pool fees determined as follows:
| · | The non-cash consideration calculated as a block reward over the continuously renewed contract periods is based on the total blocks expected to be generated on the bitcoin network for the daily 24-hour period beginning midnight UTC and ending 23:59:59 UTC in accordance with the following formula: the hash calculations that we provide to the Customer as a percent of the bitcoin betwork’s implied hash calculations as determined by the network difficulty, multiplied by the total bitcoin network block rewards expected to be generated for the same period. |
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| · | The non-cash consideration calculated as transaction fees paid by transaction requestors is based on the share of total actual fees paid over the continuously renewed contract periods beginning midnight UTC and ending 23:59:59 UTC in accordance with the following formula: total actual transaction fees generated on the bitcoin network during the contract period as a percent of total block rewards the bitcoin network actually generated during the same period, multiplied by the block rewards we earned for the same period noted above. | |
| · | The sum of the block reward and transaction fees earned by us are reduced by mining pool fees charged by the customer for operating the mining pool based on a rate schedule per the mining pool contract. The mining pool fee is only incurred to the extent we perform hash calculations and generate revenue in accordance with the Customer’s payout formula during the continuously renewed contract periods beginning mid-night UTC and ending 23:59:59 UTC daily. During the year ending August 31, 2024, we utilized one mining pool for our self-mining operations, which charges 0.3% of the bitcoin payable to us as a pool management fee. This amount represents consideration paid to the customer and is thus reported as a reduction in revenue as we do not receive a distinct good or service from the mining pool operator in exchange. |
There are no other forms of variable considerations, such as discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties, or other similar items.
The above non-cash consideration is variable in accordance with paragraphs ASC 606-10-32-5 to 606-10-32-7, since the amount of block reward earned depends on the amount of hash calculations we perform; the amount of transaction fees we are entitled to depends on the actual Bitcoin Network transaction fees over the same 24-hour period; and the operator fees for the same 24-hour period are variable since it is determined based on the total block rewards and transaction fees in accordance with the pool operator’s agreement. While the non-cash consideration is variable, we have the ability to estimate the variable consideration at contract inception with reasonable certainty without the risk of significant revenue reversal. We do not constrain this variable consideration because it is probable that a significant reversal in the amount of revenue recognized from the contract will not occur when the uncertainty is subsequently resolved and recognizes the non-cash consideration on the same day that control of the service is transferred, which is the same day as contract inception.
We measure the non-cash consideration based on the spot rate of bitcoin determined using our primary trading platform for bitcoin at mid-night UTC on the day of contract inception. We recognize non-cash consideration on the same day that control of the contracted service is transferred to the pool operator, which is the same day as the contract inception.
Step 4: The transaction price is allocated to the single performance obligation upon verification for the provision of hash calculation services to the mining pool operator. There is a single performance obligation (i.e., hash calculation services or hashrate) for the contract; therefore, all consideration from the mining pool operator is allocated to this single performance obligation.
Step 5: Our performance is complete in transferring the hash calculation services over-time (midnight to midnight UTC) to the customer and the customer obtains control of that asset.
In exchange for providing hash calculation services, we are entitled to the expected bitcoin awards earned over the measurement period, plus the expected global transaction fee rewards for the respective measurement period, less net digital asset fees due to the mining pool operator over the measurement period. The transaction consideration we receive is non-cash consideration, in the form of bitcoin. Prior to March 1, 2024, we measured the bitcoin at the closing U.S. dollar spot rate at the end of the date earned (midnight UTC). As of March 1, 2024, we began measuring the bitcoin at the opening U.S. dollar spot rate at the beginning of the date earned (midnight UTC). The change in method of calculating revenues from bitcoin mining did not result in material change in the revenues reported.
There are no deferred revenues or other liability obligations recorded by us since there are no payments in advance of the performance. At the end of the 24 hour “midnight-to-midnight” period, there are no remaining performance obligations.
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During the year ending August 31, 2024, we utilized one mining pool for our self-mining operations, which charges 0.3% of the bitcoin payable to us as a pool management fee.
Revenues from hosting
We provide energized space to customers who locate their equipment within our co-hosting facility. The equipment generating the hosting revenue is owned by the customer. We give hosting customers the option of having all mining proceeds paid into a cold wallet address in our name, which case we pays the hosting client its share of mining awards on a daily basis, or having all mining awards sent to an account of the customer, in which case we bill the customer monthly for any hosting fee that is contingent on the amount of the client’s award. All performance obligations are achieved simultaneously by providing the hosting environment for the customers’ operations. Hosting revenues consist of amounts billed in U.S. dollars for electricity and other fees, and a percentage of cryptocurrency generated by the client’s hosting activities. With regard to hosting revenues that are billed in U.S. dollars, revenues are recorded at the time of invoicing. With regard to hosting revenues that are based on a percentage of cryptocurrency generated by the customer, revenues are recorded based on our share of cryptocurrency received from the mining pool on the date of receipt or invoicing.
Revenues from the sale of mining equipment
We record revenue from the resale of mining equipment we have purchased. Revenue for the sale of mining equipment is recognized under the guidelines of ASC 606.
Cash and cash equivalents
We consider all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents.
Cryptocurrency
Cryptocurrencies held are accounted for as intangible assets with indefinite useful lives. An intangible asset with an indefinite useful life is not amortized but assessed for impairment quarterly, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value, which is measured using the quoted price of the cryptocurrency at the time its fair value is being measured. In testing for impairment, we have the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If we conclude otherwise, we are required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses, if the price of cryptocurrency increases, is not permitted. We classify cryptocurrencies as current assets because we reasonably expect to sell or exchange all cryptocurrencies within one quarter.
Cryptocurrency earned by us through our mining activities are included within operating activities on the accompanying statements of cash flows. The sales of digital currencies are included within investing activities in the accompanying statements of cash flows and any realized gains or losses from such sales are included in other income (expense) in the statements of operations and comprehensive income (loss). We account for our gains or losses in accordance with the moving weighted average method of accounting.
We hold our cryptocurrencies in an account at BitGo Trust (“BitGo”), a well-known bitcoin custodian, which we also use to liquidate our bitcoin when necessary. We also have an account with Gemini Trust Company, LLC, which is a qualified custodian regulated by the New York Department of Financial Services as a backup facility, and may hold bitcoin from time to time in a cold storage wallet. We use BitGo’s multi-signature feature for account access.
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Stock-based Compensation
We account for stock-based compensation using the fair value method following the guidance outlined in Section 718-10 of the FASB ASC for disclosure about stock-based compensation. This section requires a public entity to measure the cost of employee and non-employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which service is provided. No compensation cost is recognized for equity instruments for which service is not provided or rendered.
Related party transactions
We follow ASC 850, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. In accordance with ASC 850, our financial statements include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business, as well as transactions that are eliminated in the preparation of the financial statements.
Net Loss per Share
Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by ASC Topic 260, “Earnings per Share.” Basic earnings per common share calculations are determined by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share calculations are determined by dividing net income (loss) by the weighted average number of common shares and dilutive common share equivalents outstanding. As of August 31, 2024, there were no common stock equivalents that were dilutive.
Income Taxes
Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes related primarily to differences between depreciation which is deductible for tax purposes prior to being deductible for book purposes. The deferred tax assets and liabilities represent the future tax return consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Deferred taxes also are recognized for operating losses that are available to offset future taxable income.
From time to time, we may have differences in computing the book and tax bases of property and equipment; reserves for bad debts; capitalized overhead included in inventories; bonus plan payables, and accrued wages to shareholders/employees. Deferred tax expense or benefit is the result of the changes in the deferred tax assets, net of the valuation reserve, and liabilities.
We account for income taxes in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 740 (“FASB ASC 740”), Income Taxes, which clarifies the accounting and disclosure requirements for uncertainty in tax positions. It requires a two-step approach to evaluate tax positions and determine if they should be recognized in the financial statements. The two-step approach involves recognizing any tax positions that are “more likely than not” to occur and then measuring those positions to determine if they are recognizable in the financial statements. Management regularly reviews and analyzes all tax positions and has determined that no uncertain tax positions requiring recognition have occurred.
In general, our income tax returns are subject to examination by the taxing authorities for three years after they were filed. We have not filed any tax returns.
Recent Accounting Pronouncements
All other newly issued accounting pronouncements, but not yet effective, have been deemed either immaterial or not applicable.
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BUSINESS
Company Overview
We are a digital asset and blockchain technology company that engages in the production or “mining” of bitcoin. Our long-term business strategy generally involves the accumulation of bitcoin for long-term investment, whether acquired by our bitcoin mining operations or from the proceeds of capital raising transactions. From time to time, subject to market conditions, we intend to (i) issue debt or equity securities or engage in other capital raising transactions with the objective of using the proceeds to purchase bitcoin, and (ii) expand our bitcoin mining operations and retain any bitcoin we generate to the extent it exceeds our working capital requirements. We intend to fund further bitcoin acquisitions and mining expansion primarily through issuances of common stock and fixed-income instruments, including debt, convertible notes and preferred stock. We may also finance our mining expansion by conservatively leveraging our bitcoin holdings.
Our primary business is mining bitcoin for our own account. At times, we have hosted third-party equipment in our data centers, but currently have no hosting clients. In addition to mining and holding bitcoin, we have explored, and in the future may further explore, adding business lines that support the growth of the bitcoin network. These may or may not be directly engaged in mining or the support of mining efforts. As favorable market conditions and opportunities arise, we plan to acquire additional bitcoin using cash flows from operations, as well as proceeds from financings.
We operate our miners at both our own data centers and at third-party data centers. Our company-owned facilities are specifically designed and constructed for housing advanced mining equipment that uses immersion cooling technology. Immersion cooling is the process of submerging computer components (or full servers) in a thermally, but not electrically, conductive liquid (dielectric coolant) allowing higher heat transfer performance than air and many other benefits, such as the elimination of corrosive elements in the open air such as dust particles. Manufacturers of immersion systems report that immersion cooling, as compared to air cooling, can reduce the energy costs associated with cooling a data center by up to 90% and can reduce the cost of operating servers by up to 10%. In addition, manufacturers of immersion systems report the cooler, dust-free environment provided by immersion cooling can extend the life of data center equipment when compared to an air-cooled environment.
We also generate revenues from the advantageous purchase and sale of equipment used for digital asset mining and hosting. We have relationships with some suppliers that enable us to acquire highly desired equipment at wholesale prices, which we sometimes resell to third parties. In most cases, resales of digital asset mining equipment have been to our hosting customers, which have the dual benefit of generating short-term gross profits from the equipment sale as well as growing the customer base of our hosting business.
Bitcoin Industry Overview
Bitcoin was first introduced in 2008 and was first introduced as a means of exchange in 2009. Bitcoin is a digital asset that is issued by and transmitted through the bitcoin protocol collectively maintained by a peer-to-peer network of decentralized user nodes. This network hosts a public transaction ledger, known as the bitcoin blockchain, on which bitcoin holdings and all validated transactions that have ever taken place on the bitcoin network are recorded. Balances of bitcoin are stored in individual “wallet” functions, which associate network public addresses with a “private key” that controls the transfer of bitcoin. The bitcoin blockchain can be updated without any single entity owning or operating the network. New bitcoin is created and allocated by the bitcoin protocol that governs bitcoin through a “mining” process that rewards users that validate transactions in the bitcoin blockchain. Validated transactions are added in “blocks” approximately every 10 minutes. The mining process serves to validate transactions and secure the bitcoin network. Mining is a competitive and costly operation that requires a large amount of computational power to solve complex mathematical algorithms. This expenditure of computing power is known as “proof of work.” To incentivize miners to incur the costs of mining bitcoin, the bitcoin protocol rewards miners that successfully validate a block of transactions with newly generated bitcoin.
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The method for creating new bitcoins is mathematically controlled in a manner so that the supply of bitcoins grows at a limited rate pursuant to a pre-set schedule. The bitcoin protocol limits the total issuance of bitcoin over time to 21 million. Blocks are mined on average every ten minutes, and therefore 144 blocks are mined per day on average. The number of bitcoins awarded for solving a new block is automatically halved every 210,000 blocks. The current fixed reward for solving a new block is 3.125 bitcoin per block. It is anticipated that the reward will decrease by half to 1.5625 bitcoin per block in April 2028. This deliberately controlled rate of bitcoin creation means that bitcoins cannot be devalued through excessive production unless the bitcoin network’s source code (and the underlying protocol for bitcoin issuance) is altered.
Bitcoin exists entirely in electronic form, as virtually irreversible public transaction ledger entries on the blockchain, and transactions in bitcoin are recorded and authenticated not by a central repository, but by a decentralized peer-to-peer network. Distributed blockchain technology is a decentralized and encrypted ledger that is designed to offer a secure, efficient, verifiable, and permanent way of storing records and other information without the need for intermediaries. This decentralization avoids certain threats common to centralized computer networks, such as denial of service attacks, and reduces the dependency of the bitcoin network on any single system.
While the bitcoin network as a whole is decentralized, the private keys used to access bitcoin balances are not widely distributed and are held on hardware (which can be physically controlled by the holder or by a third party such as a custodian) or via software programs on third-party servers. The loss of such private keys results in an inability to access, and the effective loss of, the corresponding bitcoin. Consequently, bitcoin holdings are susceptible to all of the risks inherent in holding any electronic data, such as power failure, data corruption, security breach, communication failure, and user error, among others. These risks, in turn, make bitcoin subject to theft, destruction, or loss of value from hackers, corruption, or technology-specific factors such as viruses that do not affect conventional fiat currency. In addition, the bitcoin network relies on open-source developers to maintain and improve the bitcoin protocol. Accordingly, bitcoin may be subject to protocol design changes, governance disputes such as “forked” protocols, competing protocols, and other open source-specific risks that do not affect conventional proprietary software.
Bitcoin can be used to pay for goods and services, or it can be converted to fiat currencies, such as the U.S. dollar, at rates of exchange determined by market forces on bitcoin trading platforms, which operate 24-hours-a-day, 7-days-a-week and are not regulated in as comprehensive a manner as traditional securities exchanges. As a result, trading on these markets is likely more subject to manipulation than on securities markets regulated by the SEC. In addition to these platforms, over-the-counter markets and derivatives markets for bitcoin also exist; however, these markets are still maturing and many are unregulated.
Users of bitcoin believe that it offers several advantages over traditional (also known as “fiat”) currency, including:
| · | Acting as a fraud deterrent, as digital assets recorded on a blockchain are virtually impossible to counterfeit, reverse, or modify; | |
| · | Immediate settlement; | |
| · | Elimination of counterparty risk; | |
| · | No requirement for a trusted intermediary; | |
| · | Lower transaction fees; | |
| · | Identity theft prevention; | |
| · | Universal accessibility; |
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| · | Transaction verification and confirmation processes that prevent double spending; | |
| · | Decentralized mining at any time of day without any central authority (governments or financial institutions); and | |
| · | Universal value. |
As with many new and emerging technologies, there are potentially significant risks. Businesses (including ours) which are seeking to develop, promote, adopt, transact or rely upon blockchain technologies and cryptocurrencies have a limited track record and operate within an untested new environment. These risks are not only related to the businesses that we pursue, but the sector and industry as a whole, as well as the entirety of the concept behind blockchain and cryptocurrency as value. Factors such as access to computer processing capacity, interconnectivity, electricity cost, environmental factors (such as cooling capacity), and location play an important role in “mining,” which is the term for using the specialized computers in connection with the blockchain for the creation of new units of cryptocurrency.
Bitcoin Mining
Mining requires the use of specialized computers equipped with application-specific integrated circuit (ASIC) chips (known as “miners”) to solve complex cryptographic algorithms in support of the bitcoin blockchain (in a process known as “solving a block”) in exchange for digital asset rewards, in a process known as “mining.” These rewards of digital assets can be sold profitably when the sale price of the digital asset exceeds the cost of “mining,” which generally consists of the cost of mining hardware, the cost of the electrical power to operate the equipment, and other facility costs to house and operate the equipment.
Mining processing power is generally referred to as “hashing power.” A “hash” is the computation run by mining hardware in support of the blockchain. A miner’s “hashrate” refers to the rate at which it is capable of solving such computations per second. Miners with higher rated hashrates when operating at maximum efficiency have a higher chance of completing a block in the blockchain and receiving a digital asset reward.
Currently, the likelihood that an individual mining participant acting alone will solve a block and be awarded a digital asset is extremely low. As a result, to maximize the opportunities to receive a reward, most miners have joined with other miners in “mining pools” where the computing power of each pool participant is coordinated to complete the block on the blockchain and mining rewards are distributed to participants in accordance with the rules of the mining pool. Fees payable to the operator of the pool vary but can be as much as 2% of the reward earned and are deducted from the amounts earned by each pool participant. We only participate in mining pools which pay rewards on the “Full-Pay-Per-Share Method,” where the amount paid each day is based on the theoretical reward the pool participant should have received that day based on its hashing power contributed to the pool multiplied by the difficulty index. Mining pools are subject to various risks including connection issues, outages and other disruptions which can impact the quantity of digital assets earned by participants.
Key Factors Affecting Our Performance
Market Price of Digital Assets
Our business is heavily dependent on the spot price of bitcoin, as well as other digital assets. The prices of digital assets, specifically bitcoin, have experienced substantial volatility, which may reflect “bubble” type volatility, meaning that high or low prices may have little or no relationship to identifiable market forces, may be subject to rapidly changing investor sentiment, and may be influenced by factors such as technology, regulatory void or changes, bad actors, manipulation, and media reporting. Bitcoin (as well as other digital assets) may have value based on various factors, including their acceptance as a means of exchange by consumers and others, scarcity, and market demand.
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Our financial performance and growth depend in large part on our ability to mine for digital assets profitably. Increases in power costs, an inability to mine digital assets efficiently, and increases in the difficulty index due to the addition of more hash power to the network will reduce our operating margins, may harm our growth prospects, and could have a material adverse effect on our business, financial condition and results of operations. Over time, there has been a positive trend in the total market capitalization of digital assets which suggests increased adoption. However, historical trends are not indicative of future adoption, and it is possible that the adoption of digital assets and blockchain technology may slow, take longer to develop, or never be broadly adopted, any of which would negatively impact our business and operating results.
Network Hashrate and Difficulty Index
Generally, a bitcoin mining rig’s chance of solving a block on the bitcoin blockchain and earning a bitcoin reward is a function of the mining rig’s hashrate relative to the global network hashrate (i.e., the aggregate amount of computing power devoted to supporting the bitcoin blockchain at a given time). As demand for bitcoin increases, the price of bitcoin increases which often causes the global network hashrate to rapidly increase through the addition of more and better miners to the system. Further, as more and increasingly powerful mining rigs are deployed, the network difficulty for bitcoin increases. Network difficulty is a measure of how difficult it is to solve a block on the bitcoin blockchain, which is adjusted every 2,016 blocks, or approximately every two weeks, so that the average time between each block is approximately ten minutes. A high difficulty index means that it will take more computing power to solve a block and earn a new bitcoin reward, meaning a miner’s share of the global network hashrate (and therefore its chance of earning bitcoin rewards) will decline if it fails to deploy additional hashrate at pace with the industry.
Halving
Further affecting the industry, and particularly for the bitcoin blockchain, the digital asset reward for solving a block is subject to periodic incremental halving. Halving is a process designed to control the overall supply and reduce the risk of inflation in digital assets using a proof of work consensus algorithm. At a predetermined block, the mining reward is reduced by half, hence the term “halving.” For bitcoin, the reward was initially set at 50 bitcoin currency rewards per block. The bitcoin blockchain has undergone halvings four times since its inception as follows: (1) on November 28, 2012, at block height 210,000; (2) on July 9, 2016, at block height 420,000; (3) on May 11, 2020, at block height 630,000; and (4) on April 19, 2024, at a block height of 840,000, when the reward was reduced to its current level of 3.125 bitcoin per block. The next halving for the bitcoin blockchain is currently anticipated to occur in 2028 at block height 1,050,000. Halvings will continue to occur until the total amount of bitcoin currency rewards issued reaches approximately 21 million and the theoretical supply of new bitcoin is exhausted, which is expected to occur around the year 2140. Since the price of bitcoin is not adjusted proportionally after the halving, that means that each miner will produce exactly half the amount of bitcoin as it did prior to the halving from the same amount of processing power. This directly impacts the profitability of a miner immediately after the halving. Historically, halving events have also been the impetus for an increase in the price of bitcoin as the reduced rate of growth of bitcoin increases the scarcity of the asset, while the reduction in the rewards from mining causes miners to retire their less efficient miners.
Electricity Costs
Electricity cost is the major operating cost for the mining fleet, both to power miners and to dissipate the heat generated by the miners’ operations, as well as for the hosting services provided to customers and related parties. As a result, our ability to locate and select sites for our data centers that are able to obtain low-cost electricity, or our ability to negotiate contracts with third party data centers that have low-cost electricity, is key to our success.
Equipment Costs
In the past, the demand for and prices of the newest, most efficient miners and hosting equipment has been heavily influenced by increases in the price of bitcoin, sometimes leading to scarcity in the supply of miners and hosting equipment. When the market value of digital assets declined in 2022 and 2023, the demand for all types of miners also decreased. In 2024, when the price of bitcoin generally rose, the price of much equipment also rose. As a result, the cost of new machines can be unpredictable. Our ability to secure the necessary equipment in a timely manner, while maintaining proper cost controls, will be integral to our success.
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Our Facilities and Operations
Trinidad Operations
We initially decided to locate our initial facilities in Trinidad, because Trinidad has some of the cheapest electricity in the world due to its abundant supplies of oil and gas and because some of our technical staff is located there. We have entered into an agreement with Telecommunications Services of Trinidad & Tobago Limited (“TSTT”), the largest and oldest telecom company in Trinidad, to co-locate up to 125 800 kW containers for hosting digital asset miners. TSTT has numerous potential locations for co-location of our containers. Under the agreement, we have the option, but not the obligation, to co-locate containers at our own pace. We pay a fixed amount per container, plus the actual electricity costs incurred by our containers in the amount billed to TSTT by the local utility without any markup. The agreement provides that our hosting containers will be billed for electricity usage at the local utility’s standard rates, which is the greater of 3.5 cents per kWh or 75% of the declared reserve capacity, which is equal to the customer’s highest expected monthly kilovolt-ampere demand at $7.40. The term of the agreement expires on October 14, 2031. We have the right to terminate our agreement with TSTT at any time that the price for electricity consumption exceeds $0.05 per kWh. Also, both parties have the right to terminate the agreement on one month notice to the other party in either the third or sixth year of the term.
We have one site with two containers operational in Trinidad. As of the date of this prospectus, the site had 465 miners located at the site, of which 315 were in operation. We have two additional unused containers in Trinidad and are evaluating other TSTT sites as a location for those containers, which we expect to have installed in the first calendar quarter of 2025. We are also leasing space from a third party on an at-will basis to co-host 60 miners, for which we pay a flat rate of $0.06 per kWh each month. We ultimately intend to move all of our miners in Trinidad to our TSTT hosting facilities.
We are currently focusing our efforts on the development of hosting centers in the United States and Canada, both directly and in joint ventures with third parties. We are exploring situations where medium to long-term power agreements may be available at affordable prices, whether using traditional power sources such as coal or natural gas, as well as environmentally friendly sources such as hydroelectric, wind and solar-backed projects, which might allow us to generate collateral revenue from the sale of excess power to the local utility grid and from the generation of saleable carbon credits.
Pecos, Texas Operations
In October 2022, we entered into a joint venture arrangement with ROC Digital Mining Manager LLC (“ROC Manager”) to jointly develop and operate a bitcoin mining operation in Pecos, Texas. Under the joint venture, we contributed one immersion container, six transformers, and cash with an aggregate value of $987,429 as a capital contribution to ROC Digital Mining I, LLC (the “ROC Digital”). An affiliate of ROC Manager also contributed an immersion container. We simultaneously sold ROC Digital four immersion containers for $1,200,000, which is payable pursuant to a promissory note that bears interest at 5% per annum, and is payable through monthly amortizing payments until May 31, 2026. We own approximately 30% of ROC Digital, and 33 1/3% of ROC Manager.
The Texas site became fully electrified in June 2023 and has six containers owned by the joint venture. The joint venture initially filled its six immersion containers with ASIC miners provided by hosting clients, although most of the hosting clients’ agreements terminated in April 2024. Currently, approximately five of the hosting containers owned by the joint venture are fully or partially occupied by clients, and the joint venture is aggressively trying to fill the remaining capacity with hosting clients. The joint venture also owns two immersion containers which are not installed, which we expect the joint venture to install if hosting demand warrants.
We have entered into a hosting agreement with ROC Digital under which we have located one immersion container at our Pecos, Texas data center. We pay $500 per month, plus our pro rata share of electricity, internet, and insurance for the site. The hosting agreement has a term of one year, subject to our right to renew the agreement for two one-year terms after receipt of notice of the renewal terms of the joint venture’s electricity supply agreement for the upcoming year. In April 2024, we renewed our hosting agreement for an additional year and have not extended it further as of the date of this prospectus; we are currently operating on a month-to-month basis. As of the date of this prospectus, we had deployed 145 Antminer S-19 pro miners to our hosting container at the site.
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Murray, Kentucky Operations
On October 4, 2023, we purchased 1,050 used ASIC miners from Luxor Technology Corporation (“Luxor”) for $488,775, and simultaneously entered into a Co-Location Services Agreement to host the miners at a hosting facility owned by Soluna SW, LLC (“Soluna”) in Murray, Kentucky. We subsequently added 45 ASIC miners in May 2024 that we purchased from Soluna for $10,000. The hosting agreement with Soluna had a term of 18 months, and provided that we are obligated to reimburse Soluna for the actual cost of the electricity used by our machines and pay a hosting fee equal to 50% of the net profit generated by the machines each month. The hosting fee is payable in bitcoin. The hosting facility has an electricity cost of $0.025 per kWh and guarantees uptime of 83% per week. On April 8, 2025, Soluna SW, LLC, elected not to renew its hosting agreement with us on the existing terms; consequently, on April 30, 2025, we terminated our engagement with Soluna SW, LLC. We sold 850 of the ASIC miners hosted by Soluna, SW LLC to a third party for $120,000 and plan to move the remaining 245 to the Silverton, Texas location.
Silverton, Texas Operations
In November 2024, we acquired 3,000 S-19j Pro computers from Luxor Technology Corporation for $1,035,000. All 3,000 computers were shipped to a hosting site in Silverton, Texas, for warranty testing; 2,900 remained in Silverton, Texas and 100 were shipped to our Trinidad data center upon the completion of testing. As of the date of this prospectus, approximately 2,712 of the acquired miners were operating, while approximately 180 did not satisfy the warranty and will be replaced with comparable miners.
Mining-As-A-Service (MaaS) and Bitcoin Treasury Consulting
Through our MaaS business model, we deliver end-to-end mining infrastructure and management to companies seeking direct bitcoin mining exposure without the operational burden. We plan to offer MaaS to companies that own bitcoin and wish to add bitcoin denominated revenue, in addition to bitcoin, as a core treasury holding. Our MaaS strategy includes (i) hardware and infrastructure: this involves the sale or lease of mining machines, as well as full deployment support; (ii) operational management: this involves full fleet oversight, uptime maximization, and mining pool payout optimization; and (iii) financial and compliance support: this involves providing GAAP-aligned reporting tools and treasury integration guidance.
Our bitcoin treasury consulting service helps companies strategically integrate bitcoin into their corporate treasury operations. This service provides guidance on how to acquire, store, manage, and account for bitcoin, as well as risk management and hedging strategies.
The following transactions provide insights into our MaaS and bitcoin treasury consulting services:
Machine Lease Agreement
On May 16, 2025, we entered into a Machine Lease Agreement (the “MLA”) with KULR Technology Group, Inc. (“KULR”) relating to the lease of 3,000 of our ASIC miners. Under the MLA, we leased 3,000 ASIC miners to KULR for the period from May 16, 2025 to December 31, 2025 for total lease payments of $3,200,000, with $1,600,000 payable at the inception of the contract and the remainder payable through five monthly payments of $320,000 each. The first monthly payment is due July 15, 2025, and other four payments are due on the 15th day of the next four calendar months. During the lease term, all bitcoin produced by the machines is payable to KULR, provided that if KULR fails to pay any monthly lease payment by the 20th day of the calendar month, we have the right to redirect bitcoin production from the miners to our wallet account until the lease payment has been satisfied, by valuing the bitcoin produced each day at the price of bitcoin at midnight Universal Time Coordinated (UTC) on that day. Under the MLA, we are responsible for any casualty loss of the miners, for insuring the miners against loss, for any repair or maintenance costs of the miners, for any hosting fees or electricity costs of the miners, and for any taxes assessed against the miners, including ad valorem property taxes. KULR is responsible for any mining pool fees charged by the mining pool in which the miners participate. We provided a down-time guarantee in the MLA, under which we are obligated to compensate KULR to the extent the operational down-time on any day exceeds one percent. The compensation payable by us is equal to the bitcoin that would have otherwise been mined by KULR on that day to the extent the down-time exceeds one percent, valued at the price of bitcoin at midnight UTC time on that day, less any rebates or credits received from the hosting firm of the miners that are passed through to KULR.
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Consulting and Services Agreement
We also executed a Consulting and Services Agreement (the “Consulting Agreement”) with KULR on May 16, 2025. Under the Consulting Agreement, we agreed to provide a variety of services to KULR relating to both the miners that are subject to the MLA and with regard to the bitcoin mining in general. In addition, we agreed to provide the following treasury management services to KULR under the Consulting Agreement: advice on security and custody solutions; regulatory and compliance expertise based on our experience, including GAAP revenue guidance and disclosure obligations; risk management and hedging strategies; techniques and strategies to maximize bitcoin exposure as a public company; customized treasury solutions; and proactive volatility management. KULR agreed to pay us $800,000 as compensation under the Consulting Agreement, of which $400,000 was payable at execution of the Consulting Agreement and the remaining $400,000 payable in five monthly payments of $80,000 each beginning on July 15, 2025, and continuing on the 15th day of the next four calendar months. The term of the Consulting Agreement is from May 16, 2025 to May 15, 2026.
Synthetic Bitcoin Mining
Synthetic bitcoin mining is a model that allows participants to gain exposure to bitcoin mining rewards without operating physical mining hardware. Participants purchase a miner’s hashrate via a contract where they make a one time payment (in either fiat currency or bitcoin) and receive daily bitcoin rewards for the duration of the contract. Essentially, participants or buyers aim to purchase hashrate at a discount to the expected future bitcoin payout.
We adopt a dual approach to synthetic bitcoin mining: (i) we act as a buyer when public miners pre-sell at discounted rates, and (ii) we pre-sell our own future hashrate to buyers and use the proceeds to fund new mining equipment without large upfront costs.
In deploying this strategy, we entered into a Hashrate Purchase Agreement with a third party on April 22, 2025, wherein they presold the hashrate from their miners to us for approximately $104,670. The contract is for one month and we are expecting to receive between $110,000 to $115,000 worth of bitcoin throughout the duration of the contract. We expect to continue this arrangement with the third party on a month-to-month basis; however, there can be no assurance that we will continue this arrangement.
Revenue Sources
Our revenue will consist primarily of bitcoin generated from our self-mining operations, and secondarily from mining equipment sales, MaaS, hashrate trading, and bitcoin treasury consulting. We also may generate revenue from hosting fees to the extent we enter into hosting contracts with third party miners.
| · | Digital asset mining income. Mining revenue consists of two parts: (1) the block reward (current bitcoin block reward is 3.125 bitcoin) paid by the network to the miner for successfully mining a block, and (2) the transaction fees paid by the users to the miner for successfully mining a block. When a miner successfully finds a block, it is awarded all of the transaction fees in that block and the reward from the network. | |
| · | Equipment sales. Equipment sales to customers and related parties is derived from our ability to leverage our ability to secure equipment at favorable prices, which is then sold to hosting customers and unrelated third parties. | |
| · | MaaS. Revenue is generated from our ability to provide mining solutions to companies seeking direct bitcoin mining exposure without the operational burden. | |
| · | Synthetic bitcoin mining. We adopt a dual approach: (i) we act as a buyer when public miners pre-sell at discounted rates, and (ii) we pre-sell our future hashrate to buyers. | |
| · | Bitcoin treasury consulting. In exchange for a consulting fee, we provide advisory services to institutional bitcoin holders; by addressing custody, compliance, and hedging challenges. | |
| · | Hosting revenue. Hosting revenue from customers and related parties is based on consumption-based contracts with our customers and related parties. Our typical agreement provides for full reimbursement of the customer’s share of electricity costs of the hosting facility, and a percentage of bitcoin generated by the customer’s activities. The percentage is negotiable on a case-by-case basis but is expected to average 25% of revenues. In addition, we may earn minor services revenue from equipment repairs and handling shipping logistics. |
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We consider these all to be part of the same line of business. We do not have any fixed goals regarding the percentage of our data centers that we use for hosting third party miners versus the percentage that we use for self-mining. For mining or hosting equipment that we purchase, we also do not have any fixed goals regarding whether we utilize the equipment for our own account, sell it to a customer or other third party, or contribute it to a joint venture. We let market conditions and overall profitability analysis guide our decisions. When we host, we look for opportunities to profitably sell miners to the hosting client in a buy/host transaction. In some instances, we may resell data centers and electrical equipment if we are offered an attractive price and believe that we can replace it at a lower price and by the time we may need it for our internal operations. These decisions are dynamic and based on the overall market for all of the above.
Our decision to utilize the data center space for hosting versus self-mining will depend on the relative profitability of each segment at the time and whether we have the capital to invest in new miners for mining for our own account at the time. In recent years, the prices of miners have fluctuated widely due to supply and demand factors, and mining for our own account is less profitable when the price of miners is high due to the capital costs needed to acquire the miners. In addition, the margins from mining have also fluctuated widely in recent years due to wide fluctuations in the price of digital assets, fluctuations in the difficulty index, a recent halving event, and the electricity prices needed to mine digital assets.
We do not generally accept digital assets as payment for goods and services. However, we have agreed to accept digital assets as payment in some situations, and expect to enter into similar additional arrangements in the future. To the extent we agree to accept digital assets as payment, we intend to only accept bitcoin. We expect that most of our hosting contracts will provide that we receive a percentage of bitcoin mined by our hosting customers as partial payment for our hosting services, and the right to apply any bitcoin that is mined by our hosting client to overdue amounts under the hosting agreement.
We do not have a set policy in regard to how long we hold digital assets that we receive as payment, although to date our practice has been to immediately sell digital assets as needed to pay operating expenses or for capital expenditures. However, we expect to invest all of the net proceeds of this offering in bitcoin.
In the long term, we expect to either sell bitcoin or leverage our bitcoin holdings to expand our capacity to mine bitcoin by buying new miners and buying and installing new hosting equipment or exchanging or leveraging some of the bitcoin in order to gain exposure to other cryptocurrencies or for working capital and other general corporate purposes. The amounts and timing of these expenditures will depend on numerous factors, including the development of our current and future business initiatives.
Safekeeping of Digital Assets
Digital assets are each accessible and controllable only by the possessor of both the unique public key and private key associated with the digital asset, wherein the public and private keys are held in an offline or online digital wallet. To the extent a private key is lost, destroyed or otherwise compromised and no backup of the private key is available, we will be unable to access the applicable digital asset associated with that private key and the private key cannot be restored. As a result, any digital assets associated with such key could be irretrievably lost. Any loss of private keys relating to digital wallets used to store the applicable digital assets could have a material adverse effect on our business, financial condition, and results of operations. Digital asset transactions are also generally irreversible, such that if our public and private keys are stolen and the digital assets transferred without our consent, we would likely have no recourse to remedy the situation.
We do not currently hold any digital assets in an online wallet account. To reduce our risk, we hold substantially all of our digital assets at BitGo and a de minimis amount at Genesis, which we use as a backup to BitGo. We utilize several layers of fraud prevention techniques offered by BitGo which we believe makes it unlikely that our account credentials as BitGo could be compromised.
We have also onboarded Fidelity Digital Assets, with the intention of storing long-term digital assets held for investment and as collateral, with this custodian.
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Our Customers
Bitcoin is a global store of value and a medium of exchange used by people across the world as an asset and to conduct daily transactions. Mining bitcoin supports the global bitcoin blockchain and the millions of people that depend on it for economic security and other benefits. Strictly speaking, there is no customer market for mining bitcoin but we consider our mining pool operator to be our customer because it compensates us for providing processing power to the mining pool. We may enter into contracts with third party miners to use our hosting capacity, in which event the third-party miners are our customers. However, we decided not to renew all of our hosting clients in our fiscal fourth quarter of the fiscal year ended August 31, 2024, and are not actively seeking other hosting clients, as we believe it is more profitable to utilize our hosting capacity for our own miners.
We expect that customers of our MaaS will include companies seeking income streams from mining without managing hardware, thereby benefiting from our mining infrastructure. For our synthetic bitcoin mining service, we anticipate that clients will include other bitcoin mining companies or bitcoin traders looking for liquid, flexible access to mining-like returns through contract-based models. We expect that our bitcoin treasury consulting clients will be primarily businesses exploring strategic bitcoin allocation for hedging, portfolio diversification, or long-term growth.
Competition
We operate in a highly competitive industry with a growing number and scale of participants. Our bitcoin self-mining operations compete with mining operations throughout the world to complete new blocks on the blockchain and earn the reward in the form of bitcoin. We compete on the basis of our total number of miners, the degree of mining difficulty, the efficiency of our mining operations, the competitiveness of our energy costs, and the fiat value of the mining reward.
Miners of bitcoin historically ranged from individual enthusiasts and entrepreneurs to large public company mining operations. The vast majority of mining is now undertaken and further trending towards large-scale, industrial mining facilities. A mining pool is created when mining participants pool the processing power of their miners over a network and mine transactions together. Rewards are then distributed proportionately to the pool participants based on the work/hash power contributed to solving a block. Our self-mining operations also compete with non-digital asset operations for access to suitable real estate and access to affordable and dependable electric power. In addition to competing to solve new blocks, we compete to acquire new miners, to raise capital, to obtain access to facilities for the location of mining operations, and to develop or acquire new technologies. For our MaaS and synthetic bitcoin mining service, we will compete with other mining companies with established bitcoin mining infrastructure, and which offer contract-based mining exposure. In the bitcoin treasury consulting space, we expect our competitors to include a range of financial advisory firms, accounting specialists, and crypto-native consultancies that provide guidance for digital asset management.
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A number of public companies (traded in the United States, Canada, and internationally), such as the following, may be considered competitors to us:
| · | Applied Digital Corp.; | |
| · | Argo Blockchain PLC; | |
| · | Bitdeer Technologies Group; | |
| · | Bit Digital, Inc.; | |
| · | Bitfarms Technologies Ltd. (formerly Blockchain Mining Ltd); | |
| · | Cipher Mining Inc.; | |
| · | Cleanspark, Inc.; | |
| · | Core Scientific, Inc.; | |
| · | Greenidge Generation Holding Inc.; | |
| · | Hive Blockchain Technologies Inc.; | |
| · | Hut 8 Corp. (including the merged operations of U.S. Bitcoin Corp.); | |
| · | Iris Energy Ltd.; | |
| · | Marathon Digital Holdings, Inc.; | |
| · | Mawson Infrastructure Group Inc.; | |
| · | Riot Platforms, Inc.; | |
| · | Stronghold Digital Mining, Inc.; and | |
| · | TeraWulf Inc. |
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The bitcoin mining industry is a highly competitive and evolving industry and new competitors and/or emerging technologies could enter the market and affect our competitiveness in the future. Other market participants in the bitcoin mining industry include investors and speculators, retail users transacting in digital assets, and service companies that provide a variety of services, including buying, selling, payment processing, and storing of bitcoin. To continue to grow we will require sufficient additional capital to build additional facilities and to acquire new mining equipment and related infrastructure. Subject to raising additional capital, our bitcoin initiatives will compete with other industry participants that focus on investing in and securing the blockchains of bitcoin and other digital assets.
Regulation
We operate within a complex and rapidly evolving regulatory environment and are subject to a wide range of laws and regulations enacted by U.S. federal, state, and local governments, governmental agencies, and regulatory authorities, including the SEC, the Commodity Futures Trading Commission (the “CFTC”), the Federal Trade Commission (the “FTC”), and the Financial Crimes Enforcement network of the U.S. Department of Treasury (“FinCEN”), as well as similar agencies in other countries. Other regulatory bodies have demonstrated an interest in regulating or investigating companies engaged in blockchain or cryptocurrency businesses.
Presently, we do not believe any U.S. or state regulatory body has taken any action or position adverse to our main cryptocurrency, bitcoin, with respect to its production, sale, and use as a medium of exchange; however, future changes to existing regulations or entirely new regulations may affect our business in ways it is not presently possible for us to predict with any reasonable degree of reliability.
Regulations may substantially change in the future and it is presently not possible to know how regulations will apply to our business, or when they may be effective. While we anticipate that bitcoin mining will be an area of focus for regulators in 2025 and beyond, we cannot predict with certainty the impact regulations may have on our business or operations. As the regulatory and legal environment evolves, we may become subject to new laws and regulations by the SEC and other agencies, which may affect our mining operations and other activities. Additionally, state and local regulation of bitcoin mining is important with respect to where we conduct our mining operations. A substantial portion of our miners are located in Kentucky and Texas, which have generally favorable regulatory environments for bitcoin miners as compared to other states. However, we also have a data center and miners located in Trinidad, which has an uncertain regulatory environment. However, we may also become subject to additional regulatory requirements on a state and local level in the geographies in which we operate, and as we strategically expand our operations into new areas.
For additional discussion regarding our belief about the potential risks existing and future regulation pose to our business, see the Section entitled “Risk Factors” herein.
Environmental Issues
No significant pollution or other types of hazardous emission result from our direct operations and it is not anticipated that our operations will be materially affected by federal, state, or local provisions concerning environmental controls. Our costs of complying with environmental, health, and safety requirements have not historically been material.
Some local, state, and federal policymakers have expressed concerns over the high energy consumption of data centers, including bitcoin miners, and the ancillary effects on the environment from that energy consumption. Many media reports focus exclusively on the energy requirements of bitcoin mining and cite it as an environmental concern. We carefully monitor existing and pending climate change legislation, regulation, and international treaties or accords for any material effect on our business or markets that we serve, our operational results, our capital expenditures, or our financial position.
We purchase energy from the electrical grid, and as a result our energy mix will vary from period to period based on a variety of factors including weather, temperature, demand, and how the grid operator ultimately procures and utilizes energy resources. We do not currently have sufficient data to quantify the current energy mix at each of our sites, and any such data we receive is subject to the timing and details of the energy source mix information disclosed by our energy providers, including portions of the energy mix which is not disclosed by the energy providers.
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Hosting Equipment
Our focus is to build data centers using immersion hosting containers. In 2021 and 2022, we purchased a total of ten immersion hosting containers from Submer for an average of approximately $269,000 each. We have deployed or sold the immersion containers as follows:
| · | We installed two of the immersion containers at our initial co-location facility in Trinidad. |
| · | In August 2022, we sold two immersion containers to a third party in Trinidad for $960,000, of which $910,000 was payable over 25 months with interest at 7.5% per annum. In July 2024, we repossessed the immersion containers. We are currently evaluating different TSTT locations at which to deploy these containers, and expect to reinstall them in the first calendar quarter of 2025. |
| · | In October 2022, we sold four immersion containers to the ROC Digital joint venture for $1,200,000, and made an equity contribution of one immersion container. Our equity contribution also included six GE Protec 1500 KVA transformers valued at $125,000 each. |
| · | Under our agreement with ROC Digital, we installed one container at the joint venture’s hosting site, which we are using for self- mining. |
Although we originally bought our immersion containers with the intention of installing and operating them for proprietary mining or hosting third party miners, we elected to sell or contribute seven of the containers because we were offered an attractive price for them and because we did not have a suitable location to install them in the short-term. We have also shifted our focus to proprietary mining over hosting third-party miners because we believe that proprietary miner is more profitable use of our data center capacity. Following the repossession of two containers sold on credit, we currently own five immersion containers. While we do not have any agreements to purchase additional immersion containers from Submer, we believe that additional immersion containers are available for purchase from Submer or other vendors as we need them for additional hosting facilities.
Mining Equipment
Digital asset mining is dependent on specialized digital asset mining hardware utilizing application-specific integrated circuit (“ASIC”) chips to solve blocks on blockchains using the 256-bit secure hashing algorithm. Almost all of these miners are produced outside of the United States, mostly in China and Southeast Asia, by a few manufacturers, the largest of which is Bitmain Technologies, Ltd (“Bitmain”). Our principal supplier for miners has been Bitmain miners purchased through Luxor Technologies, LLC. Our mining business is highly dependent upon digital asset mining equipment suppliers such as Bitmain providing an adequate supply of new generation digital asset mining machines at economical prices to enable profitable mining by us and by third-party customers intending to purchase our hosting and other solutions.
We do not have any agreements for the acquisition of miners. To date, we have purchased miners opportunistically as they been available for sale in the “spot” market. Based on historical market activity, as the market value of digital assets increases, the demand for the newest, most efficient miners will also increase, leading to scarcity in the supply, and thereby a resulting increase in the price of miners. If we need to purchase miners in larger quantities in order to fill data center capacity, we have to enter into formal agreements with Bitmain or other suppliers. These agreements, like those of other miner manufacturers, generally require significant refundable deposits payable months in advance of delivery and additional advance payments in monthly installments thereafter. These agreements also contain other terms and conditions favorable to the manufacturer.
As of the date of this prospectus, we own a total of 3,875 miners. For our current inventory of miners, we paid an average of approximately $550 per machine, or $5.58 per terahash. Our current fleet of working miners has a j/TH efficiency of 31.8. We own a small number of less efficient machines, which are primarily in storage. We also own a small number of S-21's, with an efficiency of 18 j/TH. We hope and expect our machines in the future to be newer or current generation, with efficiency of 17-21 j/TH. We hope to slowly increase our fleet efficiency throughout calendar year 2025.
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Intellectual Property
We do not currently own any patents, trademarks, service marks or copyrights in connection with our existing and planned bitcoin mining-related operations.
Employees and Independent Contractors
As of the date of this prospectus, we had one employee and six independent contractors, which includes our officers who are performing services without a contract or compensation until we raise sufficient additional capital. We are accruing compensation with such officers based upon verbal agreements and will not be paid out of the proceeds of this offering, but may be paid from funds generated by the sale or leverage of our bitcoin assets to be acquired with the proceeds of this offering.
We have no collective bargaining agreements with our employees, and believe all independent contractor and employment agreements relationships are satisfactory. We hire independent contractors on an as-needed basis, and we may retain additional employees and independent contractors during the next 12 months, including additional executive management personnel with substantial experience in development business.
Legal Proceedings
From time to time, we may be involved in various disputes and litigation matters that arise in the ordinary course of business. We are not currently engaged in any material legal proceedings.
Corporate Information
A predecessor to us was incorporated in the state of Nevada on August 16, 1995 as Interactive Lighting Showrooms, Inc., and redomiciled in the State of Delaware on April 6, 2020.
On July 16, 2021, Jonathan Bates, Raymond Mow, Michael Maloney and Seth Bayles were appointed to our board of directors, and Jonathan Bates, Raymond Mow, Seth Bayles and Ryan Ramnath were appointed as officers. At the same time, such persons or their affiliates acquired approximately 62% of our issued and outstanding shares at the time in a private placement. Erik S. Nelson was previously the only member of the board and remained a director and our Chief Executive Officer. On May 26, 2022, our board of directors appointed Jonathan Bates as our Chief Executive Officer and Erik Nelson as our President. The appointment of certain of the new officers and directors was done in connection with our entry into the business of creating hosting centers for bitcoin mining computers primarily utilizing immersion cooling technology, as well as mining the bitcoin digital currency for our own account. Prior to such change of control, we were a shell company.
We do not own any real property. Our principal executive office is located at 10845 Griffith Peak Dr., #2, Las Vegas, Nevada 89135 in an office provided by our chief executive officer free of charge. Our telephone number is (404) 816-8240. Our corporate website address is bitminetech.io. The information contained on or accessible through our website is not a part of this prospectus, and the inclusion of our website address in this prospectus is an inactive textual reference only.
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MANAGEMENT
Our directors and executive officers and their ages as of the date of this prospectus are listed in the following table:
| Name | Age | Title | ||
| Jonathan Bates | 54 | Chairman of the Board and Chief Executive Officer | ||
| Erik S. Nelson | 57 | President and Director | ||
| Raymond Mow | 58 | Chief Financial Officer and Director | ||
| Seth Bayles | 44 | Corporate Secretary and Director | ||
| Michael Maloney | 39 | Director | ||
| Ryan Ramnath | 31 | Chief Operating Officer | ||
| Lori Love | 43 | Director | ||
| John Kelly | 56 | Director |
Directors and Executive Officers
Jonathan Bates has served as our Chairman of the Board since July 2021 and our Chief Executive Officer since May 2022. With more than 25 years of financial industry experience, Mr. Bates has spent his career analyzing the interrelations of a vast number of different markets. He has developed a deep understanding of institutional trading environments and multi-asset portfolios as a critical resource to the operations he oversees. In addition to his role as our Chairman and Chief Executive Officer, Mr. Bates is also the Chief Investment Officer and General Partner of Progression Asset Management (an affiliate of Integrated Advisors Network, LLC) since January 2019, and its subsidiary, Innovative Digital Investors, LLC (“Innovative Digital”), which is the general partner of Innovative Digital Investors Emerging Technology, L.P., a private investment fund. At Innovative Digital, Bates has helped drive several private companies from early stages to public markets in both the U.S. and Canada. From November 2017 to January 2019, Mr. Bates served as a Managing Partner of Boustead Capital Partners, LLC, an SEC registered broker dealer. Mr. Bates has twice served as a Managing Director of J.P. Morgan Securities, LLC, from 2009 to July 2012 and from July 2015 to November 2017. In between his stints at J.P. Morgan, from July 2012 to July 2015, Mr. Bates served as a Director at Barclays Wealth U.S. Over the course of his career, Mr. Bates has, at different times, held the Series 7, 9, 10 and 65 licenses. At Innovative Digital, Mr. Bates has helped drive several private companies from early stages to public markets in both the U.S. and Canada. We believe that Mr. Bates is highly qualified to serve on our board due to his knowledge of and experience with technology startups, which should be instrumental as we grow our business and pursues a listing of our common stock on a national securities exchange. Mr. Bates graduated from the University of Texas at Austin in 1992 with a degree in Business Finance.
Erik S. Nelson has served as our President since May 2022 and a Director since August 2019. Mr. Nelson also served as our Chief Executive Officer from July 2020 to May 2022. Mr. Nelson was previously a member of the Board of Nocera, Inc. from 2011 to 2022, and was previously its President from 2017 to 2019. Mr. Nelson was the sole officer (CEO, President, and CFO) and sole Director of Vinings Holdings, Inc. from October 2019 to February 2021. Mr. Nelson is also the President of Coral Capital Advisors, LLC, an advisory services firm founded in 1995 that provides services to privately held and publicly traded companies. Since September 2012, Mr. Nelson has been President of Mountain Share Transfer, LLC, an SEC registered stock transfer agent. Mr. Nelson is a graduate of the University of Colorado (1989) with a Bachelor of Science in Business Administration degree, with an emphasis in Finance. We believe that Mr. Nelson is highly qualified to serve on our board due to his extensive experience with the public markets and companies.
Raymond Mow has served as our Chief Financial Officer and a director since July 2021. With more than 30 years of financial industry experience, Mr. Mow has spent his career managing and analyzing fixed income mutual funds and institutional portfolios. He has developed a broad knowledge of various asset classes as well as interpreting and forecasting domestic and international economic measures. In addition to his role as our Chief Financial Officer, Mr. Mow also serves as Chief Investment Officer and Chief Compliance Officer of Progression Asset Management, as position he has held since January 2020, and Portfolio Manager of its subsidiary, Innovative Digital Investors, LLC, which is the general partner of Innovative Digital Investors Emerging Technology L.P., a private investment fund specializing in equity investments in cutting edge technology companies. From March 2018 to March 2019, Mr. Mow held the position of Managing Director of Fixed Income at First Foundation Advisers, overseeing a $2.3 billion portfolio. As a member of the investment policy committee, Mr. Mow collaborated on asset allocation policy and portfolio construction. From 1995 to 2018, Mr. Mow was Senior Portfolio Manager at Highmark Capital Management, overseeing $2 billion in fixed income assets. Mr. Mow currently holds a Series 65 license. Mr. Mow graduated in 1989 from University of Hawaii, Manoa with a BBA-Finance degree. We believe that Mr. Mow is highly qualified to serve on our board due to his extensive experience with financial analysis and reporting.
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Michael Maloney has served as a director since July 2021. Mr. Maloney is a digital currency and blockchain technology expert who has been active in the space since 2011. He serves as an advisor to several industry leading companies, and is regularly featured as an industry commentator and educator at public events.
Mr. Maloney most recently served as the CFO for Coinmint, LLC from July 2019 to October 2021. At Coinmint, he developed partnerships with several large public companies and high-net worth private institutions that made Coinmint one of the largest cryptocurrency mining operations in North America. Under his tenure, Coinmint’s hashrate increased from 1.3EH to over 7EH (~5% of the bitcoin network), all from increased co-hosting contracts. He was able to grow revenues of Coinmint by over 600% over this same period. Since August 2019, Mr. Maloney has also served as an Adjunct Professor at Fordham Law School and Fordham Gabelli Business, teaching "Blockchain, Virtual Currencies, and Tokens: Business and Legal Issues." Mr. Maloney helps coordinate the Fordham Law Blockchain Regulatory Symposium which draws U.S. and international regulators and financial experts together to discuss industry trends.
From November 2017 to September 2018, Mr. Maloney co-founded Galaxy Digital, the first merchant bank to serve the blockchain space, as the Managing Director. In this position, he directed both the Digital Strategy and Transaction Advisory practices to assist clients in the build and financing of blockchain technologies. Mr. Maloney also supported the development of trade and compliance technologies and provided technical critiques for the venture group.
Mr. Maloney co-founded Themys, a blockchain insurance and risk management protocol, in October 2018. There he wrote and patented the first Blockchain Derived Hashrate Bond developed to assist cryptocurrency miners finance ASIC purchases. He left in July 2019 to join Coinmint. Mr. Maloney was a founding member of Ernst & Young’s (EY) Distributed Ledger Technology group, and led global blockchain development for the firm. From June 2013 to September 2017, he assisted in the development of numerous blockchain applications for clients across a variety of industries, including: digital goods and games trading, supply chain management, anti-money laundering and KYC regulatory compliance, and language processing and machine learning marketplaces.
Since September 2016, Mr. Maloney has also served as CTO for a blockchain based non-profit organization, eduDAO. eduDAO currently assists non-profits in exploring blockchain and assessing the viability of decentralized autonomous organizations (“DAOs”) for funding needs. Mr. Maloney has a B.A. degree from Fordham University.
We believe that Mr. Maloney is highly qualified to serve on our board due to his extensive experience in the blockchain industry and bitcoin mining operations.
Seth Bayles has served as our Corporate Secretary and a director since July 2021. Mr. Bayles is a Corporate Attorney with over 15 years of experience practicing in the areas of entertainment, finance, technology, and commercial contracts. He has negotiated and drafted complex commercial agreements including multimedia, vendor, union, talent, channel, and technology-related agreements. Since 2017, he has served as the general counsel of Hospitality International Group, Inc. From 2016 to 2021, he served as general counsel and chief compliance officer of Credit Key, Inc. From 2015 to 2016, he served as director, legal affairs and business development, with ZestFinance, Inc. Prior to joining the corporate world, he worked as an associate at Weil, Gotshal & Manges, LLC in its Washington, DC office, and King & Spalding, LLP in its Washington, DC’s office. He has his B.A. in Economics and History from Brandeis University, a J.D. from the Emory University School of Law, and an L.L.M. from the Georgetown University Law Center. We believe that Mr. Bayles is highly qualified to serve on our board due to his extensive experience as a corporate attorney and in regulatory affairs.
Lori Love has served as a director since August 2023. Lori Love is a licensed CPA and an experienced finance professional with over 20 years of experience in accounting, finance, and risk management, both in public accounting and in the private sector. Her experience includes “C” level positions in cryptocurrency, energy, healthcare technology, financial services, and consulting services. From June 2022 to the present, Ms. Love has served as a Senior Manager for Eide Bailly’s outsourced managed services group. From October 2019 to December 2021, Ms. Love served as chief financial officer of CleanSpark, Inc., a NASDAQ listed company, where she was responsible for financial strategy, SEC financial reporting, and internal controls. From July 2015 to September 2019, Ms. Love was self-employed as a consultant where she provided out-sourced accounting services to various companies, including acting as chief financial officer for P2K Labs, LLC. Prior to 2015, Ms. Love served in the role of Senior Vice President of Finance at Provident Trust Group for over two years and as Vice President of Finance and Operations at WorldDoc, Inc. where she also served as a director. Prior to her work in the private sector, Ms. Love was an auditor with RSM McGladrey, where she focused primarily on financial services engagements. Ms. Love obtained her Bachelor of Business Administration (BBA) in Accounting from University of Nevada, Las Vegas and carries the CPA designation. We believe that Ms. Love is highly qualified to serve on our board due to her extensive accounting and financial experience with both privately held and publicly traded companies.
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John Kelly has served as a director since January 2024. John Kelly has started numerous successful businesses in heavy construction, site development, real estate development, car dealership construction., and bitcoin mining site development. He has helped develop over 100 car dealerships, has owned and constructed over 3 million square feet of industrial buildings, and has overseen the construction of over 10,000 individual housing units. His clients have included Amazon, Siemens, RK Centers, Group1 Automotive, and Eversource. He is currently President or Principal of three separate companies, including Rykor Energy Solutions. Rykor Energy Solutions produces a proprietary immersion datacenter primarily used for bitcoin mining. Mr. Kelly is a principal of ROC Digital Mining Manager, LLC, which manages ROC Digital Mining I, LLC, hosting and mining enterprise in which we are a major investor. Mr. Kelly is very qualified to serve on our board given his deep understanding of the construction and engineering which goes into the development and maintenance of a bitcoin mining site. Furthermore, he designed and developed his own immersion datacenter product, which provides valuable insight to our existing operations. Mr. Kelly holds numerous contractor licenses related to industrial, commercial, and residential construction. Mr. Kelly graduated from Boston College in 1991 with a degree in Political Science.
Executive Officers who are not Directors
Ryan Ramnath has served as our Chief Operating Officer since July 2021. Ryan Ramnath currently holds the role as Chief Executive Officer (CEO) of Bitflair Mining Corp. (“Bitflair”), a Canadian owned Trinidad-operated liquid cooled bitcoin mine. Mr. Ramnath co-founded Bitflair in 2017 and was instrumental in navigating the local Trinidad environment to successfully launch the first liquid-cooled bitcoin mine in the Caribbean. Since 2014, Mr. Ramnath has worked in various engineering capacities in the upstream and downstream energy sectors. Mr. Ramnath worked for the National Gas Company of Trinidad and Tobago from June 2014 to August 2014 as reliability engineer intern. Mr. Ramnath worked for Imperial Oil Company as a pipeline engineer from September 2015 to April 2016. Mr. Ramnath worked for BHP Billiton has a drilling engineering intern from June 2016 to August 2016. Mr. Ramnath has worked for Royal Dutch Shell since January 2018 to the present, first as a wellsite operations engineer from until July 2019, and thereafter as drilling engineer. As the CEO of Bitflair Mining Corp, Mr. Ramnath has developed special skills in the design, engineering, and implementation of solutions in the liquid-cooled hosting business. Mr. Ramnath was appointed as our Chief Operating Officer in 2021 due to his comprehensive understanding of the liquid-cooled bitcoin mining infrastructure and ability to build and repair any mechanical issues which may arise. Mr. Ramnath graduated from the University of Toronto with a Mechanical Engineering – High 5 Distinction.
Family Relationships
There are no family relationships between or among any of the current directors, executive officers, or persons nominated or charged to become directors or executive officers. There are no family relationships among our officers and directors and those of our subsidiaries and affiliated companies.
Board Composition
Our business and affairs are organized under the direction of our board of directors, which currently consists of seven members. Our amended and restated bylaws provide that the authorized number of directors may be changed only by resolution of the board of directors. Our directors hold office until the earlier of their death, resignation, removal or disqualification, or until their successors have been elected and qualified. Our board of directors does not have a formal policy on whether the roles of Chief Executive Officer and Chairman of our board of directors should be separate. The primary responsibilities of our board of directors are to provide oversight, strategic guidance, counselling, and direction to our management. Our board of directors meets on an as-needed basis.
Conflicts of Interest
Certain of our officers and directors are engaged in other businesses, either individually or through partnerships and corporations in which they have an interest, hold an office, or serve on a board of directors. Currently, none of our officers are required to devote 100% of their time and attention to our affairs. As a result, certain conflicts of interest may arise between the us and our officers and directors. We will attempt to resolve such conflicts of interest in our favor. Our officers and directors are accountable to us and our shareholders as fiduciaries, which require that such officers and directors exercise good faith and integrity in handling our affairs. A shareholder may be able to institute legal action on our behalf or on behalf of itself and other similarly situated shareholders to recover damages or for other relief in cases of the resolution of conflicts is in any manner prejudicial to us.
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Corporate Governance
We have a separate Audit Committee currently consisting of Jonathan Bates, Lori Love (independent director and a financial expert), and Michael Maloney (independent director). Prior to the completion of this offering, Mr. Bates will resign from his position as a member of the Audit Committee. The Audit Committee is responsible for oversight of the quality and integrity of our accounting, auditing, and reporting practices. More specifically, it assists the board of directors in fulfilling its oversight responsibilities relating to (i) the quality and integrity of our financial statements, reports and related information provided to stockholders, regulators, and others, (ii) our compliance with legal and regulatory requirements, (iii) the qualifications, independence, and performance of our independent registered public accounting firm, (iv) the internal control over financial reporting that management and the board have established, and (v) the audit, accounting, and financial reporting processes generally. The Audit Committee is also responsible for the review and approval of related-party transactions. The Audit Committee has the authority to obtain advice and assistance from, and receive appropriate funding from us for, outside legal, accounting or other advisors as it deems necessary to carry out its duties.
Our board has approved the formation of a nominating and corporate governance committee and a compensation committee, which will be effective upon consummation of this offering. The initial members of both committees will be Lori Love and Michael Maloney. The nominating and corporate governance committee is not expected to have a formal policy on board candidate qualifications. The nominating and corporate governance committee may consider those factors it deems appropriate in evaluating director nominees made either by the board or stockholders, including judgment, skill, strength of character, experience with businesses and organizations comparable in our size or scope, experience and skill relative to other board members, and specialized knowledge or experience. Depending upon the current needs of the board, certain factors may be weighed more or less heavily. In considering candidates for the board, the nominating and corporate governance committee will evaluate the entirety of each candidate’s credentials and does not have any specific minimum qualifications that must be met. The nominating and corporate governance committee will consider candidates from any reasonable source, including current board members, stockholders, professional search firms or other persons. The nominating and corporate governance committee will not evaluate candidates differently based on who has made the recommendation.
We have no formal policy regarding board diversity. Our priority in selection of board members is identification of members who will further the interests of our stockholders through his or her established record of professional accomplishment, the ability to contribute positively to the collaborative culture among board members, knowledge of our business and understanding of the competitive landscape. The board nomination process is designed to ensure that the board fulfills its responsibility to recommend candidates who are properly qualified to serve us for the benefit of all of its stockholders, consistent with the standards established by the board under our corporate governance principles. There have been no material changes to the procedures by which shareholders may recommend nominees to our board of directors.
We do not have a separate compensation committee. These functions are conducted by our board of directors acting as a whole.
There are no understandings between any director of our company or any other person pursuant to which any officer or director was or is to be selected as an officer or director.
Director Independence
Our current board consists of Erik Nelson, Jonathan Bates, Raymond Mow, Seth Bayles, and Michael Maloney. Our common stock is currently quoted on the OTCQX. Upon consummation of this offering, we expect our common stock will be listed on the NYSE American and we will follow the rules for director independence set by the NYSE American. Under the applicable NYSE American rules, a director will qualify as an “independent director” if the director meets the following qualifications:
| (a) | the director has not been employed by us during the previous three years (other than employment as an interim chief executive officer for a period of less than one year); | |
| (b) | neither the director nor an immediate family member has received more than $120,000 in compensation from us in any twelve consecutive months at any time in the prior three years, other than for (i) board or board committee services, (ii) for compensation paid to an immediate family member as an employee but not as an executive officer, (iii) compensation paid for services as an interim chief executive officer, or (iv) benefits under a tax-qualified retirement plan or non-discretionary compensation; |
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| (c) | the director is not an immediate family member of an individual who is or was at any time during the prior three years been employed as our chief executive officer; | |
| (d) | neither the director nor an immediate family member is a partner, controlling shareholder or executive officer of any organization to which we made or from which we received payments (other than those arising from investments in our securities or payments under non-discretionary charitable contribution matching programs) that exceed the greater of 5% of our consolidated gross revenues or $200,000, in any of the most recent three years; | |
| (e) | neither the director nor an immediate family member is employed as an executive officer of another entity where at any time during the most recent three fiscal years any of our executive officers serve on the compensation committee; | |
| (f) | neither the director nor an immediate family member is or was a partner of our outside auditor at any time in the past three years. |
At this time, we have determined that we have two independent directors: Michael Maloney and Lori Love.
