UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of May 2024
Commission File Number: 001-40527
DIGIHOST TECHNOLOGY INC.
(Translation of registrant’s name into English)
110 Yonge Street, Suite 1601, Toronto, Ontario
M5C 1T4
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F.
Form 20-F ☒
Form 40-F ☐
DOCUMENTS INCLUDED AS PART OF THIS FORM 6-K
On May 14, 2024, the Registrant filed with the
Canadian Securities Regulatory Authorities on the System for Electronic Data Analysis and Retrieval + condensed interim consolidated financial
statements for the three months ended March 31, 2024 and 2023, management’s discussion and analysis for the three months ended March
31, 2024 and certifications of each of its CEO and CFO, copies of which are attached hereto as Exhibits 99.1, 99.2, 99.3 and 99.4, respectively.
Exhibits 99.1 and 99.2 to this Form 6-K are each hereby incorporated by reference into the Registration Statement on Form S-8 of Digihost
Technology Inc. (File No 333-276647).
See “Exhibits” below.
Exhibits
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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DIGIHOST TECHNOLOGY INC. |
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By: |
/s/ Michel Amar |
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Name: |
Michel Amar |
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Title: |
Chief Executive Officer |
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| Date: May 14, 2024 |
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2
Exhibit 99.1
DIGIHOST TECHNOLOGY INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS ENDED MARCH 31, 2024
May 14, 2024
DIGIHOST TECHNOLOGY INC.
Management’s Discussion & Analysis
For the three months ended March 31, 2024
Introduction
The following management’s discussion &
analysis (“MD&A”) of the financial condition and results of the operations of Digihost Technology Inc. (the “Company”
or “Digihost”) constitutes management’s review of the factors that affected the Company’s financial and operating
performance for the three-month period ended March 31, 2024. This MD&A was written to comply with the requirements of National Instrument
51-102 – Continuous Disclosure Obligations. This MD&A should be read in conjunction with the audited consolidated financial
statements of the Company for the years ended December 31, 2023 and 2022, together with the notes thereto. Results are reported in United
States dollars, unless otherwise noted. The Company’s unaudited condensed consolidated interim financial statements and the financial
information contained in this MD&A, unless otherwise indicated, are prepared in accordance with International Financial Reporting
Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the
IFRS Interpretations Committee. All financial information contained herein is expressed in United States dollars, unless otherwise stated.
The effective date of this MD&A is May 14,
2024.
For the purposes of preparing this MD&A, management,
in conjunction with the Board of Directors (the “Board”), considered the materiality of information. Information is considered
material if: (i) such information results in, or would reasonably be expected to result in, a significant change in the market price or
value of Company’s subordinate voting shares; (ii) there is a substantial likelihood that a reasonable investor would consider it
important in making an investment decision; or (iii) it would significantly alter the total mix of information available to investors.
Management, in conjunction with the Board, evaluated materiality with reference to all relevant circumstances, including potential market
sensitivity.
Information about the Company and its operations
can be obtained from the offices of the Company and is available for review under the Company’s profile on the System for Electronic Documents
Analysis and Retrieval + (“SEDAR +”) website (www.sedarplus.ca) and EDGAR at www.sec.gov/edgar.
Description of Business
Digihost, through its US operating subsidiaries,
operates primarily as a blockchain technology company currently focused on