Involvement in Certain Legal Proceedings
None of our directors, executive officers, significant employees, or control persons has been involved in any legal proceeding listed in Item 401(f) of Regulation S-K in the past ten years except as follows:
Mountain Share Transfer and Erik Nelson consented to an SEC Order in 2015 related to a failure to file an updated correct TA-1 Form and other administrative violations and disclosure matters of the Transfer Agent, Mountain Share Transfer (Administrative Proceeding file no. 3-16378, 34 Act Rel. no. 74226), pursuant to which Mountain Share Transfer and Erik Nelson were censured by the SEC and ordered to cease and desist orders against future violations of such administrative and disclosure rules. The SEC contended that Mountain Share Transfer (under Mr. Nelson’s control) filed a Form TA-1 reporting that Mr. Nelson had acquired Mountain Share Transfer and relocated it to Georgia five months after the acquisition and relocation, when Form TA-1 requires that such events be reported within 60 days of their occurrence, and that Mr. Nelson failed to disclose that he had been disciplined and barred by the National Association Securities Dealers, Inc. in 1995 as required by Form TA-1. The SEC further contended that Mountain Share filed a false and misleading Form TA-2, which incorrectly indicated that the foregoing Form TA-1 had been filed timely. In addition, to the issues with the above filings, the SEC further contended that Mountain Share failed to (i) follow record-keeping requirements by making and keeping current appointment and/or termination documentation or other contracts and documents concerning the transfer agent services that MST performed for securities issuers; (ii) maintain written procedures describing MST’s obligation to search for lost securityholders; (iii) establish and implement written procedures for the cancellation, storage, transportation, destruction and disposition of securities certificates, as well as provide in such procedures for the timely and complete reporting of any cancelled certificate that is lost, stolen, missing, or counterfeit; and (iv) comply with required procedures for the fingerprinting of all transfer agent employees.
Mountain Share Transfer was ordered to retain a consultant, not unacceptable to the SEC, to conduct a comprehensive review related to the making, keeping and filing of Forms TA-1 and TA-2 with the SEC, as well as its record keeping obligations, its obligation to establish and maintain written policies, and its fingerprinting requirements. Mountain Share Transfer was further ordered to submit a written report of the independent consultant to the SEC regarding such policies and procedures and to adopt the recommendations of the consultant for implementing changes thereto. Mr. Nelson was also obligated to pay the SEC a civil penalty fee of $10,000 related thereto. Mr. Nelson and Mountain Share Transfer believe that each has fully complied with all of their obligations under their agreement with the SEC.
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Code of Business Conduct and Ethics
We have adopted a written code of business conduct and ethics that applies to our directors, officers, and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. The code of business conduct and ethics is posted on our website at www.bitminetech.io.
Communication with the Board of Directors
Our stockholders and other interested parties may send written communications directly to the board or to specified individual directors, including the Chairman or any other non-management directors, by sending such communications to our corporate headquarters. Such communications will be reviewed by our outside legal counsel and, depending on the content, will be:
| · | forwarded to the addressees or distributed at the next scheduled board meeting; | |
| · | if they relate to financial or accounting matters, forwarded to the audit committee or distributed at the next scheduled audit committee meeting; | |
| · | if they relate to executive officer compensation matters, forwarded to the compensation committee, the full board or discussed at the next scheduled board meeting; | |
| · | if they relate to the recommendation of the nomination of an individual, forwarded to the nominating and corporate governance committee (once formed), the full board or discussed at the next scheduled board meeting; or | |
| · | if they relate to our operations, forwarded to the appropriate officers of our company, and the response or other handling of such communications reported to the board at the next scheduled board meeting. |
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EXECUTIVE AND DIRECTOR COMPENSATION
The following identifies the elements of compensation for fiscal years 2024 and 2023 with respect to our “named executive officers,” which term is defined by Item 402 of the SEC’s Regulation S-K to include (i) all individuals serving as our principal executive officer at any time during fiscal year 2024, (ii) our two most highly compensated executive officers other than the principal executive officer who were serving as executive officers at August 31, 2024 and whose total compensation (excluding nonqualified deferred compensation earnings) exceeded $100,000, and (iii) up to two additional individuals for whom disclosure would have been provided pursuant to the foregoing item (ii) but for the fact that the individual was not serving as an executive officer of us at August 31, 2024.
Based on our compensation for the fiscal year ended August 31, 2024, Jonathan Bates, Raymond Mow, and Erik Nelson constitute our only “named executive officers” pursuant to Item 402 of Regulation S-K.
Summary Compensation Table
| Fiscal | Stock | All Other | ||||||||||||||||
| Name and Principal Position | Year | Salary | Compensation | Compensation | Total | |||||||||||||
| Jonathan Bates (1) | 2024 | $ | – | $ | 622,120 | $ | – | $ | 622,120 | |||||||||
| Chief Executive Officer | 2023 | $ | – | $ | 622,120 | $ | – | $ | 622,120 | |||||||||
| Raymond Mow (2) | 2024 | $ | – | $ | 155,115 | $ | – | $ | 155,115 | |||||||||
| Chief Financial Officer | 2023 | $ | – | $ | 155,115 | $ | – | $ | 155,115 | |||||||||
| Erik Nelson (3) | 2024 | $ | – | $ | 63,871 | $ | – | $ | 63,871 | |||||||||
| President | 2023 | $ | – | $ | 63,871 | $ | – | $ | 63,971 | |||||||||
| (1) | Mr. Bates has served as our chief executive officer from May 2022 to the present. Mr. Bates has not received any cash compensation for his service. On August 31, 2022, Mr. Bates was awarded 150,000 Series A Preferred Shares, which vested on January 15, 2025. Each Preferred Share was valued at its liquidation preference of $10 per share for a total value of $1,500,000, and will be amortized to expense by us pro rata from the period from September 1, 2022 through January 15, 2025. | |
| (2) | Mr. Mow has served as our chief financial officer from July 16, 2021 to the present. Mr. Mow did not receive any cash compensation for his services for either the 2022 or 2023 fiscal years. On August 31, 2022, Mr. Mow was awarded 850,000 shares of common stock, which vested on January 15, 2025. These shares were valued at $0.44 for a total value of $374,000, and will be amortized to expense by us pro rata from the period from September 1, 2022 through January 15, 2025. | |
| (3) | Includes 350,000 shares of common stock issued to Mr. Nelson. The shares were valued at $154,000, or $0.44 per share, which is the price at which we sold shares for cash in a contemporaneous offering to third parties as described in the Summary Compensation Table above for Executive Officers. These shares vested on January 15, 2025 and are amortized to expense by us pro rata for the period from September 1, 2022 through January 15, 2025. None of the shares had vested as of August 31, 2024. |
(a) The assumptions used to value the stock compensation is as follows:
| · | Our common stock is very thinly traded and not indicative of the fair market value of the common stock; | |
| · | During the fiscal year ended August 31, 2022, we conducted a Unit Offering, each Unit consisting of one share of common stock and two warrants, and sold $5,152,500 worth of the Unit Offering at a price of $1.25 per Unit; | |
| · | We used the Unit Offering as an indication of the fair market value of our common stock and performed a Black Scholes analysis to determine the respective values of the common stock and warrants included in the Unit Offering. The Black Scholes analysis yield a value of $0.44 per share for the common stock. |
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We did not grant any stock options or stock appreciation rights to our named executive officers in the last fiscal year. We did not reprice any options or stock appreciation rights during the last fiscal year. We did not waive or modify any specified performance target, goal, or condition to payout with respect to any amount included in any incentive plan compensation included in the summary compensation table.
Compensation Philosophy
The board is responsible for creating and reviewing the compensation of our executive officers, as well as overseeing our compensation and benefit plans and policies and administering our equity incentive plans. We believe in providing a competitive total compensation package to executives through a combination of base salary, annual performance bonuses, and long-term equity awards. The executive compensation program is designed to achieve the following objectives:
| · | provide competitive compensation that will help attract, retain and reward qualified executives; | |
| · | align executives’ interests with our success by making a portion of the executive’s compensation dependent upon corporate performance; and | |
| · | align executives’ interests with the interests of stockholders by including long-term equity incentives. |
The board believes that our executive compensation program should include annual and long-term components, including cash and equity-based compensation, and should reward consistent performance that meets or exceeds expectations. The board evaluates both performance and compensation to make sure that the compensation provided to executives remains competitive relative to compensation paid by companies of similar size and stage of development operating in the payment processing industry and taking into account our relative performance and its own strategic objectives.
Commencing as of September 1, 2024, we began accruing compensation for Mr. Bates at $25,000 per month, and Mr. Mow and Mr. Nelson at $10,000 per month, respectively, pursuant to oral agreements with each officer, with the understanding with each officer that it would only be paid when we have sufficient additional capital. Such accrued compensation will not be paid from the proceeds of this offering, but may be paid from funds generated from the sale or leverage of our bitcoin assets to be acquired with the proceeds of this offering. Commencing on September 1, 2024, we also began accruing stock compensation for . Bates at 120,000 shares of common stock per quarter, and Mr. Mow and Mr. Nelson at 105,000 shares of common stock per quarter, respectively, for services rendered on the board and on board committees. As of February 28, 2025, we have accrued a total of $745,470 of officers’ compensation.
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Outstanding Equity Awards At Fiscal Year-End
The following table sets forth information regarding all outstanding equity awards held by the named executive officers at August 31, 2024. There are no outstanding option awards. Outstanding restricted stock grants have been approved by our Board.
| Stock Awards | ||||||||||||||||
| Name (a) | Number of Shares or Units of Stock
that have not Vested (#) (g) | Market Value of Shares of Units
of Stock that Have not Vested ($) (h) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have not Vested (#) (i) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or other Rights that have not Vested ($) (j) (1) | ||||||||||||
| Jonathan Bates (2) | – | – | 150,000 | $ | 1,500,000 | |||||||||||
| Raymond Mow (3) | – | – | 850,000 | $ | 374,000 | |||||||||||
| Erik Nelson (4) | – | – | 350,000 | $ | 154,000 | |||||||||||
| (1) | The value of the unearned awards of common stock is based upon the estimated value of our common stock on August 31, 2024, which was $0.44 per share, based on the value estimated for the common stock in a $1.25 Unit offering completed shortly before the issuance of the awards. The value of the unearned awards of Series A Preferred Stock is based upon the liquidation preference of $10 for each share of Series A Preferred Stock | |
| (2) | The restricted stock grant consisted of 150,000 shares of Series A Preferred Stock issued as of August 31, 2022, which vested on January 15, 2025. The Series A Preferred Shares are convertible into 2,608,696 shares of common stock. None of the shares had vested as of August 31, 2024. | |
| (3) | The restricted stock grant consisted of 850,000 shares of common stock issued as of August 23, 2022, which vested on January 15, 2025. None of the shares had vested as of August 31, 2024. | |
| (4) | The restricted stock grant consisted of 350,000 shares of common stock issued to Mr. Nelson which vested on January 15, 2025. None of the shares had vested as of August 31, 2024. |
Employment Agreements
We do not have any written employment agreements with any of our named executive officers. Beginning September 1, 2024, we orally agreed to accrue compensation at the rate of $25,000 per month for Mr. Bates and $10,000 per month for Mr. Mow and Mr. Nelson respectively, which will be paid when we have sufficient additional capital. Beginning September 1, 2024, we also agreed to accrue stock compensation of 120,000 shares of common stock per quarter for Mr. Bates and 105,000 shares of common stock per quarter for Mr. Mow and Mr. Nelson, respectively.
Severance and Change of Control Benefits
We do not currently have any agreements with our named executive officers or directors which provide for severance or change of control benefits.
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Employee Benefit Plans and Pension Benefits
We established a 2025 Equity Incentive Plan (the “2025 Equity Incentive Plan”), effective May 2, 2025, for the benefit of the directors, officers, independent contractors, and key employees. Awards under the 2025 Equity Incentive Plan may be made in the form of (i) Incentive Stock Options; (ii) Nonqualified Stock Options; and (iii) Restricted Stock.
Administration. The Plan is administered by the board of directors and the Compensation Committee.
Authorized Shares. The aggregate number of shares reserved for issuance under the 2025 Equity Incentive Plan is 3,750,000 shares of common stock (on a post-split basis).
Stock Options. Stock options may be granted under the 2025 Equity Incentive Plan. The exercise price of options granted under our 2025 Equity Incentive Plan must at least be equal to the fair market value of our common stock on the date of grant. The term of an incentive stock option may not exceed ten years, except that with respect to any participant who owns more than 10% of the voting power of all classes of our outstanding stock, the term must not exceed five years and the exercise price must equal at least 110% of the fair market value on the grant date. The administrator will determine the methods of payment of the exercise price of an option, which may include cash, shares, or other property acceptable to the administrator, as well as other types of consideration permitted by applicable law. After the termination of service of an employee, director, or consultant, may exercise their options for the period of time stated in their option agreement. Generally, if termination is due to death or disability, the option will remain exercisable for 12 months. However, in no event may an option be exercised later than the expiration of its term.
Restricted Stock. The board of directors may grant stock awards and may in its discretion determine the participants to receive such stock awards and the number of common stock underlying each stock award. The board of directors may also issue performance awards and set performance targets at its discretion which, depending on the extent to which they are met, will determine the number of performance awards that will be paid out to a participant. The performance targets may be based upon company-wide, divisional, and/or individual performance.
Section 409A of the Code
Awards under the 2025 Equity Incentive Plan are intended either to be exempt from the rules of Section 409A of the Code or to satisfy those rules and shall be construed accordingly.
Section 422 of the Code
The 2025 Equity Incentive Plan provides for the grant of incentive stock options within the meaning Section 422 of the Code.
Awards Granted
As of the date of this prospectus, there have been restricted stock awards of 61,500 shares of common stock (on a post-split basis) granted under the 2025 Equity Incentive Plan.
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Nonqualified Deferred Compensation
None of our named executive officers are covered by a deferred contribution or other plan that provides for the deferral of compensation on a basis that is not tax-qualified.
Director Compensation
The following table details the total compensation earned by our non-employee directors during the year ended August 31, 2024.
| Name | Fee Earned or Paid in Cash ($) (1) | Restricted Stock Awards ($) (2) | All Other Compensation ($) | Total ($) | ||||||||||||
| Michael Maloney | $ | – | $ | – | $ | – | $ | – | ||||||||
| Seth Bayles | $ | – | $ | – | $ | – | $ | – | ||||||||
| Lori Love (2) | $ | – | $ | 52,800 | $ | – | $ | 52,400 | ||||||||
| John Kelly | $ | – | $ | – | $ | – | $ | – | ||||||||
| (1) | Excludes travel expense reimbursements. | |
| (2) | Ms. Love was issued 150,000 shares of common stock which vest at the rate of 10,000 shares per month as of the last day of each calendar month beginning on August 31, 2023. As of August 31, 2024, 130,000 shares had vested. As of the date of this prospectus, all 150,000 shares have vested. |
There were no options outstanding to directors as of August 31, 2024.
We adopted a stock compensation package (the “Stock Compensation Package”), beginning September 1, 2024, under which we accrue 615,000 shares of common stock per quarter for compensation to officers and directors, including for board and board committee service. All shares issued during the 2025 period were valued at $0.289 per share based on a third party valuation of our shares. We also reimburse our directors for reasonable travel and other related expenses.
Limitation of Liability and Indemnification Matters
Section 102 of DGCL permits a Delaware corporation to adopt provisions in its certificate of incorporation or bylaws that limit or eliminate the personal liability of our directors for a breach of their fiduciary duty of care as a director. Any such provision does not apply to: any breach of the director’s duty of loyalty to us or our stockholders; any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; any act related to unlawful stock repurchases, redemptions or other distributions or payment of dividends; or any transaction from which the director derived an improper personal benefit. We have adopted such a provision in our amended and restated certificate of incorporation but not our amended and restated bylaws.
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Our amended and restated certificate of incorporation and amended and restated bylaws require us to indemnify any officer and director who was or is a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, to the fullest extent permitted by the laws of Delaware, provided however, that except for any proceeding seeking to enforce or obtain payment under any right to indemnification by the corporation, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if the corporation has joined in or consented to the initiation of such proceeding (or part thereof).
To date, we are not required to pay any costs of indemnification, by direct payment or reimbursement of reasonable expenses (including attorneys’ fees and disbursements) in advance of the final disposition of the proceeding, except by the approval of the board of directors.
In addition, we may enter into separate indemnification agreements with some of our directors and officers. These indemnification agreements, among other things, may require us to indemnify our directors and officers for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or officer in any action or proceeding arising out of their services as a director or officer, or any other company or enterprise to which the person provides services at our request.
In the future, we may obtain a directors’ and officers’ insurance policy pursuant to which our directors and officers are insured against liability for actions taken in their capacities as directors and officers. We believe that these provisions in our amended and restated bylaws and these indemnification agreements, if entered into, are necessary to attract and retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, or the Securities Act, may be permitted to directors, officers or control persons, in the opinion of the SEC, such indemnification is against public policy, as expressed in the Securities Act and is therefore unenforceable.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In addition to the compensation arrangements, including employment, termination of employment and change in control arrangements, discussed in the sections titled “Management” and “Executive Compensation,” the following is a description of each transaction since September 1, 2023 and each currently proposed transaction in which (i) we have been or are to be a participant; (ii) the amount involved exceeded or exceeds $77,432, which is the average of our total assets at year-end of our last two fiscal years; any of our directors, executive officers, or holders of more than 5% of our outstanding capital stock, or any immediate family member of, or person sharing the household with, any of these individuals or entities, had or will have a direct or indirect material interest.
Line of Credit from IDI
On October 19, 2022, we entered into a Line of Credit Agreement (the “LOC Agreement”) with IDI, a limited partnership controlled by Jonathan Bates, our Chief Executive Officer and Chairman, and Raymond Mow, our Chief Financial Officer and a Director. The LOC Agreement provided for loans of up to $1,000,000 at our request to finance the purchase of equipment necessary for the operation of our business, and related working capital. Loans under the LOC Agreement accrue interest at 12% per annum, compounded on a 30/360 monthly basis until the loans have been repaid in full. We had the right to submit draw requests under the LOC Agreement until April 15, 2023. Each draw request is subject to the approval of IDI in its sole discretion. The amount drawn, plus all accrued interest therein, was originally repayable in full on December 1, 2023.
Effective May 13, 2023, we and IDI amended the LOC Agreement to increase the amount that we may borrow thereunder to $1,750,000, extended the date by which we could borrow funds thereunder to December 1, 2023, and extended the maturity date to December 1, 2024. Simultaneous with the extension, we borrowed an additional $500,000. Effective November 4, 2024, we and IDI amended the LOC Agreement to increase the amount that we may borrow thereunder to $2,300,000. In addition, IDI agreed that we have the right to extend the maturity date for six monthly periods in consideration for an extension fee of $25,000 for each extension, which will be added to the balance due thereunder. In addition, IDI was granted the right to convert 11,500,000 shares of common stock it owns into 2,300 shares of Series B Convertible Preferred Stock. In consideration for the above the amendments, IDI agreed to approve a new draw under the line of credit of $250,000 and to purchase an additional 200 shares of Series B Convertible Preferred Stock for $200,000, for net new financing to us of $450,000. We exercised our right to extend the maturity date of the loan on December 1, 2024; however, the $25,000 extension fee was never accrued or paid. Consequently, we executed an amendment with IDI on May 21, 2025, pursuant to which the extension fee was waived and replaced with a payment of $150,000, payable by June 6, 2025, to the extent we do not complete our public offering. Pursuant to the amendment, the maturity date was also extended to August 15, 2025. As of the date of this prospectus, the principal amount due IDI under the LOC Agreement was $1,875,000.
Mr. Bates directly and indirectly owns approximately 10% of IDI and therefore has an indirect interest in 10% of the amount due under the LOC Agreement. In addition, Mr. Bates and Mr. Mow are officers of the general partner of IDI, which is entitled to an annual management fee of 0% on the net assets of IDI and an annual performance allocation of 30% on the increase in the net asset value of IDI.
Letter Agreement with Jonathan Bates and IDI
On January 17, 2025, we entered into a Letter Agreement (“LA”) with Jonathan Bates, our Chief Executive Officer and Chairman, and IDI, a limited partnership controlled by Jonathan Bates and Raymond Mow, our Chief Financial Officer and a Director. Under the terms of the LA, Jonathan Bates and IDI agreed to, upon the consummation of this offering, convert their shares of Series A Convertible Preferred Stock into shares of common stock at the conversion price of $0.20 per share adjusted for the effects of the Reverse Stock Split. IDI further agreed to, upon the consummation of this offering, convert its shares of Series B Convertible Preferred Stock into shares of common stock at the conversion price of $0.20 per share adjusted for the effects of the Reverse Stock Split.
The LA also addresses the debt due to IDI under the LOC Agreement as follows: (i) IDI agreed to convert $1,000,000 of the amount due to IDI into a new loan of $1,000,000 evidenced by a note we shall issue to IDI (the “LA Note”). The LA Note shall provide for interest at 12.5% per annum, monthly payments of accrued interest only, and a ballon payment of all principal and interest due on December 1, 2026. The LA Note will be unsecured and not convertible into common stock; (ii) IDI agreed to exchange $600,000 of the amount owed to IDI for $597,584.25 of the amount due to us from ROC Digital (described below). IDI acknowledged the forgiveness of $2,415.75, representing the difference between $600,000 and the exchanged amount; and (iii) any amount remaining due to IDI under the LOC Agreement following the transactions described in (i) and (ii) of this paragraph will be exchanged for shares of common stock at the public offering price in connection with the consummation of this offering. The debt owed to IDI under the LA Note will be capped at $1,000,000 upon completion of the transactions referenced above, excluding any interest payments under the LA Note.
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Transactions with ROC Digital Mining I, LLC
In October 2022, we entered into a joint venture arrangement with ROC Digital to jointly develop and operate a bitcoin mining operation in Pecos, Texas. Under the joint venture, we contributed one immersion container, six transformers, and cash with an aggregate value of $987,429 as a capital contribution to ROC Digital. We simultaneously sold ROC Digital four immersion containers for $1,200,000, which is payable pursuant to a promissory note that bears interest at 5% per annum, and is payable pursuant to monthly payments of $31,203.64 per month until May 31, 2026. As of August 31, 2023 and August 31, 2024, the note receivable from ROC Digital amounted to $1,029,721 and $655,277, respectively. We own approximately 30% of ROC Digital and 33 1/3% of ROC Manager, the manager of ROC Digital.
We also obtained the right to locate one container at the location that we would be able to use for self-mining. Under our hosting agreement with ROC Digital, we located one immersion container at the site for $500 per month, plus payment of our pro rata share of electricity, internet, and insurance for the site. Under the hosting agreement, we also agreed to contribute $100,000 toward the electricity deposit for the site, which is refundable to us at the earlier of the date the electricity provider releases the deposit or 90 days after the expiration or termination of the hosting agreement. The hosting agreement has a term of one year, subject to our right to renew the agreement for two one year terms after receipt of notice of the renewal terms of the joint venture’s electricity supply agreement for the upcoming year. In April 2024, we exercised our right to extend the hosting agreement for an additional year running from May 2024 to April 30, 2025. As of the date of this prospectus, the hosting agreement with ROC Digital has not been extended, and we are currently operating on a month-to-month basis.
John Kelly, a director, owns approximately 49% of ROC Digital. Mr. Kelly also owns 33 1/3% of ROC Manager, and serves as a manager of ROC Manager.
Transactions with Rykor Energy Solutions, LLC
In May 2024, we brokered the sale of 20 transformers to Rykor Energy Solutions, LLC (“Rykor”). The total sales price of the transformers is approximately $1,407,000 and our total cost is expected to be $1,340,000. Rykor owns 133,600 shares of our common stock (post-split) and as a result is the beneficial owner of approximately 6.7% of our common stock. Subsequently, the brokered sale was reduced to ten transformers. The contract has been fully performed, and we generated a profit of $33,500 on the transaction.
John Kelly, a director, is also a shareholder and officer of Rykor.
Policies with Respect to Transactions with Related Persons
The board has adopted a Code of Ethics, which is available at bitminetech.io, that sets forth various policies and procedures intended to promote the ethical behavior of our employees, officers and directors. The Code of Ethics describes our policy on conflicts of interest.
The executive officers and the board are also required to complete a questionnaire on an annual basis which requires them to disclose any related person transactions and potential conflicts of interest. The responses to these questionnaires are reviewed by outside corporate counsel, and, if a transaction is reported by an independent director or executive officer, the questionnaire is submitted to the Audit Committee, or the independent directors if there is no Audit Committee. If necessary, the Audit Committee or the independent directors, as applicable, will determine whether the relationship is material and will have any effect on the director’s independence. After making such determination, the Audit Committee or independent directors, as applicable, will report its recommendation on whether the transaction should be approved or ratified by the entire board.
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PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the date of this prospectus, certain information concerning the beneficial ownership of our common stock by (i) each person known by us to own beneficially 5% or more of the outstanding shares of each class, (ii) each of our directors and named executive officers, and (iii) all of our executive officers and directors as a group.
The number of shares beneficially owned by each 5% stockholder, director or executive officer is determined under the rules of the Securities and Exchange Commission, or SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Under those rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power and also any shares that the individual or entity has the right to acquire within 60 days after the date of this prospectus through the exercise of any stock option, warrant or other right, or the conversion of any security. As of the date of this prospectus, there were 2,053,380 shares outstanding. After this offering, there will be a total of 5,785,170 shares of our common stock outstanding (or 6,066,420 shares if the underwriters exercise the option to purchase additional shares in full), and this is based on the outstanding shares as of the date of this prospectus as described in the immediately prior sentence, as adjusted for the Reverse Stock Split, plus shares issued in this offering assuming a public offering price of $8.00 per share of common stock, which is based on the last reported sale price of our common stock on the OTCQX on May 16, 2025, plus shares issued for approximately $775,000 of debt owed to IDI at the assumed public offering price, plus shares issued in conversion of all the outstanding shares of our Series A Convertible Preferred Stock and our Series B Convertible Preferred Stock at $4.00 per share ($0.20 per share pre-split, which is their existing conversion price). Unless otherwise indicated, each person or entity has sole voting and investment power (or shares such power with his or her spouse) with respect to the shares set forth in the following table. The inclusion in the table below of any shares deemed beneficially owned does not constitute an admission of beneficial ownership of those shares.
| Shares Beneficially Owned Prior to Offering | Shares Beneficially Owned After Offering | |||||||||||||||
| Name | Shares Beneficially Owned | Percent of Common Stock (1) | Shares Beneficially Owned | Percent of Common Stock (2) | ||||||||||||
| 5% Stockholders | ||||||||||||||||
| Innovative Digital Investors Emerging Technology, LP (3)(15) | 1,384,915 | 40.3% | 1,481,790 | 25.6% | ||||||||||||
| Sam Jorgensen (4)(15) | 351,136 | 17.1% | 351,136 | 6.1% | ||||||||||||
| BFAM Partners, LLC (3)(15) | 210,000 | 10.2% | 210,000 | 3.6% | ||||||||||||
| Abed Equities (5) 8 Hastings Plaza Hastings 15156, Barbados |
182,500 | 8.9% | 182,500 | 3.2% | ||||||||||||
| 10373885 Canada Corp. (a/k/a Bitflair Mining Corp.) (6) 23 Castelbeau Gatineau QC J9J 1C9 Canada |
172,193 | 8.4% | 172,193 | 2.9% | ||||||||||||
| Chris Moses 2429 Winding Brook Ct. Rochester Hills, MI 48309 |
156,610 | 7.6% | 156,610 | 2.7% | ||||||||||||
| Rykor Energy Solutions, LLC (7) 33 Commercial St. Raynham, MA 02797 |
133,600 | 6.5% | 133,600 | 2.3% | ||||||||||||
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| Directors and Named Executive Officers (14) | ||||||||||||||||
| Jonathan Bates (3) | 1,993,915 | 52.1% | 2,090,790 | 36.1% | ||||||||||||
| Michael Maloney (10) | 211,250 | 10.3% | 211,250 | 3.6% | ||||||||||||
| Ryan Ramnath (8) | 178,943 | 8.7% | 178,943 | 3.1% | ||||||||||||
| John Kelly (7) | 133,600 | 6.5% | 133,600 | 2.3% | ||||||||||||
| Erik S. Nelson (9) | 148,500 | 7.2% | 148,500 | 2.6% | ||||||||||||
| Raymond Mow (11) | 145,750 | 7.1% | 145,750 | 2.5% | ||||||||||||
| Seth Bayles (12) | 31,750 | 1.5% | 31,750 | 0.5% | ||||||||||||
| Lori Love (13) | 18,750 | 0.9% | 18,750 | 0.3% | ||||||||||||
| Officers and Directors as a Group (8 persons)(10) | 2,862,458 | 74.4% | 2,959,333 | 50.8% |
| (1) | Based on 2,053,380 shares of common stock issued and outstanding as of the date of this prospectus. | |
| (2) | Based on 2,053,380 shares of common stock issued and outstanding as of the date of this prospectus, as adjusted to give effect to (i) the Reverse Stock Split, (ii) the issuance of 1,759,915 shares of common stock (post-split) upon conversion of all outstanding shares of Series A Convertible Preferred Stock and Series B Convertible Preferred Stock, (iii) the issuance of 96,875 shares of common stock to IDI valued at the assume public offering price of $8.00 per share in partial satisfaction of approximately $775,000 of debt due to IDI, and (iv) 1,875,000 shares issued in this offering, assuming no exercise of the underwriters’ option to purchase additional shares of Common Stock. | |
| (3) | Includes (i) 625,000 shares that IDI has the right to acquire upon the conversion of 2,500 shares of Series B Convertible Preferred Stock, (ii) 759,915 shares that IDI has the right to acquire upon the conversion of 303,966 shares of Series A Convertible Preferred Stock, (iii) 210,000 shares owned by BFAM Partners, LLC (“BFAM”), of which Mr. Bates is the 100% owner, (iv) 375,000 shares that Mr. Bates has the right to acquire upon the conversion of 150,000 shares of Series A Convertible Preferred Stock, (v) 12,000 shares owned by Mr. Bates, and (vi) 12,000 shares which will vest on May 31, 2025, pursuant to the Stock Compensation Package. Mr. Bates has sole voting and investment power of any shares owned by IDI by virtue of his ownership of its general partner. Mr. Bates has sole voting and investment power of any shares owned by BFAM. BFAM and an individual retirement account established by Mr. Bates own approximately 10.03% of IDI. Mr. Bates owns 90% of BFAM, and a trust established for his children on the remaining 10%. Mr. Bates disclaims beneficial ownership of any shares owned by IDI beyond his percentage interest in such entity. | |
| (4) | Includes (i) 176,693 shares owned by Mr. Jorgensen, (ii) 2,250 shares which will vest on May 31, 2025, pursuant to the Stock Compensation Package, and (iii) 172,193 shares owned by Bitflair Mining Corp. (“Bitflair”), of which Mr. Jorgensen has shared voting and investment power. Mr. Jorgenson disclaims beneficial ownership of shares held by Bitflair beyond his 40% percentage interest in Bitflair. | |
| (5) | Gabriel Abed has sole voting and investment power over any shares owned by Abed Equities. | |
| (6) | Ryan Ramnath and Sam Jorgenson have shared voting and investment power over any shares owned by Bitflair Mining Corp. | |
| (7) | All shares held outright. John Kelly and Nick Marrocco have shared voting and investment power over the securities owned by Rykor Energy Solutions, LLC. | |
| (8) | Includes (i) 4,500 shares owned by Mr. Ramnath, (ii) 2,250 shares which will vest on May 31, 2025, pursuant to the Stock Compensation Package, and (iii) 172,193 shares owned by Bitflair, of which Mr. Ramnath has shared voting and investment power. Mr. Ramnath disclaims beneficial ownership of shares held by Bitflair beyond his percentage interest in Bitflair of 40%. | |
| (9) | Includes (i) 90,500 shares owned by Mr. Nelson, (ii) 5,250 shares which will vest on May 31, 2025, pursuant to the Stock Compensation Package, (iii) 75,250 shares owned by Coral Investment Partners, LP (“Coral”), as to which Mr. Nelson, in his capacity as owner of the general partner, has sole voting and investment power, and (iv) 2,500 shares owned by Morris Lake Holdings, LLC (“Morris”). Mr. Nelson disclaims beneficial ownership of shares held by Coral beyond his 40% ownership interest in Coral. Mr. Nelson does not have an interest in Morris, but his spouse and children own 80% of Morris, and Mr. Nelson’s spouse shares the power to vote and dispose of any shares owned by Morris. | |
| (10) | Includes 3,750 shares which will vest on May 31, 2025, pursuant to the Stock Compensation Package. | |
| (11) | Includes 5,250 shares which will vest on May 31, 2025, pursuant to the Stock Compensation Package | |
| (12) | Includes 2,250 shares which will vest on May 31, 2025, pursuant to the Stock Compensation Package | |
| (13) | Includes 3,750 shares which will vest on May 31, 2025, pursuant to the Stock Compensation Package | |
| (14) | Includes 515,750 shares owned directly, 593,543 shares owned by their affiliates, 1,134,915 shares which they and their affiliates have the right to acquire upon the conversion of 453,966 shares of Series A Convertible Preferred Stock, and 625,000 shares which their affiliates have the right to acquire upon the conversion of 2,500 shares of Series B Convertible Preferred Stock. | |
| (15) | The address for the shareholder is c/o Bitmine Immersion Technologies, Inc., 10845 Griffith Peak Dr., #2, Las Vegas, NV 89135. |
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DESCRIPTION OF SECURITIES WE ARE OFFERING
The following description is a summary of some of the terms of our securities, our certificate of incorporation, our amended and restated bylaws (which we expect to adopt in connection with the consummation of this offering) and Delaware law. The descriptions in this prospectus of our securities and our organizational documents do not purport to be complete and are subject to, and qualified in their entirety by reference to, our organizational documents, copies of which have been or will be filed or incorporated by reference as exhibits to the registration statement of which this prospectus form a part.
Outstanding and Authorized Shares
We are authorized to issue up to a total of 500,000,000 shares of common stock, par value $0.0001 per share, and up to 20,000,000 shares of preferred stock, par value $0.0001 per share. Our authorized but unissued shares of common stock are available for issuance without further action by our stockholders, unless such action is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be quoted or listed in the future. Our board of directors has the authority to amend our certificate of incorporation to create one or more series of preferred stock containing such rights, preferences, and limitations that the board may approve without stockholder approval. As of the date of this prospectus, our board has authorized two series of preferred stock, the Series A Convertible Preferred Stock and the Series B Convertible Preferred Stock, all of which are held by our CEO and Chairman, and IDI, an entity he controls, and which Mr. Bates and the entity have both agreed will be converted into shares of common stock at the closing of this offering. (See “Certain Relationships and Related Party Transactions—Letter Agreement with Jonathan Bates and IDI.”)
Voting
Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of our stockholders. Holders of our common stock have no cumulative voting rights. All shares of common stock offered hereby will, when issued, be fully paid and nonassessable.
Quorum
Under our amended and restated bylaws, the holders of at least one-third of the shares of our capital stock, represented in person or by proxy, are necessary to constitute a quorum for the transaction of business at any meeting. If a quorum is present, an action by stockholders entitled to vote on a matter is approved if the number of votes cast in favor of the action exceeds the number of votes cast in opposition to the action, with the exception of the election of directors, which requires a plurality of the votes cast.
Dividends
Declaration and payment of any dividend will be subject to the discretion of our Board of Directors. The time and amount of dividends will be dependent upon, among other things, our business prospects, results of operations, financial condition, cash requirements and availability, debt repayment obligations, capital expenditure needs, contractual restrictions, covenants in the agreements governing our current and future indebtedness, industry trends, the provisions of Delaware law affecting the payment of dividends and distributions to stockholders, and any other factors or considerations our Board of Directors may deem relevant. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business, and therefore do not anticipate paying any cash dividends on our common stock in the foreseeable future. (See “Dividend Policy” and “Risk Factors—Risks Related to Ownership of our Common Stock— We do not intend to pay dividends for the foreseeable future.”)
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Liquidation
Upon our liquidation, dissolution, or winding-up, holders of our common stock are entitled to share in all assets remaining after payment of all liabilities and the liquidation preferences of any of our outstanding shares of preferred stock. Subject to preferences that may be applicable to any outstanding shares of preferred stock, holders of our common stock are entitled to receive dividends, if any, as may be declared from time to time by our Board of Directors out of our assets which are legally available.
Exclusive Forum of Certain Actions
Our amended and restated certificate of incorporation provide, unless we consent in writing to the selection of an alternative forum, that the Court of Chancery of the State of Delaware (or, and only if the Court of Chancery of the State of Delaware lacks subject matter jurisdiction, any state court located within the State of Delaware, or, if and only if all such state courts lack subject matter jurisdiction, the federal district court for the District of Delaware) and any appellate court therefrom, to the fullest extent permitted by law, is the sole and exclusive forum for (i) any derivative claim or cause of action brought on our behalf; (ii) any claim or cause of action for breach of fiduciary duty owed by any of our directors, officers or other employees, agents or stockholders to us or to our stockholders; (iii) any claim or cause of action against us or any of our current or former directors, officers or other employees, arising out of or pursuant to any provision of the Delaware General Corporation Law (“DGCL”), our amended and restated certificate of incorporation, or our amended and restated bylaws (as each may be amended from time to time); and (iv) any claim or cause of action against us or any of our current or former directors, officers, or other employees, governed by the internal affairs doctrine or otherwise related to our internal affairs, in all cases to the fullest extent permitted by law and subject to the court having personal jurisdiction over the indispensable parties named as defendants; provided, however, that the exclusive forum provision described above will not apply to claims or causes of action brought to enforce a duty or liability created by the Securities Act, the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction.
Additionally, our amended and restated certificate of incorporation provides that any stockholder shall be deemed to have consented to the personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action to enforce the above provisions.
Other Rights and Preferences
Holders of our common stock have no conversion, exchange, sinking fund, redemption, or appraisal rights (other than such as may be determined by the Board of Directors in its sole discretion) and have no preemptive rights to subscribe for any of our securities.
Anti-Takeover Effects of Certain Provisions of Our Certificate of Incorporation, our Amended and Restated Bylaws and the DGCL
The provisions of our amended and restated certificate of incorporation and our amended and restated bylaws could make it more difficult to acquire us by means of a merger, tender offer, proxy contest, open market purchases, removal of incumbent directors, and otherwise. These provisions, which are summarized below, are expected to discourage types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to first negotiate with us. We believe that the benefits of increased protection of our potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging takeover or acquisition proposals because negotiation of these proposals could result in an improvement of their terms.
Vacancies. Our amended and restated certificate of incorporation and amended and restated bylaws provide the right of our Board of Directors to elect a director to fill a vacancy created by the expansion of the Board of Directors or the resignation, death, or removal of a director, which prevents stockholders from being able to fill vacancies on our Board of Directors.
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Preferred Stock. Our amended and restated certificate of incorporation authorizes the issuance of up to 20,000,000 shares of preferred stock with such rights and preferences as may be determined from time to time by our Board of Directors in their sole discretion. Our Board of Directors may, without stockholder approval, issue a series of preferred stock with dividends, liquidation, conversion, voting, or other rights that could adversely affect the voting power or other rights of the holders of our common stock.
Amendment of Bylaws. The amended and restated certificate of incorporation and amended and restated bylaws provide that the amended and restated bylaws may be altered, amended, or repealed by the Board of Directors by an affirmative vote of a majority of the Board of Directors at any regular meeting of the Board of Directors.
Limitation of Liability. The amended and restated certificate of incorporation provides for the limitation of liability of, and provides indemnification to, our directors and officers.
Special Stockholders Meeting. The amended and restated bylaws provide that a special meeting of the stockholders may only be called by the president or a majority of the Board of Directors.
Delaware Anti-Takeover Statute.
Section 203 of the DGCL provides that if a person acquires 15% or more of the voting stock of a Delaware corporation, such person becomes an “interested stockholder” and may not engage in certain “business combinations” with the corporation for a period of three years from the time such person acquired 15% or more of the corporation’s voting stock, unless:
| 1. | the board of directors approves the acquisition of stock or the merger transaction before the time that the person becomes an interested stockholder; |
| 2. | the interested stockholder owns at least 85% of the outstanding voting stock of the corporation at the time the merger transaction commences (excluding voting stock owned by directors who are also officers and certain employee stock plans); or |
| 3. | the merger transaction is approved by the board of directors and at a meeting of stockholders, not by written consent, by the affirmative vote of 2∕3 of the outstanding voting stock which is not owned by the interested stockholder. A Delaware corporation may elect in its certificate of incorporation or not to be governed by this particular Delaware law. |
Transfer Agent
The transfer agent and registrar for our common stock is West Coast Stock Transfer, Inc. The transfer agent and registrar’s address is 721 N. Vulcan Ave., Encinitas, California 92024 and its telephone number is (619) 664-4780.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been a minimal public market for our common stock, and we cannot predict what effect, if any, market sales of shares of our common stock or the availability of shares of our common stock for sale will have on the market price of our common stock prevailing from time to time. Nevertheless, sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, could materially and adversely affect the market price of our common stock and could impair our future ability to raise capital through the sale of our equity or equity-related securities at a time and price that we deem appropriate. (See “Risk Factors—Risks Related to this Offering —The sale or availability for sale of substantial amounts of common stock could adversely affect their market price.”)
Sale of Restricted Shares
Based on the number of shares of common stock outstanding as of the date of this prospectus, upon the closing of this offering, and assuming a public offering price of $8.00 per share, which is based on the last reported sale price of our common stock on the OTCQX on May 16, 2025, and assuming no exercise of the underwriters’ option to purchase additional shares of Common Stock, we will have outstanding an aggregate of approximately 5,785,170 shares of our Common Stock.
All of the shares of common stock sold in this offering will be freely tradable unless purchased by our “affiliates” as such term is defined in Rule 144 under the Securities Act or purchased by existing stockholders and their affiliated entities that are subject to lock-up agreements.
In addition to the shares issued in this offering, we have 941,494 shares that are publicly traded. All other outstanding shares of common stock upon the completion of this offering will be “restricted” securities under the meaning of Rule 144 and may not be sold in the absence of registration under the Securities Act, unless an exemption from registration is available, including the exemptions pursuant to Rule 144 and Rule 701 under the Securities Act, or Rule 701.
In addition, an aggregate of 93,750 shares of common stock (or 107,813 shares of common stock if the underwriters exercise their overallotment option in full) issuable upon exercise of warrants to be issued to the underwriter in connection with this offering, will be authorized and reserved for issuance.
The 2,959,333 shares of our Common Stock (including shares underlying convertible securities) held by our affiliates will be available for sale in the public 180 days after the date of this prospectus, upon expiration of the lock-up agreements referred to below, subject in some cases to applicable volume, manner of sale and other limitations under Rule 144 and Rule 701.
Rule 144
In general, under Rule 144 as currently in effect, persons who became the beneficial owner of shares of our common stock prior to the completion of this offering may sell their shares upon the earlier of (i) the expiration of a six-month holding period, if we have been subject to the reporting requirements of the Exchange Act for at least 90 days prior to the date of the sale and have filed all reports required thereunder or (ii) the expiration of a one-year holding period.
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At the expiration of the six-month holding period (assuming we have been subject to the reporting requirements of the Exchange Act for at least 90 days and have filed all reports required thereunder), a person who was not one of our affiliates at any time during the three months preceding a sale would be entitled to sell an unlimited number of shares of our common stock, and a person who was one of our affiliates at any time during the three months preceding a sale would be entitled to sell, within any three-month period, a number of shares of our common stock that does not exceed the greater of either of the following:
| · | 1% of the number of shares of our common stock then outstanding, which will equal approximately 55,358 shares immediately after the completion of this offering (assuming no exercise of the underwriters’ option to purchase additional shares of Common Stock); or | |
| · | the average weekly trading volume of our common stock on the NYSE American during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale. |
At the expiration of the one-year holding period, a person who was not one of our affiliates at any time during the three months preceding a sale would be entitled to sell an unlimited number of shares of our common stock without restriction. A person who was one of our affiliates at any time during the three months preceding a sale would remain subject to the volume restrictions described above.
Sales under Rule 144 by our affiliates are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us.
2025 Equity Incentive Plan
We effected our 2025 Equity Incentive Plan on May 2, 2025, which provides for the grant of incentive stock options within the meaning of Section 422 of the Code, to our employees and any parent and subsidiary corporation’s employees, and for the grant of non-statutory stock options, and restricted stock to our employees, directors and certain service providers and the employees and service providers of any parent and subsidiary corporation. A total of 3,750,000 shares of common stock (on a post-split basis) are reserved for issuance under the 2025 Equity Incentive Plan.
The issuances of securities pursuant to the 2025 Equity Incentive Plan are deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701.
Lock-Up Agreements
We have agreed, subject to certain exceptions and without the approval of the Representative (as defined below), not to offer, issue, sell, contract to sell, encumber, grant any option for the sale of or otherwise dispose of any of our securities for a period of 90 days following the closing of this offering. Our directors and executive officers have agreed with the underwriters not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of our common stock or securities convertible into common stock for a period of 180 days (or 90 days with respect to certain of the 5% or more stockholders). Other holders of 5% or greater of our common stock have agreed with the underwriters not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of our common stock or securities convertible into common stock for a period of six months after the closing of this offering. (See “Underwriting.”)
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS
The following discussion is a summary of the material U.S. federal income tax consequences to Non-U.S. Holders (as defined below) of the purchase, ownership, and disposition of our common stock issued pursuant to this offering, but does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local, or non-U.S. tax laws are not discussed. This discussion is based on the Code, Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service, or the IRS, in each case in effect as of the date hereof. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a Non-U.S. Holder of our common stock. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the purchase, ownership, and disposition of our common stock.
A nonresident alien or foreign corporation is generally taxed in the same manner as a U.S. citizen or domestic corporation on all income that is effectively connected with the conduct of a trade or business in the United States. For this purpose, gain or loss for the disposition of U.S. real property is treated as effectively connected with income. If any U.S. source income received by a nonresident alien or foreign corporation is not effectively connected with a U.S. trade or business, then it will generally be taxed at a flat 30 percent rate, absent lower tax treaty. A nonresident alien and foreign corporation may generally only claim deductions and credits related to the effectively connected income. A flat 30 percent tax rate also applies to the profits and certain interest amounts of a U.S. branch or foreign corporation that are remitted to the foreign corporation during the year. A nonresident alien or foreign corporation that engaged in trade or business in the United States at any time during the tax year or that has taxable income must generally file an income tax return (Code section 6012 and 6072 (c)) . Form 1040 NR is used by a nonresident alien, and Form 1120 F is used by a foreign corporation. A nonresident alien or foreign corporation does not need to file return in certain circumstances, including if the taxpayer’s full U.S. tax liability was withheld at the source.
This discussion is limited to Non-U.S. Holders that hold our common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to a Non-U.S. Holder’s particular circumstances, including the impact of the Medicare contribution tax on net investment income. In addition, it does not address consequences relevant to Non-U.S. Holders subject to special rules, including, without limitation:
| · | U.S. expatriates and former citizens or long-term residents of the United States; | |
| · | persons subject to the alternative minimum tax; | |
| · | persons holding our common stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction, or other integrated investment; | |
| · | banks, insurance companies, and other financial institutions; | |
| · | brokers, dealers, or traders in securities; | |
| · | “controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax; | |
| · | partnerships, other entities, or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein); | |
| · | tax-exempt organizations or governmental organizations; | |
| · | persons deemed to sell our common stock under the constructive sale provisions of the Code; | |
| · | persons who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation; | |
| · | tax-qualified retirement plans; |
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| · | “qualified foreign pension funds” and entities, all of the interests of which are held by qualified foreign pension funds; and | |
| · | persons subject to special tax accounting rules as a result of any item of gross income with respect to our common stock being taken into account in an applicable financial statement. |
If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership, and certain determinations made at the partner level. Accordingly, partnerships (and entities or arrangements treated as partnerships for U.S. federal income tax purposes) holding our common stock and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences to them.
THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL, OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.
Definition of a Non-U.S. holder
For purposes of this discussion, a “Non-U.S. Holder” is any beneficial owner of our common stock that is neither a “U.S. person” nor an entity treated as a partnership for U.S. federal income tax purposes. [See 26 U.S.C. §7701 (30)]. A U.S. person is any person that, for U.S. federal income tax purposes, is or is treated as any of the following:
| · | an individual who is a citizen or resident of the United States; | |
| · | a corporation or entity treated as a corporation that is created or organized under the laws of the United States, any state thereof, or the District of Columbia; | |
| · | an estate, the income of which is subject to U.S. federal income tax regardless of its source; or | |
| · | a trust that (i) is subject to the primary supervision of a U.S. court and the control of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code), or (ii) has a valid election in effect to be treated as a United States person for U.S. federal income tax purposes. |
Distributions
As described in the section titled “Dividend Policy,” we do not currently intend to pay any cash dividends on our capital stock in the foreseeable future. However, if we make distributions of cash or property on our common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and first be applied against and reduce a Non-U.S. Holder’s adjusted tax basis in its common stock, but not below zero. Any excess will be treated as capital gain and will be treated as described below under “— Sale or Other Taxable Disposition.”
Subject to the discussions below on effectively connected income, backup withholding and the Foreign Account Tax Compliance Act, or FATCA, dividends paid to a Non-U.S. Holder of our common stock will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty, provided the Non-U.S. Holder furnishes a valid IRS Form W-8BEN or W-8BEN-E (or other applicable documentation) certifying qualification for the lower treaty rate). A Non-U.S. Holder that does not timely furnish the required documentation, but that qualifies for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. Holders should consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaty.
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If dividends paid to a Non-U.S. Holder are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment or fixed base in the United States to which such dividends are attributable), the Non-U.S. Holder will be exempt from the U.S. federal withholding tax described above. To claim the exemption, the Non-U.S. Holder must furnish to the applicable withholding agent a valid IRS Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States.
Any such effectively connected dividends generally will be subject to U.S. federal income tax on a net income basis at the regular rates. A Non-U.S. Holder that is a corporation also generally will be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on its effectively connected earnings and profits attributable to such dividends, as adjusted for certain items. Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.
Sale or Other Taxable Disposition
Subject to the discussions below regarding backup withholding, a Non-U.S. Holder will not be subject to U.S. federal income tax on any gain realized upon the sale or other taxable disposition of our common stock unless:
| · | the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the Non-U.S. Holder maintains a permanent establishment or fixed base in the United States to which such gain is attributable); | |
| · | the Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition and certain other requirements are met; or | |
| · | our common stock constitutes a U.S. real property interest, or USRPI, by reason of our status as a U.S. real property holding corporation, or USRPHC, for U.S. federal income tax purposes. |
Gain described in the first bullet point above generally will be subject to U.S. federal income tax on a net income basis at the regular U.S. federal income rates applicable to U.S. persons. A Non-U.S. Holder that is a corporation also generally will be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on its effectively connected earnings and profits attributable to such gain, as adjusted for certain items.
Gain described in the second bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty), which may be offset by U.S. source capital losses of the Non-U.S. Holder (even though the individual is not considered a resident of the United States), provided the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses.
With respect to the third bullet point above, we believe we currently are not, and do not anticipate becoming, a USRPHC. However, because the determination of whether we are a USRPHC depends on the fair market value of our USRPIs relative to the fair market value of our non-U.S. real property interests and our other business assets, there can be no assurance we currently are not a USRPHC or will not become one in the future. Even if we are or were to become a USRPHC, gain arising from the sale or other taxable disposition by a Non-U.S. Holder of our common stock will not be subject to U.S. federal income tax if our common stock is “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market, and such Non-U.S. Holder owned, actually and constructively, 5% or less of our common stock throughout the shorter of the five-year period ending on the date of the sale or other taxable disposition or the Non-U.S. Holder’s holding period. If we are a USRPHC and either our common stock is not regularly traded on an established securities market or a Non-U.S. Holder holds more than 5% of our common stock, actually or constructively, during the applicable testing period, such Non-U.S. Holder will generally be taxed on any gain in the same manner as gain that is effectively connected with the conduct of a U.S. trade or business, except that the branch profits tax generally will not apply.
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Non-U.S. Holders should consult their tax advisors regarding any applicable income tax treaties that may provide for different rules.
Information Reporting and Backup Withholding
Payments of dividends on our common stock will not be subject to backup withholding, provided the holder either certifies its non-U.S. status by furnishing a valid IRS Form W-8BEN, W-8BEN-E or W-8ECI or otherwise establishes an exemption. However, information returns are required to be filed with the IRS in connection with any dividends on our common stock paid to the Non-U.S. Holder, regardless of whether any tax was actually withheld. In addition, proceeds of the sale or other taxable disposition of our common stock within the United States or conducted through certain U.S.-related brokers generally will not be subject to backup withholding or information reporting, if the applicable withholding agent receives the certification described above or the holder otherwise establishes an exemption. Proceeds of a disposition of our common stock conducted through a non-U.S. office of a non-U.S. broker that does not have certain enumerated relationships with the United States generally will not be subject to backup withholding or information reporting.
Copies of information returns that are filed with the IRS also may be made available under the provisions of an applicable treaty or agreement to the tax authorities of the country in which the Non-U.S. Holder resides or is established.
Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a Non-U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.
Additional Withholding Tax on Payments Made to Foreign Accounts
Withholding taxes may be imposed under Sections 1471 to 1474 of the Code (commonly referred to as FATCA) on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends on our common stock paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code), unless such Non-U.S. Holder provides a properly completed IRS Form w-8BEN-E or w-8BEN-IMY claiming an exemption from FATCA withholding.
Under the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally applies currently to payments of dividends on our common stock. While withholding under FATCA would have applied also to payments of gross proceeds from the sale or other disposition of our common stock, proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely. Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued.
Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our common stock.
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UNDERWRITING
ThinkEquity LLC is acting as representative of the underwriters of this offering (the “Representative). We have entered into an underwriting agreement dated , 2025 with the Representative. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to each underwriter named below, and each underwriter named below has severally agreed to purchase, at the public offering price less the underwriting discounts set forth on the cover page of this prospectus, the number of shares of common stock next to its name in the following table:
| Underwriter | Number of Shares | |||
| ThinkEquity LLC | ||||
| Total | ||||
Under the terms of the underwriting agreement, the underwriters are committed to purchase all of the shares of common stock offered by this prospectus if the underwriters buy any of such shares. The obligations of the underwriters may be terminated upon the occurrence of certain events specified in the underwriting agreement. Furthermore, the underwriting agreement provides that the obligations of the underwriters to pay for and accept delivery of the shares offered by us in this prospectus are subject to various representations and warranties and other customary conditions specified in the underwriting agreement, such as receipt by the underwriters of officers’ certificates and legal opinions.
The underwriters are offering the shares of common stock subject to prior sale, when, as, and if issued to and accepted by them, subject to approval of legal matters by their counsel and other conditions specified in the underwriting agreement. The underwriters reserve the right to withdraw, cancel, or modify offers to the public and to reject orders in whole or in part.
The underwriters propose to offer the common stock to the public at the public offering price set forth on the cover of the prospectus. After the shares of common stock are released for sale to the public, the underwriters may from time to time change the offering price and other selling terms.
Overallotment Option
We have granted a 45-day option to the Representative to purchase up to 281,250 additional shares of our common stock (15% of the shares sold in this offering), solely to cover overallotments, if any. If the Representative exercises all or part of this option, it will purchase shares covered by the option at the initial public offering price per share that appears on the cover page of this prospectus, less the underwriting discount. If this option is exercised in full, the gross proceeds from this offering will be $17,250,000 and the total net proceeds, before expenses, to us will be $15,956,250.
Discounts, Commissions and Reimbursement
The underwriters propose initially to offer the shares of common stock to the public at the public offering price set forth on the cover page of this prospectus and to dealers at those prices less a concession not in excess of $ per share of common stock, of which up to $ may be re-allowed to other dealers. If all of the shares of common stock offered by us are not sold at the public offering price, the underwriters may change the offering price and other selling terms by means of a supplement to this prospectus.
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The following table shows the public offering price, underwriting discounts and proceeds, before expenses, to us. The information assumes either no exercise or full exercise by the underwriters of their overallotment option.
| Total | ||||||||||||
| Per Share | Without Over- Allotment Option | With Over- Allotment Option | ||||||||||
| Offering price | $ | $ | $ | |||||||||
| Underwriting discount and commissions (7.5%) | $ | $ | $ | |||||||||
| Proceeds, before expense, to us | $ | $ | $ | |||||||||
| Non-accountable expense allowance (1%) | $ | $ | $ | |||||||||
We have agreed to pay a non-accountable expense allowance to the underwriters equal to 1% of the gross proceeds received in this offering.
We have paid an expense deposit of $35,000 to the Representative, which will be applied against the out-of-pocket accountable expenses that will be paid by us to the underwriters in connection with this offering, and will be reimbursed to us to the extent not actually incurred in compliance with FINRA Rule 5110(g)(4)(A).
We have also agreed to pay certain of the Representative’s expenses relating to the offering, including: (a) all fees, expenses and disbursements relating to background checks of our officers, directors and entities in an amount not to exceed $15,000 in the aggregate; (b) fees and expenses of the underwriter’s legal counsel not to exceed $125,000; (c) up to $20,000 of market making and trading, and clearing firm settlement expenses for the offering; and (d) up to $5,000 of the underwriters’ actual accountable “road show” expenses.
Our total estimated expenses of the offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding underwriting discounts and commissions and excluding the non-accountable expense allowance, are approximately $500,000.
Representative’s Warrants
Upon closing of this offering, we have agreed to issue the Representative warrants (the “Representative’s Warrants”) as compensation to purchase up to 93,750 shares of common stock (or 107,813 shares of common stock if the underwriters exercise their overallotment option in full) (5% of the aggregate number of shares of common stock). The Representative’s Warrants will be exercisable at a per share exercise price of $10 (125% of the public offering price). We are registering hereby the Representative’s Warrants and the shares of common stock issuable upon exercise of the Representative’s Warrants. The Representative’s Warrants are exercisable at any time and from time to time, in whole or in part, during the four and one-half year period commencing 180 days from the commencement of sales of the shares of common stock in this offering.
The Representative’s Warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(e)(1)(A) of FINRA. The Representative (or permitted assignees under Rule 5110(e)(2)) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will they engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days following the commencement of sales of the securities issued in this offering. In addition, the Representative’s Warrants provide for registration rights upon request, in certain cases. The sole demand registration right provided will not be greater than five years from the commencement of sales of the securities issued in this offering in compliance with FINRA Rule 5110(g)(8)(C). The piggyback registration rights provided will not be greater than seven years from the commencement of sales of the securities issued in this offering in compliance with FINRA Rule 5110(g)(8)(D). We will bear all fees and expenses attendant to registering the securities issuable on exercise of the warrants other than underwriting commissions incurred and payable by the holders. The exercise price and number of shares issuable upon exercise of the Representative’s Warrants may be adjusted in certain circumstances including in the event of a stock dividend or our recapitalization, reorganization, merger or consolidation. However, the Representative’s Warrant exercise price or underlying shares will not be adjusted for issuances of shares of common stock at a price below the warrant exercise price.
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Lock-Up Agreements
Pursuant to “lock-up” agreements, we, and our executive officers and directors and certain beneficial owners of 5% or more of our common stock, have agreed, without the prior written consent of the Representative, not to, directly or indirectly, offer to sell, sell, pledge, or otherwise transfer or dispose of any of shares of (or enter into any transaction or device that is designed to, or could be expected to, result in the transfer or disposition by any person at any time in the future of) our common stock, enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of shares of our common stock, make any demand for or exercise any right or cause to be filed a registration statement, including any amendments thereto, with respect to the registration of any shares of common stock or securities convertible into or exercisable or exchangeable for shares of common stock or any other of our securities or publicly disclose the intention to do any of the foregoing, subject to customary exceptions, for, with respect to us and our executive officers and directors, a period of 180 days from the date of this prospectus, and, with respect to us and certain of our 5% or more stockholders, a period of 90 days from the date of this prospectus.
Right of First Refusal
Until 24 months from the closing date of this offering, the Representative will have an irrevocable right of first refusal, in its sole discretion, to act as sole investment banker, sole book-runner, and/or sole placement agent, at the Representative’s sole discretion, for each and every future public and private equity and debt offering, including all equity linked financings, during such 24 month period, on terms customary to the representative. The Representative will have the sole right to determine whether or not any other broker-dealer will have the right to participate in any such offering and the economic terms of any such participation. The Representative will not have more than one opportunity to waive or terminate the right of first refusal in consideration of any payment or fee. If the underwriting agreement is terminated for cause by the Company, the right of first refusal shall be terminated as provided in FINRA Rule 5110(g)(5)(B).
Tail Financing Payments
We have also agreed to pay the Representative a tail fee equal to the cash and warrant compensation in this offering, if any investor who was contacted or introduced to us by the Representative during the term of its engagement, provides us with capital in any public or private offering or other financing or capital raising transaction during the 12-month period following the termination or expiration of our engagement agreement with the Representative.
Discretionary Accounts
The underwriters do not intend to confirm sales of the shares of common stock offered hereby to any accounts over which they have discretionary authority.
Determination of Offering Price
The public offering price of the shares of our common stock that we are offering was negotiated between us and the Representative based on, among other things, the trading price of our common stock prior to the offering. Other factors considered in determining the public offering price of the shares of our common stock include our history and prospects, the stage of development of our business, our business plans for the future and the extent to which they have been implemented, an assessment of our management, general conditions of the securities markets at the time of the offering, and such other factors as were deemed relevant.
Listing
We have applied to list our common stock on the NYSE American under the proposed symbol “BMNR.” The listing of our common stock on the NYSE American or another securities exchange is a condition of this offering.
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Other
From time to time, certain of the underwriters and/or their affiliates may in the future provide, various investment banking and other financial services for us for which they may receive customary fees. In the course of their businesses, the underwriters and their affiliates may actively trade our securities or loans for their own account or for the accounts of customers, and, accordingly, the underwriters and their affiliates may at any time hold long or short positions in such securities or loans. Except for services provided in connection with this offering, no underwriter has provided any investment banking or other financial services to us during the 180-day period preceding the date of this prospectus and we do not expect to retain any underwriter to perform any investment banking or other financial services for at least 90 days after the date of this prospectus.
Price Stabilization, Short Positions and Penalty Bids
In connection with this offering, the underwriters may engage in transactions that stabilize, maintain, or otherwise affect the price of our common stock. Specifically, the underwriters may over-allot in connection with this offering by selling more shares than are set forth on the cover page of this prospectus. This creates a short position in our common stock for its own account. The short position may be either a covered short position or a naked short position. In a covered short position, the number of shares of common stock overallotted by the underwriters is not greater than the number of shares of common stock that they may purchase in the overallotment option. In a naked short position, the number of shares of common stock involved is greater than the number of shares of common stock in the overallotment option. To close out a short position, the underwriters may elect to exercise all or part of the overallotment option. The underwriters may also elect to stabilize the price of our common stock or reduce any short position by bidding for, and purchasing, common stock in the open market.
The underwriters may also impose a penalty bid. This occurs when a particular underwriter or dealer repays selling concessions allowed to it for distributing shares of common stock in this offering because the underwriter repurchases the shares of common stock in stabilizing or short covering transactions.
Finally, the underwriters may bid for, and purchase, shares of our common stock in market making transactions, including “passive” market making transactions as described below.
These activities may stabilize or maintain the market price of our common stock at a price that is higher than the price that might otherwise exist in the absence of these activities. The underwriters are not required to engage in these activities, and may discontinue any of these activities at any time without notice. These transactions may be effected on the national securities exchange on which our shares of common stock are traded, in the over-the-counter market, or otherwise.
Indemnification
We have agreed to indemnify the underwriters against liabilities relating to this offering arising under the Securities Act and the Exchange Act, liabilities arising from breaches of some, or all of the representations and warranties contained in the underwriting agreement, and to contribute to payments that the underwriters may be required to make for these liabilities.
Electronic Distribution
This prospectus in electronic format may be made available on websites or through other online services maintained by one or more of the underwriters, or by their affiliates. Other than this prospectus in electronic format, the information on any underwriter’s website and any information contained in any other website maintained by an underwriter is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter in its capacity as underwriter, and should not be relied upon by investors.
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Offer Restrictions Outside the United States
Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Australia
This prospectus is not a disclosure document under Chapter 6D of the Australian Corporations Act, has not been lodged with the Australian Securities and Investments Commission and does not purport to include the information required of a disclosure document under Chapter 6D of the Australian Corporations Act. Accordingly, (i) the offer of the securities under this prospectus is only made to persons to whom it is lawful to offer the securities without disclosure under Chapter 6D of the Australian Corporations Act under one or more exemptions set out in section 708 of the Australian Corporations Act, (ii) this prospectus s made available in Australia only to those persons as set forth in clause (i) above, and (iii) the offeree must be sent a notice stating in substance that by accepting this offer, the offeree represents that the offeree is such a person as set forth in clause (i) above, and, unless permitted under the Australian Corporations Act, agrees not to sell or offer for sale within Australia any of the securities sold to the offeree within 12 months after its transfer to the offeree under this prospectus.
Canada
The shares of common stock may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
China
The information in this document does not constitute a public offer of the securities, whether by way of sale or subscription, in the People’s Republic of China (excluding, for purposes of this paragraph, Hong Kong Special Administrative Region, Macau Special Administrative Region and Taiwan). The securities may not be offered or sold directly or indirectly in the PRC to legal or natural persons other than directly to “qualified domestic institutional investors.”
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European Economic Area—Belgium, Germany, Luxembourg and Netherlands
The information in this document has been prepared on the basis that all offers of securities will be made pursuant to an exemption under the Directive 2003/71/EC (“Prospectus Directive”), as implemented in Member States of the European Economic Area (each, a “Relevant Member State”), from the requirement to produce a prospectus for offers of securities.
An offer to the public of securities has not been made, and may not be made, in a Relevant Member State except pursuant to one of the following exemptions under the Prospectus Directive as implemented in that Relevant Member State:
| · | to legal entities that are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; | |
| · | to any legal entity that has two or more of (i) an average of at least 250 employees during its last fiscal year; (ii) a total balance sheet of more than €43,000,000 (as shown on its last annual unconsolidated or consolidated financial statements) and (iii) an annual net turnover of more than €50,000,000 (as shown on its last annual unconsolidated or consolidated financial statements); | |
| · | to fewer than 100 natural or legal persons (other than qualified investors within the meaning of Article 2(1)(e) of the Prospectus Directive) subject to obtaining our prior consent or any underwriter for any such offer; or | |
| · | in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of securities shall result in a requirement for the publication by us of a prospectus pursuant to Article 3 of the Prospectus Directive. |
France
This document is not being distributed in the context of a public offering of financial securities (offre au public de titres financiers) in France within the meaning of Article L.411-1 of the French Monetary and Financial Code (Code Monétaire et Financier) and Articles 211-1 et seq. of the General Regulation of the French Autorité des marchés financiers (“AMF”). The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France.
This document and any other offering material relating to the securities have not been, and will not be, submitted to the AMF for approval in France and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in France.
Such offers, sales and distributions have been and shall only be made in France to (i) qualified investors (investisseurs qualifiés) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-1 to D.411-3, D.744-1, D.754-1; and D.764-1 of the French Monetary and Financial Code and any implementing regulation and/or (ii) a restricted number of non-qualified investors (cercle restreint d’investisseurs) acting for their own account, as defined in and in accordance with Articles L.411-2-II-2° and D.411-4, D.744-1, D.754-1; and D.764-1 of the French Monetary and Financial Code and any implementing regulation.
Pursuant to Article 211-3 of the General Regulation of the AMF, investors in France are informed that the securities cannot be distributed (directly or indirectly) to the public by the investors otherwise than in accordance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 to L.621-8-3 of the French Monetary and Financial Code.
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Ireland
The information in this document does not constitute a prospectus under any Irish laws or regulations and this document has not been filed with or approved by any Irish regulatory authority as the information has not been prepared in the context of a public offering of securities in Ireland within the meaning of the Irish Prospectus (Directive 2003/71/EC) Regulations 2005 (the “Prospectus Regulations”). The securities have not been offered or sold, and will not be offered, sold or delivered directly or indirectly in Ireland by way of a public offering, except to (i) qualified investors as defined in Regulation 2(l) of the Prospectus Regulations and (ii) fewer than 100 natural or legal persons who are not qualified investors.
Israel
The securities offered by this prospectus have not been approved or disapproved by the Israeli Securities Authority (the “ISA”), nor have such securities been registered for sale in Israel. The shares may not be offered or sold, directly or indirectly, to the public in Israel, absent the publication of a prospectus. The ISA has not issued permits, approvals or licenses in connection with the offering or publishing the prospectus; nor has it authenticated the details included herein, confirmed their reliability or completeness, or rendered an opinion as to the quality of the securities being offered. Any resale in Israel, directly or indirectly, to the public of the securities offered by this prospectus is subject to restrictions on transferability and must be effected only in compliance with the Israeli securities laws and regulations.
Italy
The offering of the securities in the Republic of Italy has not been authorized by the Italian Securities and Exchange Commission (Commissione Nazionale per le Società e la Borsa, or “CONSOB”) pursuant to the Italian securities legislation and, accordingly, no offering material relating to the securities may be distributed in Italy and such securities may not be offered or sold in Italy in a public offer within the meaning of Article 1.1(t) of Legislative Decree No. 58 of 24 February 1998 (“Decree No. 58”), other than:
| · | to Italian qualified investors, as defined in Article 100 of Decree no.58 by reference to Article 34-ter of CONSOB Regulation no. 11971 of 14 May 1999 (“Regulation no. 1197l”) as amended (“Qualified Investors”); and | |
| · | in other circumstances that are exempt from the rules on public offer pursuant to Article 100 of Decree No. 58 and Article 34-ter of Regulation No. 11971 as amended. |
Any offer, sale or delivery of the securities or distribution of any offer document relating to the securities in Italy (excluding placements where a Qualified Investor solicits an offer from the issuer) under the paragraphs above must be:
| · | made by investment firms, banks or financial intermediaries permitted to conduct such activities in Italy in accordance with Legislative Decree No. 385 of 1 September 1993 (as amended), Decree No. 58, CONSOB Regulation No. 16190 of 29 October 2007 and any other applicable laws; and | |
| · | in compliance with all relevant Italian securities, tax and exchange controls and any other applicable laws. |
Any subsequent distribution of the securities in Italy must be made in compliance with the public offer and prospectus requirement rules provided under Decree No. 58 and the Regulation No. 11971 as amended, unless an exception from those rules applies. Failure to comply with such rules may result in the sale of such securities being declared null and void and in the liability of the entity transferring the securities for any damages suffered by the investors.
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Japan
The securities have not been and will not be registered under Article 4, paragraph 1 of the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948), as amended (the “FIEL”), pursuant to an exemption from the registration requirements applicable to a private placement of securities to Qualified Institutional Investors (as defined in and in accordance with Article 2, paragraph 3 of the FIEL and the regulations promulgated thereunder). Accordingly, the securities may not be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan other than Qualified Institutional Investors. Any Qualified Institutional Investor who acquires securities may not resell them to any person in Japan that is not a Qualified Institutional Investor, and acquisition by any such person of securities is conditional upon the execution of an agreement to that effect.
Portugal
This document is not being distributed in the context of a public offer of financial securities (oferta pública de valores mobiliários) in Portugal, within the meaning of Article 109 of the Portuguese Securities Code (Código dos Valores Mobiliários). The securities have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in Portugal. This document and any other offering material relating to the securities have not been, and will not be, submitted to the Portuguese Securities Market Commission (Comissăo do Mercado de Valores Mobiliários) for approval in Portugal and, accordingly, may not be distributed or caused to distributed, directly or indirectly, to the public in Portugal, other than under circumstances that are deemed not to qualify as a public offer under the Portuguese Securities Code. Such offers, sales and distributions of securities in Portugal are limited to persons who are “qualified investors” (as defined in the Portuguese Securities Code). Only such investors may receive this document and they may not distribute it or the information contained in it to any other person.
Sweden
This document has not been, and will not be, registered with or approved by Finansinspektionen (the Swedish Financial Supervisory Authority). Accordingly, this document may not be made available, nor may the securities be offered for sale in Sweden, other than under circumstances that are deemed not to require a prospectus under the Swedish Financial Instruments Trading Act (1991:980) (Sw. lag (1991:980) om handel med finansiella instrument). Any offering of securities in Sweden is limited to persons who are “qualified investors” (as defined in the Financial Instruments Trading Act). Only such investors may receive this document, and they may not distribute it or the information contained in it to any other person.
Switzerland
The securities may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering material relating to the securities may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering material relating to the securities have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of securities will not be supervised by, the Swiss Financial Market Supervisory Authority (FINMA).
This document is personal to the recipient only and not for general circulation in Switzerland.
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United Arab Emirates
Neither this document nor the securities have been approved, disapproved or passed on in any way by the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates, nor have we received authorization or licensing from the Central Bank of the United Arab Emirates or any other governmental authority in the United Arab Emirates to market or sell the securities within the United Arab Emirates. This document does not constitute and may not be used for the purpose of an offer or invitation. No services relating to the securities, including the receipt of applications and/or the allotment or redemption of such securities, may be rendered within the United Arab Emirates by us.
No offer or invitation to subscribe for securities is valid or permitted in the Dubai International Financial Centre.
United Kingdom
Neither the information in this document nor any other document relating to the offer has been delivered for approval to the Financial Services Authority in the United Kingdom and no prospectus (within the meaning of section 85 of the Financial Services and Markets Act 2000, as amended (“FSMA”)) has been published or is intended to be published in respect of the securities. This document is issued on a confidential basis to “qualified investors” (within the meaning of section 86(7) of FSMA) in the United Kingdom, and the securities may not be offered or sold in the United Kingdom by means of this document, any accompanying letter or any other document, except in circumstances which do not require the publication of a prospectus pursuant to section 86(1) FSMA. This document should not be distributed, published or reproduced, in whole or in part, nor may its contents be disclosed by recipients to any other person in the United Kingdom.
Any invitation or inducement to engage in investment activity (within the meaning of section 21 of FSMA) received in connection with the issue or sale of the securities has only been communicated or caused to be communicated and will only be communicated or caused to be communicated in the United Kingdom in circumstances in which section 21(1) of FSMA does not apply to us.
In the United Kingdom, this document is being distributed only to, and is directed at, persons (i) who have professional experience in matters relating to investments falling within Article 19(5) (investment professionals) of the Financial Services and Markets Act 2000 (Financial Promotions) Order 2005 (“FPO”), (ii) who fall within the categories of persons referred to in Article 49(2)(a) to (d) (high net worth companies, unincorporated associations, etc.) of the FPO or (iii) to whom it may otherwise be lawfully communicated (together “relevant persons”). The investments to which this document relates are available only to, and any invitation, offer or agreement to purchase will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts, or NI 33-105, the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
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LEGAL MATTERS
FitzGerald Kreditor Bolduc Risbrough LLP, Irvine, California, is acting as counsel to the Company in connection with the registration and offering of the securities offered in this prospectus and, as such, will pass upon the validity of the securities offered in this prospectus. The underwriter is being represented by Greenberg Traurig, P.A., Miami, Florida.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Our financial statements for the fiscal year ended August 31, 2023 was originally audited by BF Borgers CPA PC (“Borgers”). On May 3, 2024, the SEC announced that it had settled charges against Borgers that it failed to conduct audits of a number of public companies in accordance with the standards of the Public Company Accounting Oversight Board. As part of the settlement, Borgers agreed to a permanent ban on appearing or practicing before the SEC. As a result of Borgers’ settlement with the SEC, we dismissed Borgers as its independent account because it is no longer authorized to perform audits for us. The dismissal of Borgers was approved by the audit committee and the full board.
Borgers’ opinion on our financial statements for the fiscal year ended August 31, 2023 did not contain an adverse opinion or a disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit scope, or accounting principles, other than a going concern qualification. For the fiscal year ended August 31, 2023, and any subsequent period until our dismissal of Borgers, there were no disagreements, within the meaning of Item 304 of Regulation S-K, with Borgers on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Borgers, would have caused it to make reference to the subject matter of the disagreements in connection with its reports.
Following our dismissal of Borgers, we engaged Bush & Associates CPA (“Bush”) as our independent registered public accounting firm for the fiscal year ending August 31, 2024, which engagement was effective May 6, 2024. Bush also reaudited our financial statements for the fiscal year ended August 31, 2023. Prior to engaging Bush, neither us nor anyone acting on our behalf consulted with Bush regarding the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, and neither a written report nor oral advice was provided to us that Bush concluded was an important factor considered by us in reaching a decision as to any accounting, auditing, or financial reporting issue.
EXPERTS
The financial statements of Bitmine Immersion Technologies, Inc. as of and for the years ended August 31, 2024 and 2023 included in this registration statement, of which this prospectus forms a part, have been audited by Bush and Associates CPA, independent registered public accounting firm, as set forth in their report appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in auditing and accounting in giving said report.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the common stock offered in this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed herewith. For further information about us and the common stock offered hereby, we refer you to the registration statement and the exhibits and schedules filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement.
We are subject to the information and periodic and current reporting requirements of the Exchange Act and, in accordance therewith, file periodic reports, proxy statements and other information with the SEC. The SEC maintains a website at www.sec.gov that contains reports, proxy statements and other information regarding companies that file electronically with it. Our periodic and current reports, proxy statements and other information are available at www.sec.gov.
We also maintain a website at bitminetech.io, by which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The reference to our website address does not constitute incorporation by reference of the information contained on our website, and you should not consider the contents of our website in making an investment decision with respect to our common stock. We have included our website address in this prospectus solely as an inactive textual reference.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
Bitmine Immersion Technologies, Inc.
OPINION ON THE FINANCIAL STATEMENTS
We have audited the accompanying balance sheet of Bitmine Immersion Technologies, Inc. (the “Company”) as of August 31, 2024, and 2023, and the related statements of operations, changes in stockholders’ equity and cash flows for the years then ended, including the revision of prior period financial statements as described in Note 9, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of August 31, 2024, and 2023, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
BASIS FOR OPINION
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (“PCAOB”) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and applicable SEC and PCAOB regulations.
We conducted our audit in accordance with PCAOB standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. This included specific procedures to evaluate the effects of the revision restatement described in Note 9, which we determined had no material impact on prior or current period results. We believe that our audit provides a reasonable basis for our opinion.
RESTATEMENT CONSIDERATIONS
The Company revised prior-period financial statements to:
| 1. | Remove the “” presentation designation to comply with SEC Regulation S-X Article 8 | |
| 2. | Enhance disclosures regarding cryptocurrency mining revenue components | |
| 3. | Reclassify certain line items for improved period-to-period comparability |
Our audit procedures confirmed:
| · | No material misstatement in prior periods under SEC Staff Accounting Bulletin 99 criteria | |
| · | $0 impact on reported revenues, net loss, total equity, or cash flows across all restated periods | |
| · | Compliance with ASC 250-10-50-7 requirements for revision restatements | |
| · | Revisions had no affect on total assets/liabilities (immaterial under SAB 99 quantitative thresholds) | |
| · | Reclassifications represent a change in presentation vs. correction of errors |
These changes constitute a revision restatement under ASC 250-10-50-7, which does not require reissuance of prior financial statements or Item 4.02(a) Form 8-K disclosure.
| F-2 |
CRITICAL AUDIT MATTERS
Critical Audit Matter: Timing and Completeness of Cryptocurrency Mining Revenue Recognition
Description of the Matter
The Company generates significant revenue from Bitcoin mining activities, which involves the validation of transactions on the Bitcoin blockchain and the subsequent receipt of newly minted Bitcoins. The revenue recognition of these Bitcoin mining activities is complex due to:
| · | The decentralized nature of the blockchain, | |
| · | The requirement to assess transaction finality thresholds, | |
| · | Mining pool fee reconciliations across multiple platforms, and | |
| · | Automated systems processing over thousands of daily transactions. |
These complexities required significant auditor judgment to evaluate the timing and completeness of revenue recognition.
How the Critical Audit Matter Was Addressed in the Audit:
Our audit procedures related to the timing and completeness of cryptocurrency mining revenue recognition included the following:
| · | We evaluated the design of controls over the process for recording Bitcoin transactions. | |
| · | We traced randomly selected mined blocks to publicly available blockchain explorers to verify transaction finality. | |
| · | We obtained evidence of ownership by verifying the Company's control over the public addresses associated with its Bitcoin holdings. | |
| · | We tested mining pool fee calculations for major pools to ensure accurate net revenue recognition. | |
| · | We performed procedures to test the completeness and accuracy of the Bitcoin transaction data used in the Company's accounting records. | |
| · | We assessed reconciliation processes for transaction completeness by comparing mining pool reports to recorded revenues in the Company’s accounting records. |
Auditor’s Evaluation:
Our procedures confirmed that management’s application of ASC 606 revenue recognition criteria remained consistent across periods.
Timing differences identified during our testing were immaterial, representing 0.35% of annual revenue. Disclosures in Note 2 explicitly
state the six-confirmation threshold used for recognizing Bitcoin mining revenue, ensuring compliance with ASC 606. Additionally, we verified
that the restatement adjustments described in Note 9 were properly classified as voluntary presentation changes under ASC 250-10-50-7,
with no material impact on prior or current period results.
/s/Bush & Associates CPA LLC
We have served as the Company’s auditor since 2024.
Henderson, Nevada
April 3, 2025
PCAOB ID Number 6797
| F-3 |
Bitmine Immersion Technologies, Inc.
Balance Sheets
| August 31, | August 31, | |||||||
| 2024 | 2023 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 499,270 | $ | 270,547 | ||||
| Prepaid expenses | 675,000 | 105,000 | ||||||
| Cryptocurrency | 14,966 | 129,469 | ||||||
| Notes receivable related party - short term | 374,444 | 374,444 | ||||||
| Total current assets | 1,563,679 | 879,460 | ||||||
| Notes receivable - long term | – | 731,472 | ||||||
| Notes receivable - related party long term | 280,834 | 655,277 | ||||||
| Investment in joint venture | 667,707 | 987,429 | ||||||
| Fixed assets, net of accumulated depreciation | 1,699,744 | 495,702 | ||||||
| Fixed assets - not in service | 3,071,565 | 4,453,466 | ||||||
| Total assets | $ | 7,283,529 | $ | 8,202,806 | ||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 400,584 | $ | 74,904 | ||||
| Accrued interest - related party | 315,609 | 97,460 | ||||||
| Customer advances - related party | 703,500 | – | ||||||
| Loans payable - related party | 1,625,000 | 1,300,000 | ||||||
| Deferred revenue - short term | 86,193 | 86,193 | ||||||
| Total current liabilities | 3,130,885 | 1,558,557 | ||||||
| Deferred revenue long term | 64,645 | 386,884 | ||||||
| Total liabilities | 3,195,530 | 1,945,441 | ||||||
| Commitments and contingencies | – | – | ||||||
| Stockholders' Equity: | ||||||||
| Series A Preferred Stock, $0.0001 par value, 500,000 shares authorized, 453,966 and 453,966 shares issued and outstanding as of August 31, 2024 and August 31, 2023, respectively | 45 | 45 | ||||||
| Common stock, $0.0001 par value, 500,000,000 shares authorized; 49,912,607 and 49,665,649 shares issued and outstanding as of August 31, 2024 and August 31, 2023, respectively | 4,991 | 4,967 | ||||||
| Additional paid-in capital | 12,306,833 | 11,183,803 | ||||||
| Accumulated deficit | (8,223,870 | ) | (4,931,450 | ) | ||||
| Total stockholders' equity | 4,087,999 | 6,257,365 | ||||||
| Total liabilities and equity | $ | 7,283,529 | $ | 8,202,806 | ||||
The accompanying notes are an integral part of these financial statements.
| F-4 |
Bitmine Immersion Technologies, Inc.
Statements of Operations
| Year | Year | |||||||
| Ended | Ended | |||||||
| August 31, | August 31, | |||||||
| 2024 | 2023 | |||||||
| Restated | Restated | |||||||
| Revenue from the sale of mining equipment | $ | 231,133 | $ | 244,036 | ||||
| Revenue from hosting | 48,305 | 12,020 | ||||||
| Revenue from self-mining | 3,030,910 | 389,222 | ||||||
| Total revenue | 3,310,348 | 645,278 | ||||||
| Cost of sales mining equipment | 180,891 | 87,080 | ||||||
| Cost of sales self-mining | 2,330,752 | 326,630 | ||||||
| Cost of sales hosting | 37,678 | 9,098 | ||||||
| Gross profit | 761,027 | 222,469 | ||||||
| Operating expenses: | ||||||||
| General and administrative expenses | 164,228 | 45,008 | ||||||
| Depreciation | 923,545 | 470,705 | ||||||
| Marketing expense | – | 214,550 | ||||||
| Investor relations | 178,190 | – | ||||||
| Travel expense | 27,746 | 34,431 | ||||||
| Professional fees | 615,256 | 456,323 | ||||||
| Officer’s compensation | 841,106 | 951,106 | ||||||
| Director’s compensation | 52,800 | 13,200 | ||||||
| Employee shareholder’s compensation | 399,447 | 345,440 | ||||||
| Impairment of fixed assets | 120,000 | 122,950 | ||||||
| Realized gain from the sale of bitcoin | (113,803 | ) | (21,682 | ) | ||||
| Impairment of cryptocurrency | – | 3,523 | ||||||
| Total operating expenses | 3,208,513 | 2,635,553 | ||||||
| Loss from operations | (2,447,485 | ) | (2,413,083 | ) | ||||
| Other income (expense) | ||||||||
| Interest expense | (268,578 | ) | (97,460 | ) | ||||
| Loss on the extinguishment of debt | (355,123 | ) | – | |||||
| Loss on investment in joint venture | (311,313 | ) | – | |||||
| Gain on note settlement | 35,379 | – | ||||||
| Other income | – | 16,939 | ||||||
| Interest income | 54,617 | 28,720 | ||||||
| Other (expense), net | (845,018 | ) | (51,801 | ) | ||||
| Net loss | $ | (3,292,503 | ) | $ | (2,464,884 | ) | ||
| Basic and diluted (loss) per common share | $ | (0.07 | ) | $ | (0.05 | ) | ||
| Weighted-average number of common shares outstanding: | ||||||||
| Basic and diluted | 49,878,610 | 49,055,973 | ||||||
The accompanying notes are an integral part of these financial statements.
| F-5 |
Bitmine Immersion Technologies, Inc.
Statements of Changes in Stockholders' Equity
| Additional | Total | |||||||||||||||||||||||||||
| Series A Preferred | Common Stock | Paid-in | Accumulated | Stockholders' | ||||||||||||||||||||||||
| Shares | Value | Shares | Value | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance, August 31, 2022 | 453,966 | $ | 45 | 48,606,915 | $ | 4,861 | $ | 9,865,865 | $ | (2,466,566 | ) | $ | 7,404,205 | |||||||||||||||
| Common stock issued for services -related party | – | – | 408,735 | 41 | 190,897 | – | 190,938 | |||||||||||||||||||||
| Common shares issued for services | – | – | 650,000 | 65 | 285,935 | – | 286,000 | |||||||||||||||||||||
| Stock based compensation -related party | – | – | – | – | 841,106 | – | 841,106 | |||||||||||||||||||||
| Net loss | – | – | – | – | – | (2,464,884 | ) | (2,464,884 | ) | |||||||||||||||||||
| Balance, August 31, 2023 | 453,966 | $ | 45 | 49,665,649 | $ | 4,967 | $ | 11,183,803 | $ | (4,931,450 | ) | $ | 6,257,365 | |||||||||||||||
| Additional | Total | |||||||||||||||||||||||||||
| Series A Preferred | Common Stock | Paid-in | Accumulated | Stockholders' | ||||||||||||||||||||||||
| Shares | Value | Shares | Value | Capital | Deficit | Equity | ||||||||||||||||||||||
| Balance, August 31, 2023 | 453,966 | $ | 45 | 49,665,649 | $ | 4,967 | $ | 11,183,803 | $ | (4,931,450 | ) | $ | 6,257,365 | |||||||||||||||
| Miscellaneous reclassification adjustment | – | – | – | – | (83 | ) | 83 | – | ||||||||||||||||||||
| Stock based compensation -related parties | – | – | 246,958 | 24 | 1,123,114 | – | 1,123,138 | |||||||||||||||||||||
| Net loss | – | – | – | – | – | (3,292,503 | ) | (3,292,503 | ) | |||||||||||||||||||
| Balance, August 31, 2024 | 453,966 | $ | 45 | 49,912,607 | $ | 4,991 | $ | 12,306,833 | $ | (8,223,870 | ) | $ | 4,087,999 | |||||||||||||||
The accompanying notes are an integral part of these financial statements.
| F-6 |
Bitmine Immersion Technologies, Inc.
Statements of Cash Flows
| Year | Year | |||||||
| Ended | Ended | |||||||
| August 31, | August 31, | |||||||
| 2024 | 2023 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | (3,292,503 | ) | $ | (2,464,884 | ) | ||
| Stock based compensation | 1,123,138 | 1,318,044 | ||||||
| Gain on note settlement | (35,379 | ) | – | |||||
| Depreciation | 923,545 | 470,705 | ||||||
| Loss on the sale of equipment | 31,641 | – | ||||||
| Loss on investment in joint venture | 311,313 | – | ||||||
| Change in balance sheet accounts | ||||||||
| Impairment of fixed assets | 120,000 | 122,950 | ||||||
| Cryptocurrencies | (225,021 | ) | (108,035 | ) | ||||
| Notes receivable | 374,443 | (123,938 | ) | |||||
| Prepaid expenses | (570,000 | ) | (100,000 | ) | ||||
| Accounts payable and accrued expenses | 374,616 | (9,858 | ) | |||||
| Customer advances | 703,500 | – | ||||||
| Deferred revenue | (86,193 | ) | (12,158 | ) | ||||
| Accrued interest - related party | 218,149 | 97,460 | ||||||
| Net cash (used in) operating activities | (28,753 | ) | (809,715 | ) | ||||
| Cash flows from investing activities | ||||||||
| Return of capital on joint venture | 8,408 | – | ||||||
| Purchase of fixed assets | (75,934 | ) | (612,288 | ) | ||||
| Net cash (used in) investing activities | (67,525 | ) | (612,288 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Related party loans | 325,000 | 1,300,000 | ||||||
| Net cash provided by financing activities | 325,000 | 1,300,000 | ||||||
| Net increase (decrease) in cash and cash equivalents | 228,723 | (122,003 | ) | |||||
| Cash and cash equivalents at beginning of period | 270,547 | 392,550 | ||||||
| Cash and cash equivalents at end of period | $ | 499,270 | $ | 270,547 | ||||
| Supplemental disclosure of non-cash investing and financing activity | ||||||||
| Proceeds received from bitcoin loan | $ | 577,934 | $ | – | ||||
| Repayment of bitcoin loan in bitcoin | $ | 577,934 | $ | – | ||||
| Purchase of equipment with bitcoin | $ | 339,525 | $ | – | ||||
| Repossession of equipment to satisfy notes receivable | $ | 530,805 | $ | – | ||||
| Payment of an accrued liability to a related party with equipment | $ | 48,938 | $ | – | ||||
| Sale of fixed assets for note receivable | $ | – | $ | 613,514 | ||||
| Property contributed to joint venture | $ | – | $ | 987,429 | ||||
The accompanying notes are an integral part of these financial statements.
| F-7 |
BITMINE IMMERSION TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT POLICIES
About Bitmine Immersion Technologies, Inc.
Bitmine Immersion Technologies Inc. f/k/a Sandy Springs Holdings, Inc. (“Bitmine” or the “Company”) is a Delaware corporation that commenced operations on July 16, 2020. A predecessor to the Company was incorporated in the state of Nevada on August 16, 1995, as Interactive Lighting Showrooms, Inc.
By a written consent dated July 16, 2021, holders of a majority of the Company’s issued and outstanding common stock approved a resolution to appoint Jonathan Bates, Raymond Mow, Michael Maloney, and Seth Bayles to the board of directors of the Company, and to appoint Jonathan Bates as Chairman, Seth Bayles as Corporate Secretary, Raymond Mow as Chief Financial Officer, and Ryan Ramnath as Chief Operating Officer (collectively, the “New O&Ds”). Erik S. Nelson remained a director and the chief executive officer. At the same time, the shareholders approved the issuance of 32,994,999 shares of common stock in the Company’s offering of common stock at $0.015 per share, and the grant of 4,750,000 shares for services, which were valued at $0.015 per share. As a result of the foregoing stock issuances, the New O&Ds (or entities controlled by them) collectively acquired 24,893,877 shares of common stock, which represented approximately 62% of the issued and outstanding shares at the time.
The appointment of certain of the New O&Ds to the Company’s board, and issuance to the New O&Ds of a controlling interest in the Company, were made in order to enable the Company to enter the business of creating a hosting center for bitcoin mining computers primarily utilizing immersion cooling technology, as well mining the bitcoin digital currency for its own account. Prior to the change of control to the New O&Ds, the Company was a shell company.
During the fiscal year ended August 31, 2022, the Company began implementing its business plan by generating revenue from the mining of bitcoin digital currency, hosting a third party bitcoin miner and the sale of mining equipment.
The Company’s year-end is August 31st.
Basis of Presentation
The accompanying financial statements have been prepared in accordance with the Financial Accounting Standards Board (“FASB”) “FASB Accounting Standard Codification™” (the “Codification”) which is the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) in the United States.
| F-8 |
Reverse Stock Split
On June 25, 2020, the Board of Directors and the shareholders of the Company approved a 1 for 40,000 reverse split, with all fractional shares rounded up to the nearest whole share, and immediately after the completion of the reverse split, effected a 200 for 1 forward stock split. The net effect of the splits was a 1 for 200 reverse split of the Company’s common shares. The stock splits were effective April 27, 2021. No fractional shares of common stock were issued in connection with the Reverse Split. If, as a result of the Reverse Split, a shareholder would have otherwise held a fractional share, the shareholder received, instead of the issuance of such fractional share, one whole share of common stock.
The Company’s financial statements in this Report for the periods ended August 31, 2024, and August 31, 2023, and all references thereto have been retroactively adjusted to reflect the split unless specifically stated otherwise.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The most significant estimates relate to the calculation of stock-based compensation, calculation of the Company’s derivative liability, collectability of notes receivable, useful lives and recoverability of long-lived assets, depreciation methods, income taxes and contingencies. The Company bases its estimates on historical experience, known or expected trends, and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates. There have been no material changes to the Company’s accounting estimates since the Company’s financial statements for the fiscal year ended August 31, 2024.
Segment Reporting
The Company operates in one segment - the cryptocurrency mining industry. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. All material Company operations qualify for aggregation due to their similar customer base and similarities in economic characteristics, nature of products and services, and procurement, manufacturing and distribution processes.
Revenue Recognition
On July 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). Results for reporting periods beginning after January 1, 2018, are presented under ASC 606.
Revenues from digital currency mining
The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
| · | Step 1: Identify the contract with the customer; | |
| · | Step 2: Identify the performance obligations in the contract; | |
| · | Step 3: Determine the transaction price; | |
| · | Step 4: Allocate the transaction price to the performance obligations in the contract; and | |
| · | Step 5: Recognize revenue when the Company satisfies a performance obligation. |
| F-9 |
Step 1: The Company enters into a contract with a bitcoin mining pool operator (i.e., the customer) to provide hash calculation services to the mining pool. The Company only utilizes pool operators that determine awards under the Full Pay-Per-Share method (the “FPPS method”) . The contracts are terminable at any time by either party without penalty and the Company’s enforceable right to compensation only begins when the Company starts providing hash calculation services to the mining pool operator (which occurs daily at midnight Universal Time Coordinated (UTC)). In general, mining revenue for industry participants consists of two parts, (1) the block reward (current bitcoin block reward is 3.125 bitcoin) paid by the network to the miner for successfully mining a block, and (2) the transaction fees paid by the users to the miner for successfully mining a block. When a mining pool successfully finds a block, it is awarded all of the transaction fees in that block and the reward from the network. Under the FPPS method utilized by the Company, the Company is entitled to an award of bitcoin equal to the expected reward per block over the measurement period of midnight-to-midnight UTC time based on the hash calculation services provided to the pool during the measurement period. The Company is also entitled to an aware of transaction fees per block based on the average of the transaction fees over the latest 144 blocks, each of which is about 10 minutes, and the total of 144 blocks equals one day. At the end of each day that runs from midnight-to-midnight UTC time, the pool operator calculates the pool participant’s expected block reward and transaction fees for the day based on the hash calculation services provided by the pool participant that day, less net digital asset fees due to the mining pool operator over the measurement period. The actual reward to the Company each day is based on the number of blocks the Company should have hypothetically mined during the measurement period based on the hash calculation services provided to the pool by the Company during the measurement period and the prevailing difficulty index, and is not based on the actual rewards received by the pool during the measurement period, which may be higher or lower than the expected rewards during such period. Applying the criteria per ASC 606-10-25-1, the contract arises at the point that the Company provides hash calculation services to the mining pool operator, which is the beginning of each contract day at midnight UTC (contract inception), because customer consumption is in tandem with daily delivery of the hash calculation services. Providing hash calculation services to mining pools is an output of our ordinary activities, and an enforceable right to compensation begins when, and continues as long as, such services are provided.
Step 2: In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:
| · | The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct); and | |
| · | The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract). |
Based on these criteria, the Company has a single performance obligation in providing hash calculation services (i.e., hashrate) to the mining pool operator (i.e., customer). The performance obligation of hash calculation services is fulfilled daily over-time, as opposed to a point in time, because the Company provides the hashrate throughout the day and the customer simultaneously obtains control of it and uses the asset to produce bitcoin. The Company has full control of the mining equipment utilized in the mining pool and if the Company determines it will increase or decrease the processing power of its machines and/or fleet (i.e., for repairs or when power costs are excessive) the hash calculation services provided to the customer will be reduced.
| F-10 |
Step 3: The transaction consideration the Company earns is non-cash digital consideration in the form of bitcoin, which is based on the Full-Pay-Per-Share (“FPPS”) payout method under the contract with the pool operator. According to the customer contract, daily settlements are calculated from midnight-to-midnight UTC time, and the amount due in bitcoin is credited to the Company’s account shortly thereafter on the following day. The amount of bitcoin the Company is entitled to for providing hash calculations to the Customer's mining pool under the FPPS payout method is made up of block rewards and transaction fees less mining pool fees determined as follows:
| · | The non-cash consideration calculated as a block reward over the continuously renewed contract periods is based on the total blocks expected to be generated on the Bitcoin Network for the daily 24-hour period beginning midnight UTC and ending 23:59:59 UTC in accordance with the following formula: the hash calculations that the Company provides to the Customer as a percent of the Bitcoin Network’s implied hash calculations as determined by the network difficulty, multiplied by the total Bitcoin Network block rewards expected to be generated for the same period. | |
| · | The non-cash consideration calculated as transaction fees paid by transaction requestors is based on the share of total actual fees paid over the continuously renewed contract periods beginning midnight UTC and ending 23:59:59 UTC in accordance with the following formula: total actual transaction fees generated on the Bitcoin Network during the contract period as a percent of total block rewards the Bitcoin Network actually generated during the same period, multiplied by the block rewards we earned for the same period noted above. | |
| · | The sum of the block reward and transaction fees earned by the Company is reduced by mining pool fees charged by the Customer for operating the mining pool based on a rate schedule per the mining pool contract. The mining pool fee is only incurred to the extent we perform hash calculations and generate revenue in accordance with the Customer’s payout formula during the continuously renewed contract periods beginning mid-night UTC and ending 23:59:59 UTC daily. During the year ending August 31, 2024, the Company utilized one mining pool for its self-mining operations, which charges 0.3% of the bitcoin payable to the Company as a pool management fee. This amount represents consideration paid to the Customer and is thus reported as a reduction in revenue as the Company does not receive a distinct good or service from the mining pool operator in exchange. |
There are no other forms of variable considerations, such as discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties, or other similar items.
The above non-cash consideration is variable in accordance with paragraphs ASC 606-10-32-5 to 606-10-32-7, since the amount of block reward earned depends on the amount of hash calculations we perform; the amount of transaction fees we are entitled to depends on the actual Bitcoin Network transaction fees over the same 24-hour period; and the operator fees for the same 24-hour period are variable since it is determined based on the total block rewards and transaction fees in accordance with the pool operator’s agreement. While the non-cash consideration is variable, the Company has the ability to estimate the variable consideration at contract inception with reasonable certainty without the risk of significant revenue reversal. The Company does not constrain this variable consideration because it is probable that a significant reversal in the amount of revenue recognized from the contract will not occur when the uncertainty is subsequently resolved and recognizes the non-cash consideration on the same day that control of the service is transferred, which is the same day as contract inception.
The Company measures the non-cash consideration based on the spot rate of bitcoin determined using the Company’s primary trading platform for bitcoin at mid-night UTC on the day of contract inception. The Company recognizes non-cash consideration on the same day that control of the contracted service is transferred to the pool operator, which is the same day as the contract inception.
| F-11 |
Step 4: The transaction price is allocated to the single performance obligation upon verification for the provision of hash calculation services to the mining pool operator. There is a single performance obligation (i.e., hash calculation services or hashrate) for the contract; therefore, all consideration from the mining pool operator is allocated to this single performance obligation.
Step 5: The Company’s performance is complete in transferring the hash calculation services over-time (midnight to midnight UTC) to the customer and the customer obtains control of that asset.
In exchange for providing hash calculation services, the Company is entitled to the expected bitcoin awards earned over the measurement period, plus the expected global transaction fee rewards for the respective measurement period, less net digital asset fees due to the mining pool operator over the measurement period. The transaction consideration the Company receives is non-cash consideration, in the form of bitcoin. Prior to March 1, 2024, the Company measured the bitcoin at the closing U.S. dollar spot rate at the end of the date earned (midnight UTC). As of March 1, 2024, the Company began measuring the bitcoin at the opening U.S. dollar spot rate at the beginning of the date earned (midnight UTC). The change in method of calculating revenues from bitcoin mining did not result in material change in the revenues reported.
There are no deferred revenues or other liability obligations recorded by the Company since there are no payments in advance of the performance. At the end of the 24 hour “midnight-to-midnight” period, there are no remaining performance obligations.
During the year ending August 31, 2024, the Company utilized one mining pool for its self-mining operations, which charges 0.3% of the bitcoin payable to the Company as a pool management fee. During the year ended August 31, 2024, the Company generated $3,030,910 in revenues from mining cryptocurrency. the year ended August 31, 2023, the Company generated $389,222 in revenues from mining cryptocurrency.
Revenues from Hosting
The Company provides energized space to customers who locate their equipment within the Company’s co-hosting facility. The equipment generating the hosting revenue is owned by the customer. The Company gives hosting customers the option of having all mining proceeds paid into a cold wallet address in the Company’s name, which case the Company pays the hosting client its share of mining awards on a daily basis, or having all mining awards sent to an account of the customer, in which case the Company bills the customer monthly for any hosting fee that is contingent on the amount of the client’s award. All performance obligations are achieved simultaneously by providing the hosting environment for the customers’ operations. Hosting revenues consist of amounts billed in U.S. dollars for electricity and other fees, and a percentage of cryptocurrency generated by the client’s hosting activities. With regard to hosting revenues that are billed in U.S. dollars, revenues are recorded at the time of invoicing. With regard to hosting revenues that are based on a percentage of cryptocurrency generated by the customer, revenues are recorded based on the Company’s share of cryptocurrency received from the mining pool on the date of receipt or invoicing.
During the year ending August 31, 2024, the Company generated $48,305 in revenues from hosting services.
Revenues from the sale of mining equipment
The Company records revenue from the resale of mining equipment it has purchased. Revenue for the sale of mining equipment is recognized under the guidelines of ASC 606. During the year ended August 31, 2024, the Company generated $231,133 in revenues from the sale of mining equipment.
Cash and cash equivalents
The Company considers all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. On August 31, 2024, and August 31, 2023, respectively, the Company’s cash equivalents totaled $499,270 and $270,547, respectively.
| F-12 |
Cryptocurrency
Cryptocurrencies held are accounted for as intangible assets with indefinite useful lives. An intangible asset with an indefinite useful life is not amortized but assessed for impairment quarterly events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value, which is measured using the quoted price of the cryptocurrency at the time its fair value is being measured. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses, if the price of cryptocurrency increases, is not permitted. During the years ending August 31, 2024 and 2023, the Company realized impairment losses of $-0- and $3,523, respectively. During the years ending August 31, 2024 and 2023, the Company realized gains from the sale of cryptocurrency of $113,803 and $21,682, respectively. The Company classifies cryptocurrencies as current assets because it reasonably expects to sell or exchange all cryptocurrencies within one quarter.
Cryptocurrency earned by the Company through its mining activities are included within operating activities on the accompanying statements of cash flows. The sales of digital currencies are included within investing activities in the accompanying statements of cash flows and any realized gains or losses from such sales are included in other income (expense) in the statements of operations and comprehensive income (loss). The Company accounts for its gains or losses in accordance with the moving weighted average method of accounting.
The Company holds its cryptocurrencies in an account at Bitgo Trust (“Bitgo”), a well-known bitcoin custodian, which it also uses to liquidate its bitcoin when necessary. The Company also has an account with Gemini Trust Company, LLC, which is a qualified custodian regulated by the New York Department of Financial Services as a backup facility, and may hold bitcoin from time to time in a cold storage wallet. The Company uses Bitgo’s multi-signature feature for account access.
Prepaid expenses
Prepaid expenses are amounts paid to secure the use of assets or the receipt of services at a future date or continuously over one or more future periods. When the prepaid expenses are eventually consumed, they are charged to expense. Prepaid expenses are recorded at fair market value. As of August 31, 2024, and August 31, 2023, the balances of prepaid expenses were $675,000 and $105,000 respectively.
Customer advances
The Company defers revenues when cash payments are received in advance of the Company’s performance obligation required under the guidelines of ASC 606. Customer advances of $703,500 as of August 31, 2024 relate solely to an advance cash payment received from the Company’s customer for the delivery by the Company of certain transformers subject to the terms of a purchase order.
Income taxes
The Company accounts for income taxes under FASB ASC 740, “Accounting for Income Taxes”. Under FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. FASB ASC 740-10-05, “Accounting for Uncertainty in Income Taxes” prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. The Company assesses the validity of its conclusions regarding uncertain tax positions quarterly to determine if facts or circumstances have arisen that might cause it to change its judgment regarding the likelihood of a tax position’s sustainability under audit.
| F-13 |
Stock-based Compensation
The Company accounts for stock-based compensation using the fair value method following the guidance outlined in Section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service.
Net Loss per Share
Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, “Earnings per Share.” Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding.
Stock Purchase Warrants
The Company accounts for warrants issued to purchase shares of its common stock as equity in accordance with FASB ASC 480, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equity. We determine the accounting classification of warrants we issue, as either liability or equity classified, by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, then in accordance with ASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate us to settle the warrants or the underlying shares by paying cash or other assets, and warrants that must or may require settlement by issuing variable number of shares. If warrants do not meet the liability classification under ASC 480-10, we assess the requirements under ASC 815-40, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature.
If the warrants do not require liability classification under ASC 815-40, in order to conclude equity classification, we also assess whether the warrants are indexed to our common stock and whether the warrants are classified as equity under ASC 815-40 or other GAAP. After all such assessments, we conclude whether the warrants are classified as liability or equity. Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations. Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date. We do not have any liability classified warrants as of any period presented.
Property and equipment
Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Estimated useful lives for leasehold improvements are typically the lesser of the estimated useful life of the asset or the life of the term of the lease. The estimated useful lives for all other property and equipment are as follows:
| Schedule of estimated useful lives of property and equipment | ||
| Life (Years) | ||
| Miners and mining equipment | 2 | |
| Machinery and equipment | 5 - 10 | |
| Office and computer equipment | 3 |
| F-14 |
No depreciation is recorded on an asset until it is placed in service. Due to the nature of the equipment, it can only be placed in service when the hosting site is properly configured to turn on the machines. As of August 31, 2024, and August 31, 2023, the Company had $3,071,565 and $4,453,466, respectively, of fixed assets not in service. During the years ended August 31, 2024 and 2023, the Company performed an analysis of the carrying cost of its mining equipment compared to the current market price for the same equipment. As a result, the Company determined that its fixed assets had been impaired by an amount of $120,000 and $122,950 in the years ending August 31, 2024 and 2023, respectively. This amount was recorded as an “impairment of fixed assets” on its statements of operations for the year ended August 31, 2023.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a new lease accounting model for lessees. The updated guidance requires an entity to recognize assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. In March 2019, the FASB issued ASU 2019-01, Codification Improvements, which clarifies certain aspects of the new lease standard. The FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases in July 2018. Also in 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, which provides an optional transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. The amendments have the same effective date and transition requirements as the new lease standard.
We adopted ASC 842 on July 16, 2020. The adoption of this guidance did not have any impact on our financial statements.
In March 2022, the SEC staff released Staff Accounting Bulletin No. 121 (“SAB 121”), which requires entities that hold crypto assets on behalf of platform users to recognize a liability to reflect the entity’s obligation to safeguard the crypto assets held for its platform users, whether directly or through an agent or another third party acting on its behalf, along with a corresponding safeguarding asset. Both the liability and corresponding safeguarding asset shall be measured at fair value. SAB 121 also requires disclosure of the nature and amount of crypto assets being safeguarded, how the fair value is determined, an entity’s accounting policy for safeguarding liabilities and corresponding safeguarding assets, and may require disclosure of other information about risks and uncertainties arising from the entity’s safeguarding activities. The Company is not in the business of holding its customer’s crypto assets for safekeeping. For crypto assets that are not maintained on our platform and for which the Company does not maintain a private key or the ability to recover a customer’s private key, these balances are not recorded, as there is no related safeguarding obligation in accordance with SAB 121. This guidance is effective from the first interim period after June 15, 2022 and should be applied retrospectively. We adopted SAB 121 during the year ended August 31, 2022, and it did not have any impact on our financial statements.
In December 2023, the FASB issued Accounting Standards Update No. 2023-08, Accounting for and Disclosure of Crypto Assets (“ASC 350-60”). ASC 350-60 requires entities with certain crypto assets to subsequently measure such assets at fair value, with changes in fair value recorded in net income (loss) in each reporting period. Crypto assets that meet all the following criteria are within the scope of ASC 350-60:
| (1) | meet the definition of intangible assets as defined in the Codification; | |
| (2) | do not provide the asset holder with enforceable rights to or claims on underlying goods, services, or other assets; | |
| (3) | are created or reside on a distributed ledger based on blockchain or similar technology; | |
| (4) | are secured through cryptography; | |
| (5) | are fungible; and | |
| (6) | are not created or issued by the reporting entity or its related parties. In addition, entities are required to provide additional disclosures about the holdings of certain crypto assets. |
bitcoin, which is the sole crypto asset mined by the Company, meets each of these criteria. For all entities, the ASC 350-60 amendments are effective for fiscal years beginning after December 15, 2024, including interim periods within those years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued (or made available for issuance). If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period. The Company has elected to early adopt the new guidance effective September 1, 2024 resulting in a $-0- cumulative-effect change to adjust the Company's bitcoin held on September 1, 2024.
| F-15 |
NOTE 2 – CRYPTOCURRENCIES
The following table presents additional dollar information about the Company’s bitcoin activity for the years ended August 31, 2024 and 2023:
| Schedule of cryptocurrencies | ||||||||
| BTC | ||||||||
| Beginning balance – August 31, 2022 | $ | 21,434 | 1.1 | |||||
| Revenue received from mining and hosting | 401,242 | 15.4 | ||||||
| Revenue recorded as “other income” from the termination of hosting agreement | 16,939 | 1.0 | ||||||
| Sales of equipment with proceeds received in cryptocurrency | 56,730 | 1.9 | ||||||
| Cash proceeds from the sale of cryptocurrency, net of fees | (149,435 | ) | (3.0 | ) | ||||
| Cryptocurrency used to pay expenses and to purchase equipment | (213,918 | ) | (11.4 | ) | ||||
| Realized gain (loss) from the sale of bitcoin | (3,523 | ) | – | |||||
| Ending balance – August 31, 2023 | $ | 129,469 | 5.0 | |||||
| Beginning balance – August 31, 2023 | 129,469 | 5.0 | ||||||
| Revenue received from mining and hosting | 3,079,215 | 58.4 | ||||||
| Loan proceeds received in cryptocurrency | 527,506 | 19.0 | ||||||
| Distribution from joint venture | 8,408 | 0.2 | ||||||
| Purchase of equipment with cryptocurrency | (339,525 | ) | (12.2 | ) | ||||
| Payments of loan with cryptocurrency | (882,629 | ) | (20.8 | ) | ||||
| Cash proceeds from the sale of cryptocurrency, net of fees | (2,137,738 | ) | (40.2 | ) | ||||
| Cryptocurrency used to pay expenses and to purchase equipment | (483,543 | ) | (9.1 | ) | ||||
| Realized gain (loss) from the sale of bitcoin | 113,803 | – | ||||||
| Ending balance – August 31, 2024 | $ | 14,966 | 0.3 | |||||
NOTE 3 – REVENUE FROM CONTRACTS WITH CUSTOMERS
The following table presents the Company’s revenues disaggregated into categories based on the nature of such revenues:
| Schedule of disaggregation of revenue | ||||||||
| Year Ended August 31, | ||||||||
| 2024 | 2023 | |||||||
| Revenues from the sale of mining equipment | $ | 231,133 | $ | 244,036 | ||||
| Revenue from hosting, net | 48,305 | 12,020 | ||||||
| Revenue from self-mining | 3,030,910 | 389,222 | ||||||
| Total revenue | $ | 3,310,348 | $ | 645,278 | ||||
| F-16 |
NOTE 4 – PROPERTY AND EQUIPMENT
The following table sets forth the components of the Company’s property and equipment at August 31, 2024 and August 31, 2023:
| Schedule of property and equipment | ||||||||||||||||||||||||
| August 31, 2024 | August 31, 2023 | |||||||||||||||||||||||
| Cost | Accumulated Depreciation | Net Book Value | Cost | Accumulated Depreciation | Net Book Value | |||||||||||||||||||
| Equipment | $ | 3,094,076 | $ | (1,394,332 | ) | $ | 1,699,744 | $ | 966,407 | $ | (470,705 | ) | $ | 495,702 | ||||||||||
| Equipment not in service | 3,071,565 | – | 3,071,565 | 4,453,466 | – | 4,453,466 | ||||||||||||||||||
| Total fixed assets | $ | 6,165,641 | $ | (1,394,332 | ) | $ | 4,771,309 | $ | 5,419,873 | $ | (470,705 | ) | $ | 4,949,168 | ||||||||||
Equipment not in service as of August 31, 2024 was comprised of the following:
| Schedule of equipment not in service | ||||
| Transformers | $ | 1,820,760 | ||
| Immersion containers | 1,250,805 | |||
| Total | $ | 3,071,565 | ||
For the years ended August 31, 2024 and August 31, 2023, the Company recorded $923,545 and $470,705, respectively, in depreciation expense.
During the year ended August 31, 2024, material acquisitions and dispositions of equipment include:
| · | Repossession of two immersion containers and related equipment valued at $530,805 due to the foreclosure of a note receivable, which was added back to equipment. See “Note 5. Investments and Notes Receivables.” | |
| · | Impairment of $120,000 of immersion fluid. | |
| · | Purchase of 1,241 miners for $564,709. | |
| · | Of equipment not in service at August 31, 2023, during the six months ended February 29, 2024, the Company: |
| o | placed $851,726 of equipment in service at its Pecos, Texas location; | |
| o | sold 100 S19 Pro+/117/220 to Luxor for $149,250, which had a cost basis of $180,891, for a loss of $31,641 on the sale; and | |
| o | placed $892,042 of equipment in service at its Trinidad location; |
NOTE 5 – INVESTMENTS AND NOTES RECEIVABLES
Policy on Doubtful Accounts
We evaluate notes receivable for impairment under the guidelines of ASC 310-10-35-41. We establish an allowance for doubtful accounts when we determine that collectability of the note is in question.
Investment in Joint Venture
In October 2022, we entered into a joint venture arrangement with ROC Digital Mining to jointly develop and operate a bitcoin mining operation in Pecos, Texas. Under the joint venture, we contributed one immersion container, six transformers and cash with a value of $987,429 as a capital contribution to ROC Digital Mining I, LLC (the “ROC Digital”). In return, we received 240 Class B Units of ROC Digital pursuant to an ongoing offering of a total of 1,000 Class B Units at $4,400 per unit. We simultaneously sold ROC Digital four immersion containers for $1,200,000, which is payable pursuant to a promissory note the bears interest at 5% per annum, and is payable pursuant to monthly payments of $31,204 per month commencing on December 30, 2022, with any remaining principal and interest payable in full on May 31, 2026. The note is secured by the equipment that was sold. We also obtained the right to locate one container at the location that we would be able to use for self-mining.
| F-17 |
ROC Digital is managed by ROC Digital Mining Manager LLC (“ROC Manager”), which owns all of the Class A Units of ROC Digital. The Class A Units have the sole right to vote on any matter that requires a vote of members, including in the selection of the manager. We own 33 1/3% of ROC Manager. ROC Manager has no financial activity and has no impact on our financial statements. ROC Manager is managed by from one to three managers selected by a vote of the members. We do not currently have a representative or designee serving as manager of ROC Manager. However, the operating agreement for ROC Manager provides that ROC Manager may not take a number of actions in relation to ROC Digital without the unanimous consent of its members, such as incurring more than $50,000 of indebtedness, approval of operating budget, filing for bankruptcy, making any material change in ROC Digital’s business, merging, consolidating or combining ROC Digital with another entity, selling off a substantial part of ROC Digital’s assets, amending the operating agreement of ROC Digital, or causing ROC Digital to enter into any agreement with a related party.
Day to day management of the operations of ROC Digital is provided by ROC Digital Mining LLC (“ROC Mining”), an affiliate of ROC Manager in which we do not have an interest. ROC Mining is entitled to a monthly management fee equal to 3% of ROC Digital’s gross revenue, subject to a monthly minimum of $10,000 and a monthly maximum of $15,000. In additional ROC Mining is entitled to an acquisition fee of 1% of the cost of any assets acquired by ROC Digital. A principal of ROC Mining serves on our board of directors.
As of August 31, 2024 the joint venture arrangement was classified as a long term asset on the Company’s balance sheet with a value of $667,707. The site became electrified in June 2023. The reduction in the value of the investment of $311,313 during the year ending August 31, 2024 represents the Company’s approximate 30.3% portion of the ROC Digital’s operating losses during the year. This loss was recorded as “loss on investment” on the Company’s Statements of Operations for the year ended August 31, 2024. During the year ended August 31, 2024, the Company received an in-kind distribution of .01992 bitcoin, valued at $8,408, as a return of capital from the joint venture.
Notes Receivable
Notes receivable consist of notes received as partial consideration for the sale of mining equipment, and are collateralized by the mining equipment that was the subject of the sale. As of August 31, 2024 and August 31, 2023, notes receivable consist of the following:
| Schedule of notes receivable | ||||||||
| As of August 31, 2024 | As of August 31, 2023 | |||||||
| Note receivable with an amended principal amount of $731,472, bearing interest at 5.0% per annum payable monthly. Principal due in one payment on August 31, 2024. Borrower has right to prepay principal with a 10% discount. | $ | – | $ | 731,472 | ||||
| Note receivable-related party in original principal amount of $1,200,000, bearing interest at 5.0% per annum, payable in 41 equal monthly payments of $31,204 commencing December 30, 2022 | 655,277 | 1,029,721 | ||||||
| Total | 655,277 | 1,761,193 | ||||||
| Less: Non-current portion | (280,834 | ) | (1,386,749 | ) | ||||
| Notes receivable – short-term | $ | 374,444 | $ | 374,444 | ||||
As of August 31, 2024 and August 31, 2023 the balance of notes receivable was $655,277 and $1,761,193, respectively. During the years ended August 31, 2024 and 2023, the Company recorded $54,617 and $28,720, respectively, in interest income on these notes.
During the year ending August 31, 2024, the Company declared a default under the $731,472 note and foreclosed on the collateral securing the note. As a result of the foreclosure, the Company recovered equipment valued at $530,805 at the location. Net of the write-off of the $731,472 note receivable, and reversal of $236,046 in deferred revenue associated with this note, the Company recorded a gain of $35,379 due to the foreclosure.
| F-18 |
NOTE 6 – LOANS PAYABLE AND ACCRUED LIABILITIES, RELATED PARTY
Line of Credit from IDI
On October 19, 2022, the Company entered into a Line of Credit Agreement (the “LOC Agreement”) with Innovative Digital Investors Emerging Technology, L.P. (“IDI), a limited partnership controlled by Jonathan Bates, the Company’s Chairman, and Raymond Mow, the Company’s Chief Financial Officer and a Director. The LOC Agreement provided for loans of up to $1,000,000 at the request of the Company to finance the purchase of equipment necessary for the operation of the Company’s business, and related working capital. Loans under the LOC Agreement accrue interest at twelve percent (12%) per annum, compounded on a 30/360 monthly basis until the loans have been repaid in full. The Company had the right to submit draw requests under the LOC Agreement until April 15, 2023. Each draw request is subject to the approval of IDI in its sole discretion. The amount drawn, plus all accrued interest therein, was repayable in full on December 1, 2023.
Effective May 13, 2023, the Company and IDI amended the LOC Agreement to increase the amount that the Company may borrow thereunder to $1,750,000, extended the date by which the Company could borrow funds thereunder to December 1, 2023, and extended the maturity date to December 1, 2024. Simultaneous with the extension, the Company borrowed an additional $500,000. As of August 31, 2024, the amount of principal and interest due to related party was $1,625,000 and $315,609, respectively, as compared to $1,300,000 and $97,460 at August 31, 2023.
Transactions with ROC Digital Mining I, LLC
In October 2022, we entered into a joint venture arrangement with ROC Digital Mining I, LLC (“ROC Digital”) to jointly develop and operate a bitcoin mining operation in Pecos, Texas. Under the joint venture, we contributed one immersion container, six transformers and cash with a value of $987,429 as a capital contribution to ROC Digital Mining I, LLC (the “ROC Digital”). In return, we received 240 Class B Units of ROC Digital pursuant to an ongoing offering of a total of 1,000 Class B Units at $4,400 per unit. We simultaneously sold ROC Digital four immersion containers for $1,200,000, which is payable pursuant to a promissory note that bears interest at 5% per annum, and is payable pursuant to monthly payments of $31,203.64 per month commencing on December 30, 2022, with any remaining principal and interest payable in full on May 31, 2026. The note is secured by the equipment that was sold. As of August 31, 2023 and August 31, 2024, the note receivable from ROC Digital amounted to $1,029,721 and $655,277, respectively.
We also obtained the right to locate one container at the location that we would be able to use for self-mining. Under our hosting agreement with ROC Digital, we located one immersion container at the site for $500 per month, plus payment of our pro rata share of electricity, internet and insurance for the site. Under the hosting agreement, we also agreed to contribute $100,000 toward the electricity deposit for the site, which is refundable to us at the earlier of the date the electricity provider releases the deposit or 90 days after the expiration or termination of the hosting agreement. The hosting agreement has a term of one year, subject to our right to renew the agreement for two one year terms after receipt of notice of the renewal terms of the joint venture’s electricity supply agreement for the upcoming year.
See “Note 5 – Investment in Joint Venture,” for more information about ROC Digital.
Transactions with Rykor Energy Solutions, LLC
In May 2024, the Company brokered the sale of 20 transformers to Rykor Energy Solutions, LLC (“Rykor”). The total sales price of the transformers is approximately $1,407,000 and the Company’s total cost is expected to be $1,340,000. As of August 31, 2024 the Company had received $703,500 against this order which is classified as an advance payment-related party since the order had not shipped as of August 31, 2024. Additionally, the Company made a payment of $670,000 to the supplier of the transformers. This amount is classified as a prepaid expense on the Company’s balance sheet as of August 31, 2024. After August 31, 2024, the transaction was consummated. See “Note 10. Subsequent Events.” Rykor owns 2,672,000 shares of our common stock and warrants to purchase an additional 5,344,000 shares, and as a result is the beneficial owner of approximately 17.8% of our common stock. A principal of Rykor (who is also a principal of ROC Mining) also serves on our board of directors.
| F-19 |
NOTE 7 – STOCKHOLDERS’ EQUITY
Stockholders’ Equity
The Company is authorized to issue 500,000,000 shares of Common Stock with a par value of $0.0001 per share, and 20,000,000 shares of preferred stock with a par value of $0.0001 per share. As of August 31, 2024, and August 31, 2023, there were 49,912,607 and 49,665,649 shares of common stock outstanding, respectively.
Series A Convertible Preferred Stock
As of August 31, 2024 and August 31, 2023, our board of directors had authorized the issuance of one series of preferred stock, the Series A Convertible Preferred Stock (the “Series A Preferred”), for 500,000 shares, of which 453,966 shares had been issued. The Series A Preferred has the following rights:
Dividends: Each share of Series A Preferred is entitled to receive non-cumulative dividends equal to the amount of dividends that the holder of such share would have received if such share of Series A Preferred were converted into shares of common stock immediately prior to the record date of the dividend declared on the common stock.
Liquidation Preference: The Series A Preferred Stock is entitled to receive, prior to any distribution to any junior class of securities, an amount equal to $10 per share, plus any accrued but unpaid dividends, as a liquidation preference before any distribution may be made to the holders of any junior security, including the common stock.
Voting Rights: Each holder of Series A Preferred Stock shall vote with holders of the common stock upon any matter submitted to a vote of shareholders, in which event it shall have the number of votes equal to the number of shares of common stock into which such share of Series A Preferred Stock would be convertible on the record date for the vote or consent of shareholders. Each holder of Series A Preferred Stock shall also be entitled to one vote per share on each submitted to a class vote of the holders of Series A Preferred Stock.
Directors: The Series A Preferred Stock has the exclusive right to nominate and vote on two (2) members of the board of directors.
Voluntary Conversion Rights: Each share of Series A Preferred Stock is convertible into that number of shares of common stock equal to the liquidation preference of the Series A Preferred divided by a conversion price of $0.575 per share.
Rank: The Series A Preferred ranks senior to the common stock and any other class or series of preferred stock that may be authorized.
Redemption by Company: The Company may redeem all of the Series A Preferred at any time on twenty days notice by payment of the liquidation preference of the Series A Preferred.
Redemption by the Holders: Any holder of Series A Preferred may request that some or all of its Series A Preferred be redeemed to the extent of 30% of the liquid net assets of the Company in excess of $2 million. To the extent any holder requests redemption under this provision, the Company is required to send a notice to all other Series A Preferred holders, who will be entitled to request redemption of some or all of their shares as well. Each holder is required to redeem at least the lesser of 10,000 shares or the number of shares of Series A Preferred held by the holder.
| F-20 |
Redemption on Fundamental Transaction: In the event the Company engages in a fundamental transaction, a majority of the holders of Series A Preferred may require the Company to redeem all of the Series A Preferred at the closing of the transaction.
Right to Participate in Future Fundings: Each holder of Series A Preferred has the right to participate in future capital raising transactions to the extent of its proportionate ownership of the Company on an as converted basis. The right extents to any issuance of common or preferred stock or debt securities convertible into common or preferred stock, except for certain exempted transactions.
Anti-Dilution Protection: The conversion price of the Series A Preferred is subject to reduction to the extent the company issues shares of common stock at a purchase price less than the then current conversion price, (ii) debt or equity securities convertible into common stock at a conversion price less than the then current conversion price, (iii) options or warrants exercisable for common stock at an exercise price less than the then current conversion price, or (iv) options or warrants to purchase convertible debt or equity securities, where the combined exercise and conversion prices would enable the holder to acquire shares of common stock for less than the then current conversion price.
Issuance of Shares
During the year ended August 31, 2024, the Company issued the following shares:
| · | 83,056 shares were issued to an officer pursuant to the terms of his employment contract, which entitle the officer to a quarterly bonus payable in shares of common stock. The shares were valued at $36,545, or $0.44 per share, based on the value indicated by the Company’s recently completed Unit Offering. The bonus shares vest on January 15, 2027 if the officer is still employed with us on that date, and are amortized from the date of issuance to January 15, 2027. | |
| · | 72,993 shares were issued to an officer pursuant to the terms of his employment contract, which entitle the officer to a quarterly bonus payable in shares of common stock. The shares were valued at $32,117, or $0.44 per share, based on the value indicated by the Company’s recently completed Unit Offering. The bonus shares vest on January 15, 2027 if the officer is still employed with us on that date, and are amortized from the date of issuance to January 15, 2027. | |
| · | 90,909 shares were issued to an officer pursuant to the terms of his employment contract, which entitle the officer to a quarterly bonus payable in shares of common stock. The shares were valued at $40,000, or $0.44 per share, based on the value indicated by the Company’s recently completed Unit Offering. The bonus shares vest on January 15, 2027 if the officer is still employed with us on that date, and are amortized from the date of issuance to January 15, 2027. |
During the year ended August 31, 2023, the Company issued the following shares:
| · | 71,429 shares were issued to an officer pursuant to the terms of his employment contract, which entitle the officer to a quarterly bonus payable in shares of common stock. The shares were valued at $31,429, or $0.44 per share, based on the value indicated by the Company’s recently completed Unit Offering. The bonus shares vest on January 15, 2027 if the officer is still employed with us on that date, and are amortized from the date of issuance to January 15, 2027. | |
| · | 70,423 shares were issued to an officer pursuant to the terms of his employment contract, which entitle the officer to a quarterly bonus payable in shares of common stock. The shares were valued at $30,986, or $0.44 per share, based on the value indicated by the Company’s recently completed Unit Offering. The bonus shares vest on January 15, 2027 if the officer is still employed with us on that date, and are amortized from the date of issuance to January 15, 2027. |
| F-21 |
| · | 45,455 shares were issued to an officer pursuant to the terms of his employment contract, which entitle the officer to a quarterly bonus payable in shares of common stock. The shares were valued at $20,000 or $0.44 per share, based on the value indicated by the Company’s recently completed Unit Offering. The bonus shares vest on January 15, 2027 if the officer is still employed with us on that date, and are amortized from the date of issuance to January 15, 2027. | |
| · | 100,000 shares were issued to a third party for investor relations services. The shares were valued at $44,000, or $0.44 per share, based on the value indicated by the Company’s recently completed Unit Offering. | |
| · | 200,000 shares were issued to an investment banking firm as an annual renewal of an investment banking agreement. The shares were valued at $0.44 per share. | |
| · |
71,429 shares were issued to an officer pursuant to the terms of his employment contract, which entitle the officer to a quarterly bonus payable in shares of common stock. The shares were valued at $31,429, or $0.44 per share, based on the value indicated by the Company’s recently completed Unit Offering. The bonus shares vest on January 15, 2027 if the officer is still employed with us on that date, and are amortized from the date of issuance to January 15, 2027.
| |
| · | 150,000 shares were issued to a Director pursuant to the terms of her Director appointment. The shares vest prorate over a 15 month period at the rate of 10,000 shares per month commencing on August 31, 2023. These shares were valued at $0.44 per share, based on the value indicated by the Company’s recently completed Unit Offering. |
The Company estimates the fair value of stock-based compensation based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). The Company attributes compensation to expense using the straight-line method. Since the Company’s common stock is thinly traded, the Company utilizes the value, or an estimate thereof, paid by third parties for common stock in arms-length transactions with the Company.
Warrants
As of August 31, 2024, the Company had the following warrants outstanding:
| Schedule of warrants outstanding | ||||||||||
| Class | Amount Outstanding | Exercise Price | Expiration Date | |||||||
| Class C-1 Warrants | 4,147,600 | $ | 2.00 | January 15, 2025 | ||||||
| Class C-2 Warrants | 4,147,600 | $ | 4.00 | January 15, 2025 | ||||||
| Class C-3 Warrants | 25,600 | $ | 1.25 | June 27, 2027 | ||||||
| Total | 8,320,800 | |||||||||
NOTE 8 – COMMITMENTS AND CONTINGENCIES
As of August 31, 2024 and August 31, 2023, the Company had no contractual commitments.
| F-22 |
NOTE 9 - RESTATEMENT DETAILS
The Company revised prior-period financial statements to enhance comparability and transparency, including the following changes:
| 1. | Removal of "" designation | |
| The Company removed the "" presentation terminology to align with SEC Regulation S-X Article 8 requirements for full financial statement presentation. | ||
| 2. | Expanded revenue disclosures | |
| The Company disaggregated cryptocurrency mining revenue components to provide greater transparency into revenue streams. This resulted in the addition of new line items in the Statement of Operations. |
Materiality Assessment
The Company determined that these revisions do not represent corrections of material errors but rather voluntary presentation enhancements under ASC 250-10-50-7. The following factors were considered in making this determination:
| · | Quantitative immateriality: The changes did not affect total assets, liabilities, or equity and had no impact on reported revenues, net loss, or cash flows across all periods presented. | |
| · | Qualitative immateriality: These revisions did not alter trends in liquidity, capital resources, or operating results and would not influence investor decisions under SEC Staff Accounting Bulletin (SAB) 99 criteria. |
Impact on Financial Statements
The revisions:
| · | Do not alter previously reported revenues, net loss, equity, or cash flows. | |
| · | Were voluntarily adopted to enhance financial statement comparability and usability for investors. |
Conclusion
These changes constitute a revision restatement under ASC 250-10-50-7. As such:
| 1. | Comparative periods have been adjusted to reflect consistent application of the revised presentation standards. | |
| 2. | Reissuance of prior financial statements is not required. | |
| 3. | No notification of non-reliance under Item 4.02(a) of Form 8-K is necessary. |
The following presents a reconciliation of the Statement of Operations for prior years ended August 31, 2024 and 2023 as previously reported to the restated amounts.
| F-23 |
Bitmine Immersion Technologies, Inc.
Statements of Operations
| Schedule of reconciliation statement of operations | ||||||||||||||||||||||||
| As Reported | As Restated | As Reported | As Restated | |||||||||||||||||||||
| Year | Year | Year | Year | |||||||||||||||||||||
| ended | ended | ended | ended | |||||||||||||||||||||
| August 31, | Restatement | August 31, | August 31, | Restatement | August 31, | |||||||||||||||||||
| 2024 | Adjustment | 2024 | 2023 | Adjustment | 2023 | |||||||||||||||||||
| Revenue from the sale of mining equipment | $ | 231,133 | $ | – | $ | 231,133 | $ | 244,036 | $ | – | $ | 244,036 | ||||||||||||
| Revenue from hosting | 48,305 | – | 48,305 | 12,020 | – | 12,020 | ||||||||||||||||||
| Revenue from self-mining | 3,030,910 | – | 3,030,910 | 389,222 | – | 389,222 | ||||||||||||||||||
| Total revenue | 3,310,348 | – | 3,310,348 | 645,278 | – | 645,278 | ||||||||||||||||||
| Cost of sales mining equipment | 180,891 | – | 180,891 | 87,080 | – | 87,080 | ||||||||||||||||||
| Cost of sales self-mining | 2,330,752 | – | 2,330,752 | 326,630 | – | 326,630 | ||||||||||||||||||
| Cost of sales hosting | 37,678 | – | 37,678 | 9,098 | – | 9,098 | ||||||||||||||||||
| Gross profit | 761,027 | – | 761,027 | 222,469 | – | 222,469 | ||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| General and administrative expenses | 370,163 | (205,936 | ) | 164,228 | 293,989 | (248,981 | ) | 45,008 | ||||||||||||||||
| Marketing fees | – | – | – | 214,550 | 214,550 | |||||||||||||||||||
| Investor relations | – | 178,190 | 178,190 | – | – | |||||||||||||||||||
| Travel expense | – | 27,746 | 27,746 | 34,431 | 34,431 | |||||||||||||||||||
| Depreciation | 923,545 | – | 923,545 | 470,705 | – | 470,705 | ||||||||||||||||||
| Professional fees | 615,256 | – | 615,256 | 456,323 | – | 456,323 | ||||||||||||||||||
| Related party compensation | 1,293,353 | (1,293,353 | ) | 1,309,746 | (1,309,746 | ) | ||||||||||||||||||
| Officers compensation | – | 841,106 | 841,106 | – | 951,106 | 951,106 | ||||||||||||||||||
| Directors compensation | – | 52,800 | 52,800 | – | 13,200 | 13,200 | ||||||||||||||||||
| Employee shareholder compensation | – | 399,447 | 399,447 | – | 345,440 | 345,440 | ||||||||||||||||||
| Impairment of fixed assets | 120,000 | – | 120,000 | 122,950 | – | 122,950 | ||||||||||||||||||
| Realized gain from the sale of bitcoin | (113,803 | ) | – | (113,803 | ) | (21,682 | ) | – | (21,682 | ) | ||||||||||||||
| Impairment of cryptocurrency | – | – | – | 3,523 | – | 3,523 | ||||||||||||||||||
| Total operating expenses | 3,208,514 | (0 | ) | 3,208,513 | 2,635,553 | (0 | ) | 2,635,553 | ||||||||||||||||
| Loss from operations | (2,447,487 | ) | – | (2,447,485 | ) | (2,413,083 | ) | – | (2,413,083 | ) | ||||||||||||||
| Other income (expense) | ||||||||||||||||||||||||
| Interest expense | (268,578 | ) | – | (268,578 | ) | (97,460 | ) | – | (97,460 | ) | ||||||||||||||
| Loss on the extinguishment of debt | (355,123 | ) | – | (355,123 | ) | – | – | – | ||||||||||||||||
| Loss on investment | (311,313 | ) | – | (311,313 | ) | – | – | – | ||||||||||||||||
| Gain on note settlement | 35,379 | – | 35,379 | – | – | – | ||||||||||||||||||
| Other income | – | – | – | 16,939 | – | 16,939 | ||||||||||||||||||
| Interest income | 54,617 | – | 54,617 | 28,720 | – | 28,720 | ||||||||||||||||||
| Other income (expense), net | (845,018 | ) | – | (845,018 | ) | (51,801 | ) | – | (51,801 | ) | ||||||||||||||
| Net loss | $ | (3,292,504 | ) | $ | – | $ | (3,292,503 | ) | $ | (2,464,884 | ) | – | $ | (2,464,884 | ) | |||||||||
| – | ||||||||||||||||||||||||
| Basic and diluted (loss) per common share | $ | (0.07 | ) | – | $ | (0.07 | ) | $ | (0.05 | ) | $ | – | $ | (0.05 | ) | |||||||||
| Weighted-average number of common shares outstanding: | ||||||||||||||||||||||||
| Basic and diluted | 49,878,610 | – | 49,878,610 | 49,055,973 | 49,055,973 | |||||||||||||||||||
| F-24 |
NOTE 10 – SUBSEQUENT EVENTS
On November 4, 2024, Company entered into an amendment to its LOC Agreement with IDI. Prior to the amendment, the LOC provided for a maximum amount of $1,750,000, and the full amount was due and payable on December 1, 2024. As of August 31, 2024 the loan balance due to IDI was $1,625,000. Pursuant to the amendment, the maximum amount has been increased to $2,300,000. In addition, the Company has the right to extend the maturity for six monthly periods in consideration for an extension fee of $25,000 for each extension, which will be added to the balance due under the LOC. In addition, IDI was granted the right to convert 11,500,000 shares of common stock it owns into 2,300 shares of Series B Convertible Preferred Stock. In consideration for the above the amendments, IDI agreed to approve a new draw under the LOC of $250,000 and to purchase an additional 200 shares of Series B Convertible Preferred Stock for $200,000, for net new financing to the Company of $450,000.
On November 4, 2024, the Company approved a Certificate of Designations, Rights and Preferences of Series B Convertible Preferred Stock (the “Certificate of Designation”) with the Delaware Secretary of State, which authorized the creation and issuance of up to 3,000 shares of Series B Convertible Preferred Stock (the “Series B Preferred”). Under the Certificate of Designation, the Series B Preferred has the following rights:
Dividends: Each share of Series B Preferred is entitled to receive non-cumulative dividends equal to the amount of dividends that the holder of such share would have received if such share of Series B Preferred were converted into shares of common stock immediately prior to the record date of the dividend declared on the common stock.
Liquidation Preference: The Series B Preferred Stock is entitled to receive, prior to any distribution to any junior class of securities, an amount equal to $1,000 per share, plus any accrued but unpaid dividends, as a liquidation preference before any distribution may be made to the holders of any junior security, including the common stock.
Voting Rights: Each holder of Series B Preferred Stock shall vote with holders of the common stock upon any matter submitted to a vote of shareholders, in which event it shall have the number of votes equal to the number of shares of common stock into which such share of Series B Preferred Stock would be convertible on the record date for the vote or consent of shareholders. Each holder of Series B Preferred Stock shall also be entitled to one vote per share on each submitted to a class vote of the holders of Series B Preferred Stock.
Voluntary Conversion Rights: Each share of Series B Preferred Stock is convertible into that number of shares of common stock equal to the liquidation preference of the Series B Preferred divided by a conversion price of $0.20 per share.
Rank: The Series B Preferred ranks senior to the common stock and any other class or series of preferred stock that may be authorized, but ranks junior to the Series A Convertible Preferred Stock.
Redemption by Company: The Company may redeem all of the Series B Preferred at any time on twenty days notice by payment of the liquidation preference of the Series B Preferred.
Redemption by the Holders: The holders of the Series B Preferred shall not have the right to compel the Company to redeem their Series B Preferred unless the Company is in default under the terms of the Certificate of Designation..
Redemption on Fundamental Transaction: In the event the Company engages in a fundamental transaction, the Company shall be obligated to redeem all of the Series B Preferred at the closing of the transaction, provided that holders of the Series B Preferred shall be entitled to convert their shares of Series B Preferred into common stock in lieu of having them redeemed.
| F-25 |
Right to Participate in Future Fundings: Each holder of Series B Preferred has the right to participate in future capital-raising transactions to the extent of its proportionate ownership of the Company on an as converted basis. The right extents to any issuance of common or preferred stock or debt securities convertible into common or preferred stock, except for certain exempted transactions.
Anti-Dilution Protection: The conversion price of the Series B Preferred is subject to reduction to the extent the company issues shares of common stock at a purchase price less than the then current conversion price, (ii) debt or equity securities convertible into common stock at a conversion price less than the then current conversion price, (iii) options or warrants exercisable for common stock at an exercise price less than the then current conversion price, or (iv) options or warrants to purchase convertible debt or equity securities, where the combined exercise and conversion prices would enable the holder to acquire shares of common stock for less than the then current conversion price.
In November 2024, the Company issued 2,500 shares of Series B Preferred to IDI in consideration for 11,500,000 shares of common stock owned by IDI and a cash investment of $200,000.
On November 14, 2024, the Company entered into an agreement to purchase 3,000 used S-19j Pro bitcoin miners for a total price of $1,035,000 from Luxor Technology Corporation (“Luxor”). The Company plans to engage a third party to host 2,900 miners. The Company expects to deploy the remaining 100 miners at its Trinidad location. The purchase price is payable as follows: 90% was due immediately, and 10% will be due within 60 days. Of the amount due immediately, $765,861.71 was paid from the proceeds of a Master Hashrate Purchase and Sale Agreement (the “Hashrate Sale Agreement”), and the balance will be paid from cash on hand. Under the Hashrate Sale Agreement, the Company sold 90 PH per day for 365 days at a price of 0.0005 per hashrate.
Subsequent to August 31, 2024, the Company issued 1,255,000 common shares as follows:
| · | 500,0000 shares each, for a total of 1,000,000 shares were issued to two executive officers as part of their compensation for fiscal 2025 officer services. These shares were valued at $0.44 each. The price of $0.44 is based upon a price indicated by a recent offering of Units by the Company for $1.25 per Unit to unrelated investors, with each Unit consisting of one share of common stock, one Class C-1 Warrant and one Class C-2 Warrant. | |
| · | 255,000 common shares were issued to various service providers in lieu of cash. These shares were valued at $0.44 each. |
In May 2024, the Company brokered the sale of 20 transformers to Rykor Energy Solutions, LLC (“Rykor”). The total sales price of the transformers was approximately $1,407,000 and the company’s total cost was expected to be $1,340,000. As of August 31, 2024 the Company had received $703,500 against this order which is classified as an advance payment-related party since the order had not shipped as of August 31, 2024. Additionally, the Company made a payment of $670,000 to the supplier of the transformers. This amount is classified as a prepaid expense on the Company’s balance sheet as of August 31, 2024. Subsequent to August 31, 2024 by mutual agreement the order was reduced to 10 transformers instead of 20 transformers. These units were delivered and the Company recorded revenue of $703,500 with a cost of sales of $670,000 resulting in a profit of $33,500, which will be recorded during the Company’s first fiscal quarter ended November 30, 2024.
| F-26 |
Bitmine Immersion Technologies, Inc.
Balance Sheets
(Unaudited)
| February 28, | August 31, | |||||||
| 2025 | 2024 | |||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Cryptocurrency | ||||||||
| Notes receivable related party - short term | ||||||||
| Total current assets | ||||||||
| Notes receivable related party - long term | ||||||||
| Investment in joint venture | ||||||||
| Fixed assets, net | ||||||||
| Fixed assets - not in service | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Accrued interest -related party | ||||||||
| Accrued officer compensation | ||||||||
| Customer advances | ||||||||
| Loans payable | ||||||||
| Loans payable-related party | ||||||||
| Deferred revenue-short term | ||||||||
| Total current liabilities | ||||||||
| Deferred revenue long term | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Stockholders' Equity: | ||||||||
| Series A Preferred Stock, $ par value, shares authorized, and shares issued and outstanding as of February 28, 2025 and August 31, 2024, respectively | ||||||||
| Series B Preferred Stock, $ par value, shares authorized, and -- shares issued and outstanding as of February 28, 2024 and August 31, 2024, respectively | ||||||||
| Common stock, $ par value, shares authorized; and shares issued and outstanding as of November, 2024 and August 31, 2024 respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders' equity | ||||||||
| Total liabilities and equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited financial statements.
| F-27 |
Bitmine Immersion Technologies, Inc.
Statements of Operations
(Unaudited)
| Three months | Three months | Six months | Six months | |||||||||||||
| ended | ended | ended | ended | |||||||||||||
| February 28, | February 29, | February 28, | February | |||||||||||||
| 2025 | 2024 | 2025 | 2024 | |||||||||||||
| Revenue from the sale of mining equipment | $ | $ | $ | $ | ||||||||||||
| Revenue from hosting | ||||||||||||||||
| Revenue from self-mining | ||||||||||||||||
| Total revenue | ||||||||||||||||
| Cost of sales mining equipment | ||||||||||||||||
| Cost of sales self-mining | ||||||||||||||||
| Cost of sales hosting | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Depreciation | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Investor relations | ||||||||||||||||
| Insurance | ||||||||||||||||
| Officers compensation | ||||||||||||||||
| Directors compensation | ||||||||||||||||
| Employee share holder compensation | ||||||||||||||||
| Change in the fair value of cryptocurrency | ( | ) | ( | ) | ( | ) | ||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Bad debt expense | ( | ) | ( | ) | ||||||||||||
| Loss on the extinguishment of debt | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss on investment | ( | ) | ( | ) | ||||||||||||
| Change in derivative liability | ( | ) | ||||||||||||||
| Interest income | ||||||||||||||||
| Other income (expense), net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Deemed dividend on Series A Preferred Stock | ( | ) | ||||||||||||||
| Net loss attributable to common stockholders | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Basic and diluted (loss) per common share | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted-average number of common shares outstanding: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
| F-28 |
Bitmine Immersion Technologies, Inc.
Statements of Changes in Stockholders' Equity
(Unaudited)
| Additional | Total | |||||||||||||||||||||||||||||||||||
| Series A Preferred | Series B Preferred | Common Stock | Paid-in | Accumulated | Stockholders' | |||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Shares | Value | Capital | Deficit | Equity | ||||||||||||||||||||||||||||
| Balance, August 31, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Common stock issued for services -related party | – | – | ||||||||||||||||||||||||||||||||||
| Net loss | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, November 30, 2023 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Stock based compensation -related parties | – | – | ||||||||||||||||||||||||||||||||||
| Net loss | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, February 29, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Additional | Total | |||||||||||||||||||||||||||||||||||
| Series A Preferred | Series B Preferred | Common Stock | Paid-in | Accumulated | Stockholders' | |||||||||||||||||||||||||||||||
| Shares | Value | Shares | Value | Shares | Value | Capital | Deficit | Equity | ||||||||||||||||||||||||||||
| Balance, August 31,2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Series A Preferred - for change of vesting terms | – | – | – | |||||||||||||||||||||||||||||||||
| Series A - deemed dividend due to convert price reset | – | – | – | ( | ) | |||||||||||||||||||||||||||||||
| Conversion of common stock to Preferred B stock and purchase of Preferred B Stock | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||||
| Stock based compensation for services | – | – | ||||||||||||||||||||||||||||||||||
| Stock based compensation -related parties | – | – | ||||||||||||||||||||||||||||||||||
| Net loss | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, November 30, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
| Stock based compensation - services | – | – | – | |||||||||||||||||||||||||||||||||
| Stock based compensation - services related parties | – | – | – | |||||||||||||||||||||||||||||||||
| Net loss | – | – | – | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Balance, February 28, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited financial statements.
| F-29 |
Bitmine Immersion Technologies, Inc.
Statements of Cash Flows
(Unaudited)
| Six months | Six months | |||||||
| ended | ended | |||||||
| February | February | |||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Stock based compensation | ||||||||
| Bad debt expense | ||||||||
| Depreciation | ||||||||
| Loss on the sale of equipment | ||||||||
| Loss on investment | ||||||||
| Change in derivative liability | ||||||||
| Amortization of note discount | ( | ) | ||||||
| Change in balance sheet accounts | ||||||||
| Cryptocurrencies | ( | ) | ( | ) | ||||
| Notes receivable | ||||||||
| Prepaid expenses | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Accrued officer compensation | ||||||||
| Customer advances | ( | ) | ||||||
| Deferred revenue | ( | ) | ( | ) | ||||
| Accrued interest - related party | ||||||||
| Net cash (used in) operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Return of capital on joint venture | ||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Net cash (used in) investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from Series A preferred stock | ||||||||
| Proceeds from Series B preferred stock | ||||||||
| Loan repayment | ( | ) | ||||||
| Related party loans | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents at beginning of period | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Supplemental disclosure of non-cash investing and financing activity | ||||||||
| Proceeds received from bitcoin loan | $ | $ | ||||||
| Repayment of bitcoin loan in bitcoin-net | $ | $ | ||||||
| Purchase of equipment for loan payable | $ | $ | ||||||
| Deemed dividend on Preferred A stock | $ | $ | ||||||
| Purchase of equipment with bitcoin | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited financial statements.
| F-30 |
BITMINE IMMERSION TECHNOLOGIES, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT POLICIES
About Bitmine Immersion Technologies, Inc.
Bitmine Immersion Technologies Inc. f/k/a Sandy Springs Holdings, Inc. (“Bitmine” or “we,” “us,” and “our”) is a Delaware corporation that commenced operations on July 16, 2020. Our predecessor was incorporated in the state of Nevada on August 16, 1995, as Interactive Lighting Showrooms, Inc.
By a written consent dated July 16, 2021, holders of a majority of our issued and outstanding common stock approved a resolution to appoint Jonathan Bates, Raymond Mow, Michael Maloney, and Seth Bayles to our board of directors, and to appoint Jonathan Bates as Chairman, Seth Bayles as Corporate Secretary, Raymond Mow as Chief Financial Officer, and Ryan Ramnath as Chief Operating Officer (collectively, the “New O&Ds”). Erik S. Nelson remained a director and the chief executive officer. At the same time, the shareholders approved the issuance of 32,994,999 shares of common stock in our offering of common stock at $0.015 per share, and the grant of 4,750,000 shares for services, which were valued at $0.015 per share. As a result of the foregoing stock issuances, the New O&Ds (or entities controlled by them) collectively acquired 24,893,877 shares of common stock, which represented approximately 62% of the issued and outstanding shares at the time. On May 26, 2022, our board of directors appointed Jonathan Bates as our chief executive officer and Erik Nelson as our president.
The appointment of certain of the New O&Ds to our board, and issuance to the New O&Ds of a controlling interest in our company, were made in order to enable us to enter the business of creating a hosting center for bitcoin mining computers primarily utilizing immersion cooling technology, as well mining the bitcoin digital currency for our own account. Prior to the change of control to the New O&Ds, we were shell company.
During the fiscal year ended August 31, 2022, we began implementing our business plan by generating revenue from the mining of bitcoin digital currency, hosting a third-party bitcoin miner and the sale of mining equipment.
The Company’s year-end is August 31st.
Basis of Presentation
The foregoing unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions for Form 10-Q and Regulation S-X as promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, these financial statements do not include all of the disclosures required by GAAP for complete financial statements. These unaudited interim financial statements should be read in conjunction with the audited financial statements and the notes thereto included on Form 10-K for the year ended August 31, 2024. In the opinion of management, the unaudited interim financial statements furnished herein include all adjustments, all of which are of a normal recurring nature, necessary for a fair statement of the results for the interim period presented.
Operating results for the six months ended February 28, 2025, are not necessarily indicative of the results that may be expected for the year ending August 31, 2025.
Reclassification
Certain amounts on the Company’s Statements of Operations for the period ended February 29, 2024 have been reclassified to conform to the current year presentation. These reclassified amounts had no impact on the Company’s revenue, cost of sales, operating expenses and net loss.
| F-31 |
Management’s Representation of Interim Financial Statements
The accompanying unaudited financial statements have been prepared by us without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). We use the same accounting policies in preparing quarterly and annual financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading. These financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of our financial position and results of operations. All such adjustments are of a normal and recurring nature. Interim results are not necessarily indicative of results for a full year.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The most significant estimates relate to the calculation of stock-based compensation, the fair market value of our common stock, the fair market value of our deemed dividend, the fair market value of investment, the calculation of our derivative liability, useful lives and impairment of fixed assets, income taxes and contingencies. We base our estimates on historical experience, known or expected trends, and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates. There have been no material changes to our accounting estimates since the issuance of our financial statements since the year ended August 31, 2024.
Segment Reporting
We operate in one segment - the cryptocurrency mining industry. In accordance with the “Segment Reporting” Topic of the ASC, our chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire company. All of our material operations qualify for aggregation due to their similar customer base and similarities in economic characteristics, nature of products and services, and procurement, manufacturing and distribution processes.
Revenue Recognition
On July 1, 2018, we adopted Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). Results for reporting periods beginning after January 1, 2018, are presented under ASC 606.
Revenues from digital currency mining
We recognize revenue under ASC 606, Revenue from Contracts with Customers. The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
| · | Step 1: Identify the contract with the customer; | |
| · | Step 2: Identify the performance obligations in the contract; | |
| · | Step 3: Determine the transaction price; | |
| · | Step 4: Allocate the transaction price to the performance obligations in the contract; and | |
| · | Step 5: Recognize revenue when we satisfy a performance obligation. |
| F-32 |
Step 1: We enter into a contract with a bitcoin mining pool operator (i.e., the customer) to provide hash calculation services to the mining pool. We only utilize pool operators that determine awards under the Full Pay-Per-Share method (the “FPPS method”). The contracts are terminable at any time by either party without penalty and our enforceable right to compensation only begins when we start providing hash calculation services to the mining pool operator (which occurs daily at midnight Universal Time Coordinated (UTC)). In general, mining revenue for industry participants consists of two parts, (1) the block reward (current bitcoin block reward is 3.125 bitcoin) paid by the network to the miner for successfully mining a block, and (2) the transaction fees paid by the users to the miner for successfully mining a block. When a mining pool successfully finds a block, it is awarded all of the transaction fees in that block and the reward from the network. Under the FPPS method utilized by us, we are entitled to an award of bitcoin equal to the expected reward per block over the measurement period of midnight-to-midnight UTC time based on the hash calculation services provided to the pool during the measurement period. We are also entitled to an aware of transaction fees per block based on the average of the transaction fees over the latest 144 blocks, each of which is about 10 minutes, and the total of 144 blocks equals one day. At the end of each day that runs from midnight-to-midnight UTC time, the pool operator calculates the pool participant’s expected block reward and transaction fees for the day based on the hash calculation services provided by the pool participant that day, less net digital asset fees due to the mining pool operator over the measurement period. The actual reward to us each day is based on the number of blocks we should have hypothetically mined during the measurement period based on the hash calculation services provided to the pool by us during the measurement period and the prevailing difficulty index, and is not based on the actual rewards received by the pool during the measurement period, which may be higher or lower than the expected rewards during such period. Applying the criteria per ASC 606-10-25-1, the contract arises at the point that we provide hash calculation services to the mining pool operator, which is the beginning of each contract day at midnight UTC (contract inception), because customer consumption is in tandem with daily delivery of the hash calculation services. Providing hash calculation services to mining pools is an output of our ordinary activities, and an enforceable right to compensation begins when, and continues as long as, such services are provided.
Step 2: In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:
| · | The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct); and | |
| · | The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract). |
Based on these criteria, we have a single performance obligation in providing hash calculation services (i.e., hashrate) to the mining pool operator (i.e., customer). The performance obligation of hash calculation services is fulfilled daily over-time, as opposed to a point in time, because we provide the hashrate throughout the day and the customer simultaneously obtains control of it and uses the asset to produce bitcoin. We have full control of the mining equipment utilized in the mining pool and if we determine it will increase or decrease the processing power of our machines and/or fleet (i.e., for repairs or when power costs are excessive) the hash calculation services provided to the customer will be reduced.
Step 3: The transaction consideration we earn is non-cash digital consideration in the form of bitcoin, which is based on the Full-Pay-Per-Share (“FPPS”) payout method under the contract with the pool operator. According to the customer contract, daily settlements are calculated from midnight-to-midnight UTC time, and the amount due in bitcoin is credited to our account shortly thereafter on the following day. The amount of bitcoin we are entitled to for providing hash calculations to the customer's mining pool under the FPPS payout method is made up of block rewards and transaction fees less mining pool fees determined as follows:
| · | The non-cash consideration calculated as a block reward over the continuously renewed contract periods is based on the total blocks expected to be generated on the bitcoin Network for the daily 24-hour period beginning midnight UTC and ending 23:59:59 UTC in accordance with the following formula: the hash calculations that we provide to the customer as a percent of the bitcoin network’s implied hash calculations as determined by the network difficulty, multiplied by the total bitcoin network block rewards expected to be generated for the same period. |
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| · | The non-cash consideration calculated as transaction fees paid by transaction requestors is based on the share of total actual fees paid over the continuously renewed contract periods beginning midnight UTC and ending 23:59:59 UTC in accordance with the following formula: total actual transaction fees generated on the bitcoin network during the contract period as a percent of total block rewards the bitcoin network actually generated during the same period, multiplied by the block rewards we earned for the same period noted above. | |
| · | The sum of the block reward and transaction fees earned by us are reduced by mining pool fees charged by the customer for operating the mining pool based on a rate schedule per the mining pool contract. The mining pool fee is only incurred to the extent we perform hash calculations and generate revenue in accordance with the customer’s payout formula during the continuously renewed contract periods beginning mid-night UTC and ending 23:59:59 UTC daily. During the year ending August 31, 2024, we utilized one mining pool for our self-mining operations, which charges 0.3% of the bitcoin payable to us as a pool management fee. This amount represents consideration paid to the customer and is thus reported as a reduction in revenue as we do not receive a distinct good or service from the mining pool operator in exchange. |
There are no other forms of variable considerations, such as discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties, or other similar items.
The above non-cash consideration is variable in accordance with paragraphs ASC 606-10-32-5 to 606-10-32-7, since the amount of block reward earned depends on the amount of hash calculations we perform; the amount of transaction fees we are entitled to depends on the actual bitcoin network transaction fees over the same 24-hour period; and the operator fees for the same 24-hour period are variable since it is determined based on the total block rewards and transaction fees in accordance with the pool operator’s agreement. While the non-cash consideration is variable, we have the ability to estimate the variable consideration at contract inception with reasonable certainty without the risk of significant revenue reversal. We do not constrain this variable consideration because it is probable that a significant reversal in the amount of revenue recognized from the contract will not occur when the uncertainty is subsequently resolved and recognizes the non-cash consideration on the same day that control of the service is transferred, which is the same day as contract inception.
We measure the non-cash consideration based on the spot rate of bitcoin determined using our primary trading platform for bitcoin at mid-night UTC on the day of contract inception. We recognize non-cash consideration on the same day that control of the contracted service is transferred to the pool operator, which is the same day as the contract inception.
Step 4: The transaction price is allocated to the single performance obligation upon verification for the provision of hash calculation services to the mining pool operator. There is a single performance obligation (i.e., hash calculation services or hashrate) for the contract; therefore, all consideration from the mining pool operator is allocated to this single performance obligation.
Step 5: Our performance is complete in transferring the hash calculation services over-time (midnight to midnight UTC) to the customer and the customer obtains control of that asset. In exchange for providing hash calculation services, we are entitled to the expected bitcoin awards earned over the measurement period, plus the expected global transaction fee rewards for the respective measurement period, less net digital asset fees due to the mining pool operator over the measurement period. The transaction consideration we receive is non-cash consideration, in the form of bitcoin. Prior to March 1, 2024, we measured the bitcoin at the closing U.S. dollar spot rate at the end of the date earned (midnight UTC). As of March 1, 2024, we began measuring the bitcoin at the opening U.S. dollar spot rate at the beginning of the date earned (midnight UTC). The change in method of calculating revenues from bitcoin mining did not result in material change in the revenues reported.
There are no deferred revenues or other liability obligations recorded by us since there are no payments in advance of the performance. At the end of the 24 hour “midnight-to-midnight” period, there are no remaining performance obligations.
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During the six months ending February 28, 2025,
we utilized one mining pool for our self-mining operations, which charges 0.3% of the bitcoin payable to us as a pool management fee.
During the six months ending February 28, 2025 and February 29, 2024, we generated $
Revenues from Hosting
We provide energized space to customers who locate their equipment within our co-hosting facility. The equipment generating the hosting revenue is owned by the customer. We give hosting customers the option of having all mining proceeds paid into a cold wallet address in our name, which case we pay the hosting client its share of mining awards on a daily basis, or having all mining awards sent to an account of the customer, in which case we bill the customer monthly for any hosting fee that is contingent on the amount of the client’s award. All performance obligations are achieved simultaneously by providing the hosting environment for the customers’ operations. Hosting revenues consist of amounts billed in U.S. dollars for electricity and other fees, and a percentage of cryptocurrency generated by the client’s hosting activities. With regard to hosting revenues that are billed in U.S. dollars, revenues are recorded at the time of invoicing. With regard to hosting revenues that are based on a percentage of cryptocurrency generated by the customer, revenues are recorded based on our share of cryptocurrency received from the mining pool on the date of receipt or invoicing. For hosting services bundled with equipment sales, performance obligations are satisfied over time as services are rendered. Revenue from hosting is recognized monthly based on usage.
During the six months ending February 28, 2025
and February 29, 2024, we generated $-
Classification of revenues from the sale of mining equipment under ASC 606 versus ASC 610
We record revenue from the resale of mining equipment it has purchased. We evaluated the sale of mining equipment under ASC 606, "Revenue from Contracts with Customers," and concluded that these transactions constitute revenue from ordinary activities as part of our ongoing operations. The sales are not incidental or peripheral activities but are integral to our core business model of providing mining equipment and hosting services. Under ASC 606-10-15-3, we determined that these transactions do not meet the scope of ASC 610, which applies to sales of nonfinancial assets outside an entity's ordinary activities. Accordingly, revenue for the sale of mining equipment is recognized under the guidelines of ASC 606.
The Company satisfies its performance obligations for mining equipment sales at a point in time when control transfers to the customer, typically upon delivery or installation of the equipment. Payment terms vary but generally include upfront deposits and remaining balances due within 30 days of delivery. The Company does not provide significant financing components and offers limited warranties, which are accounted for as assurance-type warranties under ASC 460. The Company does not have obligations for returns or refunds, as all sales are final.
During the six months ending February 28, 2025
and February 29, 2024, we generated $
Deferred Revenue
Deferred revenue represents payments received
in advance for performance obligations not yet satisfied, primarily related to hosting services and post-sale support agreements. During
the six months ended February 28, 2025, $
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The Company records deferred revenue for certain equipment sales where control has transferred but additional post-sale support obligations exist. These obligations are accounted for as separate performance obligations under ASC 606.
Cash and cash equivalents
We consider all highly liquid temporary cash investments
with an original maturity of three months or less to be cash equivalents. On February 28, 2025 and August 31, 2024, our cash equivalents
totaled $
Cryptocurrency
The only cryptocurrency which we hold is bitcoin. Bitcoin are included in current assets in our balance sheets due to our ability to sell bitcoin in a highly liquid marketplace, and such bitcoin holdings are expected to be realized in cash or sold or consumed during our normal operating cycle.
As a result of adopting ASC 350-60, Intangibles — Goodwill and Other, ("ASC 350-60") on September 1, 2024, bitcoin is measured at fair value as of each reporting period (see “Recently Issued Accounting Pronouncements below”). The fair value of bitcoin is measured using the period-end closing bitcoin price from its principal market, Coinbase, in accordance with ASC 820, Fair Value Measurement ("ASC 820"). Since bitcoin is traded on a 24-hour period, the Company utilizes the price as of 23:59:59 UTC, which aligns with the Company's revenue recognition cut-off. The changes in bitcoin valuation due to remeasurement in fair value within each reporting period are reflected on the Consolidated Statements of Operations and Comprehensive Loss as "Gain on fair value of bitcoin, net". In accordance with ASC 350-60, the Company discloses realized gains and losses from the sale of bitcoin and such gains and losses are measured as the difference between the cash proceeds and the cost basis of bitcoin as determined on a First In-First Out basis.
During the six months ending February 28, 2025
and 2024, we realized gains from the change in the fair value of cryptocurrency of $
We hold our cryptocurrencies in an account at Bitgo Trust (“Bitgo”), a well-known bitcoin custodian, which we also use to liquidate our bitcoin when necessary. We also have an account with Gemini Trust Company, LLC, which is a qualified custodian regulated by the New York Department of Financial Services as a backup facility, and may hold bitcoin from time to time in a cold storage wallet. We use Bitgo’s multi-signature feature for account access.
Prepaid expenses
Prepaid expenses are amounts paid to secure the
use of assets or the receipt of services at a future date or continuously over one or more future periods. When the prepaid expenses are
eventually consumed, they are charged to expense. Prepaid expenses are recorded at fair market value. As of August 31, 2024, and February
28, 2025, the balances of prepaid expenses were $
Customer advances
We defer revenues when cash payments are received
in advance of our performance obligation required under the guidelines of ASC 606. Customer advances of $
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Income taxes
We account for income taxes under FASB ASC 740, “Accounting for Income Taxes”. Under FASB ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under FASB ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. FASB ASC 740-10-05, “Accounting for Uncertainty in Income Taxes” prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% percent likely of being realized upon ultimate settlement. We assess the validity of our conclusions regarding uncertain tax positions quarterly to determine if facts or circumstances have arisen that might cause us to change our judgment regarding the likelihood of a tax position’s sustainability under audit.
Fair value of financial instruments
The Company follows paragraph ASC 825-10-50-10 for disclosures about fair value of its financial instruments.
To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
| ☐ | Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. | |
| ☐ | Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date. | |
| ☐ | Level 3: Pricing inputs that are generally unobservable inputs and not corroborated by market data. |
As of August 31, 2024 and February 28, 2025, the
carrying value of our note receivable was $
Stock-based Compensation
We account for stock-based compensation using the fair value method following the guidance outlined in Section 718-10 of the FASB Accounting Standards Codification for disclosure about Stock-Based Compensation. This section requires a public entity to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award- the requisite service period (usually the vesting period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. We recognize forfeitures as they occur rather than estimating expected forfeitures upfront. This policy aligns with management's assessment that actual forfeitures are immaterial and do not significantly impact stock-based compensation expense.
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Net loss per common share is computed by dividing net loss by the weighted average common shares outstanding during the period as defined by Financial Accounting Standards, ASC Topic 260, “Earnings per Share.” Basic earnings per common share (“EPS”) calculations are determined by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share calculations are determined by dividing net income by the weighted average number of common shares and dilutive common share equivalents outstanding.
Stock Purchase Warrants
We account for warrants issued to purchase shares of our common stock as equity in accordance with FASB ASC 480, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, Distinguishing Liabilities from Equity. We determine the accounting classification of warrants we issue, as either liability or equity classified, by first assessing whether the warrants meet liability classification in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, then in accordance with ASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. Under ASC 480, warrants are considered liability classified if the warrants are mandatorily redeemable, obligate us to settle the warrants or the underlying shares by paying cash or other assets, and warrants that must or may require settlement by issuing variable number of shares. If warrants do not meet the liability classification under ASC 480-10, we assess the requirements under ASC 815-40, which states that contracts that require or may require the issuer to settle the contract for cash are liabilities recorded at fair value, irrespective of the likelihood of the transaction occurring that triggers the net cash settlement feature.
If the warrants do not require liability classification under ASC 815-40, in order to conclude equity classification, we also assess whether the warrants are indexed to our common stock and whether the warrants are classified as equity under ASC 815-40 or other GAAP. After all such assessments, we conclude whether the warrants are classified as liability or equity. Liability classified warrants require fair value accounting at issuance and subsequent to initial issuance with all changes in fair value after the issuance date recorded in the statements of operations. Equity classified warrants only require fair value accounting at issuance with no changes recognized subsequent to the issuance date. We do not have any liability classified warrants as of any period presented.
Property and equipment
Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Estimated useful lives for leasehold improvements are typically the lesser of the estimated useful life of the asset or the life of the term of the lease. The estimated useful lives for all other property and equipment are as follows:
| Schedule of estimated useful lives of property and equipment | ||||
| Life (Years) | ||||
| Miners and mining equipment | ||||
| Machinery and equipment | ||||
| Office and computer equipment |
No depreciation is recorded on an asset until
it is placed in service. Due to the nature of the equipment, it can only be placed in service when the hosting site is properly configured
to turn on the machines. As of August 31, 2024, and February 28, 2025, we had $
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Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a new lease accounting model for lessees. The updated guidance requires an entity to recognize assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The amended guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. In March 2019, the FASB issued ASU 2019-01, Codification Improvements, which clarifies certain aspects of the new lease standard. The FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases in July 2018. Also in 2018, the FASB issued ASU 2018-11, Leases (Topic 842) Targeted Improvements, which provides an optional transition method whereby the new lease standard is applied at the adoption date and recognized as an adjustment to retained earnings. The amendments have the same effective date and transition requirements as the new lease standard.
We adopted ASC 842 on July 16, 2020. The adoption of this guidance did not have any impact on our financial statements.
In March 2022, the SEC staff released Staff Accounting Bulletin No. 121 (“SAB 121”), which requires entities that hold crypto assets on behalf of platform users to recognize a liability to reflect the entity’s obligation to safeguard the crypto assets held for its platform users, whether directly or through an agent or another third party acting on its behalf, along with a corresponding safeguarding asset. Both the liability and corresponding safeguarding asset shall be measured at fair value. SAB 121 also requires disclosure of the nature and amount of crypto assets being safeguarded, how the fair value is determined, an entity’s accounting policy for safeguarding liabilities and corresponding safeguarding assets, and may require disclosure of other information about risks and uncertainties arising from the entity’s safeguarding activities. We are not in the business of holding our customer’s crypto assets for safekeeping. For crypto assets that are not maintained on our platform and for which we do not maintain a private key or the ability to recover a customer’s private key, these balances are not recorded, as there is no related safeguarding obligation in accordance with SAB 121. This guidance is effective from the first interim period after June 15, 2022 and should be applied retrospectively. We adopted SAB 121 during the three months ended August 31, 2024, and it did not have any impact on our financial statements.
In December 2023, the FASB issued Accounting Standards Update No. 2023-08, Accounting for and Disclosure of Crypto Assets (“ASC 350-60”). ASC 350-60 requires entities with certain crypto assets to subsequently measure such assets at fair value, with changes in fair value recorded in net income (loss) in each reporting period. Crypto assets that meet all the following criteria are within the scope of ASC 350-60:
| (1) | meet the definition of intangible assets as defined in the Codification; | |
| (2) | do not provide the asset holder with enforceable rights to or claims on underlying goods, services, or other assets; | |
| (3) | are created or reside on a distributed ledger based on blockchain or similar technology; | |
| (4) | are secured through cryptography; | |
| (5) | are fungible; and | |
| (6) | are not created or issued by the reporting entity or its related parties. In addition, entities are required to provide additional disclosures about the holdings of certain crypto assets. |
Bitcoin, which is the sole crypto asset mined by us, meets each of these criteria. For all entities, the ASC 350-60 amendments are effective for fiscal years beginning after December 15, 2024, including interim periods within those years. Early adoption is permitted for both interim and annual financial statements that have not yet been issued (or made available for issuance). If an entity adopts the amendments in an interim period, it must adopt them as of the beginning of the fiscal year that includes that interim period. We have elected to early adopt the new guidance effective September 1, 2024 resulting in a $-0- cumulative-effect change to adjust our bitcoin held on September 1, 2024.
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Non-GAAP Financial Measures
We have included in some of our press releases, measures of financial performance that are not defined by GAAP. We believe that these measures provide useful information to investors. For each of these non-GAAP financial measures, we provide a reconciliation of the difference between the non-GAAP measure and the comparable GAAP measure, and an explanation of why we believe the non-GAAP measure provides useful information to investors.
NOTE 2 – CRYPTOCURRENCIES
The following table presents additional dollar and unit information (each bitcoin represents one unit) about our bitcoin activity for the six months ended February 28, 2025:
| Schedule of cryptocurrencies | ||||||||
| Bitcoin | ||||||||
| Beginning balance – August 31, 2024 | $ | |||||||
| Revenue received from mining | ||||||||
| Advance payment in cryptocurrency | ||||||||
| Payments of loan with cryptocurrency | ( | ) | ( | ) | ||||
| Cash proceeds from the sale of cryptocurrency, net of fees | ( | ) | ( | ) | ||||
| Cryptocurrency used to pay expenses | ( | ) | ( | ) | ||||
| Change in the fair market value of bitcoin | ||||||||
| Ending balance – February 28, 2025 | $ | |||||||
NOTE 3 – REVENUE FROM CONTRACTS WITH CUSTOMERS
The following table presents our revenue disaggregated into categories based on the nature of such revenues:
| Schedule of disaggregation of revenue | ||||||||
| Six Months Ended | ||||||||
| February 28, 2025 | February 29, 2024 | |||||||
| Revenues from the sale of mining equipment - net | $ | $ | ||||||
| Revenue from hosting, net | ||||||||
| Revenue from self-mining | ||||||||
| Total revenue | $ | $ | ||||||
NOTE 4 – PROPERTY AND EQUIPMENT
The following table sets forth the components of our property and equipment at February 28, 2025 and August 31, 2024:
| Schedule of property and equipment | ||||||||||||||||||||||||
| February 28, 2025 | August 31, 2024 | |||||||||||||||||||||||
| Cost | Accumulated Depreciation | Net Book Value | Cost | Accumulated Depreciation | Net Book Value | |||||||||||||||||||
| Equipment | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
| Equipment not in service | ||||||||||||||||||||||||
| Total fixed assets | $ | $ | ( | ) | $ | $ | $ | ( | ) | $ | ||||||||||||||
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Equipment not in service as of February 28, 2025 was comprised of the following:
| Schedule of equipment not in service | ||||
| Transformers | $ | |||
| Immersion containers | ||||
| ASIC miners | ||||
| Total | $ | |||
For the six months ended February 28, 2025 and
February 29, 2024, we recorded $
NOTE 5 – INVESTMENTS AND NOTES RECEIVABLE
Policy on Doubtful Accounts
We evaluate notes receivable for impairment under the guidelines of ASC 310-10-35-41. We establish an allowance for doubtful accounts when we determine that collectability of the note is in question.
Investment in Joint Venture
In October 2022, we entered into a joint venture
arrangement with ROC Digital Mining Manager LLC (“ROC Manager”) to jointly develop and operate a bitcoin mining operation
in Pecos, Texas. Under the joint venture, we contributed one immersion container, six transformers and cash with a value of $
ROC Digital is managed by ROC Manager, which owns all of the Class A Units of ROC Digital. The Class A Units have the sole right to vote on any matter that requires a vote of members, including in the selection of the manager. We own 33 1/3% of ROC Manager. ROC Manager has no financial activity and has no impact on our financial statements. ROC Manager is managed by from one to three managers selected by a vote of the members. We do not currently have a representative or designee serving as manager of ROC Manager. However, the operating agreement for ROC Manager provides that ROC Manager may not take a number of actions in relation to ROC Digital without the unanimous consent of its members, such as incurring more than $50,000 of indebtedness, approval of operating budget, filing for bankruptcy, making any material change in ROC Digital’s business, merging, consolidating or combining ROC Digital with another entity, selling off a substantial part of ROC Digital’s assets, amending the operating agreement of ROC Digital, or causing ROC Digital to enter into any agreement with a related party.
Day to day management of the operations of ROC Digital is provided by ROC Digital Mining LLC (“ROC Mining”), an affiliate of ROC Manager in which we do not have an interest. ROC Mining is entitled to a monthly management fee equal to 3% of ROC Digital’s gross revenue, subject to a monthly minimum of $10,000 and a monthly maximum of $15,000. In additional ROC Mining is entitled to an acquisition fee of 1% of the cost of any assets acquired by ROC Digital. A principal of ROC Manager serves on our board of directors.
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As of February 28, 2025 the joint venture arrangement
was classified as a long term asset on our balance sheet with a value of $
Notes Receivable
Notes receivable consist of notes received as partial consideration for the sale of mining equipment. As of February 28, 2025 and August 31, 2024, notes receivable consist of the following:
| Schedule of notes receivable | ||||||||
| As of February 28, 2025 | As of August 31, 2024 | |||||||
| Note receivable in original principal amount of $ | $ | $ | ||||||
| Total | ||||||||
| Less: Non-current portion | ( | ) | ( | ) | ||||
| Notes receivable – short-term | $ | $ | ||||||
The note receivable in the original principal
amount of $
During the six months ended February 28, 2025,
we recorded $
NOTE 6 – RELATED PARTY TRANSACTIONS
Line of Credit from IDI
On October 19, 2022, we entered into a Line of
Credit Agreement (the “LOC Agreement”) with Innovative Digital Investors Emerging Technology, L.P. (“IDI), a limited
partnership controlled by Jonathan Bates, our Chief Executive Officer and Chairman, and Raymond Mow, our Chief Financial Officer and a
director. The LOC Agreement provided for loans of up to $1,000,000 at our request to finance the purchase of equipment necessary for the
operation of our business, and related working capital. Loans under the LOC Agreement accrue interest at
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Effective May 13, 2023, we and IDI amended the
LOC Agreement to increase the amount that we may borrow thereunder to $1,750,000, extended the date by which we could borrow funds thereunder
to December 1, 2023, and extended the maturity date to December 1, 2024. Simultaneous with the extension, we borrowed an additional $500,000.
Effective November 4, 2024, we and IDI amended the LOC Agreement to increase the amount that we may borrow thereunder to $
Transactions with ROC Digital Mining I, LLC
In October 2022, we entered into a joint venture
arrangement with ROC Manager to jointly develop and operate a bitcoin mining operation in Pecos, Texas. Under the joint venture, we contributed
one immersion container, six transformers and cash with a value of $
We also obtained the right to locate one container at the location that we would be able to use for self-mining. Under our hosting agreement with ROC Digital, we located one immersion container at the site for $500 per month, plus payment of our pro rata share of electricity, internet and insurance for the site. Under the hosting agreement, we also agreed to contribute $100,000 toward the electricity deposit for the site, which is refundable to us at the earlier of the date the electricity provider releases the deposit or 90 days after the expiration or termination of the hosting agreement. The hosting agreement has a term of one year, subject to our right to renew the agreement for two one year terms after receipt of notice of the renewal terms of the joint venture’s electricity supply agreement for the upcoming year.
See “Note 5 – Investment in Joint Venture,” for more information about ROC Digital and ROC Manager.
Transactions with Rykor Energy Solutions, LLC
In May 2024, we brokered the sale of 20 transformers
to Rykor Energy Solutions, LLC (“Rykor”). The total sales price of the transformers was approximately $1,407,000 and our total
cost was expected to be $1,340,000. As of August 31, 2024, we had received $
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NOTE 7 – HASHRATE SALE AGREEMENT AND LOAN
On November 14, 2024, we entered into an agreement
to purchase
Under the terms of the Hashrate Sale Agreement, we recorded the following transactions in our financial statements during the six months ended February 28, 2025:
| Ø | We recorded fixed assets not in service amounting to $ | |
| Ø | On the date we entered into the Hashrate Sale Agreement the bitcoin equivalent of 90 PH for 365 days at a price of $0.0005 per hashrate was the equivalent of 16.425 bitcoin. The market equivalent on the same date we entered into the Hashrate Sale Agreement was 18.42474 bitcoin. The price of bitcoin on the date we entered into the contract was $ | |
| Ø | During the 106 days ended February 28, 2025 we also recorded a loss on the extinguishment of debt of $ | |
| Ø | Also, during this period Luxor advanced us bitcoin worth $385,723 that we had not earned or delivered any PH equivalent for that amount. We recorded this advanced amount as a Loan due to Luxor. |
On February 28, 2025, as a result of the above,
we had a loan payable of $
NOTE 8 – STOCKHOLDERS’ EQUITY
Stockholders’ Equity
We are authorized to issue shares of Common Stock with a par value of $ per share, and shares of preferred stock with a par value of $ per share. As of February 28, 2025, and August 31, 2024, there were and shares of common stock outstanding, respectively.
Series A Convertible Preferred Stock
As of February 28, 2025 and August 31, 2024, our board of directors had authorized the issuance of one series of preferred stock, the Series A Convertible Preferred Stock (the “Series A Preferred”), for shares, of which shares had been issued. The Series A Preferred has the following rights:
Dividends: Each share of Series A Preferred is entitled to receive non-cumulative dividends equal to the amount of dividends that the holder of such share would have received if such share of Series A Preferred were converted into shares of common stock immediately prior to the record date of the dividend declared on the common stock.
Liquidation Preference: The
Series A Preferred Stock is entitled to receive, prior to any distribution to any junior class of securities, an amount equal to $
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Voting Rights: Each holder of Series A Preferred Stock shall vote with holders of the common stock upon any matter submitted to a vote of shareholders, in which event it shall have the number of votes equal to the number of shares of common stock into which such share of Series A Preferred Stock would be convertible on the record date for the vote or consent of shareholders. Each holder of Series A Preferred Stock shall also be entitled to one vote per share on each submitted to a class vote of the holders of Series A Preferred Stock.
Directors: The Series A Preferred Stock has the exclusive right to nominate and vote on two (2) members of the board of directors.
Voluntary Conversion Rights:
Each share of Series A Preferred Stock is convertible into that number of shares of common stock equal to the liquidation preference of
the Series A Preferred divided by a conversion price of $
Rank: The Series A Preferred ranks senior to the common stock and any other class or series of preferred stock that may be authorized.
Redemption by Company: We may redeem all of the Series A Preferred at any time on twenty days notice by payment of the liquidation preference of the Series A Preferred.
Redemption by the Holders: Any
holder of Series A Preferred may request that some or all of its Series A Preferred be redeemed to the extent of
Redemption on Fundamental Transaction: In the event we engage in a fundamental transaction, a majority of the holders of Series A Preferred may require us to redeem all of the Series A Preferred at the closing of the transaction.
Right to Participate in Future Fundings: Each holder of Series A Preferred has the right to participate in future capital raising transactions to the extent of our proportionate ownership, on an as converted basis. The right extents to any issuance of common or preferred stock or debt securities convertible into common or preferred stock, except for certain exempted transactions.
Anti-Dilution Protection: The conversion price of the Series A Preferred is subject to reduction to the extent we issue shares of common stock at a purchase price less than the then current conversion price, (ii) debt or equity securities convertible into common stock at a conversion price less than the then current conversion price, (iii) options or warrants exercisable for common stock at an exercise price less than the then current conversion price, or (iv) options or warrants to purchase convertible debt or equity securities, where the combined exercise and conversion prices would enable the holder to acquire shares of common stock for less than the then current conversion price.
During the six months ended February 28, 2025,
we issued shares of Series B Preferred. The liquidation value of each shares of $
| F-45 |
Series B Convertible Preferred Stock
On November 4, 2024, we approved a Certificate of Designations, Rights and Preferences of Series B Convertible Preferred Stock (the “Certificate of Designation”) with the Delaware Secretary of State, which authorized the creation and issuance of up to shares of Series B Convertible Preferred Stock (the “Series B Preferred”). Under the Certificate of Designation, the Series B Preferred has the following rights:
Dividends: Each share of Series B Preferred is entitled to receive non-cumulative dividends equal to the amount of dividends that the holder of such share would have received if such share of Series B Preferred were converted into shares of common stock immediately prior to the record date of the dividend declared on the common stock.
Liquidation Preference: The
Series B Preferred Stock is entitled to receive, prior to any distribution to any junior class of securities, an amount equal to $
Voting Rights: Each holder of Series B Preferred Stock shall vote with holders of the common stock upon any matter submitted to a vote of shareholders, in which event it shall have the number of votes equal to the number of shares of common stock into which such share of Series B Preferred Stock would be convertible on the record date for the vote or consent of shareholders. Each holder of Series B Preferred Stock shall also be entitled to one vote per share on each submitted to a class vote of the holders of Series B Preferred Stock.
Voluntary Conversion Rights:
Each share of Series B Preferred Stock is convertible into that number of shares of common stock equal to the liquidation preference of
the Series B Preferred divided by a conversion price of $
Rank: The Series B Preferred ranks senior to the common stock and any other class or series of preferred stock that may be authorized, but ranks junior to the Series A Convertible Preferred Stock.
Redemption by Company: We may redeem all of the Series B Preferred at any time on twenty days notice by payment of the liquidation preference of the Series B Preferred.
Redemption by the Holders: The holders of the Series B Preferred shall not have the right to compel us to redeem their Series B Preferred unless we are in default under the terms of the Certificate of Designation.
Redemption on Fundamental Transaction: In the event we engage in a fundamental transaction, we shall be obligated to redeem all of the Series B Preferred at the closing of the transaction, provided that holders of the Series B Preferred shall be entitled to convert their shares of Series B Preferred into common stock in lieu of having them redeemed.
Right to Participate in Future Fundings: Each holder of Series B Preferred has the right to participate in future capital-raising transactions to the extent of its proportionate ownership of us on an as converted basis. The right extents to any issuance of common or preferred stock or debt securities convertible into common or preferred stock, except for certain exempted transactions.
Anti-Dilution Protection: The conversion price of the Series B Preferred is subject to reduction to the extent we issue shares of common stock at a purchase price less than the then current conversion price, (ii) debt or equity securities convertible into common stock at a conversion price less than the then current conversion price, (iii) options or warrants exercisable for common stock at an exercise price less than the then current conversion price, or (iv) options or warrants to purchase convertible debt or equity securities, where the combined exercise and conversion prices would enable the holder to acquire shares of common stock for less than the then current conversion price.
In November 2024, we issued shares of Series
B Preferred to IDI in consideration for shares of common stock owned by IDI and a cash investment of $
| F-46 |
Issuance of Shares
During the six months ended February 28, 2025, we issued the following shares.
| · | shares were issued to each of two officers, for a total of shares, as part of their compensation for fiscal 2025 officer services. These shares were valued at $ each and are being amortized to expense quarterly on a pro rata basis. The price of $ is based upon a price indicated by a recent valuation study performed on our common stock by a third party valuation firm. | |
| · | common shares were issued to various service providers in lieu of cash. These shares were valued at $ each and are being amortized to expense quarterly on a pro rata basis. The price of $ is based upon a price indicated by a recent valuation study performed on our common stock by a third party valuation firm. |
We estimate the fair value of stock-based compensation based on the grant-date fair value of the award (with limited exceptions). That cost will be recognized over the period during which an employee is required to provide service in exchange for the award - the requisite service period (usually the vesting period). We attribute compensation to expense using the straight-line method. Since our common stock is thinly traded, we previously utilized the value, or an estimate thereof, paid by third parties for common stock in arms-length transactions. However, since no stock transactions have occurred since 2022, we engaged an accredited third party valuation firm to estimate the fair market value of our common stock. As a result of their findings, the fair market value of our common stock was reduced from $ to $ for all stock issuances subsequent to August 31, 2024.
Vesting of Shares
Of our outstanding shares at February 28, 2025, were issued as compensation to a former officer, and do not vest unless the officer is still acting as a consultant to us as of December 31, 2028. We amortize the value of these share prorata during the vesting period under the assumption that shares will vest. If the vesting condition is not satisfied, all of the shares will be forfeited by the former officer.
In August 2023, we issued shares of common stock to Lori Love as a signing bonus for joining our board of directors. Under the terms of the issuance, the shares vested at the rate of 10,000 per month for 15 months to the extent Ms. Love was still a board member at each vesting date.
On August 31, 2022, we issued shares of
Series A Convertible Preferred Stock to Jonathan Bates as compensation for officer services. In November 2024, we agreed with Mr. Bates
to vest the shares immediately upon payment of $
On August 23, 2022, we issued shares each to Raymond Mow and Erik Nelson as compensation for officer services. Under the terms of the issuance, the shares were to vest in full on January 15, 2025 if the officer was still employed by us at that time.
Public Offering of Common Stock
On January 21, 2025, we filed a registration statement on Form S-1 to register an indeterminate number of shares of our common stock in a public offering to be led by ThinkEquity LLC as lead underwriter. The public offering is being pursued in order to raise capital to fund the growth of our business and to achieve a listing of our common stock on a national securities exchange.
Reverse Stock Split
On December 16, 2024, our board of directors and
a majority of our shareholders approved a resolution to authorize our board of directors to effect a reverse split of our common stock
in the range of
| F-47 |
The reverse split will become effective by filing an amendment to our certificate of incorporation. Our board will not set the ratio of the reverse split or file the amendment to effect the reverse split unless we have received preliminary approval to list our common stock on a national securities exchange. A reverse split is necessary to enable us to meet the initial minimum share price requirements of any national securities exchange. We will not issue any fractional shares as a result of the reverse split. Instead, shareholders will receive cash equal to the market value of their fractional shares. If the board does not exercise its authority to effect the reverse split within 12 months of the date shareholders approved the reverse split, the board’s authority to effect the reverse split shall lapse.
Warrants
As of February 28, 2025, we had the following warrants outstanding:
| Schedule of warrants outstanding | ||||||||||
| Class | Amount Outstanding | Exercise Price | Expiration Date | |||||||
| Class C-3 Warrants | $ | |||||||||
| Total | ||||||||||
NOTE 9 – COMMITMENTS AND CONTINGENCIES
As of February 28, 2025 and August 31, 2024, we had no contractual commitments.
NOTE 10 – SUBSEQUENT EVENTS
We exercised our right to extend the maturity date of the LOC Agreement on March 1, 2025 and April 1, 2025.
On March 7, 2025, we entered into a Machine Lease Agreement with a third party, under which we sold the hash capacity under 2,500 of our ASIC miners for the period from March 8, 2025 to May 7, 2025 for $850,000, of which $670,000 is payable on March 7, 2025 and the remaining $180,000 is payable on April 7, 2025. The miners shall remain in their current hosted location, and the lessee has no right to obtain physical possession of the units. We are responsible for any casualty loss of the units, insuring the units, any repair or maintenance cost of the units, any taxes assessed against the units, and any hosting fees or electricity costs of the Units. The lessee is entitled to all mining rewards from the units during the term of the agreement. While the lessee assumes all risk associated with the variability of production of the units, we provided a down-time guarantee under which the lessee is entitled to a credit to the extent that downtime exceeds one percent during the term of the agreement.
On April 8, 2025, Soluna SW, LLC, which hosts 1,095 ASIC miners for us at its Murray, Kentucky location, elected not to renew its hosting agreement with us on the existing terms. The scheduled termination date is April 30, 2025. We are evaluating our options to enter into a new agreement with Soluna on less favorable terms, move our ASIC miners to an alternative hosting provider or sell the ASIC miners.
| F-48 |
1,875,000 Shares of Common Stock
Bitmine Immersion Technologies, Inc.
_____________________________
PRELIMINARY PROSPECTUS
_____________________________
ThinkEquity
, 2025
Through and including , 2025 (the 25th day after the date of this offering), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the expenses in connection with this registration statement. All of such expenses are estimates, other than the filing fees payable to the Securities and Exchange Commission.
Amount to be paid |
||||
| SEC registration fee | $ | 2,806 | ||
| FINRA filing fee | 3,250 | |||
| Stock exchange listing fees | 50,000 | |||
| Printing expenses | 5,421 | |||
| Accounting fees and expenses | 8,000 | |||
| Legal fees and expenses | 400,000 | |||
| Miscellaneous | 30,523 | |||
| Total | $ | 500,000 | ||
Item 14. Indemnification of Directors and Officers
We are a Delaware corporation. Section 102 of the General Corporation Law of the State of Delaware (the “DGCL”) permits a corporation to eliminate the personal liability of directors of a corporation to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our Amended and Restated Certificate of Incorporation, as amended, provides that no director of us shall be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability, except to the extent that the DGCL prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty.
Section 145(a) of the DGCL provides that a Delaware corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, other than an action by or in the right of the corporation, by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.
Section 145(b) of the DGCL provides that a Delaware corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person acted in any of the capacities set forth above, against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in, or not opposed to, the best interests of the corporation, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation, unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine, upon application, that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper.
| II-1 |
Further subsections of DGCL Section 145 provide that:
(1) to the extent a present or former director or officer of a corporation has been successful on the merits or otherwise in the defense of any action, suit or proceeding referred to in subsections (i) and (ii) of Section 145 or in the defense of any claim, issue or matter therein, such person shall be indemnified against expenses, including attorneys’ fees, actually and reasonably incurred by such person in connection therewith;
(2) the indemnification and advancement of expenses provided for pursuant to Section 145 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise; and
(3) the corporation shall have the power to purchase and maintain insurance of behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under Section 145.
As used in this Item 14, the term “proceeding” means any threatened, pending or completed action, suit or proceeding, whether or not by or in the right of us, and whether civil, criminal, administrative, investigative or otherwise.
Our amended and restated certificate of incorporation and amended and restated Bylaws both provide, in effect, that, to the fullest extent and under the circumstances permitted by Section 145 of the DGCL, we will indemnify any and all of its officers and directors.
We may also enter into, and intend to continue to enter into, separate indemnification agreements with our directors, officers, employees and agents that may be broader than the specific indemnification provisions contained in the DGCL. These indemnification agreements may require us, among other things, to indemnify our directors, officers, employees and agents against certain liabilities that may arise by reason of their status or service as directors, officers, employees and agents, other than liabilities arising from willful misconduct. These indemnification agreements may also generally require us to advance any expenses incurred by the directors, officers, employees and agents as a result of any proceeding against them as to which they could be indemnified. The indemnification provisions of the DGCL, our organizational documents and indemnification agreements that we may enter into may be sufficiently broad to permit indemnification of our directors, officers, employees and agents for liabilities, including reimbursement of expenses incurred, arising under the Securities Act of 1933, as amended, or the Securities Act.
We may purchase and maintain insurance on behalf of each and every person who is or was a director or officer of us against any loss arising from any claim asserted against him or her and incurred by him or her in any such capacity, subject to certain exclusions.
Item 15. Recent Sales of Unregistered Securities
Since January 1, 2022, we have made the following sales of unregistered securities:
| (1) | In February 2022, we issued 2,100,000 shares of common stock to an officer as a signing bonus under an employment agreement. In addition, pursuant to the terms of his employment agreement, we issued a total of 607,208 shares of common stock to the officer as quarterly bonuses valued at $50,000 each quarter based on the closing price of the common stock on the last day of each fiscal quarter. The quarterly bonuses were paid each quarter from May 2022 to May 2024. | |
| (2) | From January 2022 to June 27, 2022, we issued 4,122,000 Units at $1.25 per Unit, in a private placement conducted pursuant to Rule 506(b) under the Securities Act of 1933. Each Unit consists of one share of common stock, one Class C-1 Warrant and one Class C-2 Warrant. In connection with the private placement, we also issued 25,600 Class C-1 Warrants, 25,600 Class C-2 Warrants, and 25,600 C-3 Warrants to a registered broker who referred three of the investors. |
| II-2 |
| (3) | In April 2022, we issued 200,000 shares to a brokerage firm for investment banking services. In May 2023, we issued an additional 200,000 shares as consideration for an annual renewal of its agreement with the firm. | |
| (4) | On August 23, 2022, we issued 600,000 shares of common stock to Erik Nelson, our President; 850,000 shares of common stock to Raymond Mow, our Chief Financial Officer; and 150,000 shares of Series A Convertible Preferred Stock to Jonathan Bates, our Chief Executive Officer; each as consideration for officer services. Mr. Bates has agreed to convert the Series A Convertible Preferred Stock into shares of common stock at the closing of this offering at their existing conversion price of $0.20 per share (pre-split), which will result in Mr. Bates receiving 375,000 shares (post-split) of common stock upon such conversion. (See “Certain Relationships and Related Party Transactions—Letter Agreement with Jonathan Bates and IDI.”) | |
| (5) | On August 31, 2022, we issued 303,966 shares of Series A Convertible Preferred Stock to IDI in satisfaction of $3,039,662 of indebtedness. IDI has agreed to convert the Series A Convertible Preferred Stock into shares of common stock at the closing of this offering at their existing conversion price of $0.20 per share (pre-split), which will result in IDI receiving 759,915 shares (post-split) of common stock upon such conversion. (See “Certain Relationships and Related Party Transactions—Letter Agreement with Jonathan Bates and IDI.”) | |
| (6) | In September 2022, we issued 100,000 shares of common stock to a third party for investor relations services. In May 2023, we issued an additional 100,000 shares of common stock to the same party to renew the contract. | |
| (7) | In May 2023, we issued 250,000 shares of common stock to a consultant. | |
| (8) | In August 2023, we issued 150,000 shares of common stock to a new director as consideration for future director services. | |
| (9) | On September 1, 2024, we issued 500,000 shares of common stock to Erik Nelson, our President, and 500,000 shares of common stock to Raymond Mow, our Chief Financial Officer, as consideration for officer services. | |
| (10) | On October 2, 2024, we issued 100,000 shares of common stock to a business consultant. | |
| (11) | On October 2, 2024, we issued a total of 155,000 shares of common stock to four persons for investor relations services. | |
| (12) | In November 2024, we issued 2,500 shares of Series B Convertible Preferred Stock to IDI in consideration for the cancellation of 11,500,000 shares of common stock and an additional investment of $200,000. IDI has agreed to convert the Series B Convertible Preferred Stock into shares of common stock at their existing conversion price of $0.20 per share (pre-split), which will result in IDI receiving 625,000 shares (post-split) of common stock upon such conversion. (See “Certain Relationships and Related Party Transactions—Letter Agreement with Jonathan Bates and IDI.”) |
The offers, sales and issuances of the securities described in paragraphs (1), (3), (4), (6), (7), (8), (9), (10) and (11) were deemed to be exempt from registration under Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving a public offering. The recipients of such securities were our directors, employees or bona fide consultants and received the securities under our equity incentive plans. Appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions had adequate access, through employment, business or other relationships, to information about us.
The offers, sales and issuances of the securities described in paragraphs (2), (5), (12) were deemed to be exempt under Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D under the Securities Act as a transaction by an issuer not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited investor within the meaning of Rule 501 of Regulation D under the Securities Act and had adequate access, through employment, business or other relationships, to information about us. No underwriters were involved in these transactions.
| II-3 |
Item 16. Exhibits and Financial Statement Schedules
| II-4 |
| † | Indicates management contract or compensatory plan arrangement. |
| * | Previously filed |
| ** | Filed herewith |
| II-5 |
Item 17. Undertakings
The undersigned registrant hereby undertakes:
1. To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
provided, however, that paragraphs (i), (ii) and (iii) do not apply if the registration statement is on Form S-1 and the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the Commission by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement;
2. For the purposes of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
3. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
4. For the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.:
| II-6 |
5. For the purposes of determining liability under the Securities Act of 1933 to any purchaser in the initial distributions of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.
6. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by a Registrant of expenses incurred or paid by a director, officer or controlling person of a Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, that Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
7. For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective
8. For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. The undersigned registrant hereby undertakes that:
9. For purposes of determining any liability under the Securities Act of 1933, each filing of the registrant’s annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan’s annual report pursuant to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
| II-7 |
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Las Vegas, State of Nevada, on the 23rd day of May, 2025.
|
Bitmine Immersion Technologies, Inc.
| ||
| /s/ Jonathan Bates | ||
| Name: Jonathan Bates | ||
| Title: Chief Executive Officer (Principal Executive Officer) |
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
| Name | Position | Date | ||
| /s/ Jonathan Bates | Chief Executive Officer and Director | May 23, 2025 | ||
| Jonathan Bates | (Principal Executive Officer) | |||
| * | Director and President | May 23, 2025 | ||
| Erik S. Nelson | ||||
| * | Chief Financial Officer and Director | May 23, 2025 | ||
| Raymond Mow | (Principal Financial Officer) | |||
| * | Director and Corporate Secretary | May 23, 2025 | ||
| Seth Bayles | ||||
| * | Director | May 23, 2025 | ||
| John Kelly | ||||
| * | Director | May 23, 2025 | ||
| Michael Maloney | ||||
| * | Director | May 23, 2025 | ||
| Lori Love |
| /s/ Jonathan Bates | Chief Executive Officer and Director | May 23, 2025 | ||
|
Jonathan Bates Attorney-in-Fact |
(Principal Executive Officer) |
| II-8 |
Exhibit 1.1
UNDERWRITING AGREEMENT
between
BITMINE IMMERSION TECHNOLOGIES, INC.
and
THINKEQUITY LLC
as Representative of the Several Underwriters
| 1 |
BITMINE IMMERSION TECHNOLOGIES, INC.
UNDERWRITING AGREEMENT
New York, New York
[•], 2025
ThinkEquity LLC
As Representative of the several Underwriters named on Schedule 1 attached
hereto
17 State Street, 41st Fl.
New York, NY 10004
Ladies and Gentlemen:
The undersigned, Bitmine Immersion Technologies, Inc., a corporation formed under the laws of the State of Delaware (collectively with its subsidiaries and affiliates, including, without limitation, all entities disclosed or described in the Registration Statement (as hereinafter defined) as being subsidiaries or affiliates of Bitmine Immersion Technologies, Inc., the “Company”), hereby confirms its agreement (this “Agreement”) with ThinkEquity LLC (hereinafter referred to as “you” (including its correlatives) or the “Representative”) and with the other underwriters named on Schedule 1 hereto for which the Representative is acting as representative (the Representative and such other underwriters being collectively called the “Underwriters” or, individually, an “Underwriter”) as follows:
| 1. | Purchase and Sale of Shares. |
1.1 Firm Shares.
1.1.1. Nature and Purchase of Firm Shares.
(i) On the basis of the representations and warranties herein contained, but subject to the terms and conditions herein set forth, the Company agrees to issue and sell to the several Underwriters, an aggregate of [•] shares (“Firm Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”).
(ii) The Underwriters, severally and not jointly, agree to purchase from the Company the number of Firm Shares set forth opposite their respective names on Schedule 1 attached hereto and made a part hereof at a purchase price of $[•] per share ([92.5]% of the per Firm Share offering price). The Firm Shares are to be offered initially to the public at the offering price set forth on the cover page of the Prospectus (as defined in Section 2.1.1 hereof).
1.1.2. Shares Payment and Delivery.
(i) Delivery and payment for the Firm Shares shall be made at 10:00 a.m., Eastern time, on the first (1st) Business Day following the effective date (the “Effective Date”) of the Registration Statement (as defined in Section 2.1.1 below) (or the second (2nd) Business Day following the Effective Date if the Registration Statement is declared effective after 4:01 p.m., Eastern time) or at such earlier time as shall be agreed upon by the Representative and the Company, at the offices of Greenberg Traurig, P.A., 333 SE 2nd Avenue, Suite 4400, Miami, Florida 33131 (“Representative Counsel”), or at such other place (or remotely by facsimile or other electronic transmission) as shall be agreed upon by the Representative and the Company. The hour and date of delivery and payment for the Firm Shares is called the “Closing Date.”
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(ii) Payment for the Firm Shares shall be made on the Closing Date by wire transfer in Federal (same day) funds, payable to the order of the Company upon delivery of the certificates (in form and substance satisfactory to the Underwriters) representing the Firm Shares (or through the facilities of the Depository Trust Company (“DTC”)) for the account of the Underwriters. The Firm Shares shall be registered in such name or names and in such authorized denominations as the Representative may request in writing at least one (1) full Business Day prior to the Closing Date. The Company shall not be obligated to sell or deliver the Firm Shares except upon tender of payment by the Representative for all of the Firm Shares. The term “Business Day” means any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions are authorized or obligated by law to close in New York, New York.
1.2 Over-allotment Option.
1.2.1. Option Shares. For the purposes of covering any over-allotments in connection with the distribution and sale of the Firm Shares, the Company hereby grants to the Underwriters an option to purchase up to [•] additional shares of Common Stock, representing fifteen percent (15%) of the Firm Shares sold in the offering, from the Company (the “Over-allotment Option”). Such [•] additional shares of Common Stock, the net proceeds of which will be deposited with the Company’s account, are hereinafter referred to as “Option Shares.” The purchase price to be paid per Option Share shall be equal to the price per Firm Share set forth in Section 1.1.1 hereof. The Firm Shares and the Option Shares are hereinafter referred to together as the “Public Securities.” The offering and sale of the Public Securities is hereinafter referred to as the “Offering.”
1.2.2. Exercise of Option. The Over-allotment Option granted pursuant to Section 1.2.1 hereof may be exercised by the Representative as to all (at any time) or any part (from time to time) of the Option Shares within 45 days after the Effective Date. The Underwriters shall not be under any obligation to purchase any Option Shares prior to the exercise of the Over-allotment Option. The Over-allotment Option granted hereby may be exercised by the giving of oral notice to the Company from the Representative, which must be confirmed in writing by overnight mail or facsimile or other electronic transmission setting forth the number of Option Shares to be purchased and the date and time for delivery of and payment for the Option Shares (the “Option Closing Date”), which shall not be later than one (1) full Business Days after the date of the notice or such other time as shall be agreed upon by the Company and the Representative, at the offices of Representative Counsel or at such other place (including remotely by facsimile or other electronic transmission) as shall be agreed upon by the Company and the Representative. If such delivery and payment for the Option Shares does not occur on the Closing Date, the Option Closing Date will be as set forth in the notice. Upon exercise of the Over-allotment Option with respect to all or any portion of the Option Shares, subject to the terms and conditions set forth herein, (i) the Company shall become obligated to sell to the Underwriters the number of Option Shares specified in such notice and (ii) each of the Underwriters, acting severally and not jointly, shall purchase that portion of the total number of Option Shares then being purchased as set forth in Schedule 1 opposite the name of such Underwriter.
1.2.3. Payment and Delivery. Payment for the Option Shares shall be made on the Option Closing Date by wire transfer in Federal (same day) funds, payable to the order of the Company upon delivery to you of certificates (in form and substance satisfactory to the Underwriters) representing the Option Shares (or through the facilities of DTC) for the account of the Underwriters. The Option Shares shall be registered in such name or names and in such authorized denominations as the Representative may request in writing at least one (1) full Business Day prior to the Option Closing Date. The Company shall not be obligated to sell or deliver the Option Shares except upon tender of payment by the Representative for applicable Option Shares. The Option Closing Date may be simultaneous with, but not earlier than, the Closing Date, and in the event that such time and date are simultaneous with the Closing Date, the term “Closing Date” share refer to the time and date of delivery of the Firm Shares and the Option Shares.
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1.3 Representative’s Warrants.
1.3.1. Purchase Warrants. The Company hereby agrees to issue and sell to the Representative (and/or its designees) on the Closing Date and Option Closing Date, as applicable, an option (“Representative’s Warrant”) for the purchase of an aggregate number of [•] shares of Common Stock representing 5% of the Public Securities, for an aggregate purchase price of $100.00. The Representative’s Warrant agreement, in the form attached hereto as Exhibit A (the “Representative’s Warrant Agreement”), shall be exercisable, in whole or in part, commencing on a date which is one hundred eighty (180) days after the Effective Date and expiring on the five-year anniversary of the Effective Date at an initial exercise price per share of Common Stock of $[•], which is equal to 125% of the initial public offering price of the Firm Shares. The Representative’s Warrant Agreement and the shares of Common Stock issuable upon exercise thereof are hereinafter referred to together as the “Representative’s Securities.” The Representative understands and agrees that there are significant restrictions pursuant to FINRA Rule 5110 against transferring the Representative’s Warrant Agreement and the underlying shares of Common Stock during the one hundred eighty (180) days after the Effective Date and by its acceptance thereof shall agree that it will not sell, transfer, assign, pledge or hypothecate the Representative’s Warrant Agreement, or any portion thereof, or be the subject of any hedging, short sale, derivative, put or call transaction that would result in the effective economic disposition of such securities for a period of one hundred eighty (180) days following the Effective Date to anyone other than (i) an Underwriter or a selected dealer in connection with the Offering, or (ii) a bona fide officer or partner of the Representative or of any such Underwriter or selected dealer; and only if any such transferee agrees to the foregoing lock-up restrictions.
1.3.2. Delivery. Delivery of the Representative’s Warrant Agreement shall be made on the Closing Date and shall be issued in the name or names and in such authorized denominations as the Representative may request.
| 2. | Representations and Warranties of the Company. The Company represents and warrants to the Underwriters as of the Applicable Time (as defined below), as of the Closing Date and as of the Option Closing Date, if any, as follows: |
2.1 Filing of Registration Statement.
2.1.1. Pursuant to the Securities Act. The Company has filed with the U.S. Securities and Exchange Commission (the “Commission”) a registration statement, and an amendment or amendments thereto, on Form S-1 (File No. 333-284361), including any related prospectus or prospectuses, for the registration of the Public Securities and the Representative’s Securities under the Securities Act of 1933, as amended (the “Securities Act”), which registration statement and amendment or amendments have been prepared by the Company in all material respects in conformity with the requirements of the Securities Act and the rules and regulations of the Commission under the Securities Act (the “Securities Act Regulations”) and will contain all material statements that are required to be stated therein in accordance with the Securities Act and the Securities Act Regulations. Except as the context may otherwise require, such registration statement, as amended, on file with the Commission at the time the registration statement became effective (including the Preliminary Prospectus included in the registration statement, financial statements, schedules, exhibits and all other documents filed as a part thereof or incorporated therein and all information deemed to be a part thereof as of the Effective Date pursuant to paragraph (b) of Rule 430A of the Securities Act Regulations (the “Rule 430A Information”)), is referred to herein as the “Registration Statement.” If the Company files any registration statement pursuant to Rule 462(b) of the Securities Act Regulations, then after such filing, the term “Registration Statement” shall include such registration statement filed pursuant to Rule 462(b). The Registration Statement has been declared effective by the Commission on the date hereof.
Each prospectus used prior to the effectiveness of the Registration Statement, and each prospectus that omitted the Rule 430A Information that was used after such effectiveness and prior to the execution and delivery of this Agreement, is herein called a “Preliminary Prospectus.” The Preliminary Prospectus, subject to completion, dated [•], 2025, that was included in the Registration Statement immediately prior to the Applicable Time is hereinafter called the “Pricing Prospectus.” The final prospectus in the form first furnished to the Underwriters for use in the Offering is hereinafter called the “Prospectus.” Any reference to the “most recent Preliminary Prospectus” shall be deemed to refer to the latest Preliminary Prospectus included in the Registration Statement.
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“Applicable Time” means [•] [a.m./p.m.], Eastern time, on the date of this Agreement.
“Issuer Free Writing Prospectus” means any “issuer free writing prospectus,” as defined in Rule 433 of the Securities Act Regulations (“Rule 433”), including without limitation any “free writing prospectus” (as defined in Rule 405 of the Securities Act Regulations) relating to the Public Securities that is (i) required to be filed with the Commission by the Company, (ii) a “road show that is a written communication” within the meaning of Rule 433(d)(8)(i), whether or not required to be filed with the Commission, or (iii) exempt from filing with the Commission pursuant to Rule 433(d)(5)(i) because it contains a description of the Public Securities or of the Offering that does not reflect the final terms, in each case in the form filed or required to be filed with the Commission or, if not required to be filed, in the form retained in the Company’s records pursuant to Rule 433(g).
“Issuer General Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is intended for general distribution to prospective investors (other than a “bona fide electronic road show,” as defined in Rule 433 (the “Bona Fide Electronic Road Show”)), as evidenced by its being specified in Schedule 2-B hereto.
“Issuer Limited Use Free Writing Prospectus” means any Issuer Free Writing Prospectus that is not an Issuer General Use Free Writing Prospectus.
“Pricing Disclosure Package” means any Issuer General Use Free Writing Prospectus issued at or prior to the Applicable Time, the Pricing Prospectus and the information included on Schedule 2-A hereto, all considered together.
2.1.2. Pursuant to the Exchange Act. The Company has filed with the Commission a Form 8-A (File Number 000-[•]) providing for the registration pursuant to Section 12(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), of the shares of Common Stock. The registration of the shares of Common Stock under the Exchange Act has been declared effective by the Commission on or prior to the date hereof. The Company has taken no action designed to, or likely to have the effect of, terminating the registration of the shares of Common Stock under the Exchange Act, nor has the Company received any notification that the Commission is contemplating terminating such registration.
2.2 Stock Exchange Listing. The shares of Common Stock have been approved for listing on the [·] (the “Exchange”), and the Company has taken no action designed to, or likely to have the effect of, delisting the shares of Common Stock from the Exchange, nor has the Company received any notification that the Exchange is contemplating terminating such listing except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
2.3 No Stop Orders, etc. Neither the Commission nor, to the Company’s knowledge, any state regulatory authority has issued any order preventing or suspending the use of the Registration Statement, any Preliminary Prospectus or the Prospectus or has instituted or, to the Company’s knowledge, threatened to institute, any proceedings with respect to such an order. The Company has complied with each request (if any) from the Commission for additional information.
2.4 Disclosures in Registration Statement.
2.4.1. Compliance with Securities Act and 10b-5 Representation.
(i) Each of the Registration Statement and any post-effective amendment thereto, at the time it became effective, complied in all material respects with the requirements of the Securities Act and the Securities Act Regulations. Each Preliminary Prospectus, including the prospectus filed as part of the Registration Statement as originally filed or as part of any amendment or supplement thereto, and the Prospectus, at the time each was filed with the Commission, complied in all material respects with the requirements of the Securities Act and the Securities Act Regulations. Each Preliminary Prospectus delivered to the Underwriters for use in connection with this Offering and the Prospectus was or will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
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(ii) Neither the Registration Statement nor any amendment thereto, at its effective time, as of the Applicable Time, at the Closing Date or at any Option Closing Date (if any), contained, contains or will contain an untrue statement of a material fact or omitted, omits or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading.
(iii) The Pricing Disclosure Package, as of the Applicable Time, at the Closing Date or at any Option Closing Date (if any), did not, does not and will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and each Issuer Limited Use Free Writing Prospectus hereto does not conflict with the information contained in the Registration Statement, any Preliminary Prospectus, the Pricing Prospectus or the Prospectus, and each such Issuer Limited Use Free Writing Prospectus, as supplemented by and taken together with the Pricing Prospectus as of the Applicable Time, did not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to statements made or statements omitted in reliance upon and in conformity with written information furnished to the Company with respect to the Underwriters by the Representative expressly for use in the Registration Statement, the Pricing Prospectus or the Prospectus or any amendment thereof or supplement thereto. The parties acknowledge and agree that such information provided by or on behalf of any Underwriter consists solely of the following disclosure contained in the “Underwriting” section of the Prospectus: (i) the first sentence of the subsection entitled “Discounts, Commissions and Reimbursement” related to concessions; (ii) the subsection entitled “Discretionary Accounts”; (iii) the first three paragraphs under the subsection entitled “Price Stabilization, Short Positions and Penalty Bids”; and (iv) the subsection entitled “Electronic Distribution” (the “Underwriters’ Information”) (the “Underwriters’ Information”); and
(iv) Neither the Prospectus nor any amendment or supplement thereto (including any prospectus wrapper), as of its issue date, at the time of any filing with the Commission pursuant to Rule 424(b), at the Closing Date or at any Option Closing Date, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to the Underwriters’ Information.
2.4.2. Disclosure of Agreements. The agreements and documents described in the Registration Statement, the Pricing Disclosure Package and the Prospectus conform in all material respects to the descriptions thereof contained therein and there are no agreements or other documents required by the Securities Act and the Securities Act Regulations to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus or to be filed with the Commission as exhibits to the Registration Statement, that have not been so described or filed. Each agreement or other instrument (however characterized or described) to which the Company is a party or by which it is or may be bound or affected and (i) that is referred to in the Registration Statement, the Pricing Disclosure Package and the Prospectus, or (ii) is material to the Company’s business, has been duly authorized and validly executed by the Company, is in full force and effect in all material respects and is enforceable against the Company and, to the Company’s knowledge, the other parties thereto, in accordance with its terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. None of such agreements or instruments has been assigned by the Company, and neither the Company nor, to the Company’s knowledge, any other party is in default thereunder and, to the Company’s knowledge, no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a default thereunder. To the best of the Company’s knowledge, performance by the Company of the material provisions of such agreements or instruments will not result in a violation of any existing applicable law, rule, regulation, judgment, order or decree of any governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of its assets or businesses (each, a “Governmental Entity”), including, without limitation, those relating to environmental laws and regulations.
2.4.3. Prior Securities Transactions. Since January 1, 2022, no securities of the Company have been sold by the Company or by or on behalf of, or for the benefit of, any person or persons controlling, controlled by or under common control with the Company, except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Preliminary Prospectus.
2.4.4. Regulations. The disclosures in the Registration Statement, the Pricing Disclosure Package and the Prospectus concerning the effects of federal, state, local and all foreign regulation on the Offering and the Company’s business as currently contemplated are correct in all material respects and no other such regulations are required to be disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus which are not so disclosed.
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2.5 Changes After Dates in Registration Statement.
2.5.1. No Material Adverse Change. Since the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package and the Prospectus, except as otherwise specifically stated therein: (i) there has been no material adverse change in the financial position or results of operations of the Company, nor any change or development that, singularly or in the aggregate, would involve a material adverse change or a prospective material adverse change, in or affecting the condition (financial or otherwise), results of operations, business, assets or prospects of the Company (a “Material Adverse Change”); (ii) there have been no material transactions entered into by the Company, other than as contemplated pursuant to this Agreement; and (iii) no officer or director of the Company has resigned from any position with the Company.
2.5.2. Recent Securities Transactions, etc. Subsequent to the respective dates as of which information is given in the Registration Statement, the Pricing Disclosure Package and the Prospectus, and except as may otherwise be indicated or contemplated herein or disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has not: (i) issued any securities or incurred any liability or obligation, direct or contingent, for borrowed money; or (ii) declared or paid any dividend or made any other distribution on or in respect to its capital stock.
2.6 Independent Accountants. To the knowledge of the Company, Bush & Associates CPA LLC (the “Auditor”), whose report is filed with the Commission as part of the Registration Statement, the Pricing Disclosure Package and the Prospectus, is an independent registered public accounting firm as required by the Securities Act and the Securities Act Regulations and the Public Company Accounting Oversight Board. The Auditor has not, during the periods covered by the financial statements included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, provided to the Company any non-audit services, as such term is used in Section 10A(g) of the Exchange Act.
2.7 Financial Statements, etc. The financial statements, including the notes thereto and supporting schedules included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, fairly present the financial position and the results of operations of the Company at the dates and for the periods to which they apply; and such financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”), consistently applied throughout the periods involved (provided that unaudited interim financial statements are subject to year-end audit adjustments that are not expected to be material in the aggregate and do not contain all footnotes required by GAAP); and the supporting schedules included in the Registration Statement present fairly the information required to be stated therein. Except as included therein, no historical or pro forma financial statements are required to be included in the Registration Statement, the Pricing Disclosure Package or the Prospectus under the Securities Act or the Securities Act Regulations. To the best of the Company’s management’s knowledge, the pro forma and pro forma as adjusted financial information and the related notes, if any, included in the Registration Statement, the Pricing Disclosure Package and the Prospectus have been properly compiled and prepared in accordance with the applicable requirements of the Securities Act and the Securities Act Regulations and present fairly the information shown therein, and the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions and circumstances referred to therein. To the best of the Company’s management’s knowledge, all disclosures contained in the Registration Statement, the Pricing Disclosure Package or the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of the Commission), if any, comply with Regulation G of the Exchange Act and Item 10 of Regulation S-K of the Securities Act, to the extent applicable. Each of the Registration Statement, the Pricing Disclosure Package and the Prospectus discloses all material off-balance sheet transactions, arrangements, obligations (including contingent obligations), and other relationships of the Company with unconsolidated entities or other persons that may have a material current or future effect on the Company’s financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources, or significant components of revenues or expenses. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, (a) neither the Company nor any of its direct and indirect subsidiaries, including each entity disclosed or described in the Registration Statement, the Pricing Disclosure Package and the Prospectus as being a subsidiary of the Company (each, a “Subsidiary” and, collectively, the “Subsidiaries”), has incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions other than in the ordinary course of business, (b) the Company has not declared or paid any dividends or made any distribution of any kind with respect to its capital stock, (c) there has not been any change in the capital stock of the Company or any of its Subsidiaries, or, other than in the course of business, any grants under any stock compensation plan, and (d) there has not been any material adverse change in the Company’s long-term or short-term debt.
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2.8 Authorized Capital; Options, etc. The Company had, at the date or dates indicated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the duly authorized, issued and outstanding capitalization as set forth therein. Based on the assumptions stated in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company will have on the Closing Date the adjusted stock capitalization set forth therein. Except as set forth in, or contemplated by, the Registration Statement, the Pricing Disclosure Package and the Prospectus, on the Effective Date, as of the Applicable Time and on the Closing Date and any Option Closing Date, there will be no stock options, warrants, or other rights to purchase or otherwise acquire any authorized, but unissued shares of Common Stock of the Company or any security convertible or exercisable into shares of Common Stock of the Company, or any contracts or commitments to issue or sell shares of Common Stock or any such options, warrants, rights or convertible securities.
2.9 Valid Issuance of Securities, etc.
2.9.1. Outstanding Securities. To the best of the Company’s knowledge, all issued and outstanding securities of the Company issued prior to the transactions contemplated by this Agreement have been duly authorized and validly issued and are fully paid and non-assessable; the holders thereof have no rights of rescission, rights of first refusal or rights of participation or similar rights with respect thereto or put rights, and are not subject to personal liability by reason of being such holders; and none of such securities were issued in violation of the preemptive rights, rights of first refusal or rights of participation or similar rights of any holders of any security of the Company or similar contractual rights granted by the Company. The authorized shares of Common Stock conform in all material respects to all statements relating thereto contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus. To the best of the Company’s knowledge, all offers and sales of the outstanding shares of Common Stock were at all relevant times either registered under the Securities Act and the applicable state securities or “blue sky” laws or, based in part on the representations and warranties of the purchasers of such Shares, exempt from such registration requirements.
2.9.2. Securities Sold Pursuant to this Agreement. The Public Securities and Representative’s Securities have been duly authorized for issuance and sale and, when issued and paid for, will be validly issued, fully paid and non-assessable; the holders thereof are not and will not be subject to personal liability by reason of being such holders; the Public Securities and Representative’s Securities are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company; and all corporate action required to be taken for the authorization, issuance and sale of the Public Securities and Representative’s Securities has been duly and validly taken. The Public Securities and Representative’s Securities conform in all material respects to all statements with respect thereto contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus. All corporate action required to be taken for the authorization, issuance and sale of the Representative’s Warrant Agreement has been duly and validly taken; the shares of Common Stock issuable upon exercise of the Representative’s Warrant have been duly authorized and reserved for issuance by all necessary corporate action on the part of the Company and when paid for and issued in accordance with the Representative’s Warrant and the Representative’s Warrant Agreement, such shares of Common Stock will be validly issued, fully paid and non-assessable; the holders thereof are not and will not be subject to personal liability by reason of being such holders; and such shares of Common Stock are not and will not be subject to the preemptive rights of any holders of any security of the Company or similar contractual rights granted by the Company.
2.10 Registration Rights of Third Parties. Except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus, no holders of any securities of the Company or any rights exercisable for or convertible or exchangeable into securities of the Company have the right to require the Company to register any such securities of the Company under the Securities Act or to include any such securities in a registration statement to be filed by the Company that have not been waived, rendered moot, or are immaterial or will be locked up for a period of at least 90 days from the date of the Offering.
2.11 Validity and Binding Effect of Agreements. This Agreement and the Representative’s Warrant Agreement have been duly and validly authorized by the Company, and, when executed and delivered, will constitute, the valid and binding agreements of the Company, enforceable against the Company in accordance with their respective terms, except: (i) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally; (ii) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws; and (iii) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.
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2.12 No Conflicts, etc. The execution, delivery and performance by the Company of this Agreement, the Representative’s Warrant Agreement and all ancillary documents, the consummation by the Company of the transactions herein and therein contemplated and the compliance by the Company with the terms hereof and thereof do not and will not, with or without the giving of notice or the lapse of time or both: (i) result in a material breach of, or conflict with any of the terms and provisions of, or constitute a material default under, or result in the creation, modification, termination or imposition of any lien, charge, mortgage, pledge, security, interest, claim, preferential arrangement, encumbrance or restriction of any kind whatsoever upon any property or assets of the Company pursuant to the terms of any agreement or instrument, license or permit, to which the Company is a party, or to which any of its assets are bound; (ii) result in any violation of the provisions of the Company’s Certificate of Incorporation (as the same may be amended or restated from time to time, the “Charter”) or the by-laws of the Company; or (iii) violate any existing applicable law, rule, regulation, judgment, order or decree of any Governmental Entity as of the date hereof.
2.13 No Defaults; Violations. No material default exists in the due performance and observance of any term, covenant or condition of any material license, contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or any other agreement or instrument evidencing an obligation for borrowed money, or any other material agreement or instrument to which the Company is a party or by which the Company may be bound or to which any of the properties or assets of the Company is subject. The Company is not in violation of any term or provision of its Charter or by-laws, or in violation of any franchise, license, permit, applicable law, rule, regulation, judgment or decree of any Governmental Entity.
2.14 Corporate Power; Licenses; Consents.
2.14.1. Conduct of Business. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has all requisite corporate power and authority, and has all necessary consents, authorizations, approvals, orders, licenses, certificates, qualifications, registrations and permits of and from all governmental regulatory officials and bodies that it needs as of the date hereof to conduct its business purpose as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus; provided that the foregoing representation is based on the Company’s determination that the placement of equipment with a hosting firm for the purpose of “mining” bitcoin, where all on-site service and maintenance is provided by hosting firm personnel, does not constitute business activity within such jurisdiction sufficient to result in an obligation to register the Company as a foreign corporation with the state or require a business license from the state, county or city in which the equipment is located.
2.14.2. Transactions Contemplated Herein. The Company has all corporate power and authority to enter into this Agreement and to carry out the provisions and conditions hereof, and all consents, authorizations, approvals, orders, licenses, certificates, qualifications and registrations required in connection therewith have been obtained. No consent, authorization or order of, and no filing with, any court, government agency or other body is required for the valid issuance, sale and delivery of the Public Securities and the consummation of the transactions and agreements contemplated by this Agreement and the Representative’s Warrant Agreement and as contemplated by the Registration Statement, the Pricing Disclosure Package and the Prospectus, except with respect to applicable federal and state securities laws and the rules and regulations of the Financial Industry Regulatory Authority, Inc. (“FINRA”).
2.15 D&O Questionnaires. To the Company’s knowledge, all information contained in the questionnaires (the “Questionnaires”) completed by each of the Company’s directors and officers immediately prior to the Offering (the “Insiders”) as supplemented by all information concerning the Company’s directors, officers and principal stockholders as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, as well as in the Lock-Up Agreement (as defined in Section 2.25 below), provided to the Underwriters, is true and correct in all material respects and the Company has not become aware of any information which would cause the information disclosed in the Questionnaires to become materially inaccurate and incorrect.
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2.16 Litigation; Governmental Proceedings. There is no action, suit, proceeding, inquiry, arbitration, investigation, litigation or governmental proceeding pending or, to the Company’s knowledge, threatened against, or involving the Company or, to the Company’s knowledge, any executive officer or director which has not been disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus or in connection with the Company’s listing application for the listing of the Public Securities on the Exchange.
2.17 Good Standing. The Company has been duly organized and is validly existing as a corporation and is in good standing under the laws of the State of Delaware as of the date hereof, and is duly qualified to do business and is in good standing in each other jurisdiction in which its ownership or lease of property or the conduct of business requires such qualification, except where the failure to qualify, singularly or in the aggregate, would not have or reasonably be expected to result in a Material Adverse Change; provided that the foregoing representation is based on the Company’s determination that the placement of equipment with a hosting firm for the purpose of “mining” bitcoin, where all on-site service and maintenance is provided by hosting firm personnel, does not constitute business activity within such jurisdiction sufficient to result in an obligation to register the Company as a foreign corporation with the state or require a business license from the state, county or city in which the equipment is located.
2.18 Insurance. The Company carries, plans to obtain, or is entitled to the benefits of insurance, with reputable insurers, in such amounts and covering such risks which the Company believes are adequate, including, but not limited to, directors and officers insurance coverage at least equal to $5,000,000 (which the Company agrees to obtain within thirty (30) calendar days of the Closing Date) and all such insurance is in full force and effect. The Company has no reason to believe that it will not be able (i) to renew its existing insurance coverage as and when such policies expire or (ii) to obtain comparable coverage from similar institutions as may be necessary or appropriate to conduct its business as now conducted and at a cost that would not result in a Material Adverse Change.
2.19 Transactions Affecting Disclosure to FINRA.
2.19.1. Finder’s Fees. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, there are no claims, payments, arrangements, agreements or understandings relating to the payment of a finder’s, consulting or origination fee by the Company or any Insider with respect to the sale of the Public Securities hereunder or any other arrangements, agreements or understandings of the Company or, to the Company’s knowledge, any of its stockholders that may affect the Underwriters’ compensation, as determined by FINRA.
2.19.2. Payments Within Twelve (12) Months. Except as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company has not made any direct or indirect payments (in cash, securities or otherwise) to: (i) any person, as a finder’s fee, consulting fee or otherwise, in consideration of such person raising capital for the Company or introducing to the Company persons who raised or provided capital to the Company; (ii) any FINRA member; or (iii) any person or entity that has any direct or indirect affiliation or association with any FINRA member, within the twelve (12) months prior to the Effective Date, other than the payment to the Underwriters as provided hereunder in connection with the Offering.
2.19.3. Use of Proceeds. None of the net proceeds of the Offering will be paid by the Company to any participating FINRA member or its affiliates, except as specifically authorized herein.
2.19.4. FINRA Affiliation. There is no (i) officer or director of the Company, (ii) beneficial owner of 10% or more of any class of the Company's securities or (iii) beneficial owner of the Company's unregistered equity securities which were acquired during the 180-day period immediately preceding the filing of the Registration Statement that is an affiliate or associated person of a FINRA member participating in the Offering (as determined in accordance with the rules and regulations of FINRA).
2.19.5. Information. All information provided by the Company in its, and, to the Company’s knowledge, all information provided by the Company’s officers and directors in their FINRA questionnaire to Representative Counsel specifically for use by Representative Counsel in connection with its Public Offering System filings (and related disclosure) with FINRA is true, correct and complete in all material respects.
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2.20 Foreign Corrupt Practices Act. None of the Company and its Subsidiaries or, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company and its Subsidiaries or any other person acting on behalf of the Company and its Subsidiaries, has, directly or indirectly, (i) given or agreed to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or agent of a customer or supplier, or official or employee of any governmental agency or instrumentality of any government (domestic or foreign) or any political party or candidate for office (domestic or foreign) or other person who was, is, or may be in a position to help or hinder the business of the Company (or assist it in connection with any actual or proposed transaction) that (a) might subject the Company to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (b) if not given in the past, might have had a Material Adverse Change, (c) if not continued in the future, might adversely affect the assets, business, operations or prospects of the Company, or (d) violated or is in violation of any provision of the FCPA or any applicable non-U.S. anti-bribery statute or regulation; (ii) made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment; or (iii) received notice of any investigation, proceeding or inquiry by any Governmental Entity regarding any of the matters in clauses (i) or (ii) above; and the Company and, to the knowledge of the Company, the Company’s affiliates have conducted their respective businesses in compliance with the FCPA and have instituted and maintain policies and procedures designed to ensure, and which are reasonably expected to continue to ensure, continued compliance therewith. The Company has taken reasonable steps to ensure that its accounting controls and procedures are sufficient to cause the Company to comply in all material respects with the Foreign Corrupt Practices Act of 1977, as amended.
2.21 Compliance with OFAC. None of the Company and its Subsidiaries or, to the Company’s knowledge, any director, officer, agent, employee or affiliate of the Company and its Subsidiaries or any other person acting on behalf of the Company and its Subsidiaries, is currently subject to any U.S. sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”), and the Company will not, directly or indirectly, use the proceeds of the Offering hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity, for the purpose of financing the activities of any person currently subject to any U.S. sanctions administered by OFAC.
2.22 Forward-Looking Statements. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) contained in either the Registration Statement, Disclosure Package or Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.
2.23 Money Laundering Laws. The operations of the Company and its Subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the money laundering statutes of all jurisdictions, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any Governmental Entity (collectively, the “Money Laundering Laws”); and no action, suit or proceeding by or before any Governmental Entity involving the Company with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.
2.24 Officers’ Certificate. Any certificate signed by any duly authorized officer of the Company and delivered to you or to Representative Counsel shall be deemed a representation and warranty by the Company to the Underwriters as to the matters covered thereby.
2.25 Lock-Up Agreements. Schedule 3 hereto contains a complete and accurate list of the Company’s officers, directors and each owner of at least 5% (after giving effect to the “pro forma adjustments” described in the Prospectus) of the Company’s outstanding shares of Common Stock (or securities convertible or exercisable into shares of Common Stock) (collectively, the “Lock-Up Parties”). The Company has caused each of the Lock-Up Parties to deliver to the Representative an executed Lock-Up Agreement, in the form attached hereto as Exhibit B (the “Lock-Up Agreement”), prior to the execution of this Agreement.
2.26 Subsidiaries. All direct and indirect Subsidiaries of the Company are duly organized and in good standing under the laws of the place of organization or incorporation, and each Subsidiary is in good standing in each jurisdiction in which its ownership or lease of property or the conduct of business requires such qualification, except where the failure to qualify would not have a material adverse effect on the assets, business or operations of the Company taken as a whole. The Company’s ownership and control of each Subsidiary is as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
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2.27 Related Party Transactions. There are no business relationships or related party transactions involving the Company or any other person required to be described in the Registration Statement, the Pricing Disclosure Package and the Prospectus that have not been described as required.
2.28 No Relationships with Customers and Suppliers. No relationship, direct or indirect, exists between or among the Company on the one hand, and the directors, officers, 5% or greater stockholders, customers or suppliers of the Company or any of the Company’s affiliates on the other hand, which is required to be described in the Pricing Disclosure Package and the Prospectus or a document incorporated by reference therein and which is not so described.
2.29 No Unconsolidated Entities. There are no transactions, arrangements or other relationships between and/or among the Company, any of its affiliates (as such term is defined in Rule 405 of the Securities Act) and any unconsolidated entity, including, but not limited to, any structured finance, special purpose or limited purpose entity that could reasonably be expected to materially affect the Company’s liquidity or the availability of or requirements for its capital resources required to be described in the Pricing Disclosure Package and the Prospectus or a document incorporated by reference therein which have not been described as required.
2.30 Board of Directors. The Board of Directors of the Company is comprised of the persons set forth under the heading of the Pricing Prospectus and the Prospectus captioned “Management.” The qualifications of the persons serving as board members and the overall composition of the board comply with the Exchange Act, the Exchange Act Regulations, the Sarbanes-Oxley Act of 2002 and the rules promulgated thereunder (the “Sarbanes-Oxley Act”) applicable to the Company and the listing rules of the Exchange. At least one member of the Audit Committee of the Board of Directors of the Company qualifies as an “audit committee financial expert,” as such term is defined under Regulation S-K and the listing rules of the Exchange. In addition, at least a majority of the persons serving on the Board of Directors qualify as “independent,” as defined under the listing rules of the Exchange or will qualify as “independent” by the required dates of any phase-in schedule allowed by the listing rules of the Exchange.
2.31 Sarbanes-Oxley Compliance.
2.31.1. Disclosure Controls. The Company has developed and currently maintains disclosure controls and procedures that will comply with Rule 13a-15 or 15d-15 under the Exchange Act Regulations, and such controls and procedures are effective to ensure that all material information concerning the Company will be made known on a timely basis to the individuals responsible for the preparation of the Company’s Exchange Act filings and other public disclosure documents.
2.31.2. Compliance. The Company is, or at the Applicable Time and on the Closing Date will be, in material compliance with the provisions of the Sarbanes-Oxley Act applicable to it, and has implemented or will implement such programs and taken reasonable steps to ensure the Company’s future compliance (not later than the relevant statutory and regulatory deadlines therefor) with all of the material provisions of the Sarbanes-Oxley Act.
2.32 Accounting Controls. The Company and its Subsidiaries maintain systems of “internal control over financial reporting” (as defined under Rules 13a-15 and 15d-15 under the Exchange Act Regulations) that comply with the requirements of the Exchange Act and have been designed by, or under the supervision of, their respective principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including, but not limited to, internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. Except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company is not aware of any material weaknesses in its internal controls. The Company’s auditors and the Audit Committee of the Board of Directors of the Company have been advised of: (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are known to the Company’s management and that have adversely affected or are reasonably likely to adversely affect the Company’ ability to record, process, summarize and report financial information; and (ii) any fraud known to the Company’s management, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.
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2.33 No Investment Company Status. The Company is not and, after giving effect to the Offering and the application of the proceeds thereof as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, will not be, required to register as an “investment company,” as defined in the Investment Company Act of 1940, as amended.
2.34 No Labor Disputes. No labor dispute with the employees of the Company or any of its Subsidiaries exists or, to the knowledge of the Company, is imminent.
2.35 Intellectual Property Rights. To the extent that the Company represents ownership by it and each of its Subsidiaries of any patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, copyrights, licenses, inventions, trade secrets and similar rights (“Intellectual Property Rights”) in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company hereby represents that it and each of its Subsidiaries owns or possesses or has valid rights to such Intellectual Property Rights. To the knowledge of the Company, no action or use by the Company or any of its Subsidiaries necessary for the conduct of its business as currently carried on and as described in the Registration Statement and the Prospectus will involve or give rise to any infringement of, or license or similar fees for, any Intellectual Property Rights of others. Neither the Company nor any of its Subsidiaries has received any notice alleging any such infringement, fee or conflict with asserted Intellectual Property Rights of others. Except as would not reasonably be expected to result, individually or in the aggregate, in a Material Adverse Change (A) to the knowledge of the Company, there is no infringement, misappropriation or violation by third parties of any of the Intellectual Property Rights owned by the Company; (B) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the rights of the Company in or to any such Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any such claim, that would, individually or in the aggregate, together with any other claims in this Section 2.35, reasonably be expected to result in a Material Adverse Change; (C) the Intellectual Property Rights owned by the Company and, to the knowledge of the Company, the Intellectual Property Rights licensed to the Company have not been adjudged by a court of competent jurisdiction invalid or unenforceable, in whole or in part, and there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property Rights, and the Company is unaware of any facts which would form a reasonable basis for any such claim that would, individually or in the aggregate, together with any other claims in this Section 2.35, reasonably be expected to result in a Material Adverse Change; (D) there is no pending or, to the Company’s knowledge, threatened action, suit, proceeding or claim by others that the Company infringes, misappropriates or otherwise violates any Intellectual Property Rights or other proprietary rights of others, the Company has not received any written notice of such claim and the Company is unaware of any other facts which would form a reasonable basis for any such claim that would, individually or in the aggregate, together with any other claims in this Section 2.35, reasonably be expected to result in a Material Adverse Change; and (E) to the Company’s knowledge, no employee of the Company is in or has ever been in violation in any material respect of any term of any employment contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation agreement, nondisclosure agreement or any restrictive covenant to or with a former employer where the basis of such violation relates to such employee’s employment with the Company, or actions undertaken by the employee while employed with the Company and could reasonably be expected to result, individually or in the aggregate, in a Material Adverse Change. To the Company’s knowledge, all material technical information developed by and belonging to the Company which has not been patented has been kept confidential. The Company is not a party to or bound by any options, licenses or agreements with respect to the Intellectual Property Rights of any other person or entity that are required to be set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus and are not described therein. The Registration Statement, the Pricing Disclosure Package and the Prospectus contain in all material respects the same description of the matters set forth in the preceding sentence. None of the technology employed by the Company has been obtained or is being used by the Company in violation of any contractual obligation binding on the Company or, to the Company’s knowledge, any of its officers, directors or employees, or otherwise in violation of the rights of any persons.
To the Company’s knowledge, any and all licenses for the use of the Intellectual Property are in full force and effect in all material respects and are enforceable by the Company and, to the Company’s knowledge, the other parties thereto, in accordance with their terms, except (x) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (y) as enforceability of any indemnification or contribution provision may be limited under the federal and state securities laws, and (z) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. None of such agreements or instruments has been assigned by the Company, and the Company, has no knowledge, that any other party is in default thereunder and no event has occurred that, with the lapse of time or the giving of notice, or both, would constitute a default thereunder.
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2.36 Taxes. Each of the Company and its Subsidiaries has filed all returns (as hereinafter defined) required to be filed with taxing authorities prior to the date hereof or has duly obtained extensions of time for the filing thereof. Each of the Company and its Subsidiaries has paid all taxes (as hereinafter defined) shown as due on such returns that were filed and has paid all taxes imposed on or assessed against the Company or such respective Subsidiary. The provisions for taxes payable, if any, shown on the financial statements filed with or as part of the Registration Statement are sufficient for all accrued and unpaid taxes, whether or not disputed, and for all periods to and including the dates of such consolidated financial statements. Except as disclosed in writing to the Underwriters, (i) no issues have been raised (and are currently pending) by any taxing authority in connection with any of the returns or taxes asserted as due from the Company or its Subsidiaries, and (ii) no waivers of statutes of limitation with respect to the returns or collection of taxes have been given by or requested from the Company or its Subsidiaries. The term “taxes” means all federal, state, local, foreign and other net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, profits, license, lease, service, service use, withholding, payroll, employment, excise, severance, stamp, occupation, premium, property, windfall profits, customs, duties or other taxes, fees, assessments or charges of any kind whatever, together with any interest and any penalties, additions to tax or additional amounts with respect thereto. The term “returns” means all returns, declarations, reports, statements and other documents required to be filed in respect to taxes.
2.37 ERISA Compliance. The Company and any “employee benefit plan” (as defined under the Employee Retirement Income Security Act of 1974, as amended, and the regulations and published interpretations thereunder (collectively, “ERISA”)) established or maintained by the Company or its “ERISA Affiliates” (as defined below) are in compliance in all material respects with ERISA. “ERISA Affiliate” means, with respect to the Company, any member of any group of organizations described in Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as amended, and the regulations and published interpretations thereunder (the “Code”) of which the Company is a member. No “reportable event” (as defined under ERISA) has occurred or is reasonably expected to occur with respect to any “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates. No “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates, if such “employee benefit plan” were terminated, would have any “amount of unfunded benefit liabilities” (as defined under ERISA). Neither the Company nor any of its ERISA Affiliates has incurred or reasonably expects to incur any material liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any “employee benefit plan” or (ii) Sections 412, 4971, 4975 or 4980B of the Code. Each “employee benefit plan” established or maintained by the Company or any of its ERISA Affiliates that is intended to be qualified under Section 401(a) of the Code is so qualified and, to the knowledge of the Company, nothing has occurred, whether by action or failure to act, which would cause the loss of such qualification.
2.38 Compliance with Laws. The Company: (A) is and at all times has been in compliance with all statutes, rules, regulations, ordinances, judgments, orders and decrees of all Governmental Entities applicable to the Company’s business (“Applicable Laws”), except as could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Change; (B) has not received any warning letter, untitled letter or other correspondence or notice from any other Governmental Entity alleging or asserting noncompliance with any Applicable Laws or any licenses, certificates, approvals, clearances, authorizations, consents, permits and supplements or amendments thereto required by any such Applicable Laws (“Authorizations”); (C) possesses all material Authorizations and such Authorizations are valid and in full force and effect and are not in material violation of any term of any such Authorizations; (D) has not received notice of any claim, action, suit, litigation, proceeding, hearing, enforcement, investigation, inquiry, arbitration or other action from any Governmental Entity or third party alleging that any product operation or activity is in violation of any Applicable Laws or Authorizations and has no knowledge that any such Governmental Entity or third party is considering any such claim, litigation, arbitration, action, suit, litigation, proceeding, hearing, enforcement, investigation, inquiry, arbitration or other action; (E) has not received notice that any Governmental Entity has taken, is taking or intends to take action to limit, suspend, modify or revoke any Authorizations and has no knowledge that any such governmental authority is considering such action; (F) has filed, obtained, maintained or submitted all material reports, documents, forms, filings, notices, applications, records, claims, submissions and supplements or amendments as required by any Applicable Laws or Authorizations and that all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were complete and correct on the date filed (or were corrected or supplemented by a subsequent submission); and (G) has not, either voluntarily or involuntarily, initiated, conducted, or issued or caused to be initiated, conducted or issued, any recall, market withdrawal or replacement, safety alert, post-sale warning, “dear doctor” letter, or other notice or action relating to the alleged lack of safety or efficacy of any product or any alleged product defect or violation and, to the Company’s knowledge, no third party has initiated, conducted or intends to initiate any such notice or action.
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2.39 Ineligible Issuer. At the time of filing the Registration Statement and any post-effective amendment thereto, at the time of effectiveness of the Registration Statement and any amendment thereto, at the earliest time thereafter that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the Securities Act Regulations) of the Public Securities and at the date hereof, the Company was not and is not an “ineligible issuer,” as defined in Rule 405, without taking account of any determination by the Commission pursuant to Rule 405 that it is not necessary that the Company be considered an ineligible issuer.
2.40 Environmental Laws. The Company is in compliance with all foreign, federal, state and local rules, laws and regulations relating to the use, treatment, storage and disposal of hazardous or toxic substances or waste and protection of health and safety or the environment which are applicable to their businesses (“Environmental Laws”), except where the failure to comply would not, singularly or in the aggregate, result in a Material Adverse Change. There has been no storage, generation, transportation, handling, treatment, disposal, discharge, emission, or other release of any kind of toxic or other wastes or other hazardous substances by, due to, or caused by the Company (or, to the Company’s knowledge, any other entity for whose acts or omissions the Company is or may otherwise be liable) upon any of the property now or previously owned or leased by the Company, or upon any other property, in violation of any law, statute, ordinance, rule, regulation, order, judgment, decree or permit or which would, under any law, statute, ordinance, rule (including rule of common law), regulation, order, judgment, decree or permit, give rise to any liability; and there has been no disposal, discharge, emission or other release of any kind onto such property or into the environment surrounding such property of any toxic or other wastes or other hazardous substances with respect to which the Company has knowledge.
2.41 Real Property. Except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus, the Company and its Subsidiaries have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real or personal property which are material to the business of the Company and its Subsidiaries taken as a whole, in each case free and clear of all liens, encumbrances, security interests, claims and defects that do not, singly or in the aggregate, materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company or its Subsidiaries; and all of the leases and subleases material to the business of the Company and its subsidiaries, considered as one enterprise, and under which the Company or any of its Subsidiaries holds properties described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, are in full force and effect, and neither the Company nor any Subsidiary has received any notice of any material claim of any sort that has been asserted by anyone adverse to the rights of the Company or any Subsidiary under any of the leases or subleases mentioned above, or affecting or questioning the rights of the Company or such Subsidiary to the continued possession of the leased or subleased premises under any such lease or sublease.
2.42 Contracts Affecting Capital. There are no transactions, arrangements or other relationships between and/or among the Company, any of its affiliates (as such term is defined in Rule 405 of the Securities Act Regulations) and any unconsolidated entity, including, but not limited to, any structured finance, special purpose or limited purpose entity that could reasonably be expected to materially affect the Company’s or its Subsidiaries’ liquidity or the availability of or requirements for their capital resources required to be described or incorporated by reference in the Registration Statement, the Pricing Disclosure Package and the Prospectus which have not been described or incorporated by reference as required.
2.43 Loans to Directors or Officers. There are no outstanding loans, advances (except normal advances for business expenses in the ordinary course of business) or guarantees or indebtedness by the Company or its Subsidiaries to or for the benefit of any of the officers or directors of the Company, its Subsidiaries or any of their respective family members, except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
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2.44 Smaller Reporting Company. As of the time of filing of the Registration Statement, the Company was a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act Regulations.
2.45 Industry Data. The statistical and market-related data included in each of the Registration Statement, the Pricing Disclosure Package and the Prospectus are based on or derived from sources that the Company reasonably and in good faith believes are reliable and accurate or represent the Company’s good faith estimates that are made on the basis of data derived from such sources.
2.46 Reverse Stock Split. The Company has taken all necessary corporate action to effectuate a reverse stock split of its shares of Common Stock on the basis of one (1) such share for each twenty (20) issued and outstanding shares thereof (the “Reverse Stock Split”), such Reverse Stock Split to be effective no later than the first trading day of the Firm Shares following the date hereof.
2.47 Minute Books. The minute books of the Company have been made available to the Underwriters and counsel for the Underwriters, and such books (i) contain a complete summary of all meetings and actions of the board of directors (including each board committee) and stockholders of the Company (or analogous governing bodies and interest holders, as applicable), and each of its Subsidiaries since the time of its respective incorporation or organization through the date of the latest meeting and action, and (ii) accurately in all material respects reflect all transactions referred to in such minutes. There are no material transactions, agreements, dispositions or other actions of the Company that are not properly approved and/or accurately and fairly recorded in the minute books of the Company, as applicable.
2.48 Integration. Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the Offering to be integrated with prior offerings by the Company for purposes of the Securities Act that would require the registration of any such securities under the Securities Act.
2.49 No Stabilization. Neither the Company nor, to its knowledge, any of its employees, directors or stockholders (without the consent of the Representative) has taken or shall take, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under Regulation M of the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Public Securities.
2.50 Confidentiality and Non-Competition. To the Company’s knowledge, no director, officer, key employee or consultant of the Company is subject to any confidentiality, non-disclosure, non-competition agreement or non-solicitation agreement with any employer or prior employer that could reasonably be expected to materially affect his ability to be and act in his respective capacity of the Company or be expected to result in a Material Adverse Change.
2.51 Emerging Growth Company. From the time of the initial confidential submission of the Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged directly in or through any person authorized to act on its behalf in any Testing-the Waters Communication) through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the Securities Act (an “Emerging Growth Company”). “Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the Securities Act.
2.52 Testing-the-Waters Communications. The Company has not (i) alone engaged in any Testing-the-Waters Communications, other than Testing-the-Waters Communications with the written consent of the Representative and with entities that are qualified institutional buyers within the meaning of Rule 144A under the Securities Act or institutions that are accredited investors within the meaning of Rule 501 under the Securities Act and (ii) authorized anyone other than the Representative to engage in Testing-the-Waters Communications. The Company confirms that the Representative has been authorized to act on its behalf in undertaking Testing-the-Waters Communications. The Company has not distributed any Written Testing-the-Waters Communications other than those listed on Schedule 2-C hereto. “Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act.
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2.53 Electronic Road Show. The Company has made available a Bona Fide Electronic Road Show in compliance with Rule 433(d)(8)(ii) of the Securities Act Regulations such that no filing of any “road show” (as defined in Rule 433(h) of the Securities Act Regulations) is required in connection with the Offering.
2.54 Margin Securities. The Company owns no “margin securities” as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”), and none of the proceeds of Offering will be used, directly or indirectly, for the purpose of purchasing or carrying any margin security, for the purpose of reducing or retiring any indebtedness which was originally incurred to purchase or carry any margin security or for any other purpose which might cause any of the shares of Common Stock to be considered a “purpose credit” within the meanings of Regulation T, U or X of the Federal Reserve Board.
| 3. | Covenants of the Company. The Company covenants and agrees as follows: |
3.1 Amendments to Registration Statement. The Company shall deliver to the Representative, prior to filing, any amendment or supplement to the Registration Statement or Prospectus proposed to be filed after the Effective Date and not file any such amendment or supplement to which the Representative shall reasonably object in writing.
3.2 Federal Securities Laws.
3.2.1. Compliance. The Company, subject to Section 3.2.2, shall comply with the requirements of Rule 430A of the Securities Act Regulations, and will notify the Representative promptly, and confirm the notice in writing, (i) when any post-effective amendment to the Registration Statement shall become effective or any amendment or supplement to the Prospectus shall have been filed; (ii) of the receipt of any comments from the Commission; (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for additional information; (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post-effective amendment or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus, or of the suspension of the qualification of the Public Securities and Representative’s Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes or of any examination pursuant to Section 8(d) or 8(e) of the Securities Act concerning the Registration Statement and (v) if the Company becomes the subject of a proceeding under Section 8A of the Securities Act in connection with the Offering of the Public Securities and Representative’s Securities. The Company shall effect all filings required under Rule 424(b) of the Securities Act Regulations, in the manner and within the time period required by Rule 424(b) (without reliance on Rule 424(b)(8)), and shall take such steps as it deems necessary to ascertain promptly whether the form of prospectus transmitted for filing under Rule 424(b) was received for filing by the Commission and, in the event that it was not, it will promptly file such prospectus. The Company shall use its best efforts to prevent the issuance of any stop order, prevention or suspension and, if any such order is issued, to obtain the lifting thereof at the earliest possible moment.
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3.2.2. Continued Compliance. The Company shall comply with the Securities Act, the Securities Act Regulations, the Exchange Act and the Exchange Act Regulations so as to permit the completion of the distribution of the Public Securities as contemplated in this Agreement and in the Registration Statement, the Pricing Disclosure Package and the Prospectus. If at any time when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172 of the Securities Act Regulations (“Rule 172”), would be) required by the Securities Act to be delivered in connection with sales of the Public Securities, any event shall occur or condition shall exist as a result of which it is necessary, in the opinion of counsel for the Underwriters or for the Company, to (i) amend the Registration Statement in order that the Registration Statement will not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) amend or supplement the Pricing Disclosure Package or the Prospectus in order that the Pricing Disclosure Package or the Prospectus, as the case may be, will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein not misleading in the light of the circumstances existing at the time it is delivered to a purchaser or (iii) amend the Registration Statement or amend or supplement the Pricing Disclosure Package or the Prospectus, as the case may be, in order to comply with the requirements of the Securities Act or the Securities Act Regulations, the Company will promptly (A) give the Representative notice of such event; (B) prepare any amendment or supplement as may be necessary to correct such statement or omission or to make the Registration Statement, the Pricing Disclosure Package or the Prospectus comply with such requirements and, a reasonable amount of time prior to any proposed filing or use, furnish the Representative with copies of any such amendment or supplement and (C) file with the Commission any such amendment or supplement; provided that the Company shall not file or use any such amendment or supplement to which the Representative or counsel for the Underwriters shall reasonably object. The Company will furnish to the Underwriters such number of copies of such amendment or supplement as the Underwriters may reasonably request. The Company has given the Representative notice of any filings made pursuant to the Exchange Act or the Exchange Act Regulations within 48 hours prior to the Applicable Time. The Company shall give the Representative notice of its intention to make any such filing from the Applicable Time until the later of the Closing Date and the exercise in full or expiration of the Over-allotment Option specified in Section 1.2 hereof and will furnish the Representative with copies of the related document(s) a reasonable amount of time prior to such proposed filing, as the case may be, and will not file or use any such document to which the Representative or counsel for the Underwriters shall reasonably object.
3.2.3. Exchange Act Registration. For a period of three (3) years after the date of this Agreement, the Company shall use its best efforts to maintain the registration of the shares of Common Stock under the Exchange Act. The Company shall not deregister the shares of Common Stock under the Exchange Act without the prior written consent of the Representative.
3.2.4. Free Writing Prospectuses. The Company agrees that, unless it obtains the prior written consent of the Representative, it shall not make any offer relating to the Public Securities that would constitute an Issuer Free Writing Prospectus or that would otherwise constitute a “free writing prospectus,” or a portion thereof, required to be filed by the Company with the Commission or retained by the Company under Rule 433; provided that the Representative shall be deemed to have consented to each Issuer General Use Free Writing Prospectus hereto and any “road show that is a written communication” within the meaning of Rule 433(d)(8)(i) that has been reviewed by the Representative. To the extent the Company is eligible or becomes eligible to use a free writing prospectus under Rule 433, the Company represents that it has treated or agrees that it will treat each such free writing prospectus consented to, or deemed consented to, by the Underwriters as an “issuer free writing prospectus,” as defined in Rule 433, and that it has complied and will comply with the applicable requirements of Rule 433 with respect thereto, including timely filing with the Commission where required, legending and record keeping. If at any time following issuance of an Issuer Free Writing Prospectus there occurred or occurs an event or development as a result of which such Issuer Free Writing Prospectus conflicted or would conflict with the information contained in the Registration Statement or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company will promptly notify the Underwriters and will promptly amend or supplement, at its own expense, such Issuer Free Writing Prospectus to eliminate or correct such conflict, untrue statement or omission.
3.2.5. Testing-the-Waters Communications. If at any time following the distribution of any Written Testing-the-Waters Communication there occurred or occurs an event or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Company shall promptly notify the Representative and shall promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.
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3.3 Delivery to the Underwriters of Registration Statements. The Company has delivered or made available or shall deliver or make available to the Representative and counsel for the Representative, without charge, signed copies of the Registration Statement as originally filed and each amendment thereto (including exhibits filed therewith) and signed copies of all consents and certificates of experts, and will also deliver to the Underwriters, without charge, a conformed copy of the Registration Statement as originally filed and each amendment thereto (without exhibits) for each of the Underwriters. The copies of the Registration Statement and each amendment thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
3.4 Delivery to the Underwriters of Prospectuses. The Company has delivered or made available or will deliver or make available to each Underwriter, without charge, as many copies of each Preliminary Prospectus as such Underwriter reasonably requested, and the Company hereby consents to the use of such copies for purposes permitted by the Securities Act. The Company will furnish to each Underwriter, without charge, during the period when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the Securities Act, such number of copies of the Prospectus (as amended or supplemented) as such Underwriter may reasonably request. The Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T.
3.5 Effectiveness and Events Requiring Notice to the Representative. The Company shall use its best efforts to cause the Registration Statement to remain effective with a current prospectus for at least nine (9) months after the Applicable Time, and shall notify the Representative immediately and confirm the notice in writing: (i) of the effectiveness of the Registration Statement and any amendment thereto; (ii) of the issuance by the Commission of any stop order or of the initiation, or the threatening, of any proceeding for that purpose; (iii) of the issuance by any state securities commission of any proceedings for the suspension of the qualification of the Public Securities for offering or sale in any jurisdiction or of the initiation, or the threatening, of any proceeding for that purpose; (iv) of the mailing and delivery to the Commission for filing of any amendment or supplement to the Registration Statement or Prospectus; (v) of the receipt of any comments or request for any additional information from the Commission; and (vi) of the happening of any event during the period described in this Section 3.5 that, in the judgment of the Company, makes any statement of a material fact made in the Registration Statement, the Pricing Disclosure Package or the Prospectus untrue or that requires the making of any changes in (a) the Registration Statement in order to make the statements therein not misleading, or (b) in the Pricing Disclosure Package or the Prospectus in order to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Commission or any state securities commission shall enter a stop order or suspend such qualification at any time, the Company shall make every reasonable effort to obtain promptly the lifting of such order.
3.6 Review of Financial Statements. For a period of five (5) years after the date of this Agreement, the Company, at its expense, shall cause its regularly engaged independent registered public accounting firm to review (but not audit) the Company’s financial statements for each of the three fiscal quarters immediately preceding the announcement of any quarterly financial information.
3.7 Listing. The Company shall use its best efforts to maintain the listing of the shares of Common Stock (including the Public Securities) on the Exchange for at least three years from the date of this Agreement.
3.8 Financial Public Relations Firm. Within thirty (30) calendar days of the Closing Date, the Company shall retain a financial public relations firm reasonably acceptable to the Representative and the Company, which firm shall be experienced in assisting issuers in initial public offerings of securities and in their relations with their security holders, and shall retain such firm or another firm reasonably acceptable to the Representative for a period of not less than two (2) years after the firm’s engagement.
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3.9 Reports to the Representative.
3.9.1. Periodic Reports, etc. For a period of three (3) years after the date of this Agreement, the Company shall furnish or make available to the Representative copies of such financial statements and other periodic and special reports as the Company from time to time furnishes generally to holders of any class of its securities and also promptly furnish to the Representative: (i) a copy of each periodic report the Company shall be required to file with the Commission under the Exchange Act and the Exchange Act Regulations; (ii) a copy of every press release and every news item and article with respect to the Company or its affairs which was released by the Company; (iii) a copy of each Form 8-K prepared and filed by the Company; (iv) five copies of each registration statement filed by the Company under the Securities Act; and (v) such additional documents and information with respect to the Company and the affairs of any future subsidiaries of the Company as the Representative may from time to time reasonably request; provided the Representative shall sign, if requested by the Company, a Regulation FD compliant confidentiality agreement which is reasonably acceptable to the Representative and Representative Counsel in connection with the Representative’s receipt of such information. Documents filed with the Commission pursuant to its EDGAR system shall be deemed to have been delivered to the Representative pursuant to this Section 3.9.1.
3.9.2. Transfer Agent; Transfer Sheets. For a period of three (3) years after the date of this Agreement, the Company shall retain a transfer agent and registrar acceptable to the Representative (the “Transfer Agent”) and shall furnish to the Representative at the Company’s sole cost and expense such transfer sheets of the Company’s securities as the Representative may reasonably request, including the daily and monthly consolidated transfer sheets of the Transfer Agent and DTC. West Coast Stock Transfer, Inc. is acceptable to the Representative to act as Transfer Agent for the shares of Common Stock. The Company may utilize the services of a different Transfer Agent in its sole discretion in the future.
3.9.3. Trading Reports. During such time as the Public Securities are listed on the Exchange, the Company shall provide to the Representative, at the Company’s expense, such reports published by Exchange relating to price trading of the Public Securities, as the Representative shall reasonably request.
3.10 Payment of Expenses
3.10.1. General Expenses Related to the Offering. The Company hereby agrees to pay on each of the Closing Date and the Option Closing Date, if any, to the extent not paid at the Closing Date, all expenses incident to the performance of the obligations of the Company under this Agreement, including, but not limited to: (a) all filing fees and communication expenses relating to the registration of the shares of Common Stock to be sold in the Offering (including the Option Shares) with the Commission; (b) all filing fees associated with the review of the Offering by FINRA; (c) all fees and expenses relating to the listing of such Public Securities on the Exchange and such other stock exchanges as the Company and the Representative together determine, including any fees charged by The Depository Trust Company (DTC) for new securities; (d) all fees, expenses and disbursements relating to background checks of the Company’s officers and directors in an amount not to exceed $15,000 in the aggregate; (e) all fees, expenses and disbursements relating to the registration or qualification of the Public Securities under the “blue sky” securities laws of such states and other jurisdictions as the Representative may reasonably designate; (f) all fees, expenses and disbursements relating to the registration, qualification or exemption of the Public Securities under the securities laws of such foreign jurisdictions as the Representative may reasonably designate; (g) the costs of all mailing and printing of the underwriting documents (including, without limitation, the Underwriting Agreement, any Blue Sky Surveys and, if appropriate, any Agreement Among Underwriters, Selected Dealers’ Agreement, Underwriters’ Questionnaire and Power of Attorney), Registration Statements, Prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final Prospectuses as the Representative may reasonably deem necessary; (h) the costs and expenses of a public relations firm; (i) the costs of preparing, printing and delivering certificates representing the Public Securities; (j) fees and expenses of the transfer agent for the shares of Common Stock; (k) stock transfer and/or stamp taxes, if any, payable upon the transfer of securities from the Company to the Underwriters; (l) to the extent approved by the Company in writing, the costs associated with post-Closing advertising the Offering in the national editions of the Wall Street Journal and New York Times; (m) the fees and expenses of the Company’s accountants; (n) the fees and expenses of the Company’s legal counsel and other agents and representatives; (o) fees and expenses of the Representative’s legal counsel not to exceed $125,000; (p) up to $5,000 of ThinkEquity’s actual accountable “road show” expenses; and (q) up to $20,000 of ThinkEquity’s market making and trading, and clearing firm settlement expenses for the Offering. The Representative may deduct from the net proceeds of the Offering payable to the Company on the Closing Date, or the Option Closing Date, if any, the expenses set forth herein to be paid by the Company to the Underwriters.
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3.10.2. Non-accountable Expenses. The Company further agrees that, in addition to the expenses payable pursuant to Section 3.10.1, on the Closing Date it shall pay to the Representative, by deduction from the net proceeds of the Offering contemplated herein, a non-accountable expense allowance equal to one percent (1%) of the gross proceeds received by the Company from the sale of the Firm Shares, less the Advance (as such term is defined in Section 8.3 hereof), provided, however, that in the event that the Offering is terminated, the Company agrees to reimburse the Underwriters pursuant to Section 8.3 hereof.
3.11 Application of Net Proceeds. The Company shall apply the net proceeds from the Offering received by it in a manner consistent with the application thereof described under the caption “Use of Proceeds” in the Registration Statement, the Pricing Disclosure Package and the Prospectus.
3.12 Delivery of Earnings Statements to Security Holders. The Company shall make generally available to its security holders as soon as practicable, but not later than the first day of the fifteenth (15th) full calendar month following the date of this Agreement, an earnings statement (which need not be certified by independent registered public accounting firm unless required by the Securities Act or the Securities Act Regulations, but which shall satisfy the provisions of Rule 158(a) under Section 11(a) of the Securities Act) covering a period of at least twelve (12) consecutive months beginning after the date of this Agreement.
3.13 Stabilization. Neither the Company nor, to its knowledge, any of its employees, directors or shareholders (without the consent of the Representative) has taken or shall take, directly or indirectly, any action designed to or that has constituted or that might reasonably be expected to cause or result in, under Regulation M of the Exchange Act, or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Public Securities.
3.14 Internal Controls. The Company shall maintain a system of internal accounting controls sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary in order to permit preparation of financial statements in accordance with GAAP and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
3.15 Accountants. As of the date of this Agreement, the Company shall retain an independent registered public accounting firm reasonably acceptable to the Representative, and the Company shall continue to retain a nationally recognized independent registered public accounting firm for a period of at least three (3) years after the date of this Agreement. The Representative acknowledges that the Auditor is acceptable to the Representative.
3.16 FINRA. The Company shall advise the Representative (who shall make an appropriate filing with FINRA) if it is or becomes aware that (i) any officer or director of the Company, (ii) any beneficial owner of 10% or more of any class of the Company's securities or (iii) any beneficial owner of the Company's unregistered equity securities which were acquired during the 180 days immediately preceding the filing of the Registration Statement is or becomes an affiliate or associated person of a FINRA member participating in the Offering (as determined in accordance with the rules and regulations of FINRA).
3.17 No Fiduciary Duties. The Company acknowledges and agrees that the Underwriters’ responsibility to the Company is solely contractual in nature and that none of the Underwriters or their affiliates or any selling agent shall be deemed to be acting in a fiduciary capacity, or otherwise owes any fiduciary duty to the Company or any of its affiliates in connection with the Offering and the other transactions contemplated by this Agreement.
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3.18 Company Lock-Up Agreements.
3.18.1. Restriction on Sales of Capital Stock. The Company, on behalf of itself and any successor entity, agrees that, without the prior written consent of the Representative, it will not, for a period of 90 days after the date of this Agreement (the “Lock-Up Period”), (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company; (ii) file or caused to be filed any registration statement with the Commission relating to the offering of any shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company; (iii) complete any offering of debt securities of the Company, other than entering into a line of credit with a traditional bank or (iv) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of capital stock of the Company, whether any such transaction described in clause (i), (ii), (iii) or (iv) above is to be settled by delivery of shares of capital stock of the Company or such other securities, in cash or otherwise.
The restrictions contained in this Section 3.18.1 shall not apply to (i) the shares of Common Stock to be sold hereunder, (ii) the issuance by the Company of shares of Common Stock upon the exercise of a stock option or warrant or the conversion of a security outstanding on the date hereof, which is disclosed in the Registration Statement, Disclosure Package and Prospectus, provided that such options, warrants, and securities have not been amended since the date of this Agreement to increase the number of such securities or to decrease the exercise price, exchange price or conversion price of such securities or to extend the term of such securities, or (iii) the issuance by the Company of stock options or shares of capital stock of the Company under any equity compensation plan of the Company, provided that in each of (ii) and (iii) above, the underlying shares shall be restricted from sale during the entire Lock-Up Period.
Notwithstanding the foregoing, if (i) during the last 17 days of the Lock-Up Period, the Company issues an earnings release or material news or a material event relating to the Company occurs, or (ii) prior to the expiration of the Lock-Up Period, the Company announces that it will release earnings results or becomes aware that material news or a material event will occur during the 16-day period beginning on the last day of the Lock-Up Period, the restrictions imposed by this Section 3.18.1 shall continue to apply until the expiration of the 18-day period beginning on the issuance of the earnings release or the occurrence of such material news or material event, as applicable, unless the Representative waives, in writing, such extension; provided, however, that this extension of the Lock-Up Period shall not apply to the extent that FINRA has amended or repealed NASD Rule 2711(f)(4), or has otherwise provided written interpretive guidance regarding such rule, in each case, so as to eliminate the prohibition of any broker, dealer, or member of a national securities association from publishing or distributing any research report, with respect to the securities of an Emerging Growth Company prior to or after the expiration of any agreement between the broker, dealer, or member of a national securities association and the Emerging Growth Company or its shareholders that restricts or prohibits the sale of securities held by the Emerging Growth Company or its shareholders after the initial public offering date.
3.18.2. Restriction on Continuous Offerings. Notwithstanding the restrictions contained in Section 3.18.1, the Company, on behalf of itself and any successor entity, agrees that, without the prior written consent of the Representative, it will not, for a period of 24 months after the date of this Agreement, directly or indirectly in any “at-the-market” or continuous equity transaction, offer to sell, sell, contract to sell, grant any option to sell or otherwise dispose of shares of capital stock of the Company or any securities convertible into or exercisable or exchangeable for shares of capital stock of the Company.
3.19 Release of D&O Lock-up Period. If the Representative, in its sole discretion, agrees to release or waive the restrictions set forth in the Lock-Up Agreements described in Section 2.25 hereof for an officer or director of the Company and provide the Company with notice of the impending release or waiver at least three (3) Business Days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Exhibit C hereto through a major news service at least two (2) Business Days before the effective date of the release or waiver.
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3.20 Blue Sky Qualifications. The Company shall use its best efforts, in cooperation with the Underwriters, if necessary, to qualify the Public Securities for offering and sale under the applicable securities laws of such states and other jurisdictions (domestic or foreign) as the Representative may designate and to maintain such qualifications in effect so long as required to complete the distribution of the Public Securities; provided, however, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation or as a dealer in securities in any jurisdiction in which it is not so qualified or to subject itself to taxation in respect of doing business in any jurisdiction in which it is not otherwise so subject.
3.21 Reporting Requirements. The Company, during the period when a prospectus relating to the Public Securities is (or, but for the exception afforded by Rule 172, would be) required to be delivered under the Securities Act, will file all documents required to be filed with the Commission pursuant to the Exchange Act within the time periods required by the Exchange Act and Exchange Act Regulations. Additionally, the Company shall report the use of proceeds from the issuance of the Public Securities as may be required under Rule 463 under the Securities Act Regulations.
3.22 Emerging Growth Company Status. The Company shall promptly notify the Representative if the Company ceases to be an Emerging Growth Company at any time prior to the later of (i) completion of the distribution of the Public Securities within the meaning of the Securities Act and (ii) fifteen (15) days following the completion of the Lock-Up Period.
3.23 Sarbanes Oxley. The Disclosure Package and Prospectus, the Company shall at all times comply with all applicable provisions of the Sarbanes Oxley Act in effect from time to time.
4. Conditions of Underwriters’ Obligations. The obligations of the Underwriters to purchase and pay for the Public Securities, as provided herein, shall be subject to (i) the continuing accuracy of the representations and warranties of the Company as of the date hereof and as of each of the Closing Date and the Option Closing Date, if any; (ii) the accuracy of the statements of officers of the Company made pursuant to the provisions hereof; (iii) the performance by the Company of its obligations hereunder; and (iv) the following conditions:
4.1 Regulatory Matters.
4.1.1. Effectiveness of Registration Statement; Rule 430A Information. The Registration Statement has become effective not later than 5:00 p.m., Eastern time, on the date of this Agreement or such later date and time as shall be consented to in writing by you, and, at each of the Closing Date and any Option Closing Date, no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued under the Securities Act, no order preventing or suspending the use of any Preliminary Prospectus or the Prospectus has been issued and no proceedings for any of those purposes have been instituted or are pending or, to the Company’s knowledge, contemplated by the Commission. The Company has complied with each request (if any) from the Commission for additional information. The Prospectus containing the Rule 430A Information shall have been filed with the Commission in the manner and within the time frame required by Rule 424(b) (without reliance on Rule 424(b)(8)) or a post-effective amendment providing such information shall have been filed with, and declared effective by, the Commission in accordance with the requirements of Rule 430A.
4.1.2. FINRA Clearance. On or before the date of this Agreement, the Representative shall have received clearance from FINRA as to the amount of compensation allowable or payable to the Underwriters as described in the Registration Statement.
4.1.3. Exchange Stock Market Clearance. On the Closing Date, the Company’s shares of Common Stock, including the Firm Shares, shall have been approved for listing on the Exchange, subject only to official notice of issuance. On the first Option Closing Date (if any), the Company’s shares of Common Stock, including the Option Shares, shall have been approved for listing on the Exchange, subject only to official notice of issuance.
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4.2 Company Counsel Matters.
4.2.1. Closing Date Opinion of Counsel. On the Closing Date, the Representative shall have received the favorable opinion of Fitzgerald Kreditor Bolduc Risbrough LLP, counsel to the Company, dated the Closing Date and addressed to the Representative, substantially in the form of Exhibit D attached hereto.
4.2.2. Option Closing Date Opinions of Counsel. On the Option Closing Date, if any, the Representative shall have received the favorable opinions of counsel listed in Section 4.2.1, dated the Option Closing Date, addressed to the Representative and in form and substance reasonably satisfactory to the Representative, confirming as of the Option Closing Date, the statements made by such counsel in their opinion delivered on the Closing Date.
4.2.3. Reliance. In rendering such opinions, such counsel may rely: (i) as to matters involving the application of laws other than the laws of the United States and jurisdictions in which they are admitted, to the extent such counsel deems proper and to the extent specified in such opinion, if at all, upon an opinion or opinions (in form and substance reasonably satisfactory to the Representative) of other counsel reasonably acceptable to the Representative, familiar with the applicable laws; and (ii) as to matters of fact, to the extent they deem proper, on certificates or other written statements of officers of the Company and officers of departments of various jurisdictions having custody of documents respecting the corporate existence or good standing of the Company, provided that copies of any such statements or certificates shall be delivered to Representative Counsel if requested. The opinion of Fitzgerald Kreditor Bolduc Risbrough LLP and any opinion relied upon by Fitzgerald Kreditor Bolduc Risbrough LLP shall include a statement to the effect that it may be relied upon by Representative Counsel in its opinion delivered to the Underwriters.
4.3 Comfort Letters.
4.3.1. Cold Comfort Letter. At the time this Agreement is executed, you shall have received a cold comfort letter containing statements and information of the type customarily included in accountants’ comfort letters with respect to the financial statements and certain financial information contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus, addressed to the Representative and in form and substance satisfactory in all respects to you and to the Auditor, dated as of the date of this Agreement.
4.3.2. Bring-down Comfort Letter. At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received from the Auditor a letter, dated as of the Closing Date or the Option Closing Date, as applicable, to the effect that the Auditor reaffirms the statements made in the letter furnished pursuant to Section 4.3.1, except that the specified date referred to shall be a date not more than three (3) business days prior to the Closing Date or the Option Closing Date, as applicable.
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4.4 Officers’ Certificates.
4.4.1. Officers’ Certificate. The Company shall have furnished to the Representative a certificate, dated the Closing Date and any Option Closing Date (if such date is other than the Closing Date), of its Chief Executive Officer, its President and its Chief Financial Officer stating that (i) such officers have carefully examined the Registration Statement, the Pricing Disclosure Package, any Issuer Free Writing Prospectus and the Prospectus and, in their opinion, the Registration Statement and each amendment thereto, as of the Applicable Time and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date) did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and the Pricing Disclosure Package, as of the Applicable Time and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), any Issuer Free Writing Prospectus as of its date and as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), the Prospectus and each amendment or supplement thereto, as of the respective date thereof and as of the Closing Date, did not include any untrue statement of a material fact and did not omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances in which they were made, not misleading, (ii) since the effective date of the Registration Statement, no event has occurred which should have been set forth in a supplement or amendment to the Registration Statement, the Pricing Disclosure Package or the Prospectus, (iii) to the best of their knowledge after reasonable investigation, as of the Closing Date (or any Option Closing Date if such date is other than the Closing Date), the representations and warranties of the Company in this Agreement are true and correct and the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date (or any Option Closing Date if such date is other than the Closing Date), and (iv) there has not been, subsequent to the date of the most recent audited financial statements included or incorporated by reference in the Pricing Disclosure Package, any material adverse change in the financial position or results of operations of the Company, or any change or development that, singularly or in the aggregate, would involve a material adverse change or a prospective material adverse change, in or affecting the condition (financial or otherwise), results of operations, business, assets or prospects of the Company, except as set forth in the Prospectus.
4.4.2. Secretary’s Certificate. At each of the Closing Date and the Option Closing Date, if any, the Representative shall have received a certificate of the Company signed by the Secretary of the Company, dated the Closing Date or the Option Date, as the case may be, respectively, certifying: (i) that each of the Charter and Bylaws is true and complete, has not been modified and is in full force and effect; (ii) that the resolutions of the Company’s Board of Directors relating to the Offering are in full force and effect and have not been modified; (iii) as to the accuracy and completeness of all correspondence between the Company or its counsel and the Commission; and (iv) as to the incumbency of the officers of the Company. The documents referred to in such certificate shall be attached to such certificate.
4.5 No Material Changes. Prior to and on each of the Closing Date and each Option Closing Date, if any: (i) there shall have been no material adverse change or development involving a prospective material adverse change in the condition or prospects or the business activities, financial or otherwise, of the Company from the latest dates as of which such condition is set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus; (ii) no action, suit or proceeding, at law or in equity, shall have been pending or threatened against the Company or any Insider before or by any court or federal or state commission, board or other administrative agency wherein an unfavorable decision, ruling or finding may materially adversely affect the business, operations, properties, assets, prospects or financial condition or income of the Company, except as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus; (iii) no stop order shall have been issued under the Securities Act and no proceedings therefor shall have been initiated or threatened by the Commission; and (iv) the Registration Statement, the Pricing Disclosure Package and the Prospectus and any amendments or supplements thereto shall contain all material statements which are required to be stated therein in accordance with the Securities Act and the Securities Act Regulations and shall conform in all material respects to the requirements of the Securities Act and the Securities Act Regulations, and neither the Registration Statement, the Pricing Disclosure Package nor the Prospectus nor any amendment or supplement thereto shall contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.
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4.6 Corporate Proceedings. All corporate proceedings and other legal matters incident to the authorization, form and validity of each of this Agreement, the Public Securities, the Registration Statement, the Disclosure Package and the Prospectus and all other legal matters relating to this Agreement and the transactions contemplated hereby and thereby shall be reasonably satisfactory in all material respects to counsel for the Underwriters, and the Company shall have furnished to such counsel all documents and information that they may reasonably request to enable them to pass upon such matters.
4.7 Delivery of Agreements.
4.7.1. Lock-Up Agreements. On or before the date of this Agreement, the Company shall have delivered to the Representative executed copies of the Lock-Up Agreements from each of the persons listed in Schedule 3 hereto.
4.7.2. Representative’s Warrant Agreement. On the Closing Date, the Company shall have delivered to the Representative executed copies of the Representative’s Warrant Agreement.
4.8 Additional Documents. At the Closing Date and at each Option Closing Date (if any) Representative Counsel shall have been furnished with such documents and opinions as they may require for the purpose of enabling Representative Counsel to deliver an opinion to the Underwriters, or in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions, herein contained; and all proceedings taken by the Company in connection with the issuance and sale of the Public Securities and the Representative’s Securities as herein contemplated shall be satisfactory in form and substance to the Representative and Representative Counsel.
4.9 Reverse Stock Split. Not later than the first trading day of the Firm Shares following the date hereof, the Reverse Stock Split shall be effective.
| 5. | Indemnification. |
5.1 Indemnification of the Underwriters.
5.1.1. General. Subject to the conditions set forth below, the Company agrees to indemnify and hold harmless each Underwriter, its affiliates and each of its and their respective directors, officers, members, employees, representatives, partners, shareholders, affiliates, counsel, and agents and each person, if any, who controls any such Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (collectively the “Underwriter Indemnified Parties,” and each an “Underwriter Indemnified Party”), against any and all loss, liability, claim, damage and expense whatsoever (including but not limited to any and all legal or other expenses reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, whether arising out of any action between any of the Underwriter Indemnified Parties and the Company or between any of the Underwriter Indemnified Parties and any third party, or otherwise) to which they or any of them may become subject under the Securities Act, the Exchange Act or any other statute or at common law or otherwise or under the laws of foreign countries (a “Claim”), (i) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in (A) the Registration Statement, the Pricing Disclosure Package, any Preliminary Prospectus, the Prospectus, or in any Issuer Free Writing Prospectus or in any Written Testing-the-Waters Communication (as from time to time each may be amended and supplemented); (B) any materials or information provided to investors by, or with the approval of, the Company in connection with the marketing of the Offering, including any “road show” or investor presentations made to investors by the Company (whether in person or electronically); or (C) any application or other document or written communication (in this Section 5, collectively called “application”) executed by the Company or based upon written information furnished by the Company in any jurisdiction in order to qualify the Public Securities and Representative’s Securities under the securities laws thereof or filed with the Commission, any state securities commission or agency, the Exchange or any other national securities exchange; or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, unless such statement or omission was made in reliance upon, and in conformity with, the Underwriters’ Information or (ii) otherwise arising in connection with or allegedly in connection with the Offering. The Company also agrees that it will reimburse each Underwriter Indemnified Party for all fees and expenses (including but not limited to any and all legal or other expenses reasonably incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, whether arising out of any action between any of the Underwriter Indemnified Parties and the Company or between any of the Underwriter Indemnified Parties and any third party, or otherwise) (collectively, the “Expenses”), and further agrees wherever and whenever possible to advance payment of Expenses as they are incurred by an Underwriter Indemnified Party in investigating, preparing, pursuing or defending any Claim.
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5.1.2. Procedure. If any action is brought against an Underwriter Indemnified Party in respect of which indemnity may be sought against the Company pursuant to Section 5.1.1, such Underwriter Indemnified Party shall promptly notify the Company in writing of the institution of such action and the Company shall assume the defense of such action, including the employment and fees of counsel (subject to the approval of such Underwriter Indemnified Party) and payment of actual expenses if an Underwriter Indemnified Party requests that the Company do so. Such Underwriter Indemnified Party shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of the Company, and shall be advanced by the Company. The Company shall not be liable for any settlement of any action effected without its consent (which shall not be unreasonably withheld). In addition, the Company shall not, without the prior written consent of the Underwriters, settle, compromise or consent to the entry of any judgment in or otherwise seek to terminate any pending or threatened action in respect of which advancement, reimbursement, indemnification or contribution may be sought hereunder (whether or not such Underwriter Indemnified Party is a party thereto) unless such settlement, compromise, consent or termination (i) includes an unconditional release of each Underwriter Indemnified Party, acceptable to such Underwriter Indemnified Party, from all liabilities, expenses and claims arising out of such action for which indemnification or contribution may be sought and (ii) does not include a statement as to or an admission of fault, culpability or a failure to act, by or on behalf of any Underwriter Indemnified Party.
5.2 Indemnification of the Company. Each Underwriter, severally and not jointly, agrees to indemnify and hold harmless the Company, its directors, its officers who signed the Registration Statement and persons who control the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act against any and all loss, liability, claim, damage and expense described in the foregoing indemnity from the Company to the several Underwriters, as incurred, but only with respect to untrue statements or omissions made in the Registration Statement, any Preliminary Prospectus, the Pricing Disclosure Package or Prospectus or any amendment or supplement thereto or in any application, in reliance upon, and in strict conformity with, the Underwriters’ Information. In case any action shall be brought against the Company or any other person so indemnified based on any Preliminary Prospectus, the Registration Statement, the Pricing Disclosure Package or Prospectus or any amendment or supplement thereto or any application, and in respect of which indemnity may be sought against any Underwriter, such Underwriter shall have the rights and duties given to the Company, and the Company and each other person so indemnified shall have the rights and duties given to the several Underwriters by the provisions of Section 5.1.2. The Company agrees promptly to notify the Representative of the commencement of any litigation or proceedings against the Company or any of its officers, directors or any person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, in connection with the issuance and sale of the Public Securities or in connection with the Registration Statement, the Pricing Disclosure Package, the Prospectus, or any Issuer Free Writing Prospectus or any Written Testing-the-Waters Communication.
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5.3 Contribution.
5.3.1. Contribution Rights. If the indemnification provided for in this Section 5 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 5.1 or 5.2 in respect of any loss, claim, damage or liability, or any action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, or action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters, on the other, from the Offering of the Public Securities, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, on the one hand, and the Underwriters, on the other, with respect to the statements or omissions that resulted in such loss, claim, damage or liability, or action in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Underwriters, on the other, with respect to such Offering shall be deemed to be in the same proportion as the total net proceeds from the Offering of the Public Securities purchased under this Agreement (before deducting expenses) received by the Company, as set forth in the table on the cover page of the Prospectus, on the one hand, and the total underwriting discounts and commissions received by the Underwriters with respect to the shares of the Common Stock purchased under this Agreement, as set forth in the table on the cover page of the Prospectus, on the other hand. The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 5.3.1 were to be determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take into account the equitable considerations referred to herein. The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section 5.3.1 shall be deemed to include, for purposes of this Section 5.3.1, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 5.3.1 in no event shall an Underwriter be required to contribute any amount in excess of the amount by which the total underwriting discounts and commissions received by such Underwriter with respect to the Offering of the Public Securities exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.
5.3.2. Contribution Procedure. Within fifteen (15) days after receipt by any party to this Agreement (or its representative) of notice of the commencement of any action, suit or proceeding, such party will, if a claim for contribution in respect thereof is to be made against another party (“contributing party”), notify the contributing party of the commencement thereof, but the failure to so notify the contributing party will not relieve it from any liability which it may have to any other party other than for contribution hereunder. In case any such action, suit or proceeding is brought against any party, and such party notifies a contributing party or its representative of the commencement thereof within the aforesaid 15 days, the contributing party will be entitled to participate therein with the notifying party and any other contributing party similarly notified. Any such contributing party shall not be liable to any party seeking contribution on account of any settlement of any claim, action or proceeding affected by such party seeking contribution on account of any settlement of any claim, action or proceeding affected by such party seeking contribution without the written consent of such contributing party. The contribution provisions contained in this Section 5.3.2 are intended to supersede, to the extent permitted by law, any right to contribution under the Securities Act, the Exchange Act or otherwise available. Each Underwriter’s obligations to contribute pursuant to this Section 5.3 are several and not joint.
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| 6. | Default by an Underwriter. |
6.1 Default Not Exceeding 10% of Firm Shares or Option Shares. If any Underwriter or Underwriters shall default in its or their obligations to purchase the Firm Shares or the Option Shares, if the Over-allotment Option is exercised hereunder, and if the number of the Firm Shares or Option Shares with respect to which such default relates does not exceed in the aggregate 10% of the number of Firm Shares or Option Shares that all Underwriters have agreed to purchase hereunder, then such Firm Shares or Option Shares to which the default relates shall be purchased by the non-defaulting Underwriters in proportion to their respective commitments hereunder.
6.2 Default Exceeding 10% of Firm Shares or Option Shares. In the event that the default addressed in Section 6.1 relates to more than 10% of the Firm Shares or Option Shares, you may in your discretion arrange for yourself or for another party or parties to purchase such Firm Shares or Option Shares to which such default relates on the terms contained herein. If, within one (1) Business Day after such default relating to more than 10% of the Firm Shares or Option Shares, you do not arrange for the purchase of such Firm Shares or Option Shares, then the Company shall be entitled to a further period of one (1) Business Day within which to procure another party or parties satisfactory to you to purchase said Firm Shares or Option Shares on such terms. In the event that neither you nor the Company arrange for the purchase of the Firm Shares or Option Shares to which a default relates as provided in this Section 6, this Agreement will automatically be terminated by you or the Company without liability on the part of the Company (except as provided in Sections 3.9 and 5 hereof) or the several Underwriters (except as provided in Section 5 hereof); provided, however, that if such default occurs with respect to the Option Shares, this Agreement will not terminate as to the Firm Shares; and provided, further, that nothing herein shall relieve a defaulting Underwriter of its liability, if any, to the other Underwriters and to the Company for damages occasioned by its default hereunder.
6.3 Postponement of Closing Date. In the event that the Firm Shares or Option Shares to which the default relates are to be purchased by the non-defaulting Underwriters, or are to be purchased by another party or parties as aforesaid, you or the Company shall have the right to postpone the Closing Date or Option Closing Date for a reasonable period, but not in any event exceeding five (5) Business Days, in order to effect whatever changes may thereby be made necessary in the Registration Statement, the Pricing Disclosure Package or the Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment to the Registration Statement, the Pricing Disclosure Package or the Prospectus that in the opinion of counsel for the Underwriter may thereby be made necessary. The term “Underwriter” as used in this Agreement shall include any party substituted under this Section 6 with like effect as if it had originally been a party to this Agreement with respect to such shares of Common Stock.
| 7. | Additional Covenants. |
7.1 Board Composition and Board Designations. The Company shall ensure that: (i) the qualifications of the persons serving as members of the Board of Directors and the overall composition of the Board comply with the Sarbanes-Oxley Act, with the Exchange Act and with the listing rules of the Exchange or any other national securities exchange, as the case may be, in the event the Company seeks to have its Public Securities listed on another exchange or quoted on an automated quotation system, and (ii) if applicable, at least one member of the Audit Committee of the Board of Directors qualifies as an “audit committee financial expert,” as such term is defined under Regulation S-K and the listing rules of the Exchange.
7.2 Prohibition on Press Releases and Public Announcements. The Company shall not issue press releases or engage in any other publicity, without the Representative’s prior written consent, for a period ending at 5:00 p.m., Eastern time, on the first (1st) Business Day following (i) the later of the Option Closing Date and the twenty-fifth day after the Closing Date if the Over-allotment Option has been exercised in full, or (ii) the forty-fifth (45th) day after the Closing Date if the Over-allotment Option has not been exercised in full , other than normal and customary releases issued in the ordinary course of the Company’s business.
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7.3 Right of First Refusal. Provided that the Firm Shares are sold in accordance with the terms of this Agreement, the Representative shall have an irrevocable right of first refusal (the “Right of First Refusal”), for a period of twenty-four (24) months after the date the Offering is completed, to act as sole and exclusive investment banker, sole and exclusive book-runner, sole and exclusive financial advisor, sole and exclusive underwriter and/or sole and exclusive placement agent, at the Representative’s sole and exclusive discretion, for each and every future public and private equity and debt offering, including all equity linked financings (each, a “Subject Transaction”), during such twenty-four (24) month period, of the Company, or any successor to or subsidiary of the Company, on terms and conditions customary to the Representative for such Subject Transactions. For the avoidance of any doubt, the Company shall not retain, engage or solicit any additional investment banker, book-runner, financial advisor, underwriter and/or placement agent in a Subject Transaction without the express written consent of the Representative.
The Company shall notify the Representative of its intention to pursue a Subject Transaction, including the material terms thereof, by providing written notice thereof by registered mail or overnight courier service addressed to the Representative. If the Representative fails to exercise its Right of First Refusal with respect to any Subject Transaction within ten (10) Business Days after the mailing of such written notice, then the Representative shall have no further claim or right with respect to the Subject Transaction. The Representative may elect, in its sole and absolute discretion, not to exercise its Right of First Refusal with respect to any Subject Transaction; provided that any such election by the Representative shall not adversely affect the Representative’s Right of First Refusal with respect to any other Subject Transaction during the twenty-four (24) month period agreed to above. Notwithstanding the above, if this Agreement is terminated for “Cause” (as defined in that certain letter agreement, dated as of November 27, 2024, as amended, by and between the Company and the Representative), the Representative’s Right of First Refusal shall be immediately null and void.
| 8. | Effective Date of this Agreement and Termination Thereof. |
8.1 Effective Date. This Agreement shall become effective when both the Company and the Representative have executed the same and delivered counterparts of such signatures to the other party.
8.2 Termination. The Representative shall have the right to terminate this Agreement at any time prior to any Closing Date, (i) if any domestic or international event or act or occurrence has materially disrupted, or in your opinion will in the immediate future materially disrupt, general securities markets in the United States; or (ii) if trading on the New York Stock Exchange or the Nasdaq Stock Market LLC shall have been suspended or materially limited, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required by FINRA or by order of the Commission or any other government authority having jurisdiction; or (iii) if the United States shall have become involved in a new war or an increase in major hostilities; or (iv) if a banking moratorium has been declared by a New York State or federal authority; or (v) if a moratorium on foreign exchange trading has been declared which materially adversely impacts the United States securities markets; or (vi) if the Company shall have sustained a material loss by fire, flood, accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act which, whether or not such loss shall have been insured, will, in your opinion, make it inadvisable to proceed with the delivery of the Firm Shares or Option Shares; or (vii) if the Company is in material breach of any of its representations, warranties or covenants hereunder; or (viii) if the Representative shall have become aware after the date hereof of such a material adverse change in the conditions or prospects of the Company, or such adverse material change in general market conditions as in the Representative’s judgment would make it impracticable to proceed with the offering, sale and/or delivery of the Public Securities or to enforce contracts made by the Underwriters for the sale of the Public Securities; or (ix) the Common Stock shall fail for any reason to open for trading on the Exchange by the end of regular trading hours on [trade date].
8.3 Expenses. Notwithstanding anything to the contrary in this Agreement, except in the case of a default by the Underwriters, pursuant to Section 6.2 above, in the event that this Agreement shall not be carried out for any reason whatsoever, within the time specified herein or any extensions thereof pursuant to the terms herein, the Company shall be obligated to pay to the Underwriters their actual and accountable out-of-pocket expenses related to the transactions contemplated herein then due and payable (including the fees and disbursements of Representative Counsel) up to $165,000, inclusive of the $35,000 advance for accountable expenses previously paid by the Company to the Representative (the “Advance”) and upon demand the Company shall pay the full amount thereof to the Representative on behalf of the Underwriters; provided, however, that such expense cap in no way limits or impairs the indemnification and contribution provisions of this Agreement. Notwithstanding the foregoing, any advance received by the Representative will be reimbursed to the Company to the extent not actually incurred in compliance with FINRA Rule 5110(g)(4)(A).
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8.4 Indemnification. Notwithstanding any contrary provision contained in this Agreement, any election hereunder or any termination of this Agreement, and whether or not this Agreement is otherwise carried out, the provisions of Section 5 shall remain in full force and effect and shall not be in any way affected by, such election or termination or failure to carry out the terms of this Agreement or any part hereof.
8.5 Representations, Warranties, Agreements to Survive. All representations, warranties and agreements contained in this Agreement or in certificates of officers of the Company submitted pursuant hereto, shall remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of any Underwriter or its Affiliates or selling agents, any person controlling any Underwriter, its officers or directors or any person controlling the Company or (ii) delivery of and payment for the Public Securities.
| 9. | Miscellaneous. |
9.1 Notices. All communications hereunder, except as herein otherwise specifically provided, shall be in writing and shall be mailed (registered or certified mail, return receipt requested), personally delivered or sent by electronic mail transmission and confirmed and shall be deemed given when so delivered and confirmed or if mailed, two (2) days after such mailing.
If to the Representative:
ThinkEquity
17 State Street, 41st Fl
New York, New York 10004
Attn: Head of Investment Banking
e-mail: Notices@think-equity.com
with a copy (which shall not constitute notice) to:
Greenberg Traurig, P.A.
333 SE 2nd Avenue, Suite 4400
Miami, Florida 33131
Telephone: (305) 579-0500
Attn: David Huberman, Esq. & Win Rutherfurd, Esq.
e-mail: david.huberman@gtlaw.com & rutherfurdw@gtlaw.com
If to the Company:
Bitmine Immersion Technologies, Inc.
10845 Griffith Peak Dr., #2
Las Vegas, Nevada 89135
Telephone: (404) 816-8240
Attention: Jonathan Bates
e-mail: jbates@bitminetech.io
with a copy (which shall not constitute notice) to:
FitzGerald Kreditor Bolduc Risbrough LLP
2 Park Plaza, Suite 850
Irvine, California 92614
Telephone: (949) 788-8900
Attention: Lynne Bolduc, Esq.
e-mail: lbolduc@fkbrlegal.com
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9.2 Headings. The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the meaning or interpretation of any of the terms or provisions of this Agreement.
9.3 Amendment. This Agreement may only be amended by a written instrument executed by each of the parties hereto.
9.4 Entire Agreement. This Agreement (together with the other agreements and documents being delivered pursuant to or in connection with this Agreement) constitutes the entire agreement of the parties hereto with respect to the subject matter hereof and thereof, and supersedes all prior agreements and understandings of the parties, oral and written, with respect to the subject matter hereof. Notwithstanding anything to the contrary set forth herein, it is understood and agreed by the parties hereto that all other terms and conditions of that certain engagement letter between the Company and ThinkEquity LLC dated November 27, 2024, not inconsistent with the terms of this Agreement shall remain in full force and effect, including, without limitation, the Tail Fee (as defined therein).
9.5 Binding Effect. This Agreement shall inure solely to the benefit of and shall be binding upon the Representative, the Underwriters, the Company and the controlling persons, directors and officers referred to in Section 5 hereof, and their respective successors, legal representatives, heirs and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provisions herein contained. The term “successors and assigns” shall not include a purchaser, in its capacity as such, of securities from any of the Underwriters.
9.6 Governing Law; Consent to Jurisdiction; Trial by Jury. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflict of laws principles thereof. The Company hereby agrees that any action, proceeding or claim against it arising out of, or relating in any way to this Agreement shall be brought and enforced in the New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum. Any such process or summons to be served upon the Company may be served by transmitting a copy thereof by registered or certified mail, return receipt requested, postage prepaid, addressed to it at the address set forth in Section 9.1 hereof. Such mailing shall be deemed personal service and shall be legal and binding upon the Company in any action, proceeding or claim. The Company agrees that the prevailing party(ies) in any such action shall be entitled to recover from the other party(ies) all of its reasonable attorneys’ fees and expenses relating to such action or proceeding and/or incurred in connection with the preparation therefor. The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
9.7 Execution in Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement, and shall become effective when one or more counterparts has been signed by each of the parties hereto and delivered to each of the other parties hereto. Delivery of a signed counterpart of this Agreement by facsimile or email/pdf transmission shall constitute valid and sufficient delivery thereof.
9.8 Waiver, etc. The failure of any of the parties hereto to at any time enforce any of the provisions of this Agreement shall not be deemed or construed to be a waiver of any such provision, nor to in any way effect the validity of this Agreement or any provision hereof or the right of any of the parties hereto to thereafter enforce each and every provision of this Agreement. No waiver of any breach, non-compliance or non-fulfillment of any of the provisions of this Agreement shall be effective unless set forth in a written instrument executed by the party or parties against whom or which enforcement of such waiver is sought; and no waiver of any such breach, non-compliance or non-fulfillment shall be construed or deemed to be a waiver of any other or subsequent breach, non-compliance or non-fulfillment.
[Signature Page Follows]
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If the foregoing correctly sets forth the understanding between the Underwriters and the Company, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement between us.
Very truly yours,
BITMINE IMMERSION TECHNOLOGIES, INC.
By:
Name:
Title:
Confirmed as of the date first written above mentioned, on behalf of itself and as Representative of the several Underwriters named on Schedule 1 hereto:
THINKEQUITY LLC
By:
Name:
Title:
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SCHEDULE 1
| Underwriter |
Total Number of Firm Shares to be Purchased |
Number of Option Shares to be Purchased if the Over-Allotment Option is Fully Exercised | ||
| ThinkEquity LLC | ||||
|
|
| |||
| TOTAL |
|
|
Sch. 1-1
SCHEDULE 2-A
Pricing Information
Number of Firm Shares: [•]
Number of Option Shares: [•]
Public Offering Price per Share: $[•]
Underwriting Discount per Share: $[•]
Underwriting Non-accountable expense allowance per Share: $[•]
Proceeds to Company per Share (before expenses): $[•]
SCHEDULE 2-B
Issuer General Use Free Writing Prospectuses
[None.]
SCHEDULE 2-C
Written Testing-the-Waters Communications
[None.]
Sch. 2-1
SCHEDULE 3
List of Lock-Up Parties
180-day lock-up
| 1. | Jonathan Bates | |
| 2. | Erik S. Nelson | |
| 3. | Raymond Mow | |
| 4. | Seth Bayles | |
| 5. | Michael Maloney | |
| 6. | Ryan Ramnath | |
| 7. | Lori Love | |
| 8. | John Kelly | |
| 9. | Innovative Digital Investors Emerging Technology, LP | |
| 10. | BFAM Partners | |
| 11. | 10373885 Canada Corp. |
90-day lock-up
| 12. | Samuel Jorgensen | |
| 13. | Abed Equities |
Sch. 3-1
EXHIBIT A
Form of Representative’s Warrant Agreement
THE REGISTERED HOLDER OF THIS WARRANT BY ITS ACCEPTANCE HEREOF, AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS WARRANT EXCEPT AS HEREIN PROVIDED AND THE REGISTERED HOLDER OF THIS WARRANT AGREES THAT IT WILL NOT SELL, TRANSFER, ASSIGN, PLEDGE OR HYPOTHECATE THIS WARRANT FOR A PERIOD OF ONE HUNDRED EIGHTY DAYS FOLLOWING THE DATE OF THE COMMENCEMENT OF SALES (DEFINED BELOW) IN THE OFFERING TO ANYONE OTHER THAN (I) THINKEQUITY LLC, OR AN UNDERWRITER OR A SELECTED DEALER IN CONNECTION WITH THE OFFERING, OR (II) A BONA FIDE OFFICER OR PARTNER OF THINKEQUITY LLC OR OF ANY SUCH UNDERWRITER OR SELECTED DEALER.
THIS WARRANT IS NOT EXERCISABLE PRIOR TO [ ] [DATE THAT IS 180 DAYS FROM THE DATE OF THE COMMENCEMENT OF SALES IN THE OFFERING]. VOID AFTER 5:00 P.M., EASTERN TIME, [___________________] [DATE THAT IS FIVE YEARS FROM THE DATE OF COMMENCEMENT OF SALES IN THE OFFERING].
WARRANT TO PURCHASE COMMON STOCK
Bitmine Immersion Technologies, Inc
Warrant Shares: _______
Initial Exercise Date: ______, 2025
THIS WARRANT TO PURCHASE COMMON STOCK (the “Warrant”) certifies that, for value received, _____________ or its assigns (the “Holder”) is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after ____, 2025 [180 DAYS FROM THE DATE OF THE COMMENCEMENT OF SALES IN THE OFFERING], (the “Initial Exercise Date”) and, in accordance with FINRA Rule 5110(g)(8)(A), prior to at 5:00 p.m. (New York time) ____, 2025 the date that is five (5) years following the date of the Commencement of Sales (the “Termination Date”) but not thereafter, to subscribe for and purchase from Bitmine Immersion Technologies, Inc, a Delaware corporation (the “Company”), up to ______ shares of Common Stock, par value $0.0001 per share, of the Company (the “Common Stock and such shares of Common Stock issuable upon exercise of this Warrant, the “Warrant Shares”), as subject to adjustment hereunder. The purchase price of one share of Common Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b). This Warrant is being issued pursuant to that certain Underwriting Agreement (as defined below).
Section 1. Definitions. In addition to the terms defined elsewhere in this Warrant the following terms have the meanings indicated in this Section 1:
“Affiliate” means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.
“Business Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.
| Ex. A-1 |
“Commencement of Sales” means the first date on which the Company commences sales of Common Stock under the registration statement on Form S-1 (File No. 333-284361), pursuant to the Underwriting Agreement.
“Commission” means the United States Securities and Exchange Commission.
“Common Stock Equivalents” means any securities of the Company or its subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred share, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.
“Rule 144” means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended or interpreted from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same purpose and effect as such Rule.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Trading Day” means a day on which the NYSE American or the Nasdaq Capital Market are open for trading.
“Trading Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE American, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, or the New York Stock Exchange (or any successors to any of the foregoing).
“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market, the volume weighted average price of a share of Common Stock for such date (or the nearest preceding date) on the OTCQB or OTCQX as applicable, (c) if Common Stock is not then listed or quoted for trading on the OTCQB or OTCQX and if prices for Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of Common Stock so reported or (d) in all other cases, the fair market value of the Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.
“Underwriting Agreement” means that certain Underwriting Agreement, dated as of [.], 2025, by and between the Company and ThinkEquity LLC.
| Ex. A-2 |
Section 2. Exercise.
a) Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing on the books of the Company) of a duly executed PDF copy submitted by e-mail (or e-mail attachment) of the Notice of Exercise in the form annexed hereto (the “Notice of Exercise”). Within the earlier of (i) two (2) Trading Days and (ii) the number of Trading Days comprising the Standard Settlement Period (as defined in Section 2(d)(i) herein) following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the Warrant Shares specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. No ink-original Notice of Exercise shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any Notice of Exercise form be required. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within five (5) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. The Company shall deliver any objection to any Notice of Exercise form within two (2) Business Days of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant, acknowledge and agree that, by reason of the provisions of this Section 2(a), following the purchase of a portion of the Warrant Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount stated on the face hereof.
b) Exercise Price. The exercise price per share of the Common Stock under this Warrant shall be $_______,1 subject to adjustment hereunder (the “Exercise Price”).
c) Cashless Exercise. In lieu of exercising this Warrant by delivering the aggregate Exercise Price by wire transfer or cashier’s check, at the election of the Holder this Warrant may also be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall be entitled to receive the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:
(A) = as applicable: (i) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is (1) both executed and delivered pursuant to Section 2(a) hereof on a day that is not a Trading Day or (2) both executed and delivered pursuant to Section 2(a) hereof on a Trading Day prior to the opening of “regular trading hours” (as defined in Rule 600(b)(64) of Regulation NMS promulgated under the federal securities laws) on such Trading Day, (ii) the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise if such Notice of Exercise is executed during “regular trading hours” on a Trading Day and is delivered within two (2) hours thereafter (including until two (2) hours after the close of “regular trading hours” on a Trading Day) pursuant to Section 2(a) hereof or (iii) the VWAP on the date of the applicable Notice of Exercise if the date of such Notice of Exercise is a Trading Day and such Notice of Exercise is both executed and delivered pursuant to Section 2(a) hereof after the close of “regular trading hours” on such Trading Day;
(B) = the Exercise Price of this Warrant, as adjusted hereunder; and
(X) = the number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if such exercise were by means of a cash exercise rather than a cashless exercise.
__________________
1125% of the public offering price per share of common stock in the offering.
| Ex. A-3 |
If Warrant Shares are issued in such a “cashless exercise,” the parties acknowledge and agree that in accordance with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the registered characteristics of the Warrants being exercised, and the holding period of the Warrants being exercised may be tacked on to the holding period of the Warrant Shares. The Company agrees not to take any position contrary to this Section 2(c).
Notwithstanding anything herein to the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section 2(c).
d) Mechanics of Exercise.
i. Delivery of Warrant Shares Upon Exercise. The Company shall cause the Warrant Shares purchased hereunder to be transmitted by its transfer agent to the Holder by crediting the account of the Holder’s or its designee’s balance account with The Depository Trust Company through its Deposit or Withdrawal at Custodian system (“DWAC”) if the Company’s transfer agent is then a participant in such system and either (A) there is an effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by Holder, or (B) the Warrant Shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144 and, in either case, the Warrant Shares have been sold by the Holder prior to the Warrant Share Delivery Date (as defined below), and otherwise by physical delivery of a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the address specified by the Holder in the Notice of Exercise by the date that is the earliest of (i) two (2) Trading Days after the delivery to the Company of the Notice of Exercise; provided that payment of the aggregate Exercise Price (other than in the instance of a cashless exercise) is received by the Company by such date, (ii) one (1) Trading Day after delivery of the aggregate Exercise Price to the Company and (iii) the number of Trading Days comprising the Standard Settlement Period after the delivery to the Company of the Notice of Exercise (such date, the “Warrant Share Delivery Date”). If the Warrant Shares can be delivered via DWAC, the transfer agent shall have received from the Company, at the expense of the Company, any legal opinions or other documentation required by it to deliver such Warrant Shares without legend (subject to receipt by the Company of reasonable back up documentation from the Holder, including with respect to affiliate status) and, if applicable and requested by the Company prior to the Warrant Share Delivery Date, the transfer agent shall have received from the Holder a confirmation of sale of the Warrant Shares (provided the requirement of the Holder to provide a confirmation as to the sale of Warrant Shares shall not be applicable to the issuance of unlegended Warrant Shares upon a cashless exercise of this Warrant if the Warrant Shares are then eligible for resale pursuant to Rule 144(b)(1)). The Warrant Shares shall be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised, with payment to the Company of the Exercise Price (or by cashless exercise, if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance of such shares, having been paid. If the Company fails for any reason to deliver to the Holder the Warrant Shares subject to a Notice of Exercise by the second Trading Day following the Warrant Share Delivery Date, the Company shall pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise (based on the VWAP of the Common Stock on the date of the applicable Notice of Exercise), $10 per Trading Day (increasing to $20 per Trading Day on the fifth Trading Day after such liquidated damages begin to accrue) for each Trading Day after the second Trading Day following such Warrant Share Delivery Date until such Warrant Shares are delivered or Holder rescinds such exercise. The Company agrees to maintain a transfer agent that is a participant in the FAST program so long as this Warrant remains outstanding and exercisable. As used herein, “Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the date of delivery of the Notice of Exercise. Notwithstanding the foregoing, with respect to any Notice(s) of Exercise delivered on or prior to 12:00 p.m. (New York City time) on the Initial Exercise Date, which may be delivered at any time after the time of execution of the Underwriting Agreement, the Company agrees to deliver the Warrant Shares subject to such notice(s) by 4:00 p.m. (New York City time) on the Initial Exercise Date and the Initial Exercise Date shall be the Warrant Share Delivery Date for purposes hereunder, provided that payment of the aggregate Exercise Price (other than in the case of a cashless exercise) is received by such Warrant Share Delivery Date
| Ex. A-4 |
ii. Delivery of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder and upon surrender of this Warrant, at the time of delivery of the Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this Warrant.
iii. Rescission Rights. If the Company fails to cause its transfer agent to deliver to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind such exercise; provided, however, that the Holder shall be required to return any Warrant Shares or Common Stock subject to any such rescinded exercise notice concurrently with the return to Holder of the aggregate Exercise Price paid to the Company for such Warrant Shares and the restoration of Holder’s right to acquire such Warrant Shares pursuant to this Warrant (including, issuance of a replacement warrant certificate evidencing such restored right).
iv. Compensation for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise. In addition to any other rights available to the Holder, if the Company fails to cause its transfer agent to transmit to the Holder the Warrant Shares in accordance with the provisions of Section 2(d)(i) above pursuant to an exercise on or before the Warrant Share Delivery Date, and if after such date the Holder is required by its broker to purchase (in an open market transaction or otherwise) or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (1) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (2) the price at which the sell order giving rise to such purchase obligation was executed, and (B) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (A) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.
v. No Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise of this Warrant. As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such exercise, the Company shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Exercise Price or round up to the next whole share.
vi. Charges, Taxes and Expenses. Issuance of Warrant Shares shall be made without charge to the Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such Warrant Shares, all of which taxes and expenses shall be paid by the Company, and such Warrant Shares shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided, however, that in the event that Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto. The Company shall pay all transfer agent fees required for same-day processing of any Notice of Exercise and all fees to the Depository Trust Company (or another established clearing corporation performing similar functions) required for same-day electronic delivery of the Warrant Shares.
| Ex. A-5 |
vii. Closing of Books. The Company will not close its stockholder books or records in any manner which prevents the timely exercise of this Warrant, pursuant to the terms hereof.
viii. Signature. This Section 2 and the exercise form attached hereto set forth the totality of the procedures required of the Holder in order to exercise this Warrant. Without limiting the preceding sentences, no ink-original exercise form shall be required, nor shall any medallion guarantee (or other type of guarantee or notarization) of any exercise form be required in order to exercise this Warrant. No additional legal opinion, other information or instructions shall be required of the Holder to exercise this Warrant. The Company shall honor exercises of this Warrant and shall deliver Shares underlying this Warrant in accordance with the terms, conditions and time periods set forth herein.
e) Holder’s Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to the extent that after giving effect to such issuance after exercise as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and any other Persons acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a more recent written notice by the Company or the Company’s transfer agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon exercise of this Warrant. The Holder, upon notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(e), provided that the Beneficial Ownership Limitation in no event exceeds 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e) shall continue to apply. Any increase in the Beneficial Ownership Limitation will not be effective until the 61st day after such notice is delivered to the Company. The provisions of this Section 2(e) shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2(e) to correct this Section 2(e) (or any portion hereof) which may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation. The limitations contained in this Section 2(e) shall apply to a successor holder of this Warrant.
| Ex. A-6 |
Section 3. Certain Adjustments.
a) Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon exercise of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (iv) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event, and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. For the purposes of clarification, the Exercise Price of this Warrant will not be adjusted in the event that the Company or any Subsidiary thereof, as applicable, sells or grants any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents, at an effective price per share less than the Exercise Price then in effect.
b) [RESERVED]
c) Subsequent Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, if at any time that this Warrant is outstanding the Company grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation).
d) Pro Rata Distributions. During such time as this Warrant is outstanding, if the Company shall declare or make any dividend (other than cash dividends) or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of shares or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a "Distribution"), at any time after the issuance of this Warrant, then, in each such case, the Holder shall be entitled to participate in such Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date of which a record is taken for such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the participation in such Distribution (provided, however, to the extent that the Holder's right to participate in any such Distribution would result in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Distribution to such extent (or in the beneficial ownership of any shares of Common Stock as a result of such Distribution to such extent) and the portion of such Distribution shall be held in abeyance for the benefit of the Holder until such time, if ever, as its right thereto would not result in the Holder exceeding the Beneficial Ownership Limitation). To the extent that this Warrant has not been partially or completely exercised at the time of such Distribution, such portion of the Distribution shall be held in abeyance for the benefit of the Holder until the Holder has exercised this Warrant.
| Ex. A-7 |
e) Fundamental Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the Company or the successor entity of such transaction, (ii) the Company (all of its Subsidiaries, taken as a whole), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common Stock or 50% or more of the voting power of the common equity of the Company, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 50% of the aggregate voting power of the Company or the successor entity of such transaction. or (v) the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, at the option of the Holder (without regard to any limitation in Section 2(e) on the exercise of this Warrant), the number of shares of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration (the “Alternate Consideration”) receivable by holders of Common Stock as a result of such Fundamental Transaction for each share of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental Transaction (without regard to any limitation in Section 2(e) on the exercise of this Warrant). For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant in accordance with the provisions of this Section 3(e) pursuant to written agreements in form and substance reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant referring to the “Company” shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant with the same effect as if such Successor Entity had been named as the Company herein.
f) Calculations. All calculations under this Section 3 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 3, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.
| Ex. A-8 |
g) Notice to Holder.
i. Adjustment to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.
ii. Notice to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed a notice to the Holder at its last address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or effective date hereinafter specified, stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to provide such notice or any defect therein shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.
Section 4. Transfer of Warrant.
a) Transferability. Pursuant to FINRA Rule 5110(g)(1), neither this Warrant nor any Warrant Shares issued upon exercise of this Warrant shall be sold, transferred, assigned, pledged, or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the securities by any Person for a period of 180 days immediately following the date of effectiveness or commencement of sales in the offering pursuant to which this Warrant is being issued, except the transfer of any security:
i. by operation of law or by reason of reorganization of the Company;
ii. to any FINRA member firm participating in the offering and the officers or partners thereof, if all securities so transferred remain subject to the lock-up restriction in this Section 4(a) for the remainder of the time period;
iii. if the aggregate amount of securities of the Company held by the Holder or related Person do not exceed 1% of the securities being offered;
iv. that is beneficially owned on a pro-rata basis by all equity owners of an investment fund, provided that no participating member manages or otherwise directs investments by the fund, and participating members in the aggregate do not own more than 10% of the equity in the fund; or
| Ex. A-9 |
v. the exercise or conversion of any security, if all securities received remain subject to the lock-up restriction in this Section 4(a) for the remainder of the time period.
Subject to the foregoing restriction, any applicable securities laws and the conditions set forth in Section 4(d), this Warrant and all rights hereunder (including, without limitation, any registration rights) are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent, together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically surrender this Warrant to the Company unless the Holder has assigned this Warrant in full, in which case, the Holder shall surrender this Warrant to the Company within three (3) Trading Days of the date the Holder delivers an assignment form to the Company assigning this Warrant full. The Warrant, if properly assigned in accordance herewith, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued.
b) New Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 4(a), as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the initial issuance date of this Warrant and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.
c) Warrant Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.
d) Representation by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities law, except pursuant to sales registered or exempted under the Securities Act.
Section 5. Registration Rights.
5.1. Demand Registration.
5.1.1Grant of Right. The Company, upon written demand (a “Demand Notice”) of the Holder(s) of at least 51% of the Warrants and/or the underlying Warrant Shares (“Majority Holders”), agrees to register, on one occasion, all or any portion of the Warrant Shares underlying the Warrants (collectively, the “Registrable Securities”). On such occasion, the Company will file a registration statement with the Commission covering the Registrable Securities within sixty (60) days after receipt of a Demand Notice and use its reasonable best efforts to have the registration statement declared effective promptly thereafter, subject to compliance with review by the Commission; provided, however, that the Company shall not be required to comply with a Demand Notice if the Company has filed a registration statement with respect to which the Holder is entitled to piggyback registration rights pursuant to Section 5.2 hereof and either: (i) the Holder has elected to participate in the offering covered by such registration statement or (ii) if such registration statement relates to an underwritten primary offering of securities of the Company, until the offering covered by such registration statement has been withdrawn or until thirty (30) days after such offering is consummated. The demand for registration may be made at any time beginning on the Initial Exercise Date and expiring on the fifth anniversary of the date of the Commencement of Sales. The Company covenants and agrees to give written notice of its receipt of any Demand Notice by any Holder(s) to all other registered Holders of the Warrants and/or the Registrable Securities within ten (10) days after the date of the receipt of any such Demand Notice.
| Ex. A-10 |
5.1.2 Terms. The Company shall bear all fees and expenses attendant to the registration of the Registrable Securities pursuant to Section 5.1.1, but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. The Company agrees to use its reasonable best efforts to cause the filing required herein to become effective promptly and to qualify or register the Registrable Securities in such States as are reasonably requested by the Holder(s); provided, however, that in no event shall the Company be required to register the Registrable Securities in a State in which such registration would cause: (i) the Company to be obligated to register or license to do business in such State or submit to general service of process in such State, or (ii) the principal shareholders of the Company to be obligated to escrow their shares of capital stock of the Company. The Company shall cause any registration statement filed pursuant to the demand right granted under Section 5.1.1 to remain effective for a period of at least twelve (12) consecutive months after the date that the Holders of the Registrable Securities covered by such registration statement are first given the opportunity to sell all of such securities. The Holders shall only use the prospectuses provided by the Company to sell the Warrant Shares covered by such registration statement, and will immediately cease to use any prospectus furnished by the Company if the Company advises the Holder that such prospectus may no longer be used due to a material misstatement or omission. Notwithstanding the provisions of this Section 5.1.2, the Holder shall be entitled to a demand registration under this Section 5.1.2 on only one (1) occasion and such demand registration right shall terminate on the fifth anniversary of the date of the Underwriting Agreement (as defined below) in accordance with FINRA Rules 5110(g)(8)(B) and 5110(g)(8)(C).
5.2 “Piggy-Back” Registration.
5.2.1Grant of Right. In addition to the demand right of registration described in Section 5.1 hereof, the Holder shall have the right, for a period of no more than two (2) years from the Initial Exercise Date in accordance with FINRA Rule 5110(g)(8)(D), to include the Registrable Securities as part of any other registration of securities filed by the Company (other than in connection with a transaction contemplated by Rule 145(a) promulgated under the Securities Act or pursuant to Form S-8 or any equivalent form); provided, however, that if, solely in connection with any primary underwritten public offering for the account of the Company, the managing underwriter(s) thereof shall, in its reasonable discretion, impose a limitation on the number of Shares which may be included in the registration statement because, in such underwriter(s)’ judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall be obligated to include in such registration statement only such limited portion of the Registrable Securities with respect to which the Holder requested inclusion hereunder as the underwriter shall reasonably permit. Any exclusion of Registrable Securities shall be made pro rata among the Holders seeking to include Registrable Securities in proportion to the number of Registrable Securities sought to be included by such Holders; provided, however, that the Company shall not exclude any Registrable Securities unless the Company has first excluded all outstanding securities, the holders of which are not entitled to inclusion of such securities in such registration statement or are not entitled to pro rata inclusion with the Registrable Securities.
5.2.2 Terms. The Company shall bear all fees and expenses attendant to registering the Registrable Securities pursuant to Section 5.2.1 hereof, but the Holders shall pay any and all underwriting commissions and the expenses of any legal counsel selected by the Holders to represent them in connection with the sale of the Registrable Securities. In the event of such a proposed registration, the Company shall furnish the then Holders of outstanding Registrable Securities with not less than thirty (30) days written notice prior to the proposed date of filing of such registration statement. Such notice to the Holders shall continue to be given for each registration statement filed by the Company during the two (2) year period following the Initial Exercise Date until such time as all of the Registrable Securities have been sold by the Holder. The holders of the Registrable Securities shall exercise the “piggy-back” rights provided for herein by giving written notice within ten (10) days of the receipt of the Company’s notice of its intention to file a registration statement. Except as otherwise provided in this Warrant, there shall be no limit on the number of times the Holder may request registration under this Section 5.2.2; provided, however, that such registration rights shall terminate on the second anniversary of the Initial Exercise Date.
| Ex. A-11 |
5.3 General Terms
5.3.1Indemnification. The Company shall indemnify the Holder(s) of the Registrable Securities to be sold pursuant to any registration statement hereunder and each person, if any, who controls such Holders within the meaning of Section 15 of the Securities Act or Section 20 (a) of the Exchange Act against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which any of them may become subject under the Securities Act, the Exchange Act or otherwise, arising from such registration statement but only to the same extent and with the same effect as the provisions pursuant to which the Company has agreed to indemnify the Underwriters (as defined in the Underwriting Agreement) contained in Section 5.1 of the Underwriting Agreement. The Holder(s) of the Registrable Securities to be sold pursuant to such registration statement, and their successors and assigns, shall severally, and not jointly, indemnify the Company, against all loss, claim, damage, expense or liability (including all reasonable attorneys’ fees and other expenses reasonably incurred in investigating, preparing or defending against any claim whatsoever) to which they may become subject under the Securities Act, the Exchange Act or otherwise, arising from information furnished by or on behalf of such Holders, or their successors or assigns, in writing, for specific inclusion in such registration statement to the same extent and with the same effect as the provisions contained in Section 5.2 of the Underwriting Agreement pursuant to which the Underwriters have agreed to indemnify the Company.
5.3.2 Exercise of Warrants. Nothing contained in this Warrant shall be construed as requiring the Holder(s) to exercise their Warrants prior to or after the initial filing of any registration statement or the effectiveness thereof.
5.3.3 Documents Delivered to Holders. The Company shall furnish to each Holder participating in any of the foregoing offerings and to each underwriter of any such offering, if any, a signed counterpart, addressed to such Holder or underwriter, of: (i) an opinion of counsel to the Company, dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, an opinion dated the date of the closing under any underwriting agreement related thereto), and (ii) a “cold comfort” letter dated the effective date of such registration statement (and, if such registration includes an underwritten public offering, a letter dated the date of the closing under the underwriting agreement) signed by the independent registered public accounting firm which has issued a report on the Company’s financial statements included in such registration statement, in each case covering substantially the same matters with respect to such registration statement (and the prospectus included therein) and, in the case of such accountants’ letter, with respect to events subsequent to the date of such financial statements, as are customarily covered in opinions of issuer’s counsel and in accountants’ letters delivered to underwriters in underwritten public offerings of securities. The Company shall also deliver promptly to each Holder participating in the offering requesting the correspondence and memoranda described below and to the managing underwriter, if any, copies of all correspondence between the Commission and the Company, its counsel or auditors and all memoranda relating to discussions with the Commission or its staff with respect to the registration statement and permit each Holder and underwriter to do such investigation, upon reasonable advance notice, with respect to information contained in or omitted from the registration statement as it deems reasonably necessary to comply with applicable securities laws or rules of FINRA. Such investigation shall include access to books, records and properties and opportunities to discuss the business of the Company with its officers and independent auditors, all to such reasonable extent and at such reasonable times as any such Holder shall reasonably request.
5.3.4 Underwriting Agreement. The Company shall enter into an underwriting agreement with the managing underwriter(s), if any, selected by any Holders whose Registrable Securities are being registered pursuant to this Section 5, which managing underwriter shall be reasonably satisfactory to the Company. Such agreement shall be reasonably satisfactory in form and substance to the Company, each Holder and such managing underwriters, and shall contain such representations, warranties and covenants by the Company and such other terms as are customarily contained in agreements of that type used by the managing underwriter. The Holders shall be parties to any underwriting agreement relating to an underwritten sale of their Registrable Securities and may, at their option, require that any or all the representations, warranties and covenants of the Company to or for the benefit of such underwriters shall also be made to and for the benefit of such Holders. Such Holders shall not be required to make any representations or warranties to or agreements with the Company or the underwriters except as they may relate to such Holders, their Warrant Shares and their intended methods of distribution.
| Ex. A-12 |
5.3.5 Documents to be Delivered by Holder(s). Each of the Holder(s) participating in any of the foregoing offerings shall furnish to the Company a completed and executed questionnaire provided by the Company requesting information customarily sought of selling security holders.
5.3.6 Damages. Should the registration or the effectiveness thereof required by Sections 5.1 and 5.2 hereof be delayed by the Company or the Company otherwise fails to comply with such provisions, the Holder(s) shall, in addition to any other legal or other relief available to the Holder(s), be entitled to obtain specific performance or other equitable (including injunctive) relief against the threatened breach of such provisions or the continuation of any such breach, without the necessity of proving actual damages and without the necessity of posting bond or other security.
Section 6. Miscellaneous.
a) No Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i).
b) Loss, Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any certificate relating to the Warrant Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate.
c) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or granted herein shall not be a Trading Day, then, such action may be taken or such right may be exercised on the next succeeding Trading Day.
d) Authorized Shares.
The Company covenants that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of issuing the necessary Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant and payment for such Warrant Shares in accordance herewith, be duly authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).
Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable the Company to perform its obligations under this Warrant.
| Ex. A-13 |
Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.
e) Jurisdiction. All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance with the provisions of the Underwriting Agreement.
f) Restrictions. The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, and the Holder does not utilize cashless exercise, will have restrictions upon resale imposed by state and federal securities laws.
g) Nonwaiver and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate as a waiver of such right or otherwise prejudice the Holder’s rights, powers or remedies. Without limiting any other provision of this Warrant or the Underwriting Agreement, if the Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to the Holder such amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings, incurred by the Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder.
h) Notices. Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered in accordance with the notice provisions of the Underwriting Agreement.
i) Limitation of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder for the purchase price of any Common Stock or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.
j) Remedies. The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert the defense in any action for specific performance that a remedy at law would be adequate.
k) Successors and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure to the benefit of and be binding upon the successors and permitted assigns of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder from time to time of this Warrant and shall be enforceable by the Holder or holder of Warrant Shares.
l) Amendment. This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.
m) Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant.
n) Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant.
| Ex. A-14 |
o) Facsimile and Electronic Signatures. Facsimile and other electronically scanned and transmitted signatures, including by email attachment, shall be deemed originals for all purposes of this Warrant.
********************
(Signature Page Follows)
| Ex. A-15 |
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.
| Bitmine Immersion Technologies, Inc | |
|
By:__________________________________________ Name: Title: |
| Ex. A-16 |
NOTICE OF EXERCISE
TO:[COMPANY]
_________________________
(1) The undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant (only if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.
(2) Payment shall take the form of (check applicable box):
[ ] in lawful money of the United States; or
[ ] if permitted the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c), to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure set forth in subsection 2(c).
(3) Please register and issue said Warrant Shares in the name of the undersigned or in such other name as is specified below:
_______________________________
The Warrant Shares shall be delivered to the following DWAC Account Number or by physical delivery of a certificate to:
_______________________________
_______________________________
_______________________________
(4) Accredited Investor. If the Warrant is being exercised via cash exercise and no registration statement covering the issuance of the Warrant Shares is effective, the undersigned is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended
[SIGNATURE OF HOLDER]
Name of Investing Entity: _______________________________________________________________
Signature of Authorized Signatory of Investing Entity: _________________________________________
Name of Authorized Signatory: ___________________________________________________________
Title of Authorized Signatory: ____________________________________________________________
Date: ________________________________________________________________________________
| Ex. A-17 |
ASSIGNMENT FORM
(To assign the foregoing warrant, execute
this form and supply required information.
Do not use this form to exercise the warrant.)
FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to
_______________________________________________ whose address is
_______________________________________________________________.
_______________________________________________________________
Dated: ______________, _______
Holder’s Signature: _____________________________
Holder’s Address: _____________________________
_____________________________
NOTE: The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant.
| Ex. A-18 |
EXHIBIT B
Lock-Up Agreement
[•], 20[XX]
ThinkEquity LLC
17 State Street, 41st Floor
New York, NY 10004
As Representative of the several Underwriters named on Schedule 1 to
the Underwriting Agreement referenced below
Ladies and Gentlemen:
The undersigned understands that ThinkEquity LLC (the “Representative”), proposes to enter into an Underwriting Agreement (the “Underwriting Agreement”) with Bitmine Immersion Technologies, Inc., a Delaware corporation (the “Company”), providing for the initial public offering (the “Public Offering”) of shares of common stock, par value $0.0001 per share, of the Company (the “Common Shares”).
To induce the Representative to continue its efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of the Representative, the undersigned will not, during the period commencing on the date hereof and ending [90][180] days after the date of the Underwriting Agreement relating to the Public Offering (the “Lock-Up Period”), (1) offer, pledge, sell, contract to sell, grant, lend, or otherwise transfer or dispose of, directly or indirectly, any Common Shares or any securities convertible into or exercisable or exchangeable for Common Shares, whether now owned or hereafter acquired by the undersigned or with respect to which the undersigned has or hereafter acquires the power of disposition (collectively, the “Lock-Up Securities”); (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Lock-Up Securities, in cash or otherwise; (3) make any demand for or exercise any right with respect to the registration of any Lock-Up Securities; or (4) publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement relating to any Lock-Up Securities. Notwithstanding the foregoing, and subject to the conditions below, the undersigned may transfer Lock-Up Securities without the prior written consent of the Representative in connection with (a) transactions relating to Lock-Up Securities acquired in open market transactions after the completion of the Public Offering; provided that no filing under Section 13 or Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or other public announcement shall be required or shall be voluntarily made in connection with subsequent sales of Lock-Up Securities acquired in such open market transactions; (b) transfers of Lock-Up Securities as a bona fide gift, by will or intestacy or to a family member or trust for the benefit of the undersigned or a family member (for purposes of this lock-up agreement, “family member” means any relationship by blood, marriage or adoption, not more remote than first cousin); (c) transfers of Lock-Up Securities to a charity or educational institution; (d) if the undersigned is a corporation, partnership, limited liability company or other business entity, (i) any transfers of Lock-Up Securities to another corporation, partnership or other business entity that controls, is controlled by or is under common control with the undersigned or (ii) distributions of Lock-Up Securities to members, partners, stockholders, subsidiaries or affiliates (as defined in Rule 405 promulgated under the Securities Act of 1933, as amended) of the undersigned; (e) if the undersigned is a trust, to a trustee or beneficiary of the trust; provided that in the case of any transfer pursuant to the foregoing clauses (b), (c) (d) or (e), (i) any such transfer shall not involve a disposition for value, (ii) each transferee shall sign and deliver to the Representative a lock-up agreement substantially in the form of this lock-up agreement and (iii) no filing under Section 13 or Section 16(a) of the Exchange Act or other public announcement shall be required or shall be voluntarily made; (f) the receipt by the undersigned from the Company of Common Shares upon the vesting of restricted stock awards or stock units or upon the exercise of options to purchase the Company’s Common Shares issued under an equity incentive plan of the Company or an employment arrangement described in the Pricing Prospectus (as defined in the Underwriting Agreement) (the “Plan Shares”) or the transfer of Common Shares or any securities convertible into Common Shares to the Company upon a vesting event of the Company’s securities or upon the exercise of options to purchase the Company’s securities, in each case on a “cashless” or “net exercise” basis or to cover tax obligations of the undersigned in connection with such vesting or exercise, but only to the extent such right expires during the Lock-up Period, provided that no filing under Section 13 or Section 16(a) of the Exchange Act or other public announcement shall be required or shall be voluntarily made within 90 days after the date of the Underwriting Agreement, and after such 90th day, if the undersigned is required to file a report under Section 13 or Section 16(a) of the Exchange Act reporting a reduction in beneficial ownership of Common Shares during the Lock-Up Period, the undersigned shall include a statement in such schedule or report to the effect that the purpose of such transfer was to cover tax withholding obligations of the undersigned in connection with such vesting or exercise and, provided further, that the Plan Shares shall be subject to the terms of this lock-up agreement; (g) the transfer of Lock-Up Securities pursuant to agreements described in the Pricing Prospectus under which the Company has the option to repurchase such securities or a right of first refusal with respect to the transfer of such securities, provided that if the undersigned is required to file a report under Section 13 or Section 16(a) of the Exchange Act reporting a reduction in beneficial ownership of Common Shares during the Lock-Up Period, the undersigned shall include a statement in such schedule or report describing the purpose of the transaction; (h) the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of Lock-Up Securities, provided that (i) such plan does not provide for the transfer of Lock-Up Securities during the Lock-Up Period and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required of or voluntarily made by or on behalf of the undersigned or the Company regarding the establishment of such plan, such public announcement or filing shall include a statement to the effect that no transfer of Lock-Up Securities may be made under such plan during the Lock-Up Period; [(i) the conversion of the outstanding preferred stock of the Company into Common Shares, provided that such Common Shares remain subject to the terms of this agreement;2 (j) the transfer of Lock-Up Securities that occurs by operation of law, such as pursuant to a qualified domestic order or in connection with a divorce settlement, provided that the transferee agrees to sign and deliver a lock-up agreement substantially in the form of this lock-up agreement for the balance of the Lock-Up Period, and provided further, that any filing under Section 13 or Section 16(a) of the Exchange Act that is required to be made during the Lock-Up Period as a result of such transfer shall include a statement that such transfer has occurred by operation of law; and (k) the transfer of Lock-Up Securities pursuant to a bona fide third party tender offer, merger, consolidation or other similar transaction made to all holders of the Common Shares involving a change of control (as defined below) of the Company after the closing of the Public Offering and approved by the Company’s board of directors; provided that in the event that the tender offer, merger, consolidation or other such transaction is not completed, the Lock-Up Securities owned by the undersigned shall remain subject to the restrictions contained in this lock-up agreement. For purposes of clause (k) above, “change of control” shall mean the consummation of any bona fide third party tender offer, merger, amalgamation, consolidation or other similar transaction the result of which is that any “person” (as defined in Section 13(d)(3) of the Exchange Act), or group of persons, becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act) of a majority of total voting power of the voting stock of the Company. The undersigned also agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent and registrar against the transfer of the undersigned’s Lock-Up Securities except in compliance with this lock-up agreement.
__________________
2 Use if company has outstanding preferred stock that will be converted into common shares.
| Ex. B-1 |
The undersigned agrees that, prior to engaging in any transaction or taking any other action that is subject to the terms of this lock-up agreement during the period from the date hereof to and including the 34th day following the expiration of the Lock-Up Period, the undersigned will give notice thereof to the Company and will not consummate any such transaction or take any such action unless it has received written confirmation from the Company that the Lock-Up Period has expired.
If the undersigned is an officer or director of the Company, (i) the undersigned agrees that the foregoing restrictions shall be equally applicable to any issuer-directed or “friends and family” Securities that the undersigned may purchase in the Public Offering; (ii) the Representative agrees that, at least three (3) business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of Lock-Up Securities, the Representative will notify the Company of the impending release or waiver; and (iii) the Company has agreed in the Underwriting Agreement to announce the impending release or waiver by press release through a major news service at least two (2) business days before the effective date of the release or waiver. Any release or waiver granted by the Representative hereunder to any such officer or director shall only be effective two (2) business days after the publication date of such press release. The provisions of this paragraph will not apply if (a) the release or waiver is effected solely to permit a transfer of Lock-Up Securities not for consideration and (b) the transferee has agreed in writing to be bound by the same terms described in this lock-up agreement to the extent and for the duration that such terms remain in effect at the time of such transfer.
The undersigned understands that the Company and the Representative are relying upon this lock-up agreement in proceeding toward consummation of the Public Offering. The undersigned further understands that this lock-up agreement is irrevocable and shall be binding upon the undersigned’s heirs, legal representatives, successors and assigns.
The undersigned understands
that, if the Underwriting Agreement is not executed by June 30, 2025, or if the Underwriting Agreement (other than the provisions thereof
which survive termination) shall terminate or be terminated prior to payment for and delivery of the Common Shares to be sold thereunder,
then this lock-up agreement shall be void and of no further force or effect.
| Ex. B-2 |
Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to an Underwriting Agreement, the terms of which are subject to negotiation between the Company and the Representative.
Very truly yours,
__________________________________________
(Name - Please Print)
__________________________________________
(Signature)
__________________________________________
(Name of Signatory, in the case of entities - Please Print)
__________________________________________
(Title of Signatory, in the case of entities - Please Print)
| Address: | ||
| Ex. B-3 |
EXHIBIT C
Form of Press Release
[COMPANY]
[Date]
Bitmine Immersion Technologies, Inc. (the “Company”) announced today that ThinkEquity LLC, acting as representative for the underwriters in the Company’s recent public offering of _______ shares of the Company’s common stock, is [waiving] [releasing] a lock-up restriction with respect to _________ shares of the Company’s common stock held by [certain officers or directors] [an officer or director] of the Company. The [waiver] [release] will take effect on _________, 20___, and the shares may be sold on or after such date.
This press release is not an offer or sale of the securities in the United States or in any other jurisdiction where such offer or sale is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the Securities Act of 1933, as amended.
| Ex. C-1 |
EXHIBIT D
Form of Opinion of Counsel
(i) The Company has been duly organized and is validly existing as a corporation and is in good standing under the laws of the State of Delaware Registration Statement, the Pricing Disclosure Package and the Prospectus and to enter into and perform its obligations under the Underwriting Agreement. The Company is duly qualified as a foreign corporation to transact business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the Company has determined that the placement of equipment with a hosting firm for the purpose of “mining” bitcoin, where all on-site service and maintenance is provided by hosting firm personnel, does not constitute business activity within such jurisdiction sufficient to result in an obligation to register the Company as a foreign corporation with the state or require a business license from the state, county, or city in which the equipment is located or where the failure to so qualify or to be in good standing would not result in a Material Adverse Change.
(ii) Since January 1, 2022, all issued and outstanding securities of the Company have been duly authorized and validly issued and are fully paid3 and non-assessable and none of such securities were issued in violation of the preemptive rights of any stockholder of the Company arising by operation of law or under the Charter, the Bylaws or, to such counsel’s knowledge, the Material Contracts (as defined below). Since January 1, 2022, the offers and sales of the outstanding securities were at all relevant times either registered under the Securities Act or exempt from such registration requirements. The authorized and outstanding shares of capital stock of the Company are as set forth in the Prospectus.
(iii) The Public Securities have been duly authorized for issuance and sale to the Underwriters pursuant to the Underwriting Agreement and, when issued and paid for pursuant to the terms of the Underwriting Agreement, will be validly issued and fully paid and non-assessable; to such counsel’s knowledge, the holders thereof are not and will not be subject to personal liability solely by reason of being such holders. To such counsel’s knowledge, the issuance of the Public Securities is not and will not be subject to the preemptive or similar rights of any holders of any security of the Company arising by operation of law or under the Charter, the Bylaws or the Material Contracts, subject to the conversion of all shares of Series A Convertible Preferred Stock and Series B Convertible Stock in connection with the closing of the Offering as set forth in the Registration Statement.
(iv) The Underwriting Agreement has been duly and validly authorized, executed and delivered by the Company.
(v) The Representative’s Warrant Agreement has been duly and validly authorized, executed and delivered by the Company and constitutes the valid and legally binding obligation of the Company, enforceable against the Company in accordance with its terms, except (a) as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting creditors’ rights generally, (b) as enforceability of any indemnification or contribution provisions may be limited under the Federal and state securities laws, and (c) that the remedy of specific performance and injunctive and other forms of equitable relief may be subject to the equitable defenses and to the discretion of the court before which any proceeding therefore may be brought. The shares of Common Stock issuable upon exercise of the Representative’s Warrant Agreement have been duly authorized and reserved for issuance by all necessary corporate action on the part of the Company and, when issued in accordance with the terms of the Representative’s Warrant Agreement, will be validly issued, fully paid and non-assessable and will not be subject to the preemptive or similar rights of any holders of any security of the Company arising by operation of law or under the Charter, the Bylaws or the Material Contracts.
(vi) To Counsel’s knowledge and assuming all transactions to be effected prior to or by the Closing have been effected as set forth in the Registration Statement, the execution, delivery and performance of the Underwriting Agreement and the Representative’s Warrant Agreement, and compliance by the Company with the terms and provisions thereof and the consummation of the transactions contemplated thereby, and the issuance and sale of the Public Securities, do not and will not, whether with or without the giving of notice or the lapse of time or both, (a) violate, conflict with, or result in a breach of, any of the terms or provisions of, or constitute a default under, or result in the creation or modification of any lien, security interest, charge or encumbrance upon any of the properties or assets of the Company pursuant to the terms of, any mortgage, deed of trust, note, indenture, loan, contract, commitment or other agreement or instrument filed or incorporated by reference as an exhibit to the Registration Statement (collectively, the “Material Contracts”), (b) result in any violation of the provisions of the Charter, the By-laws or any other governing documents of the Company, or (c) violate any law, statute or any judgment, order or decree, rule or regulation applicable to the Company of any Governmental Entity.
__________________
3 Subject to any applicable vesting conditions.
Ex. D-1 |
(vii) The shares of Common Stock offered pursuant to the Prospectus conform in all material respects to the description thereof contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus. No United States or state statute or regulation required to be described in the Prospectus is not described as required (except as to the “blue sky” laws of the various states, as to which such counsel expresses no opinions), nor are any contracts or documents of a character required to be described in the Registration Statement, Pricing Disclosure Package or the Prospectus or to be filed or incorporated by reference as exhibits to the Registration Statement not so described or filed as required.
(viii) The form of certificate used to evidence the Common Stock complies in all material respects with all applicable Delaware law requirements, with any applicable requirements of the Charter and By-laws and with the requirements of the Exchange.
(ix) The statements in the Registration Statement, Pricing Disclosure Package and the Prospectus under the heading “Description of Securities We Are Offering,” insofar as such statements purport to summarize legal matters, legal conclusions, the Charter, the By-laws, or other agreements or documents discussed therein, are correct in all material respects
(x) The statements in the Registration Statement, Pricing Disclosure Package and the Prospectus under the heading “Material U.S. Federal Income Tax Consequences for Non-U.S. Holders,” insofar as such statements purport to summarize matters of U.S. federal tax law and regulations or legal conclusions with respect thereto, are correct in all material respects.
(xi) Securities ActNo stop order suspending the effectiveness of the Registration Statement has been issued under the Securities Act or any order preventing or suspending the use of any Preliminary Prospectus, any Issuer Free Writing Prospectus or the Prospectus has been issued, and no proceedings for any such purpose have been instituted or, to such counsel’s knowledge, are pending by the Commission or any other Governmental EntitySecurities Act
(xii) Based upon current regulatory interpretations in effect on the date hereof to the knowledge and understanding of Counsel, the Company is not required and, after giving effect to the Offering and sale of the Public Securities and the application of the proceeds thereof as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, will not be required, to register as an “investment company,” under the Investment Company Act of 1940, as amended.
(xiii) From the time of the initial submission of the Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged directly in or through any Person authorized to act on its behalf in any Testing-the-Waters Communication) through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the Securities Act.
No filing with, or authorization, approval, consent, license, order, registration, qualification or decree of, any Governmental Entity (other than under the Securities Act and the Securities Act Regulations, which have been obtained, or as may be required under the securities or blue sky laws of the various states, as to which we need express no opinion) is necessary or required for the performance by the Company of its obligations under the Underwriting Agreement, in connection with the offering, issuance or sale of the Public Securities thereunder or the consummation of the transactions contemplated thereby, except such as have been already made or obtained or as may be required under the rules of the Exchange, state securities laws or the rules of FINRA
(xv) The Reverse Stock Split has been authorized by all necessary corporation action of the Company. The Reverse Stock Split was duly effected by the Company on [•], 2025 in accordance with Delaware Revised Statutes.
(xvi) The Public Securities have been approved for listing on the Exchange upon official notice of issuance.
(xvii) that have not been waived, rendered moot, or are immaterial or will be locked up for a period of at least 90 days from the date of the Public OfferingRegistration Statement, the Pricing Disclosure Package, the Prospectus.
(xviii) To such counsel’s knowledge, there are not (1) any pending legal proceedings to which the Company is a party or of which the Company’s property is the subject, or (2) any proceedings contemplated by any Governmental Authority, in each case, which are required to be disclosed in the Registration Statement, Pricing Disclosure Package and the Prospectus and are not so disclosed.
Ex. D-2 |
(xix) To such counsel’s knowledge, neither the Company, nor any of its affiliates, nor any person acting on its behalf has, directly or indirectly, made any offers or sales of any security or solicited any offers to buy any security, under circumstances that would cause the Offering to be integrated with prior offerings by the Company for purposes of the Securities Act, which would require the registration of the sales of any such securities under the Securities Act.
(xx) Each of (1) the Registration Statement, as of the time it became effective, (2) the Pricing Disclosure Package, as of the Applicable Time, and (3) the Prospectus, as of its date (in each case other than the financial statements and supporting schedules included therein, as to which no opinion need be rendered), complied as to form in all material respects with the requirements of the Securities Act and Securities Act Regulations.
The opinion shall further include the following:
Nothing has come to such counsel’s attention that caused such counsel to believe that (1) the Registration Statement, as of the time it became effective, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading; (2) the Pricing Disclosure Package, as of the Applicable Time, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; or (3) the Prospectus, as of its date and as of the Closing Date or Option Closing Date, as applicable, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading (except that, in each case, such counsel need express no view, and make no statement, with respect to the financial statements and schedules and notes thereto and other financial data derived therefrom that are contained in or omitted from the Registration Statement, the Pricing Disclosure Package or the Prospectus).
Ex. D-3 |
Exhibit 3.6
Exhibit 3.7
CERTIFICATE OF CORRECTION Pursuant to Title 8, Section 103(f) of the Delaware General Corporation Law, the undersigned corporation executed the following Certificate of Correction: 1. That the name of corporation is BitMine Immersion Technologies, Inc. (the "Corporation''). 2. A Certificate of Amendment to the Amended and Restated Certificate oflncorporation was filed with the Secretary of State of Delaware on May 15 , 2025 , which disclosed a 1 for 20 Reverse Stock Split effect May 18 , 2025 . Said Certificate of Amendment to the Amended and Restated Certificate oflncorporation requires correction as permitted by Section 103 (f) of the Delaware General Corporation Law . 3. The inaccuracies or defects of said Certificate of Amendment to the Amended and Restated Certificate oflncorporation are as follows : (A) Article Four erroneously stated that the Certificate of Amendment shall become effective as of May 1 st 11 , 2025 at 5 : 00 pm . Whereas the Minutes of the Meeting of the Board of Directors stated the Company would request the earliest possible announcement date by FINRA, which announced the reverse - split as effective on May 16 ' 2025 at 9 : 00 am . 4. Article Four of the Certificate of Amendment to the Amended and Restated Certificate oflncorporation is corrected to read as follows : FOUR: This Certificate of Amendment shall become effective as of May 16, 2025 at9:00am. IN WITNESS WHEREOF, the Corporation has caused this certificate to be executed in its corporate name as of the 16 day of May, 2025. Sincerely, Erik S. Nelson, President Stale of Delaware Secretary of State Division or Col'poratlons Dell,,ered 02:04 PM 05/16/2025 FILED 02:04 PM 05/16/2025 SR 20252373646 - File Number 7713994
Exhibit 4.2
BITMINE IMMERSION TECHNOLOGIES, INC.
2025 EQUITY INCENTIVE PLAN
ARTICLE I
GENERAL PROVISIONS
1.1 Purpose of Plan. This 2025 Equity Incentive Plan is intended to further the growth and financial success of the Company by providing additional incentives to selected employees, directors, and Service Providers, as well as incentives which will attract, retain, motivate, and reward executive officers, non-employee directors, and other key employees to the Company or subsidiary corporation of the Company as those terms are defined in Sections 424(e) and 424(f) of the Code (such parent corporations and subsidiary corporations hereinafter collectively referred to as “Affiliates”) so that such employees, directors, and Service Providers may acquire or increase their proprietary interest in the Company.
1.2 Awards. Awards under the Plan may be made to Participants in the form of (i) Incentive Stock Options; (ii) Nonqualified Stock Options; and (iii) Restricted Stock.
1.3 Effective Date. The Plan shall be effective on May 2, 2025 (the “Effective Date”). Any Awards granted under the Plan prior to such approval shall be effective when made (unless otherwise specified by the Plan Administrator at the time of grant). Shareholder approval of the Plan shall be sought to be obtained no later than 12 months from the Effective Date.
1.4 Number of Shares Available Under the Plan. The total number of shares of Common Stock that may be granted under the Plan (including the number of shares of Common Stock which may be purchased through the exercise of Options under this Plan) shall not exceed 75,000,000, subject to adjustments as provided in Article VI of the Plan. Subject to adjustments as provided in Article VI of the Plan, the maximum number of shares of Common Stock that may be covered by Options that are designated as Incentive Stock Options within the meaning of section 422 of the Code shall not exceed 75,000,000 shares of Common Stock, provided that such shares shall be available to but not exclusively for Incentive Stock Options. If any Award shall for any reason terminate or expire, any shares allocated thereto but remaining unpurchased upon such expiration or termination shall again be available for the grant of Awards with respect thereto under this Plan as though no Award had been granted with respect to such shares.
1.5 Reservation of Shares. The Company shall reserve and keep available at all times during the term of the Plan such number of shares as shall be sufficient to satisfy the requirements of the Plan. If, after reasonable efforts, which efforts shall not include the registration of the Plan or Options under the Act, the Company is unable to obtain authority from any applicable regulatory body, which authorization is deemed necessary by legal counsel for the Company for the lawful issuance of shares hereunder, the Company shall be relieved of any liability with respect to its failure to issue and sell the shares for which such requisite authority was so deemed necessary unless and until such authority is obtained.
ARTICLE II
DEFINITIONS
2.1 “10% Holder” means a person who at the time an Option is granted owns (or is deemed to own pursuant to Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of value of all classes of stock of the Company, or of any Affiliate.
2.2 “Act” means the Securities Act of 1933, as amended.
2.3 “Affiliate” shall have the meaning set forth in Section 1.1 of the Plan.
2.4 “Award” means an award granted to a Participant in accordance with the provisions of the Plan, including, but not limited to, an Option or Restricted Stock, or any combination of the foregoing.
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2.5 “Board” means the Board of Directors of the Company.
2.6 “Cashless Exercise Transaction” means the exercise of an Option for vested shares, through a special sale and remittance procedure pursuant to which a Participant shall concurrently provide irrevocable instructions (a) to a Company-approved brokerage firm to effect the immediate sale of the purchased shares and remit to the Company, out of the sale proceeds available on the settlement date, sufficient funds to cover the aggregate Option Price payable for the purchased shares plus all applicable federal, state and local income and employment taxes required to be withheld by the Company by reason of such exercise; and (b) to the Company to deliver the certificates for the purchased shares directly to such brokerage firm in order to complete the sale.
2.7 “Code” means the Internal Revenue Code of 1986, as amended.
2.8 “Company” means Bitmine Immersion Technologies, Inc., a Delaware corporation.
2.9 “Change in Control” means (i) if there is an employment agreement, at will offer letter, or director agreement between the Participant and the Company or any of its Affiliates in effect (for the avoidance of doubt, any Change of Control Agreement between the Participant and the Company shall not be considered an employment agreement, offer letter, or director agreement for the purposes of this Plan), “Change in Control” shall have the same definition as the definition of “Change in Control” contained in such employment agreement, at will offer letter, or director agreement; or (ii) if “Change in Control” is not defined in or if there is no such employment agreement, at will offer letter, or director agreement between the Participant and the Company or any of its Affiliates in effect, “Change in Control” of the Company shall be deemed to have occurred upon any of the following events:
(a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of either (a) the then-outstanding shares of Common Stock (the “Outstanding Company Common Stock”) or (b) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection, the following acquisitions shall not constitute a Change in Control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (4) any acquisition by any corporation pursuant to a transaction which complies with clauses (a), (b) and (c) of subsection (b) of this Section 2.9; or
(b) Consummation of a reorganization, merger, consolidation, or sale, or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination, (a) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be; (b) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Business Combination, or the combined voting power of the then-outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination; and (c) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or
(c) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.
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In the context of this Plan, the occurrence of a Public Offering shall not be construed as constituting a Change in Control event with regard to the Plan.
2.10 “Common Stock” means the common stock of the Company and any other common equity securities of the Company (whether voting or non-voting).
2.11 “Committee” means the compensation committee of the Board, when and if enacted.
2.12 “Days” means calendar days and the phrase “business days” refers to all days other than Saturdays, Sundays, and legal holidays defined by the Code, or, if not defined by the Code, as defined by the State of Delaware.
2.13 “Disability” means (i) if there is an employment agreement, at will offer letter, or director agreement between the Participant and the Company or any of its Affiliates in effect (for the avoidance of doubt, any Change of Control Agreement between the Participant and the Company shall not be considered an employment agreement, offer letter, or director agreement for the purposes of this Plan), “Disability” shall have the same definition as the definition of “Disability” contained in such employment agreement, at will offer letter, or director agreement; or (ii) if “Disability” is not defined in such employment agreement, at will offer letter, or director agreement or if there is no employment agreement, at will offer letter, or director agreement between the Participant and the Company or any of its Affiliates in effect, “Disability” shall mean the following, as may be further modified or supplemented by the Plan Administrator in its sole discretion: As a result of the Participant’s physical or mental illness, the Participant is absent from the Participant’s duties with the Company on a full-time basis for three consecutive months, and within 30 days after written Notice of Termination is given, the Participant does not return to the full-time performance of the Participant’s duties.
2.14 “Effective Date” shall have the meaning set forth in Section 1.3 of the Plan.
2.15 “Exchange Act” means the Securities Exchange Act of 1934, as amended.
2.16 “Exercise Date” means the date of the exercise of an Option, including payment and execution of all required documents.
2.17 “Fair Market Value” shall mean, as of any given date, the closing price of a share of Common Stock on such public trading market on which shares of Common Stock are listed or quoted on that date. If there is no regular public trading market for shares of Common Stock, the Fair Market Value of a share of Common Stock shall be determined by the Plan Administrator in good faith. In each case, the Fair Market Value shall be determined without regard to whether shares of Common Stock are restricted or represent a minority interest.
2.18 “Incentive” means the Incentive Stock Option, the Nonqualified Stock Option, and Restricted Stock.
2.19 “Incentive Stock Option” means an Option granted under Article IV of the Plan, and as defined in Section 422 of the Code.
2.20 “IRS” means the Internal Revenue Service.
2.21 “Nonqualified Stock Option” means an Option granted under Article IV of the Plan.
2.22 “Notice of Termination” means a written notice from the Company which indicates that the Participant has been determined to have a Disability and which sets forth in reasonable detail the facts and circumstances claimed to provide a basis for such determination.
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2.23 “Option” means Incentive Stock Option as defined in Section 422A of the Code and any regulations promulgated under said Section, or Nonqualified Stock Options at the discretion of the Board and as reflected in the respective written stock option agreements granted pursuant to Article IV of the Plan.
2.24 “Option Price” means the price to purchase the underlying shares or securities under an Option determined in accordance with Section 4.3 (b) of the Plan.
2.25 “Options Stock” shall have the meaning set forth in Section 4.2.1 of the Plan.
2.26 “Participant” means persons who are eligible to receive Options as provided in Article IV of the Plan or persons who are eligible to receive Restricted Stock as provided in Article V of the Plan, and to whom an Award has been granted and has entered into an Agreement evidencing the Award.
2.27 “Performance Award” means an Award of shares granted in accordance with Section 5.5.
2.28 “Performance Based Award” means certain Awards granted under the Plan which are granted in a manner such that the Awards qualify as “performance-based compensation” (as such term is used in Section 162(m) of the Code and the regulations thereunder) and thus be exempt from the deduction limitation imposed by Section 162(m) of the Code.
2.29 “Plan” means this Bitmine Immersion Technologies, Inc. 2025 Equity Incentive Plan, as amended from time to time.
2.30 “Plan Administrator” means the Board or the Committee if and when one is formed such that when the Committee is formed, it shall be the primary administrator of the Plan.
2.31 “Public Offering” means an offering of securities of the Company pursuant to a registration statement filed with the United States Securities and Exchange Commission and declared effective under the Act.
2.32 “Restricted Stock” means an Award under Article V of the Plan, which stock is issued with the restriction that the holder may not sell, transfer, pledge, or assign such stock and with such other restrictions as the Plan Administrator, in its discretion, may impose (including, without limitation, any restriction on the right to vote such stock and the right to receive any cash dividends), which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Plan Administrator may deem appropriate.
2.33 “Service Provider” shall have the meaning set forth in Section 4.1.1 of the Plan.
2.34 “Stock Award” means an Award of shares granted in accordance with Section 5.4.
2.35 “W-2 Employees” means persons who are classified as employees of the Company for tax and employment purposes and receive a W-2 tax form at the end of the calendar year.
ARTICLE III
ADMINISTRATION
3.1 Administration. The Plan shall be administered by the Plan Administrator. If the Plan Administrator is a Committee, such Committee must have no fewer than two members, all of whom are members of the Board and all of whom are non-employee directors, as contemplated by Rule 16b-3 promulgated under the Exchange Act (“Rule 16b-3”).
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3.2 General Powers of the Plan Administrator. Subject to the provisions of the Plan, the Plan Administrator shall have authority to (a) grant, in its discretion, Incentive Stock Options in accordance with Section 422A of the Code or Nonqualified Stock Options; (b) grant Restricted Stock; (c) determine in good faith the Fair Market Value of the stock; (d) determine which eligible persons shall be granted Awards and the number of shares to be covered thereby and the term thereof; (e) construe and interpret the Plan; (f) promulgate, amend, and rescind rules and regulations relating to Plan administration, and correct defects, omissions, and inconsistencies in the Plan or any Award; (g) consistent with the Plan and with the consent of the recipient, as appropriate, amend any outstanding Incentive or amend the exercise date or dates thereof; (h) determine the duration and purpose of leaves of absence which may be granted to Award holders without constituting termination of their employment for the purpose of the Plan; and (i) make all other determinations necessary or advisable for the Plan’s administration. The interpretation and construction by the Plan Administrator of any provisions of the Plan or of any Award shall be conclusive and final.
3.3 Power to Delegate. The Plan Administrator may delegate such of its powers and authority under the Plan as it deems appropriate to designated officers or employees of the Company. In addition, in the event the Committee is formed and becomes the primary administrator of the Plan, the independent members of the full Board may exercise any of the powers and authority of the Committee under the Plan. In the event of such delegation of authority or exercise of authority by the Board, references in the Plan to the Committee or the Plan Administrator shall be deemed to refer, as appropriate, to the agent of the Committee or the Board. The selection of members of the Committee or any subcommittee thereof, and any delegation by the Committee to designated officers or employees, under this Section 3.3 shall comply with Section 16(b) of the Exchange Act, the performance-based provisions of Section 162(m) of the Code, and the regulations promulgated under each of such statutory provisions, or the respective successors to such statutory provisions or regulations, as in effect from time to time, except to the extent that the Board determines that such compliance is not necessary or desirable. The Plan Administrator may employ such legal or other counsel, consultants, and agents as it may deem desirable for the administration of the Plan and may rely upon any opinion or computation received from any such counsel, consultant, or agent. Expenses incurred by the Plan Administrator in the engagement of such counsel, consultant, or agent shall be paid by the Company or any of its Affiliates whose employees have benefited from the Plan, as determined by the Plan Administrator.
3.4 No Liability for Actions as Plan Administrator. No member of the Board or the Committee and no agent of the Committee who is an employee of the Company shall be liable for any act or failure to act hereunder, except in circumstances involving their bad faith, gross negligence, or willful misconduct, or for any act or failure to act hereunder by any other member or employee or by any agent to whom duties in connection with the administration of this Plan have been delegated. The Company shall indemnify members of the Board or the Committee and any agent of the Board or the Committee who is an employee of the Company against any and all liabilities or expenses to which they may be subjected by reason of any act or failure to act with respect to their duties on behalf of the Plan, except in circumstances involving such person’s bad faith, gross negligence, or willful misconduct.
ARTICLE IV
INCENTIVE AND NONQUALIFIED STOCK OPTIONS
4.1Eligibility
4.1.1 General. Subject to Sections 4.1.2 and 4.1.3 of the Plan, the persons who shall be eligible to receive Options shall be employees, directors, or Service Providers of the Company or any of its Affiliates. The term “Service Provider” shall mean any person who is engaged by the Company to render services whether or not compensated for such services.
4.1.2 Incentive Stock Options. Incentive Stock Options may only be issued to W-2 Employees of the Company or its Affiliates. Incentive Stock Options may be granted to officers, whether or not they are directors, but a director shall not be granted an Incentive Stock Option unless such director is also an employee of the Company. Payment of a director fee shall not be sufficient to constitute employment by the Company. A Participant may hold more than one Option. The Company shall not grant an Incentive Stock Option under the Plan to any employee if such grant would result in such employee holding the right to exercise for the first time in any one calendar year, all options granted to such employee under the Plan or any other stock option plan maintained by the Company or any Affiliate, with respect to shares of stock having an aggregate Fair Market Value, determined as of the date the Option is granted, in excess of $100,000. Should it be determined that an Incentive Stock Option granted under the Plan exceeds such maximum for any reason other than a failure in good faith to value the stock subject to such Option, the excess portion of such Option shall be considered a Nonqualified Stock Option. If, for any reason, an entire Option does not qualify as an Incentive Stock Option by reason of exceeding such maximum, such Option shall be considered a Nonqualified Stock Option.
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4.1.3 Nonqualified Stock Option. The provisions of the foregoing Section 4.1.2 shall not apply to any option designated as a “Nonqualified Stock Option” or which sets forth the intention of the parties that the Option be a Nonqualified Stock Option. Nonqualified Stock Options may only be issued to non-employee directors and Service Providers of the Company or its Affiliates.
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4.2.1 General. The stock subject to Options shall be the shares of the Company’s authorized but unissued or reacquired Common Stock (the “Options Stock”).
4.3Terms and Conditions of Options. Options granted hereunder shall be evidenced by agreements between the Company and the respective Participants, in such form and substance as the Plan Administrator shall from time to time approve. Such agreements need not be identical, and in each case may include such provisions as the Plan Administrator may determine, but all such agreements shall be subject to and limited by the following terms and conditions:
(a) Number of Shares. Each Option shall state the number of shares to which it pertains.
(b) Option Price. Each Option shall state the Option Price, which shall be determined as follows:
i. Any Option granted to a 10% Holder shall have an Option Price of no less than 110% of the Fair Market Value of the Common Stock as of the date of grant;
ii. Incentive Stock Options granted to a person who at the time the Option is granted is not a 10% Holder shall have an Option Price of no less than 100% of the Fair Market Value of the Common Stock as of the date of grant; and
iii. Nonqualified Stock Options granted to a person who at the time the Option is granted is not a 10% Holder shall have an Option Price determined by the Board as of the date of grant.
(c) Medium and Time of Payment. To the extent permissible by applicable law, the Option price shall be paid, at the discretion of the Board, at either the time of grant or the time of exercise of the Option (i) in cash or by check, (ii) by delivery of other common stock of the Company, provided such tendered stock was not acquired directly or indirectly from the Company, or, if acquired from the Company, has been held by the Participant for more than six months, (iii) by a Cashless Exercise Transaction, or (iv) such other form of legal consideration permitted by federal and state law as may be acceptable to the Board.
(d) Term and Exercise of Options. Any Option granted to a 10% Holder shall become exercisable over a period of no longer than five years. Any Option otherwise granted to an employee of the Company shall become exercisable over a period of no longer than ten years. No less than 20% of the shares covered by any Option granted shall become exercisable annually and no Option shall be exercisable, in whole or in part, prior to one year from the date it is granted unless the Board shall specifically determine otherwise, as provided herein. In no event shall any Option be exercisable after the expiration of ten years from the date it is granted. Unless otherwise specified by the Plan Administrator in the resolution authorizing such Option, the date of grant of an Option shall be deemed to be the date upon which the Plan Administrator authorizes the granting of such Option. Each Option shall be exercisable to the nearest whole share, in installments or otherwise, as the respective option agreements may provide. During the lifetime of a Participant, the Option shall be exercisable only by the Participant and shall not be assignable or transferable by the Participant, and no other person shall acquire any rights therein. To the extent not exercised, installments (if more than one) shall accumulate, but shall be exercisable, in whole or in part, only during the period for exercise as stated in the option agreement, whether or not other installments are then exercisable.
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(e) Termination of Status as Employee, Director, or Service Provider. If Participant’s status as an employee, director, or Service Provider shall terminate for any reason, then the Participant (or if the Participant shall die after such termination, but prior to exercise, Participant’s personal representative or the person entitled to succeed to the Option) shall have the right to exercise any vested Options, in whole or in part, during the period specified in the Notice of Grant, but not shorter than 12 months in the event Participant’s termination was caused by permanent disability within the meaning of Section 22(e)(3) of the Code. The Option may be exercised only with respect to installments that the Participant could have exercised at the date of termination of employment. Nothing contained herein or in any Option granted pursuant hereto shall be construed to affect or restrict in any way the right of the Company to terminate the employment of a Participant with or without cause.
(f) Death of an Option Holder. If a Participant dies while employed or engaged as a director or Service Provider by the Company or an Affiliate, the portion of such Participant’s Option or Options which were exercisable at the date of death may be exercised, in whole or in part, by the estate of the decedent or by a person succeeding to the right to exercise such Option or Options, at any time within the remaining term of the Option, but only to the extent, that Participant could have exercised the Option as of the date of Participant’s death; provided, in any case, that the Option may be so exercised only to the extent that the Option has not previously been exercised by the Participant.
(g) Non-transferability of Option. No Option shall be transferable by the Participant, except by will or by the laws of descent and distribution.
(h) Rights as a Shareholder. A Participant shall have no rights as a shareholder with respect to any shares covered by an Option until the Exercise Date. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities, or other property) or distributions or other rights for which the record date is prior to the Exercise Date, except as expressly provided in Article VI of the Plan.
(i) Modification, Acceleration, Extension, and Renewal of Options. Subject to the terms and conditions and within the limitations of the Plan, the Board may modify an Option, or once an Option is exercisable, accelerate the rate at which it may be exercised, and may extend or renew outstanding Options granted under the Plan or accept the surrender of outstanding Options (to the extent not theretofore exercised) and authorize the granting of new Options in substitution for such Options, provided such action is permissible under Section 422A of the Code and state law. Notwithstanding the foregoing provisions of this Section 4.3 (i), however, no modification of an Option shall, without the consent of the Participant, alter to the Participant’s detriment or impair any rights or obligations under any Option theretofore granted under the Plan.
(j) Investment Intent. Unless and until the issuance and sale of the shares subject to the Plan are registered under the Act, each Option under the Plan shall provide that the purchases of stock thereunder shall be for investment purposes and not with a view to, or for resale in connection with, any distribution thereof. Further, unless the issuance and sale of the stock have been registered under the Act, each Option shall provide that no shares shall be purchased upon the exercise of such Option unless and until (i) any then applicable requirements of state and federal laws and regulatory agencies shall have been fully complied with to the satisfaction of the Company and its counsel, and (ii) if requested to do so by the Company, the person exercising the Option shall (A) give written assurances as to the knowledge and experience of such person (or a representative employed by such person) in financial and business matters and the ability of such person (or representative) to evaluate the merits and risks of exercising the Option, and (B) execute and deliver to the Company a letter of investment intent, all in such form and substance as the Company may require. If shares are issued upon exercise of an Option without registration under the Act, subsequent registration of such shares shall relieve the purchaser thereof of any investment restrictions or representations made upon the exercise of such Options.
(k) Exercise Before Exercise Date. At the discretion of the Board, the Option may, but need not, include a provision whereby the Participant may elect to exercise all or any portion of the Option prior to the stated Exercise Date of the Option or any installment thereof. Any shares so purchased prior to the stated Exercise Date shall be subject to repurchase by the Company upon termination of Participant’s employment as contemplated by Sections 4.3 (e) and (f) hereof prior to the exercise date stated in the Option and such other restrictions and conditions as the Plan Administrator may deem advisable.
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(l) Other Provisions. The Option agreements authorized under this Plan shall contain such other provisions, including, without limitation, restrictions upon the exercise of the Options, as the Plan Administrator shall deem advisable. Shares shall not be issued pursuant to the exercise of an Option if the exercise of such Option or the issuance of shares thereunder would violate, in the opinion of legal counsel for the Company, the provisions of any applicable law or the rules or regulations of any applicable governmental or administrative agency or body, such as the Act, the Exchange Act, the rules promulgated under the foregoing, or the rules and regulations of any exchange upon which the shares of the Company are listed.
4.4. Availability of Information. During the term of the Plan and any additional period during which an Option granted pursuant to the Plan shall be exercisable, the Company shall make available, not later than 120 days following the close of each of its fiscal years, such financial and other information regarding the Company as is required by the bylaws of the Company and applicable law to be furnished to the shareholders of the Company.
4.5. No Obligation to Exercise Option. The granting of an Option shall impose no obligation upon the Participant to exercise such Option.
4.6. Application of Funds. The proceeds received by the Company from the sale of Common Stock pursuant to the exercise of Options will be used for general corporate purposes.
ARTICLE V
RESTRICTED STOCK
5.1 Eligibility. The persons who shall be eligible to receive Restricted Stock shall be executive officers, directors (employed or non-employed), Service Providers, and other key employees of the Company or any of its Affiliates as the Plan Administrator in its sole discretion determines to be significantly responsible for the success and future growth and profitability of the Company and whom the Plan Administrator may designate from time to time to receive Awards under the Plan. Designation of a Participant in any year shall not require the Plan Administrator to designate such person to receive an Award in any other year or, once designated, to receive the same type or amount of Award as granted to the Participant in any other year. The Plan Administrator shall consider such factors as it deems pertinent in selecting Participants and in determining the type and amount of Awards.
5.2 Types of Awards and Vesting Restrictions. Stock Awards and Performance Awards may, as determined by the Plan Administrator, in its discretion, constitute Performance-Based Awards. Awards granted to Participants under the Plan may be subject to a graded vesting schedule with a minimum vesting period of two years, unless otherwise determined by the Plan Administrator. Awards shall be evidenced by Award agreements in such form as the Plan Administrator may from time to time approve; provided, however, that in the event of any conflict between the provisions of the Plan and any such agreements, the provisions of the Plan shall prevail.
5.3 Common Stock Available Under the Plan
5.3.1 Shares Underlying Awards That Again Become Available. The following shares of Common Stock shall again become available for Awards: (1) any shares of Common Stock subject to an Award that are forfeited to the Company under Section 5.7.2 or 5.7.3 of this Plan or under the provisions of the applicable Award agreement; (2) any shares of Common Stock subject to an Award that are retained by the Company as payment of the tax withholding obligations with respect to an Award; and (3) a number of shares of Common Stock equal to the number of previously owned shares of Common Stock surrendered to the Company to satisfy tax withholding obligations with respect to an Award.
5.4 Stock Awards. The Plan Administrator is authorized to grant Stock Awards and shall, in its sole discretion, determine such Participants in the Plan who will receive Stock Awards and the number of shares of Common Stock underlying each Stock Award. Each Stock Award shall be subject to such terms and conditions consistent with the Plan as shall be determined by the Plan Administrator and as set forth in the Award agreement, including, without limitation, restrictions on the sale or other disposition of such shares, and the right of the Company to reacquire such shares for no consideration upon termination of the Participant’s employment or membership on the Board, as applicable, within specified periods. The Plan Administrator may require the Participant to deliver a duly signed stock power, endorsed in blank, relating to Common Stock covered by such Stock Award and/or that the stock certificates evidencing such shares be held in custody or bear restrictive legends until the restrictions thereon shall have lapsed. The Award agreement shall specify whether the Participant shall have, with respect to the shares of Common Stock subject to a Stock Award, all of the rights of a holder of shares of Common Stock, including the right to receive dividends or other distributions and to vote the shares.
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5.5 Performance Awards
5.5.1 In General. The Plan Administrator is authorized to grant Performance Awards and shall, in its sole discretion, determine such Participants who will receive Performance Awards and the number of shares of Common Stock that may be subject to each Performance Award. Each Performance Award shall be subject to such terms and conditions consistent with the Plan as shall be determined by the Plan Administrator and as set forth in the Award agreement. The Plan Administrator shall set performance targets at its discretion which, depending on the extent to which they are met, will determine the number of Performance Awards that will be paid out to the Participants, and may attach to such Performance Awards one or more restrictions. Performance targets may be based upon, without limitation, Company-wide, divisional, and/or individual performance.
5.5.2 Adjustment of Performance Targets. With respect to those Performance Awards that are not intended to qualify as Performance-Based Awards, the Plan Administrator shall have the authority at any time to make adjustments to performance targets for any outstanding Performance Awards which the Plan Administrator deems necessary or desirable unless at the time of establishment of goals the Plan Administrator shall have precluded its authority to make such adjustments.
5.5.3 Payout. Payment of earned Performance Awards shall be made in shares of Common Stock and shall be made in accordance with the terms and conditions prescribed or authorized by the Plan Administrator. The Plan Administrator, in its sole discretion, may permit a Participant to elect to defer the receipt of any Performance Award based upon a performance period of at least 12 months, provided that the Participant performed services continuously from a date no later than the date upon which the performance criteria are established through a date no earlier than the date upon which the Participant makes such deferral election. An election to defer the receipt of a Performance Award must be made no later than the date that is six months before the end of the performance period, provided that in no event may an election to defer a Performance Award be made after such Performance Award has become both substantially certain to be paid and readily ascertainable. Notwithstanding the foregoing to the contrary, a Participant shall not be permitted to elect to defer the receipt of a Performance Award unless such election complies with Code Section 409A and treasury regulations, rulings and notices of IRS issued thereunder.
5.6 Performance-Based Awards
5.6.1 In General. Certain Stock Awards and Performance Awards granted under the Plan, and the compensation attributable to such Awards, are intended to (i) qualify as Performance-Based Awards or (ii) be otherwise exempt from the deduction limitation imposed by Section 162(m) of the Code. Awards may only qualify as Performance-Based Awards if at the time of grant the Plan Administrator is comprised solely of two or more “outside directors” (as such term is used in Section 162(m) of the Code and the regulations thereunder).
5.6.2 Other Performance-Based Awards. Stock Awards and Performance Awards granted under the Plan should qualify as Performance-Based Awards if, as determined by the Plan Administrator, in its discretion, either the granting or vesting of such Award is subject to the achievement of a performance target or targets based on one or more of the performance measures specified in Section 5.6.3 below. With respect to such Awards intended to qualify as Performance-Based Awards:
(a) Establishment by the Plan Administrator. The Plan Administrator shall establish in writing (A) the objective performance-based goals applicable to a given period and (B) the individual employees or class of employees to which such performance-based goals apply no later than 90 days after the commencement of such period (but in no event after 25% of such period has elapsed);
(b) No Payment or Vesting Without Certification. No Performance-Based Awards shall be payable to or vest with respect to, as the case may be, any Participant for a given period until the Plan Administrator certifies in writing that the objective performance goals (and any other material terms) applicable to such period have been satisfied; and
(c) Restriction on the Revision of Performance Goal. After the establishment of a performance goal, the Plan Administrator shall not revise such performance goal or increase the amount of compensation payable thereunder (as determined in accordance with Section 162(m) of the Code) upon the attainment of such performance goal.
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5.6.3 Performance Measures. The Plan Administrator may use the following performance measures (either individually or in any combination) to set performance targets with respect to Awards intended to qualify as Performance-Based Awards: net sales; pretax income before allocation of corporate overhead and bonus; budget; earnings per share; net income; division, group, or corporate financial goals; return on shareholders’ equity; return on assets; return on net assets; return on investment capital; gross margin return on investment; gross margin dollars or percent; sales per square foot or per hour; payroll as a percentage of sales; inventory shrink; inventory turnover; employee turnover; sales, general, and administrative expense; attainment of strategic and operational initiatives; appreciation in and/or maintenance of the price of Common Stock or any other publicly-traded securities of the Company, if any; market share; gross profits; earnings before interest and taxes; earnings before interest, taxes, depreciation, and amortization; economic value-added models; comparisons with various stock market indices; and/or reductions in costs. The foregoing criteria shall have any reasonable definitions that the Plan Administrator may specify, which may include or exclude any or all of the following items as the Plan Administrator may specify: extraordinary, unusual, or non-recurring items; effects of accounting changes; effects of financing activities; expenses for restructuring or productivity initiatives; other non-operating items; spending for acquisitions; effects of divestitures; and effects of litigation activities and settlements. Any such performance criterion or combination of such criteria may apply to the Participant’s Award opportunity in its entirety or to any designated portion or portions of the Award opportunity, as the Plan Administrator may specify.
5.7 Termination of Employment or Membership on the Board
5.7.1 Membership on the Board. A non-employee director’s membership on the Board is considered “terminated” in the event of their (i) Removal; (ii) not being re-nominated for membership on the Board for the next succeeding period; (iii) being nominated for membership on the Board for the next succeeding period but not being reelected for membership on the Board for such period by the Company’s shareholders; or (iv) resignation from the Board, in any such case, prior to the actual vesting or lapse of any other forfeiture restrictions, as may be determined by the Plan Administrator, in its sole discretion. “Removal” for purposes of this provision shall mean the removal of a non-employee director from the Board, with or without cause, in accordance with the Company’s Certificate of Incorporation, bylaws, or the Delaware General Corporation Law.
5.7.2 Death or Disability. Subject to any written agreement between the Participant and the Company or any of its Affiliates, if a Participant’s employment or membership on the Board is terminated due to death or Disability:
(a) Unvested Stock Awards. All unvested Stock Awards held by the Participant on the date of the Participant’s termination of employment or membership on the Board due to death or the date of the termination of their employment or membership on the Board related to Disability, as the case may be, shall immediately be forfeited as of such date; and
(b) Unvested or Unearned Performance Awards. All unearned and/or unvested Performance Awards held by the Participant on the date of the Participant’s termination of employment due to death or the date of the termination of their employment related to Disability, as the case may be, shall treated as follows:
i. Unearned and/or unvested Performance Awards with performance periods of greater than one year for which the Participant has completed a minimum of at least one year into a performance period shall immediately become earned or vested as of such date and shall be paid out and/or settled based on the Company’s and/or Participant’s performance immediately prior to the date of the Participant’s termination of employment or membership on the Board due to death or the date of the termination of their employment or membership on the Board related to Disability on a pro-rated basis; and
ii. All other unearned and/or unvested Performance Awards shall immediately be forfeited by such Participant as of such date.
5.7.3 Other Termination. Subject to any written agreement between the Participant and the Company or any of its Affiliates, if a Participant’s employment or membership on the Board is terminated for any reason, including without limitation, retirement, other than due to death or Disability, all unearned or unvested Awards held by the Participant on the date of the termination of their employment or membership on the Board shall immediately be forfeited by such Participant as of such date.
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5.7.4 Discretionary Accelerated Vesting. Notwithstanding anything contained in the Plan to the contrary, the Plan Administrator may, in its discretion, provide that any or all unvested Stock Awards held by the Participant on the date of the Participant’s death and/or the date of the termination of the Participant’s employment or membership on the Board shall immediately become vested as of such date.
5.8 Transferability. Each Award granted under Article V of this Plan to a Participant shall not be transferable otherwise than by will or the laws of descent and distribution. Notwithstanding the foregoing, at the discretion of the Plan Administrator, an Award may permit the transferability of such Award by a Participant solely to members of the Participant’s immediate family or trusts or family partnerships for the benefit of such persons, subject to any restriction included in the Award agreement.
5.9 Other Provisions. Awards granted under Article V of this Plan may also be subject to such other provisions (whether or not applicable to the Award granted to any other Participant) as the Plan Administrator determines on the date of grant to be appropriate, including without limitation, for the forfeiture of, or restrictions on resale or other disposition of, Common Stock acquired under any form of the Award, for the acceleration of vesting of Awards, or to comply with federal and state securities laws, or understandings or conditions as to the Participant’s employment or membership on the Board, in addition to those specifically provided for under the Plan. The Plan Administrator shall have the authority to retract or clawback any Award or other benefit granted under Article V of this Plan in case of a material restatement of the financial statements of the Company or if it is otherwise determined by the Plan Administrator that the previously granted Award was not earned by the Participant.
5.10 Withholding. All payments or distributions of Awards made pursuant to Article V of this Plan shall be net of any amounts required to be withheld pursuant to applicable federal, state, and local tax withholding requirements. If the Company proposes or is required to distribute Common Stock pursuant to Article V of this Plan, it may require the Participant receiving such Common Stock to remit to it or to the Affiliate that employs such Participant an amount sufficient to satisfy such tax withholding requirements prior to the delivery of any certificates for such Common Stock. In lieu thereof, the Company or the Affiliate employing the Participant shall have the right to withhold the amount of such taxes from any other sums due or to become due from the Company or the Affiliate, as the case may be, to the Participant receiving Common Stock, as the Plan Administrator shall prescribe. The Plan Administrator may, in its discretion, and subject to such rules as the Plan Administrator may adopt (including any as may be required to satisfy applicable tax and/or non-tax regulatory requirements), permit a Participant to pay all or a portion of the federal, state, and local withholding taxes arising in connection with any Award consisting of shares of Common Stock by electing to have the Company withhold shares of Common Stock having a Fair Market Value equal to the amount of tax to be withheld, such tax calculated at rates required by statute or regulation.
5.11 Tenure. A Participant’s right, if any, to continue to serve the Company as an executive officer, non-employee director, Service Provider, other key employee, or otherwise shall not be enlarged or otherwise affected by their designation as a Participant under the Plan.
ARTICLE VI
ADJUSTMENT AND CHANGE IN CONTROL
| 6.1 | Adjustment Provisions |
6.1.1 Adjustment. Subject to any required action by the shareholders, the number of shares of Common Stock covered by each outstanding Award, and the price per share or number of shares thereof set forth in each such Award, shall be automatically and proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock of the Company resulting from a consolidation, subdivision, reorganization, recapitalization, stock dividend, stock split, reverse stock split, split up, spin-off, combination of shares, exchange of shares, dividend in kind, or other like change in capital structure or distribution (other than normal cash dividends) to shareholders of the Company, or any other increase or decrease in the number of such shares affected without receipt of consideration by the Company, other than pursuant to an incentive plan approved by the Board.
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6.1.2 No Right to Adjustment Except as Provided in the Plan. Except as expressly provided in this Plan, the Participant shall have no rights by reason of any subdivision or consolidation of shares of stock or any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class, and the number or price of shares of Common Stock subject to any Award shall not be affected by, and no adjustment shall be made by reason of, any dissolution, liquidation, merger or consolidation, or any issue by the Company of shares of stock.
6.1.3 Change in Common Stock. In the event of a change in the Common Stock of the Company as presently constituted, which is limited to a change of all of its authorized shares without par value into the same number of shares with a par value, the shares resulting from any such change shall be deemed to be the Common Stock within the meaning of this Plan.
6.1.4 No Limitation on the Company’s Right to Make Corporate Decisions. The grant of an Award pursuant to the Plan shall not affect in any way the right or power of the Company to make any adjustments, reclassifications, reorganizations, or changes in its capital or business structure or to merge, consolidate, dissolve, or liquidate or to sell or transfer all or any part of its business or assets.
6.2 Change in Control
6.2.1 Accelerated Vesting. Notwithstanding any other provision of this Plan, unless otherwise provided in the applicable Award agreement, if there is a Change in Control of the Company, all unvested Restricted Stock granted under the Plan shall become fully vested immediately upon the occurrence of the Change in Control and such vested Restricted Stock shall be paid out or settled, as applicable, within 60 days upon the occurrence of the Change in Control, subject to requirements of applicable laws and regulations. The Plan Administrator shall have full discretion, notwithstanding anything herein or in an Award agreement to the contrary, with respect to an outstanding Award, upon the merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company, to provide that the securities of another entity may be substituted hereunder for the shares of Common Stock and to make equitable adjustment with respect thereto.
6.2.2 Adjustment
or Termination of Options. Subject to any required action by the shareholders, if the Company shall be the surviving entity in any
merger or consolidation, each outstanding Option thereafter shall pertain to and apply to the securities to which a holder of shares of
Common Stock equal to the shares subject to the Option would have been entitled by reason of such merger or consolidation. A dissolution
or liquidation of the Company or a merger or consolidation in which the Company is not the surviving entity shall cause each outstanding
Option to terminate on the effective date of such dissolution, liquidation, merger, or consolidation. In such event, if the entity which
shall be the surviving entity does not tender to the Participant an offer, for which it has no obligation to do so, to substitute for
any unexercised Option, a stock option or capital stock of such surviving entity, as applicable, which on an equitable basis shall provide
the Participant with substantially the same economic benefit as such unexercised Option, then the Board may grant to such Participant,
but shall not be obligated to do so, the right for a period commencing 30 days prior to and ending immediately prior to such dissolution,
liquidation, merger, or consolidation or during the remaining term of the Option, whichever is the lesser, to exercise any unexpired Option
or Options, without regard to the installment provisions of Section 4.3 (d) of this Plan; provided, that any such right granted shall
be granted to all Option holders not receiving an offer to substitute on a consistent basis, and provided further, that any such exercise
shall be subject to the consummation of such dissolution, liquidation, merger, or consolidation.
ARTICLE VII
AMENDMENT AND TERMINATION
7.1 Amendment and Termination. Subject to Sections 7.2 and 7.3 of the Plan, the Board, upon recommendation of the Committee, or otherwise, at any time and from time to time, may amend or terminate the Plan as may be necessary or desirable to implement or discontinue this Plan or any provision thereof.
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7.2 Article IV of the Plan. Except with the approval of shareholders of the Company, no such revision or amendment shall (i) reprice Options or decrease the price at which Options may be granted, (ii) materially increase the benefits to Option holders, or (iii) change the class of persons eligible to receive Options under this Plan; provided, however, no such action shall alter or impair the rights and obligations under any Option outstanding as of the date thereof without the written consent of the Participant thereunder. No Option may be granted while the Plan is suspended or after it is terminated, but the rights and obligations under any Option granted while the Plan is in effect shall not be impaired by suspension or termination of the Plan. Article IV of the Plan shall expire on the tenth anniversary of the Effective Date, but such expiration shall not affect the validity of outstanding Options.
7.3 Article V of the Plan. No action authorized by this Article VII shall reduce the amount of any existing Award or change the terms and conditions thereof without the Participant’s consent, except as otherwise provided for in Section 6.1. No amendment of the Plan shall, without approval of the shareholders of the Company, (i) modify the requirements as to eligibility for Awards under Article V of the Plan; or (ii) otherwise materially amend Article V of the Plan as provided in the rules of any public trading market on which shares of Common Stock are then listed or quoted. Article V of the Plan shall terminate on the tenth anniversary of the Effective Date (unless sooner terminated by the Board). No Award shall be granted more than ten years after the Effective Date; provided, however, that the terms and conditions applicable to any Award granted prior to such date may thereafter be amended or modified by mutual agreement between the Company and the Participant or such other persons as may then have an interest therein.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 Section 409A of the Code
8.1.1 Compliance with the Code. Awards under the Plan are intended either to be exempt from the rules of Section 409A of the Code or to satisfy those rules and shall be construed accordingly. However, the Company shall not be liable to any Participant or other holder of an Award with respect to any Award-related adverse tax consequences arising under Section 409A or other provision of the Code.
8.1.2 Automatic Modification of the Plan to Comply with the Code. If any provision of the Plan or an Award agreement contravenes any regulations or treasury guidance promulgated under Code Section 409A or could cause an Award to be subject to the interest and penalties under Code Section 409A, such provision of the Plan or Award shall be deemed automatically modified to maintain, to the maximum extent practicable, the original intent of the applicable provision without violating the provisions of Code Section 409A. Moreover, any discretionary authority that the Plan Administrator may have pursuant to the Plan shall not be applicable to an Award that is subject to Code Section 409A to the extent such discretionary authority will contravene Section 409A or the regulations or guidance promulgated thereunder.
8.1.3 No Acceleration if it will Result in Non-compliance with the Code. Notwithstanding any provisions of this Plan or any Award granted hereunder to the contrary, no acceleration shall occur with respect to any Award to the extent such acceleration would cause the Plan or an Award granted hereunder to fail to comply with Code Section 409A.
8.1.4 Delay in Payment. Notwithstanding any provisions of this Plan or any applicable Award agreement to the contrary, no payment shall be made with respect to any Award granted under this Plan to a “specified employee” (as such term is defined for purposes of Code Section 409A) prior to the six-month anniversary of the employee’s separation of service to the extent such six-month delay in payment is required to comply with Code Section 409A.
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8.2 Unfunded Plan. Participants shall have no right, title, or interest whatsoever in or to any investments which the Company may make to aid it in meeting its obligations under the Plan. Nothing contained in the Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind, or a fiduciary relationship between the Company and any Participant, beneficiary, legal representative, or any other person. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts except as expressly set forth in the Plan. The Plan is not intended to be subject to the Employee Retirement Income Security Act of 1974, as amended.
8.3 No Fractional Shares. No fractional shares of Common Stock shall be issued or delivered pursuant to the Plan or any Award. The Plan Administrator shall determine whether cash, or Awards, or other property shall be issued or paid in lieu of fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.
8.4 Indemnification of Board. In addition to such other rights or indemnifications as they may have as directors or otherwise, and to the extent allowed by applicable law, the members of the Board and the Committee shall be indemnified by the Company against the reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, action, suit or proceeding, or in connection with any appeal thereof, to which they or any of them may be a party by reason of any action taken, or failure to act, under or in connection with the Plan or any Award granted thereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such claim, action, suit, or proceeding, except in any case in relation to matters as to which it shall be adjudged in such claim, action, suit, or proceeding that such Board member is liable for negligence or misconduct in the performance of their duties; provided that within 60 days after institution of any such action, suit or Board proceeding the member involved shall offer the Company, in writing, the opportunity, at its own expense, to handle and defend the same.
8.5 Notices. Any notice, request, instruction, or other document required by the terms of this Plan shall be in writing and shall be given by personal delivery, overnight delivery, mailed by registered or certified mail, postage prepaid, with return receipt requested, or sent by electronic mail (with receipt confirmed) to the party to whom notice is to be given. If notice is given by personal delivery or overnight delivery in accordance with the provisions of this Section 8.5, such notice shall be conclusively deemed given at the time of such delivery provided a receipt is obtained from the recipient. If notice is given by mail in accordance with the provisions of this Section 8.5, such notice shall be conclusively deemed given upon receipt and delivery or refusal. If notice is given by electronic mail transmission in accordance with the provisions of this Section 8.5, such notice shall be conclusively deemed given at the time of delivery if between the hours of 9:00 a.m. and 5:00 p.m. Pacific time on a business day (“business hours”) and if not during business hours, at 9:00 a.m. on the next business day following delivery, provided a delivery confirmation is obtained by the sender.
8.6 Headings. The section headings contained in this Plan are inserted for convenience only and will not affect in any way the meaning or interpretation of this Plan.
8.7 Governing Law. THIS PLAN, AWARDS GRANTED HEREUNDER AND ACTIONS TAKEN IN CONNECTION HEREWITH SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (REGARDLESS OF THE LAW THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE DELAWARE PRINCIPLES OF CONFLICT OF LAWS).
8.8 Severability. In case any provision of this Plan shall be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired.
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The foregoing 2025 Equity Incentive Plan was duly adopted and approved by the Board of Directors on May 9, 2025 and will be submitted for approval by the shareholders of the Company at the next annual shareholders meeting.
BITMINE IMMERSION TECHNOLOGIES, INC.
/s/ Jonathan Bates
By: Jonathan Bates
Its: Chief Executive Officer
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Exhibit 5.1
 |
ATTORNEYS AT LAW |
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May 27, 2025
Board of Directors Bitmine Immersion Technologies, Inc. 10845 Griffith Peak Dr., #2 Las Vegas, Nevada 89135
Re: Registration Statement No. 333-284361 |
Michael J. FitzGerald* Eoin L. Kreditor* Lynne Bolduc Robert C. Risbrough George Vausher, LLM, CPA‡ David M. Lawrence Brook John Changala Natalie F. Foti Pfrancez C. Quijano William Allen Miller Litao Zhou Ikechukwu (Ike) Ubaka Elsie L. Secoquian David A. Kelly† William R. Mitchell† Kelly P Pfeiffer† Deborah M. Rosenthal† Maria M. Rullo† Paul J. Sievers |
Ladies and Gentlemen:
We have acted as counsel to Bitmine Immersion Technologies, Inc., a Delaware corporation (the “Company”), in connection with the proposed issuance of: (i) up to 1,875,000 shares (the “Shares”) of the Company’s common stock, $0.0001 par value (the “Common Stock”); (ii) up to 281,250 additional shares of Common Stock (the “Over-Allotment Shares”) for which the underwriters have been granted an over-allotment option; (iii) underwriter’s warrants to purchase up to a number of shares of Common Stock equal to 5% of the number of Shares sold pursuant to the Registration Statement, at a per share exercise price equal to 125% of the public offering price per share (the “Representative’s Warrants”), and (iv) all shares of Common Stock issuable upon exercise of the Representative’s Warrants (the “Warrant Shares”).
The Shares are included in a registration statement on Form S-1 under the Securities Act of 1933, as amended (the “Act”), initially filed with the Securities and Exchange Commission (the “Commission”) on January 21, 2025, as amended (Registration No. 333-284361) (the “Registration Statement”). The term “Shares” shall include any additional shares of common stock registered by the Company pursuant to Rule 462(b) under the Act in connection with the offering contemplated by the Registration Statement.
This opinion is being furnished in connection with the requirements of Item 601(b)(5) of Regulation S-K under the Act, and no opinion is expressed herein as to any matter pertaining to the contents of the Registration Statement or related prospectus, other than as expressly stated herein with respect to the issue of the Shares.
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As such counsel, we have examined such matters of fact and questions of law as we have considered appropriate for purposes of this letter. We have relied upon certificates and other assurances of officers of the Company and others as to factual matters without having independently verified such factual matters. We are opining herein as to the Delaware General Corporation Law of the State of Delaware and federal laws of the United States and we express no opinion with respect to any other laws.
Subject to the foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof, when the Securities shall have been duly registered on the books of the transfer agent and registrar therefor in the name or on behalf of the purchasers, and have been issued by the Company against payment therefor in total numbers that do not exceed the total number of securities available under the Company’s certificate of incorporation and in the circumstances contemplated by the form of underwriting agreement most recently filed as an exhibit to the Registration Statement, the issue and sale of the Securities will have been duly authorized by all necessary corporate action of the Company, and the Securities will be validly issued, fully paid and nonassessable. In rendering the foregoing opinion, we have assumed that the Company will comply with all applicable notice requirements regarding uncertificated shares provided in the Delaware General Corporation Law of the State of Delaware.
This opinion is for your benefit in connection with the Registration Statement and may be relied upon by you and by persons entitled to rely upon it pursuant to the applicable provisions of the Act. We consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to our firm in the prospectus under the heading “Legal Matters.” We further consent to the incorporation by reference of this letter and consent into any registration statement filed pursuant to Rule 462(b) with respect to the Shares. In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder.
Sincerely,
/s/ FitzGerald Kreditor Bolduc Risbrough LLP
FitzGerald Kreditor Bolduc Risbrough LLP
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Exhibit 10.17
Machine Lease Agreement
This Machine Lease Agreement ("Agreement") is made effective as of May 16, 2025 ("Effective Date"), by and between Bitmine Immersion Technologies, Inc., a Delaware corporation (“BitMine”, "Lessor") and KULR Technology Group, Inc., a Delaware corporation (“KULR”, “Lessee”). Lessor and Lessee are sometimes referred to in this Agreement individually as a “Party” and collectively as the “Parties.”
| 1. | Lease of Units: Lessor hereby agrees to lease to Lessee, and Lessee agrees to lease from Lessor, three thousand (3000) S-19 bitcoin mining machines (as identified and detailed in Exhibit A), and any related or associated hardware or software components (collectively the "Units"), which includes all Bitcoin payouts from these machines to the mining pool of the Lessee for the term of the agreement, subject to the terms and conditions set forth in this Agreement. Lessee shall provide (or cause Lessee’s third-party provider to provide) the digital wallet (“Lessee’s Digital Wallet”) to which the daily mining payouts from the Units shall be directed during the Term, net of any mining pool fees. |
| 2. | Term: The term of this Agreement shall commence effective as of May 16, 2025 at 12:01 AM Universal Time (UTC)(May 15, 2025 7:01 PM Eastern Time), and shall continue for 228 days, until midnight UTC Thursday December 31, 2025 (December 30th, 2025, 7:00PM Eastern Time)(the “Term”.) |
| 3. | Lease Payments: Lessee shall pay Lessor six lease payments- the first being one million six hundred thousand Dollars ($1,600,000) on or before Friday May 16, 2025, and the next five being three hundred twenty thousand dollars ($320,000) each due on the 15th of the month, for five consecutive months, beginning July 15, 2025. In the event payment is not received by the 20th of the month, BitMine reserves the right to redirect daily mining payouts to its own digital wallet until the amount of the missing payment(s) has been recouped, using the daily payout amount in Bitcoin and the closing US Dollar price of Bitcoin as of at midnight Universal Time Coordinated (UTC) on such date as published by Yahoo Finance. For the avoidance of doubt, in the event any representations, warranties or covenants of the Lessor are breached, Lessee shall be entitled to terminate this Agreement and to receive a refund of any and all unused lease payments at a rate of $14,035 per unused day ($3,200,000 / 228). |
| 4. | Location and Operations: The Units shall remain at the Lessor’s facility (or such other location as Lessor has designated and has all rights to designate) for the duration of the Term. Lessor shall (or have a third party – currently Soluna and BitMine), on behalf of Lessee, operate and maintain the Units throughout the Term. |
In addition, throughout the Term, Lessor shall, on behalf of Lessee, send or cause to be sent the hashing power of the Units (initially to a mining pool operated by Luxor Technology Corporation) to a mining pool mutually agreed to by Lessor and Lessee. Lessor further agrees to provide (or have a third party provide) certain operational services, necessary to facilitate the operation and management of the Units on Lessee’s behalf, as listed separately in the “Mining as a Service and Bitcoin Treasury Management Consulting Agreement”. The Lease contains the following assurances:
a. Down-Time Guarantees. Lessee assumes all risk associated with the variability of production from the Units, including but not limited to changes in the price of bitcoin, changes in the difficulty index, and or operational interruptions, provided that if operational down-time exceeds one percent during the term of the lease, the lessee will be entitled to a full credit of the days of downtime in excess of one percent, based on the bitcoin that would have otherwise been mined, and the closing price of Bitcoin as published by Yahoo Finance at midnight Universal Time Coordinated (UTC) on such date. Nevertheless, Lessor shall promptly notify Lessee of any material interruption in service or Unit failure. In addition, with respect to any minimum performance guarantees in the hosting agreement concerning the Units, the Lessee shall be entitled to any rebates or credits which are payable by the host under the hosting agreement for such down-time, provided that any rebates or credits provided by the host under the hosting agreement shall reduce the amount of the Lessor’s down-time guarantee obligation on the same day. In fulfilling its obligations under this Agreement, Lessor shall act in good faith and exercise commercially reasonable judgment to ensure uninterrupted or minimally interrupted operation of the Units.
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b. Site Visit. Lessee shall have reasonable access to perform site visits in order to inspect the Units. Lessor shall cause the hosting provider to give representatives of the Lessee reasonable access to the Units in order to verify the location of the Units, to make reasonable improvements to the air cooling systems (if acceptable by the hosting provider) and to verify the number of working Units.
| 5. | Ownership and Risk of Loss: The Units shall at all times remain the property of Lessor, and Lessee shall have no right or claim to such Units except as expressly set forth in this Agreement. The Lessee shall not have the right to obtain physical possession of the Units, and may not request the removal of the Units from the possession of the hosting firm designated by the Lessor without the prior written consent of the Lessor. The Lessor shall be responsible for any casualty loss of the Units, for insuring the Units against Loss, for any repair or maintenance costs of the Units, for any hosting fees or electricity costs of the Units, and for any taxes assessed against the Units, including ad valorem property taxes. |
Notwithstanding the foregoing, all mining awards, including Bitcoin (“Mined Proceeds”), generated, produced, or mined by the Units during the Term shall be and remain the sole property of Lessee. Lessor acknowledges and agrees that it shall not receive or be entitled to any portion of the Mined Proceeds or any proceeds derived therefrom, except to the extent otherwise provided herein. If Lessor receives any Mined Proceeds by mistake or otherwise, Lessor shall promptly transfer all such Mined Proceeds to the Lessee’s Digital Wallet.
| 6. | Warranties and Disclaimer |
| a. | Title and Ownership: Lessor represents and warrants that it owns good and marketable title to the Units, free and clear of all liens, encumbrances, security interests, or other adverse claims, except as disclosed in writing to Lessee prior to the Effective Date. Lessor further represents that it has not assigned, pledged, or otherwise transferred any interest in the Units that would conflict with or impair Lessee’s rights under this Agreement. In the event the lessor has a lien against the machines, the lessor agrees to keep segregated bitcoin collateral to repay the lien in full, at all times. | |
| b. | Due Authorization: The execution, delivery, and performance of this Agreement by each Party has been duly authorized by all necessary corporate (or equivalent) action, and no other proceedings (corporate or otherwise) on the part of the Party are necessary to authorize the execution, delivery, or performance of this Agreement. Furthermore, the execution and performance of this Agreement: (a) do not and will not violate any provision of the Party’s organizational documents, (b) do not and will not conflict with, result in a breach of, or constitute a default under any contract or agreement to which such Party is a party or by which such Party is bound, and (c) does not and will not violate or conflict with any law, regulation, court order, or other legal requirement applicable to Lessor or the Units. | |
| c. | Performance Warranty: Lessor warrants that the Units will be in working condition at the beginning of the Term, and shall be responsible to maintain the Units in such working condition throughout the Term. Notwithstanding, Lessor does not guarantee that the operation of the Units will be uninterrupted or error-free, provided that Lessor shall process any necessary repairs to the Units (or authorize the hosting firm to make any necessary repairs, if applicable) at Lessor’s expense in accordance with Section 4(a) herein in a prompt and business-like fashion. Lessor shall be liable to the Lessee in accordance with Section 4(b), should there be operation downtime in excess of one percent. | |
| d. | Disclaimer of Other Warranties: Except as expressly set forth in this Agreement, Lessor makes no warranty, express or implied, regarding the Units, including any warranty of merchantability or fitness for a particular purpose. Lessor expressly disclaims all other warranties. | |
| e. | Limitation of Liability: In no event shall either Party be liable to the other Party or any third party for any indirect, incidental, special, consequential, or punitive damages, including but not limited to lost profits or lost revenue, even if the liable Party has been advised of the possibility of such damages. Lessor’s total liability under this Agreement for any claim is limited to the total lease payments received by Lessor from Lessee for the Units involved in such claim. | |
| f. | Lessee’s Acknowledgement: Lessee acknowledges that the Units are subject to the inherent risks associated with Bitcoin mining, including but not limited to fluctuations in the hashrate, difficulty, and transaction fees. Lessee assumes all risks associated with the operation of the Units and agrees that Lessor shall not be liable for any losses incurred as a result of these risks. Lessee’s total liability under this Agreement for any claim is limited to 30% of the BTC produced by the Units involved in such claim. |
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| 7. | Indemnity: Each Party agrees to indemnify, defend, and hold harmless the other Party’s respective affiliates, officers, directors, employees, and agents from and against any losses, damages, liabilities, claims, actions, costs, including reasonable attorneys' fees, arising from the use of the Units, breach of any covenant, representation or warranty in this Agreement, a breach of the existing hosting agreement or violation of law or third-party rights, in each case to the extent caused by the actions or inactions of the indemnitor. |
| 8. | Miscellaneous: This Agreement constitutes the entire agreement between the parties pertaining to its subject matter and supersedes all prior agreements, understandings, negotiations, and discussions, whether oral or written, of the parties. Any amendments to this Agreement must be in writing and signed by both parties. |
| 9. | Governing Law: This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware. |
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
Lessor: BitMine Immersion Technologies Inc.
By: /s/ Jonathan Bates
Name: Jonathan Bates Title: CEO
Date: As of May 16, 2025
Lessee: KULR Technology Group, Inc.
By: /s/ Michael Mo
Name: Michael Mo Title: CEO
Date: As of May 16, 2025
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Exhibit A
Nameplate Hashrate: 270,875 TH on 2750 Bitmain S-19j Pro ASIC Mining Computers; 250 Bitmain S-19 various types, ranging from 95 TH to 110 TH, with the combination equaling at least 98.5 TH per machine, the same hashing power as the 2750.
Target Hashrate: 99% or greater uptime at 295,500 TH for 228 consecutive days. A credit will be issued to the Lessee in the manner described in the agreement, in the event the machines have downtime of greater than 1% in aggregate, for the entirety of the 228-day lease.
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Exhibit 10.18
CONSULTING AND SERVICES AGREEMENT
THIS CONSULTING AND SERVICES AGREEMENT (the “Agreement”), made and entered into as of May 16, 2025 (hereinafter referred to as the “Agreement Date”), by and between KULR Technologies, Inc., a Delaware corporation (“Client”), and Bitmine Immersion Technologies, Inc., a Delaware corporation (“Consultant”).
WHEREAS, Client and Consultant are entering into this Agreement to memorialize various services (collectively, the “Services”) that the Consultant will provide to the Client that are related to the mining and treasury management industries, including services (for example) related to and that are not otherwise enumerated under a Machine Lease Agreement (the “Lease”) relating to Consultant’s lease of 3,000 ASIC miners to the Client that the Consultant and the Client have or are expected to enter into on or around the Agreement Date;
NOW, THEREFORE, for and in consideration of the covenants and agreements hereinafter set forth, the parties hereby covenant and agree as follows:
1. Mining Consulting Services. The Consultant shall perform the following services relating to the Lease and other bitcoin mining activities of the Client:
| a) | Performing, or causing to be performed, all commercially reasonable and necessary services required for the 3,000 leased miners to operate consistent with the performance guidelines or guarantee in the Lease, |
| b) | Managing the relationship with hosting providers of the leased equipment (Soluna and BitMine), as well as other hosting providers of Client’s other bitcoin mining equipment; |
| c) | Managing mining pool providers of the leased equipment (Luxor and BitMine), as well as other pool providers of Client’s other bitcoin mining equipment, |
| d) | Coordinating on-site and off-site miner repairs as necessary, |
| e) | Dashboard monitoring of miners (miner and network error troubleshooting), |
| f) | Market analysis, including monitoring miner market pricing, advising on miner purchases/sales, etc., |
| g) | Shipping logistics importing purchased miners/exporting sold miners, |
2. Additional Treasury Management Services. The Consultant shall perform the following services relating to the bitcoin treasury activities of the Client:
| a) | Security & Custody Solutions, |
| b) | Regulatory & Compliance Expertise based on Consultant’s experience, including GAAP revenue guidance and disclosure obligations, |
| c) | Risk Management & Hedging Strategies, |
| d) | Techniques and strategies to maximize bitcoin exposure as a public company, |
| e) | Customized treasury solutions, and |
| f) | Proactive volatility management. |
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3. Compensation for Services. For the services described in Paragraphs 1 and 2 herein, Client shall pay the Consultant six consulting fee payments - the first being four hundred thousand Dollars ($4000,000) on or before Friday May 16th, 2025, and the next five (5) being eighty thousand dollars ($80,000) each due on the 15th of the month, for five consecutive months, beginning July 15th , 2025.
4. Devotion of Time by Consultant. It is anticipated the Consultant will spend sufficient working time to fulfill its obligations under this Agreement. The particular amount of time may vary from day to day or week to week. The Consultant shall not be entitled to any additional compensation except to the extent the Client agrees to pay additional compensation in advance on a case-by-case basis. The Consultant shall be entitled to perform all services remotely from its normal business location, and shall not be required to travel to any location unless the Client agrees to pay reasonable additional compensation and travel expenses.
5. Independent Consultant. It is understood and agreed that Consultant is retained only for the purposes and to the extent set forth in this Agreement, that the relationship of the Consultant and any employees of Consultant to Client during the term of this Agreement shall be that of an independent Consultant, and that the Consultant or employees shall have no authority to contract for or bind Client except to the extent specifically provided herein. Except to the extent agreed otherwise by Client in writing, the Consultant shall be solely responsible for all costs incurred by the Consultant to perform its services hereunder, including any costs of employees or independent Consultants hired by the Consultant, and any sales, entertainment, travel or office expenses of the Consultant.
6. Term. This Agreement shall be for a fixed term of May 16, 2025 to May 15, 2026. Neither party may terminate this Agreement without cause without the consent of the other party. The date on which this Agreement terminates, either for cause or without cause as specified below shall be the “Termination Date.”
7. Termination With Cause. Either party may terminate this Agreement (i) in the event of a default which involves the nonpayment of any amount due hereunder by the due date thereof, if such amount remains unpaid five (5) days following written notice of nonpayment to the nonpaying party; (ii) a failure by Consultant to provide the Services, provided that the Client has sent Consultant a written notice specifying in detail the Services that are not being provided and Consultant has failed or refused to cure the deficiency, or provided reasonable assurances that the deficiency will be cured promptly, within thirty (30) days of the date of such written notice; or (iii) immediately if the other party makes any assignment of assets or business for the benefit of creditors, or a trustee or receiver is appointed to conduct its business or affairs, or it is adjudged in any legal proceeding to be in either voluntary or involuntary bankruptcy.
8. Effect of Termination. In the event this Agreement is terminated without cause or for cause by either the Consultant or the client, the Consultant shall have no obligation to the Client hereunder. In the event this Agreement is terminated by the Consultant without cause or by the Client for cause, the Client shall be entitled to a prorated reimbursement of the remaining fees left on the 365-day agreement, except that in no event shall the prorated reimbursement exceed fifty percent (50%) of the consultant fees actually paid hereunder. If either party terminates for any other reason, then Consultant shall not be obligated to refund any portion of the fees paid to the client.
9. Assignment. This Agreement may not be assigned by either party without the written consent of the other party; provided, however, Client may assign this Agreement to party acquiring substantially all of its assets; and further provided, however, Consultant may assign this Agreement to a subsidiary corporation created and wholly-owned by Consultant for the purpose of carrying out Consultant’s obligations hereunder.
10. No Conflicting Obligations. Consultant represents and warrants that his engagement as an independent consultant hereunder will not constitute a breach of any non-competition agreement, non- solicitation, non-disclosure agreement, consulting agreement, employment agreement, shareholder agreement, or any other contract, agreement or obligation of the Consultant to any other party of any nature whatsoever, oral or written. Consultant hereby agrees to indemnify and hold the Client harmless, against any claim or liability arising out of a breach of such representation and warranty, including any attorney’s fees incurred by the Client in connection with such a breach.
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11. Limitation of Liability. Except as otherwise expressly provided in this Agreement, Consultant disclaims all warranties, express or implied, statutory or otherwise, including, without limitation, any implied warranties of merchantability or fitness for a particular purpose. Client agrees that Consultant shall not be liable to the Client for any mistakes, errors, omissions, malpractice, negligence, gross negligence or recklessness, as well as for any consequential, incidental, special or indirect damages (including, but not limited to, loss of profits, revenues, goodwill, restitution or disgorgement claims, fines, penalties, customer claims or other intangible items) arising from or related to the performance of Consultant under this Agreement, even if Consultant has been advised of the possibility of such damages or losses. Consultant is not responsible for damages resulting from improper or incomplete use of Consultant’s products and services. With respect to any other damages, Consultant’s cumulative liability to Client for all claims relating to the Services and/or this Agreement shall in no event exceed the greater of the sum of all fees paid to Consultant (less any fees refunded to Client pursuant to the provisions hereof). Notwithstanding anything herein to the contrary, any damages suffered by Client relating to non-performance or downtime of the ASIC miners under the Lease shall be limited to the amount payable under the “down-time guarantee” set forth in the Lease.
12. Non-Solicitation. Each party agrees that during the Term of this Agreement and for a period of one (1) year following the termination of this Agreement, such party shall not solicit, retain, hire, offer to hire, refer, entice anyway or in any manner persuade or attempt to persuade any officer, director, employee or independent contractor (collectively, an “Employee”) of the other party to discontinue his or her relationship with the other party; provided that the foregoing limitation shall not apply if the other party obtains written consent by an undersigned officer of the other party. Each party agrees that a party that violates this paragraph shall be obligated to pay the non-breaching party liquidated damages in an amount equal to the annual compensation paid or payable by the breaching party to the Employee of the non-breaching party that is the subject of the breach. Each Party acknowledges and agrees, after taking into account the terms of this Agreement and all relevant circumstances at the date hereof, that the liquidated damages payable under the foregoing sentence represents a reasonable and genuine pre-estimate of the damages which would be suffered by a party in the event of a breach of this paragraph and does not constitute a penalty. The parties shall also have the right to request that affiliates of and key vendors to the other party agree to the same restrictions that are imposed on the party by this paragraph as a condition to continuing performance under this Agreement.
13. Governing Law; Jurisdiction; Right to Attorney’s Fees. This Agreement shall be governed by the laws of the State of Nevada. The parties agree that jurisdiction and venue of any action to interpret or enforce this Agreement shall be in the courts of Clark County, Nevada, or the federal district court with venue over disputes in said county. Either party shall be entitled to recover its attorney’s fees and costs from the other party in the event it utilizes the services of an attorney to enforce any provision of this Agreement or to collect any amounts due hereunder, and it is the prevailing party.
14. Severability. If any term or provision of this Agreement, or the application thereof to any person or circumstance, shall be determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is determined to be invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforced to the fullest extent permitted by law.
15. Counterparts. This Agreement and any amendments hereto may be executed in any number of counterparts, either by the parties hereto and their successors, or their duly authorized attorneys in fact, with the same effect as if all parties had signed the same document. All counterparts shall be construed as and shall constitute one and the same instrument. Delivery of an executed counterpart of the signature page to this Agreement by telecopier or by email with a PDF attachment shall be effective as delivery of a manually executed counterpart of this Agreement.
16. Force Majeure. Neither party shall be liable for any delay or failure to perform per the terms of this Agreement caused by Acts of God or other causes beyond the parties’ control and without fault or negligence. In such event, either party may suspend this Agreement in whole or in part for the duration of the delaying cause. Both parties shall resume performance under this Agreement immediately after the delaying cause ceases and the initial term of this Agreement shall be extended for a period of time equivalent to the length of time the excused delay occurred.
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17. Entire Agreement; No Waivers; Modifications. This Agreement supersedes all prior discussions and agreements between the Client and Consultant concerning the transactions contemplated herein, and all other matters contained herein, and constitutes the sole and entire agreement between the Client and Consultant with respect hereto. No failure or delay on the part of any party in exercising any right, power, privilege or remedy arising hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power, privilege or remedy preclude any other or future exercise thereof or the exercise of any other right, power, privilege or remedy. No modification, amendment or waiver of any provision of this Agreement, nor any consent to any departure by any party from the terms hereof, shall be effective unless the same be in writing and signed by all parties hereto.
18. Binding Arbitration. If a dispute or disagreement arising out of, or relating to, the formation, interpretation, performance or breach of this Agreement exists between the parties (a “Dispute”), then either party may submit the reasons for its position, in writing, to the other party and such other party shall submit the reasons for its position, in writing, to the first party and to then enter into good faith negotiations to attempt to resolve the Dispute. If the Dispute cannot be settled by good faith negotiation between the parties within thirty (30) days after the last written submission is due, then either may require that the Dispute shall be submitted to and settled by arbitration by a panel of three arbitrators in accordance with the Commercial Arbitration Rules of the American Arbitration Association then in effect, except to the extent modified herein. Judgment on the award rendered may be entered in any court having jurisdiction thereof. The arbitrators shall not be empowered to award punitive or exemplary damages. The parties shall, within thirty (30) days of receipt of notice that the dispute has been submitted to arbitration, appoint one arbitrator if the amount in controversy is $100,000 or less and three arbitrators if the amount in controversy is greater than $100,000. If the arbitrators cannot be selected by unanimous agreement of the parties, said arbitrators shall be appointed by the American Arbitration Association. Unless otherwise determined by the arbitrators, the parties shall bear their respective costs incurred in connection with the procedures described in this paragraph. The filing fee
and pre-hearing fees and expenses of the arbitrator(s) shall be borne by the party initiating the arbitration proceeding. Final responsibility for the filing fee and all fees and expenses of the arbitrator(s) shall be assessed against the losing party in the arbitration, or if there is no clear losing party, in such manner that the arbitrator(s) determine is just and equitable under the circumstances. The arbitrators shall be required to make a decision within sixty (60) days of the appointment of the arbitrators. Any such arbitration proceeding shall take place in Clark County, Nevada. This provision shall not apply to any action for injunctive or other equitable relief that either party may bring against the other. Any such action must be brought in accordance with paragraph 13 of this Agreement.
IN WITNESS WHEREOF the parties have executed this Agreement as of the Agreement Date.
Client:
KULR Technologies, Inc. |
Consultant:
Bitmine Immersion Technologies, Inc. | |||
| /s/ Michael Mo | /s/ Jonathan Bates | |||
| By: | Michael Mo | By: | Jonathan Bates | |
| Its: | CEO | Its: | CEO- BitMine Immersion Technologies, Inc. | |
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Exhibit 10.19
AGREEMENT OF AMENDMENT OF LINE OF CREDIT AGREEMENT
BETWEEN BITMINE IMMERSION TECHNOLOGIES, INC. AND
INNOVATIVE DIGITAL INVESTORS EMERGING TECHNOLOGY, L.P.
THIS AGREEMENT (the “Amendment”) is made and entered into by and between Bitmine Immersion Technologies, Inc., a Delaware corporation (“Bitmine”), and Innovative Digital Investors Emerging Technology, L.P., a Delaware limited partnership (“IDI”) on May 21, 2025. Bitmine and IDI may also be referred to as a “Party” and collectively as the “Parties.”
WHEREAS, on October 19, 2022, Bitmine and IDI entered into a Line of Credit Agreement, which was amended on May 13, 2023 and again on November 4, 2024 (the “November 4, 2024 Amendment” and all collectively, the “LOC Agreement”); and
WHEREAS, the Parties desire to further amend the LOC Agreement to retroactively waive previously agreed upon monthly penalties and any additional accrued interest which would have accrued as a result of the addition of these monthly penalties, and to extend the maturity date of the line of credit (“LOC”) to August 15, 2025.
NOW, THEREFORE, in consideration for the mutual covenants and agreements set forth herein and for other good and valuable consideration set forth herein, the receipt and sufficiency of which are hereby acknowledged, the undersigned agrees as follows:
1. Retroactive waiver of all monthly penalties and any additional interest which would have accrued as a result of the monthly penalties. IDI hereby agrees to waive all monthly penalties listed in the November 4, 2024 Amendment, as well as any and all additional interest that would have been added to the LOC balance as a result of these penalties being added to the LOC balance. This waiver is effective retroactively to November 3, 2024, such that the penalty and any additional interest as a result of the penalty were void and of no effect from inception.
2. Extension of Maturity Date. The Parties hereby agree that the maturity date of the LOC will now be August 15, 2025, with interest continuing to accrue at 12%. BitMine hereby agrees to make a payment of $150,000 toward the LOC balance on June 6, 2025, in the event that the pending equity transaction being contemplated by ThinkEquity has not closed on or before that date.
3. Existing LOC Agreement. Nothing herein shall alter, amend or modify the LOC Agreement except to the extent specifically addressed herein. All terms used herein shall have the same meaning that they have in the LOC Agreement unless defined otherwise herein.
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IN WITNESS WHEREOF, the Parties have caused this Amendment to be entered into as of the date first written above.
Bitmine:
Bitmine Immersion Technologies, Inc., a Delaware corporation
/s/ Raymond Mow__________________________________
By: Raymond Mow, Chief Financial Officer
IDI:
Innovative Digital Investors Emerging Technology, LP, a Delaware limited partnership
By: Innovative Digital Investors, LLC, its general partner
/s/ Jonathan Bates__________________________________
By: Jonathan Bates, Managing Member
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Exhibit 10.20
MASTER HASHRATE PURCHASE AND SALE AGREEMENT
dated as of 2025-05-22
between BitMine Immersion Technologies, Inc. (Purchaser) and Luxor Technology Corporation (Seller)
have entered and/or anticipate entering into one or more transactions (each a “Transaction”) that are or will be governed by this Master Hashrate Purchase and Sale Agreement (the “Master Agreement”). Each Transaction will be evidenced by an agreement executed between Seller and Purchaser in the form attached hereto as Exhibit A (each a “Confirmation”). This Master Agreement and each Confirmation are collectively referred to as the “Agreement”. Seller and Purchaser are each referred to in this Confirmation individually as a “Party” and collectively as the “Parties.”
Accordingly, Seller and Purchaser agree as follows:
| 1. | Definitions |
| 1. | “Bitcoin Hashprice” is an amount, expressed in units of Bitcoin per Hashrate per day, equal to the expected amount of Bitcoin that would be generated in one day through Bitcoin Mining at a given Hashrate, taking into account network difficulty, the Bitcoin block subsidy and transaction fees. |
| 2. | “Bitcoin Mining” means the process of generating new Bitcoin by validating and adding new transactions to the Bitcoin blockchain, through the competitive process of solving mathematically intensive cryptographic problems. |
| 3. | “Calculation Agent” has the meaning set forth in Section 6. |
| 4. | “Confirmation” has the meaning specified in the preamble. |
| 5. | “Daily Delivery Quota” means, for any day, the Daily Hashrate multiplied by the Luxor Bitcoin Hashprice Index Daily Reference Rate for such day. |
| 6. | “Daily Hashrate” means the amount of Petahash the Seller is obligated to deliver to the Purchaser on a daily basis pursuant to a Confirmation. |
| 7. | “Day” means the 24-hour period from 0:00 UTC to 23:59:59 UTC. |
| 8. | “Defaulting Party” has the meaning set forth in Section 11. |
| 9. | “Delivery Period” means, with respect to each Transaction, the term of the Transaction, beginning on the Start Date and ending on the earlier of (i) the End Date and (ii) the Early Termination Date (if applicable). |
| 10. | “Delivery Point” means the point at which the Hashrate will be delivered and received, as specified in the Transaction. Unless otherwise specified in a Confirmation, the Delivery Point shall be the Sub-account |
| 11. | “Delivery Shortfall” means, for any day of determination, the Seller fails to deliver an amount of Hashrate to Purchaser with associated bitcoin amount equivalent to the Daily Delivery Quota. The Delivery Shortfall is defined as the difference between the Daily Delivery Quota and what the Seller delivers to the Purchaser. |
| 12. | “Duration” means, the quantity of Days, from Start Date through End Date, for each Transaction. |
| 13. | “Early Termination Date” has the meaning set forth in Section 12. |
| 14. | “End Date” means, for a Transaction month, the last day that a Transaction occurs during such month. |
| 15. | “Equitable Defenses” means any bankruptcy, insolvency, reorganization and other laws affecting creditors’ rights generally, and with regard to equitable remedies, the discretion of the court before which proceedings to obtain same may be pending. |
| 16. | “Event of Default” has the meaning ascribed to it in Section 11. |
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| 17. | “Hashprice” the expected value of 1 PH/s of hashing power per day, expressed in increments of 0.000000001 BTC. |
| 18. | “Hashrate” means a measure of the computational power on a Bitcoin blockchain network as determined by the number of guesses per second. | |
| 19. | “Initial Payment Amount” means, for each Transaction, the amount specified in the Confirmation for such Transaction, which amount shall be equal to the Transaction Value for such Transaction. |
| 20. | “Luxor Bitcoin Hashprice Index Daily Reference Rate” means, for any Day, an amount, expressed in units of Bitcoin per Hashrate per Day, that is calculated by measuring the Bitcoin Hashprice every 15 seconds during such Day, averaging such measurements, and multiplying such average by 86,400. |
| 21. | “Luxor Pool Account” means a Bitcoin mining pool account established with Purchaser or Seller. |
| 22. | “Petahash” means the unit of computing power equal to 1,000 terahash. |
| 23. | “Regulatory Event” has the meaning set forth in Section 22. |
| 24. | “Representatives” means a Party’s employees, accountants, auditors, advisors, consultants, lenders, investors, and potential investors. |
| 25. | “Settlement Time” has the meaning set forth in Section 3. |
| 26. | “Start Date” means, for a specific month, the first day that a Transaction occurs during such month. |
| 27. | “Terahash” per second (TH/s) is a unit used to determine the rate of data processing power and it is equivalent to 1 trillion hashes per second. |
| 28. | “Termination Payment” means an amount that is owed by Seller to Purchaser upon the early termination of a Transaction, which amount shall equal A x (B / C), where: A = the Transaction Value applicable to such Transaction; B = the number of Days remaining in the Delivery Period of such Transaction on the Early Termination Date of the Transaction; and C = the total number of Days in the Delivery Period of such Transaction. |
| 29. | “Terminated Transaction” has the meaning set forth in Section 12. |
| 30. | “Transaction” has the meaning specified in the preamble. |
| 31. | “Transaction Value” means, for each Transaction, the amount of Bitcoin set forth on the Confirmation for such Transaction. |
| 32. | “Units” means, for each Confirmation, the product of the Daily Hashrate applicable to such Confirmation multiplied by the total of days in the term of such Confirmation. |
| 33. | “UTC” means Coordinated Universal Time. |
| 2. | Hashrate Purchase and Sale. With respect to each Transaction, Seller shall sell and deliver, or cause to be delivered, and Purchaser shall purchase and receive, or cause to be received, on each Day during the Delivery Period, an amount of Hashrate such that the Daily Delivered Bitcoin equals or exceeds the Daily Delivery Quota. In exchange for Seller’s Delivery of the Hashrate, Purchaser shall pay Seller the Transaction Value and make the payments and transfers described in the Confirmation below, subject to the conditions and requirements in the Confirmation. Seller shall be responsible for any costs or charges imposed on or associated with the Hashrate or its delivery of the Hashrate up to the Delivery Point. Purchaser shall be responsible for any costs or charges imposed on or associated with the Hashrate or its receipt at and from the Delivery Point. Seller shall arrange and be responsible for transmitting the Hashrate to the Delivery Point. Purchaser shall arrange and be responsible for receiving the Hashrate at the Delivery Point. |
| 3. | Payment. The Purchaser shall pay the Seller the Initial Payment Amount for Hashrate specified in the Confirmation in accordance with the payment terms specified in such Confirmation. Purchaser shall pay the Transaction Value by 4:00 PM New York time on the applicable Day (the “Settlement Time”). |
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| 4. | Monitoring and Audit. The Parties agree to monitor the Hashrate delivery during the Delivery Period. Seller shall provide Purchaser periodic updates on the Hashrate delivery and any other relevant performance metrics as mutually agreed upon by the Parties. Each Party has the right, at its sole expense and during normal working hours, to examine the records of the other Party to the extent reasonably necessary to verify the accuracy of any statement, charge or computation made pursuant to this Master Agreement. |
| 5. | Governmental Charges. |
| 1. | Cooperation. Each Party shall use reasonable efforts to implement the provisions of and to administer this Master Agreement in accordance with the intent of the parties to minimize all taxes, so long as neither Party is materially adversely affected by such efforts. |
| 2. | Governmental Charges . Seller shall pay or cause to be paid all taxes imposed by any government authority (“Governmental Charges”) on or with respect to the Hashrate or a Transaction arising prior to the Delivery Point. Purchaser shall pay or cause to be paid all Governmental Charges on or with respect to the Hashrate or a Transaction at and from the Delivery Point (other than ad valorem, franchise or income taxes which are related to the sale of the Hashrate and are, therefore, the responsibility of the Seller). In the event Seller is required by law or regulation to remit or pay Governmental Charges which are Purchaser’s responsibility hereunder, Purchaser shall promptly reimburse Seller for such Governmental Charges. If Purchaser is required by law or regulation to remit or pay Governmental Charges which are Seller’s responsibility hereunder, Purchaser may deduct the amount of any such Governmental Charges from the sums due to Seller. Nothing shall obligate or cause a Party to pay or be liable to pay any Governmental Charges for which it is exempt under the law.] |
| 6. | Calculation Agent. All calculations with respect to the Transactions under this Master Agreement shall be performed by the Calculation Agent. The “Calculation Agent” means Seller unless (i) a different person is specified as the Calculation Agent in the Confirmation for the relevant Transaction or (ii) Seller is a Defaulting Party, in which case Purchaser or a reputable institution appointed by Purchaser shall be the Calculation Agent. All calculations and determinations by the Calculation Agent shall be made in good faith and in a commercially reasonable manner. If one Party disputes a particular determination or calculation made by the Calculation Agent, each Party agrees to be bound by the determinations and calculations of a leading, independent institution that is not an affiliate of either Party, selected by agreement between the parties within one Business Day of such disagreement (the “Substitute Calculation Agent”), whose fees and expenses shall be met equally by both parties. If the Parties are unable to agree on a Substitute Calculation Agent, each of the Parties shall elect an independent institution and such two dealers shall agree on a third institution, who shall be deemed to be the Substitute Calculation Agent. |
| 7. | Representations. On the Effective Date and the date of entering into each Transaction, each Party represents and warrants to the other Party that: |
| 1. | it is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation; |
| 2. | it has all regulatory authorizations necessary for it to legally perform its obligations under this Master Agreement and each Transaction; |
| 3. | the execution, delivery and performance of this Master Agreement and each Transaction are within its powers, have been duly authorized by all necessary action and do not violate any of the terms and conditions in its governing documents, any contracts to which it is a party or any law, rule, regulation, order or the like applicable to it; |
| 4. | this Master Agreement, each Transaction, and each other document executed and delivered in accordance with this Master Agreement constitutes its legally valid and binding obligation enforceable against it in accordance with its terms, subject to any Equitable Defenses; |
| 5. | it is not Bankrupt and there are no proceedings pending or being contemplated by it or, to its knowledge, threatened against it which would result in it being or becoming Bankrupt; |
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| 6. | there is not pending or, to its knowledge, threatened against it or any of its Affiliates any legal proceedings that could materially adversely affect its ability to perform its obligations under this Master Agreement and each Transaction; |
| 7. | no Event of Default with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Master Agreement and each Transaction; |
| 8. | it is acting for its own account, has made its own independent decision to enter into this Master Agreement and each Transaction and as to whether this Master Agreement and each such Transaction is appropriate or proper for it based upon its own judgment, is not relying upon the advice or recommendations of the other Party in so doing, and is capable of assessing the merits of and understanding, and understands and accepts, the terms, conditions and risks of this Master Agreement and each Transaction; and | |
| 9. | the material economic terms of each Transaction are subject to individual negotiation by the Parties. |
| 8. | Title and Risk of Loss . Title to and risk of loss related to the Hashrate shall transfer from Seller to Purchaser at the Delivery Point. Seller warrants that it will deliver to Purchaser the Daily Hashrate free and clear of all liens, security interests, claims and encumbrances or any interest therein or thereto by any person arising prior to the Delivery Point. Each Party warrants that any Bitcoin that it Transfers to the other Party is free and clear of all liens, security interests, claims and encumbrances or any interest therein or thereto by any person. |
| 9. | Limitation of Liability. EXCEPT AS SET FORTH HEREIN, THERE IS NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND ANY AND ALL IMPLIED WARRANTIES ARE DISCLAIMED. THE PARTIES CONFIRM THAT THE EXPRESS REMEDIES AND MEASURES OF DAMAGES PROVIDED IN THIS AGREEMENT SATISFY THE ESSENTIAL PURPOSES HEREOF. FOR BREACH OF ANY PROVISION FOR WHICH AN EXPRESS REMEDY OR MEASURE OF DAMAGES IS PROVIDED, SUCH EXPRESS REMEDY OR MEASURE OF DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY, THE OBLIGOR’S LIABILITY SHALL BE LIMITED AS SET FORTH IN SUCH PROVISION AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. IF NO REMEDY OR MEASURE OF DAMAGES IS EXPRESSLY PROVIDED HEREIN OR IN A TRANSACTION, THE OBLIGOR’S LIABILITY SHALL BE LIMITED TO DIRECT ACTUAL DAMAGES ONLY, SUCH DIRECT ACTUAL DAMAGES SHALL BE THE SOLE AND EXCLUSIVE REMEDY AND ALL OTHER REMEDIES OR DAMAGES AT LAW OR IN EQUITY ARE WAIVED. UNLESS EXPRESSLY HEREIN PROVIDED, NEITHER PARTY SHALL BE LIABLE FOR CONSEQUENTIAL, INCIDENTAL, PUNITIVE, EXEMPLARY OR INDIRECT DAMAGES, LOST PROFITS OR OTHER BUSINESS INTERRUPTION DAMAGES, BY STATUTE, IN TORT OR CONTRACT, UNDER ANY INDEMNITY PROVISION OR OTHERWISE. IT IS THE INTENT OF THE PARTIES THAT THE LIMITATIONS HEREIN IMPOSED ON REMEDIES AND THE MEASURE OF DAMAGES BE WITHOUT REGARD TO THE CAUSE OR CAUSES RELATED THERETO, INCLUDING THE NEGLIGENCE OF ANY PARTY, WHETHER SUCH NEGLIGENCE BE SOLE, JOINT OR CONCURRENT, OR ACTIVE OR PASSIVE. TO THE EXTENT ANY DAMAGES REQUIRED TO BE PAID HEREUNDER ARE LIQUIDATED, THE PARTIES ACKNOWLEDGE THAT THE DAMAGES ARE DIFFICULT OR IMPOSSIBLE TO DETERMINE, OR OTHERWISE OBTAINING AN ADEQUATE REMEDY IS INCONVENIENT AND THE DAMAGES CALCULATED HEREUNDER CONSTITUTE A REASONABLE APPROXIMATION OF THE HARM OR LOSS. |
| 10. | Indemnification. In addition and without prejudice to any other right or remedy which either Party may have (whether at law or otherwise), each Party (the “Indemnifying Party”) shall defend, indemnify and hold harmless the other Party, its directors, officers, employees, and agents, from and against all claims, demands, proceedings, suits, and actions and all liabilities, expenses, reasonable attorney’s fees (including fees and costs incurred in enforcing this right to indemnification), and all costs in connection therewith resulting from the Indemnifying Party’s gross negligence or willful misconduct. Each Party shall indemnify, defend and hold harmless the other Party against any Governmental Charges for which such Party is responsible. |
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| 11. | Events of Default. An “Event of Default” shall mean, with respect to a Party (a “Defaulting Party”), the occurrence of any of the following: |
| 1. | With respect to Seller, the occurrence of a Delivery Shortfall where such Delivery Shortfall is not excused by Purchaser’s failure to perform and Seller fails to cure the Delivery Shortfall within 48 hours of the Settlement Time. |
| 2. | With respect to Purchaser, the failure to pay the Initial Payment Amount within 24 hours of the Settlement Time; | |
| 3. | any representation or warranty made by such Party herein is false or misleading in any material respect when made or when deemed made or repeated; | |
| 4. | the failure to perform any material covenant or obligation set forth in this Master Agreement if such failure is not remedied within three (3) business days after written notice; |
| 5. | such Party becomes Bankrupt; or | |
| 6. | such Party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all of its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer, the resulting, surviving or transferee entity fails to assume all the obligations of such Party under this Master Agreement to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other Party. |
| 12. | Remedies Upon an Event of Default. |
| 1. | Declaration of an Early Termination Date and Calculation of Net Termination Payment . If an Event of Default with respect to a Defaulting Party shall have occurred and be continuing, the other Party (the “Non- Defaulting Party”) shall have the right (i) to designate a day, no earlier than the Day such notice is effective and no later than three (3) Days after such notice is effective, as an early termination date (“Early Termination Date”) to accelerate all amounts owing between the Parties and to liquidate and terminate all, but not less than all, Transactions (each referred to as a “Terminated Transaction”) between the Parties, (ii) withhold any payments due to the Defaulting Party under this Master Agreement and (iii) suspend performance. The Non-Defaulting Party shall act as the Calculation Agent and calculate the Termination Payment for each such Terminated Transaction as of the Early Termination Date and the Net Termination Payment, as further set forth below. |
| 2. | Net Termination Payment . If an Event of Default has occurred and the Non-Defaulting Party has declared an Early Termination Date, the Non-Defaulting Party shall calculate the “Net Termination Payment”, which is equal to: (i) the sum of (x) all Termination Payments that are due to Purchaser, plus (y) any unpaid Net Excess/Shortfall Amount that is due to Purchaser, plus (z) all other amounts that may be payable to Purchaser pursuant to the Master Agreement; minus (ii) the sum of (x) all unsatisfied Initial Payment Amounts, plus (y) all other amounts that may be payable to Seller pursuant to the Master Agreement. |
| 3. | Notice of Net Termination Payment . As soon as practicable after a liquidation, notice shall be given by the Non-Defaulting Party to the Defaulting Party of the amount of the Net Termination Payment and whether the Net Termination Payment is due to or due from the Non-Defaulting Party. The notice shall include a written statement explaining in reasonable detail the calculation of such amount. The Net Termination Payment shall be made by the Party that owes it within two (2) Business Days after such notice is effective. |
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| 4. | Disputes With Respect to Net Termination Payment . If the Defaulting Party disputes the Non-Defaulting Party’s calculation of the Net Termination Payment, in whole or in part, the Defaulting Party shall, within two (2) Business Days of receipt of Non-Defaulting Party’s calculation of the Net Termination Payment, provide to the Non-Defaulting Party a detailed written explanation of the basis for such dispute; provided, however, that if the Net Termination Payment is due from the Defaulting Party, the Defaulting Party shall first Transfer Bitcoin to the Non-Defaulting Party in an amount equal to the undisputed portion of the Net Termination Payment. |
| 5. | Satisfaction of the Net Termination Payment. If Seller owes the Net Termination Payment to Purchaser, such Net Termination Payment shall be satisfied (i) first, by (x) Purchaser assuming possession of any Collateral remaining and/or (y) if Purchaser is the Non-Defaulting Party, Purchaser setting off any amounts owed to Seller pursuant to subsection below and (ii) second, by Seller separately paying the remainder (if any) of the Net Termination Amount to Purchaser. |
| 6. | Closeout Setoffs . After calculation of a Net Termination Payment in accordance with the above, if the Defaulting Party would be owed the Net Termination Payment, the Non-Defaulting Party shall be entitled, at its option and in its discretion, to set off against such Net Termination Payment any amounts due and owing by the Defaulting Party to the Non-Defaulting Party under any other agreements, instruments or undertakings between the Defaulting Party and the Non-Defaulting Party. The remedy provided for in the previous sentence shall be without prejudice and in addition to any right of setoff, combination of accounts, lien or other right to which any Party is at any time otherwise entitled (whether by operation of law, contract or otherwise). |
| 7. | Suspension of Performance . Notwithstanding any other provision of this Master Agreement, if an Event of Default shall have occurred and be continuing, the Non-Defaulting Party, upon written notice to the Defaulting Party, shall have the right (i) to suspend performance under any or all Transactions; provided, |
however, in no event shall any such suspension continue for longer than three (3) Days unless an Early Termination Date shall have been declared and notice thereof pursuant to Section 12 given, and (ii) to the extent an Event of Default shall have occurred and be continuing to exercise any remedy available at law or in equity.
| 13. | Term and Termination. The term of this Master Agreement shall commence on the Effective Date and shall remain in effect until terminated by either Party upon (thirty) 30 days’ prior written notice; provided, however, that neither Party may terminate this Master Agreement during the Delivery Period of any Transaction and no termination of this Master Agreement shall affect or excuse the performance of either Party under any provision of this Master Agreement that by its terms survives any such termination and, provided further, that this Master Agreement and any other documents executed and delivered hereunder shall remain in effect with respect to the Transaction(s) entered into prior to the effective date of such termination until both Parties have fulfilled all of their obligations with respect to such Transaction(s), or such Transaction(s) that have been terminated under Section 12 of this Master Agreement. |
| 14. | Confidentiality. This Master Agreement, all Transactions subject to this Master Agreement, each Confirmation, all communications relating to any of the foregoing, and any and all other information provided by a Party or its Representative to the other Party or its Representative (collectively, “Confidential Information”) shall be kept in strict confidence and shall not be disclosed without the express written consent of the other Party. Information prohibited from disclosure by this Section shall exclude information that (i) becomes public knowledge through no fault of the receiving Party or its Representatives, (ii) was already in the possession of the disclosing Party and not subject to an obligation of confidentiality, or (iii) was independently acquired or developed by the receiving Party without violating any of the confidentiality obligations hereunder. Notwithstanding the foregoing, Confidential Information may be disclosed (i) to a Party’s affiliates (it being understood that the persons to whom such disclosure is made will be informed of the confidential nature of such Confidential Information and instructed to keep such Confidential Information confidential); (ii) to the extent required or requested by any regulatory authority purporting to have jurisdiction over such person or its affiliates; (iii) to the extent required by applicable laws or rules or by any subpoena or similar legal process or request by a regulator having jurisdiction over the Party; (iv) in connection with the exercise of any remedies hereunder or any action or proceeding relating to this Master Agreement or the enforcement of rights hereunder; or (v) as may be furnished to a Party’s Representatives who shall be required to keep the information that is disclosed in confidence; (vi) with the written consent of the other Party. |
| 15. | Disclaimer of Reliance. In connection with all aspects of the Agreement, each Party acknowledges and agrees that: (i) any Transaction between the Parties is an arm’s-length commercial transaction between the parties, and each Party is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of this Master Agreement and the Transactions, (ii) in connection with this Master Agreement and any Transaction, each Party is and has been acting solely as a principal and not as a financial advisor, agent or fiduciary, for the other Party or any of its affiliates, equity holders, directors, officers, employees, creditors or any other party, (iii) neither Party nor any of its affiliates, or any of its or their Representatives has assumed or will assume an advisory, agency or fiduciary responsibility the other Party’s or any of its affiliates’ favor with respect to this Master Agreement or any Transaction (irrespective of whether any such person has advised or is currently advising Seller or its affiliates on other matters) and neither Party has an obligation to any person with respect to this Master Agreement or any Transaction except those obligations expressly set forth in this Master Agreement, (iv) each Party and its affiliates may be engaged in a broad range of transactions that involve interests that differ from the other Party’s and its affiliates’ interest and neither Party nor any of its affiliates shall have any obligation to disclose any of such interests, and (v) neither Party nor its affiliates, and its and their Representatives has provided, or will provide, any legal, accounting, regulatory, tax or other advice with respect to the Agreement or any of the Transactions and each Party has consulted its own advisors to the extent it has deemed appropriate. Each Party hereby waives and releases, to the fullest extent permitted by law, any claims that the other Party or any of its affiliates may have against such Party, its affiliates, and its and their Representatives with respect to any breach or alleged breach of agency or fiduciary duty. Nothing contained in the Agreement shall constitute a solicitation, recommendation, endorsement, or offer by either Party or any third-party service provider to buy or sell any asset or other financial instrument. |
| 16. | Intellectual Property Rights. Each Party retains all rights, titles, and interests to its own intellectual property, including all copyrights, inventions, trademarks, designs, domain names, know-how, trade secrets, and other intangible property and other rights in Purchaser’s products and services.\ |
| 17. | Force Majeure. In case an event of force majeure (“Force Majeure Event”) due to natural disaster, any order of a competent government authority, strike, fires or other facility obstruction as well as pause of utility, failure of Internet service provider or the like directly affects a Party’s performance of this Agreement or performance of this Agreement in accordance with the agreed terms and conditions, neither Party shall be responsible for any losses suffered by the other Party from such a Force Majeure Event. Should a Force Majeure Event arise which renders one Party unable to perform its obligations, (a) such Party shall immediately notify the other Party of the situation, and (b) the other Party shall be entitled to terminate this Agreement by written notice with immediate effect upon receipt of the notice by the Party that suffers a Force Majeure Event. |
| 18. | Governing Law and Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to its principals of conflicts of laws. Each Party agrees to submit any dispute arising out of this Agreement to the exclusive jurisdiction of, and expressly consents to the venue in, the state and/or federal court(s) located in Delaware. Each Party waives any objection to venue that such Party may have pursuant to the doctrine of forum non conveniens. |
| 19. | Waiver of Jury Trial. EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY PROCEEDINGS RELATING TO THE AGREEMENT OR ANY TRANSACTION. |
| 6 |
| 20. | No Joint Venture. By entering into the Agreement, neither Party is establishing any joint venture, partnership, agency or any similar relationship or entity with one another, or their respective affiliates or Representatives, and nothing contained in the Agreement shall be deemed to constitute a joint venture, partnership or agency agreement among them for any purposes, including, but not limited to, federal income tax purposes. Additionally, no prior, present or subsequent conduct, communication or public press release by the parties (nor any prior, present or subsequent conduct or communication or public press release of either Party with any other person) shall be interpreted as creating such a relationship or expressing an intent to create such relationship. In performing any of their obligations hereunder, the parties shall be independent contractors and shall discharge their contractual obligations at their own risk. |
| 21. | No Third-Party Rights. This Agreement is not intended to grant any third-party rights, whether as a third-party beneficiary or otherwise. |
| 22. | Enforceability. This Master Agreement (including the exhibits, schedules and any written supplements hereto) and all Transactions (including any Confirmation) constitute the entire agreement between the Parties relating to the subject matter. This Master Agreement shall be considered for all purposes as prepared through the joint efforts of the parties and shall not be construed against one party or the other as a result of the preparation, substitution, submission or other event of negotiation, drafting or execution hereof. Except to the extent herein provided for, no amendment or modification to this Master Agreement shall be enforceable unless reduced to writing and executed by both Parties. This Master Agreement shall not impart any rights enforceable by any third party (other than a permitted successor or assignee bound to this Master Agreement). Waiver by a Party of any default by the other Party shall not be construed as a waiver of any other default. Any provision declared or rendered unlawful by any applicable court of law or regulatory agency or deemed unlawful because of a statutory change (individually or collectively, such events referred to as “Regulatory Event”) will not otherwise affect the remaining lawful obligations that arise under this Master Agreement; and provided, further, that if a Regulatory Event occurs, the Parties shall use their best efforts to reform this Master Agreement in order to give effect to the original intention of the Parties. The term “including” when used in this Master Agreement shall be by way of example only and shall not be considered in any way to be in limitation. The headings used herein are for convenience and reference purposes only. All indemnity and audit rights shall survive the termination of this Master Agreement for twelve (12) months. This Master Agreement shall be binding on each Party’s successors and permitted assigns. |
| 23. | Entire Agreement. This Master Agreement, including any Confirmation executed hereunder, constitutes the entire agreement between the parties with respect to the purchase and sale of Hashrate between them and supersedes all prior negotiations, understandings, or agreements, whether written or oral with respect thereto. Each Confirmation executed under this Master Agreement shall be subject to the terms and conditions contained herein, unless explicitly stated otherwise. |
| 24. | Amendments. This Master Agreement shall not be amended or modified in any way except in writing signed by an authorized representative of each Party. |
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IN WITNESS WHEREOF, the Parties have executed this Master Hashrate Purchase and Sale Agreement as of the date first written above.
Purchaser
SIGNATURE: /s/ Jonathan Bates
NAME: Jonathan Bates
TITLE: CEO
COMPANY: BitMine Immersion Technologies, Inc.
DATE: 2025-05-22
Seller
SIGNATURE: /s/ Matthew Williams
NAME: Matthew Williams
TITLE: Head of Derivatives
COMPANY: Luxor Technology Corporation
DATE: 2025-05-22
| 8 |
Confirmation to Master Hashrate Purchase and Sale Agreement
Execution Date: 2025-05-22
Seller : LUXOR TECHNOLOGY CORPORATION
1100 Bellevue Way NE
Suite 8A #514
Bellevue, WA 98004 US
Purchaser: BitMine Immersion Technologies, Inc.
2030 Powers Ferry Road SE; Suite 212; Atlanta, GA 30339
This Confirmation is entered into pursuant to that certain Master Hashrate Purchase and Sale Agreement and confirms the terms and conditions of a Transaction between Seller and Purchaser. Seller and Purchaser are each referred to in this Confirmation individually as a “Party” and collectively as the “Parties.” Capitalized terms used in this Confirmation and not otherwise defined herein shall have the meaning specified for such terms in the Master Hashrate Purchase and Sale Agreement and this Confirmation is subject to all the terms and conditions of the Master Hashrate Purchase and Sale Agreement.
THE PARTIES ACKNOWLEDGE AND AGREE THAT THIS CONFIRMATION REPRESENTS A PURCHASE AND SALE TRANSACTION.
Transaction Terms
| Term | Value |
| Start Date | UTC 00:00:00 on May 23rd, 2025 |
| End Date | UTC 23:59:59 on November 14th, 2025 |
| Duration | 176 Days |
| Daily Hashrate | 90 PH/s |
| Units | 15,840 |
| Unit Hashprice | 0.00051500 |
| Transaction Value | 8.15760000 BTC |
| Daily Delivery Quota | Luxor BTC Hashprice Index * 90 PH |
| Settlement Currency | BTC |
| Calculation Agent | Seller |
| 9 |
IN WITNESS WHEREOF, the Parties have executed this Confirmation as of the date first written above.
Purchaser
SIGNATURE: /s/ Jonathan Bates
NAME: Jonathan Bates
TITLE: CEO
COMPANY: BitMine Immersion Technologies, Inc.
DATE: 2025-05-22
Seller
SIGNATURE: /s/ Matthew Williams
NAME: Matthew Williams
TITLE: Head of Derivatives
COMPANY: Luxor Technology Corporation
DATE: 2025-05-22
| 10 |
Exhibit B
Luxor Hashprice Index Methodology
WHERE:
h = latest block height
d = network difficulty
b = block subsidy
t = transaction fees
n = 144 = lookback period (number of blocks) included in the index
Please see Annex 1 for Luxor’s Bitcoin Hashprice Index BTC spot price methodology.
The daily settlement rate is the average of each 15 second interval during the UTC day.
Luxor’s Bitcoin Hashprice Index uses spot prices from four US- based cryptocurrency exchanges to account for USD conversion.
The final spot price is calculated using the following methodology:
| 1. | Calculate the trailing 30-minute volume weight by constituent market. |
| 2. | For each constituent market, get all trades within the last minute and exclude trades that deviate two standard deviations or more from the observed constituent market mean. Indices without a trade within the last minute are excluded. With the clean dataset, compute the median per constituent market. |
| 3. | The final value for the computation interval is the mean of the 30-minute rolling volume weighted average medians obtained in the previous step. |
Constituent markets include Kraken, Gemini, Coinbase
| 11 |
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
Bitmine Immersion Technologies, Inc.
Las Vegas, Nevada
We hereby consent to the use in the Prospectus constituting a part of this Registration Statement of our report dated April 3, 2025, relating to the consolidated financial statements of Bitmine Immersion Technologies, Inc., which is contained in the Prospectus.
We also consent to the reference to us under the caption “Experts” in the Prospectus.
/s/ Bush & Associates CPA LLC (PCAOB 6797)
Henderson, Nevada
May 23, 2025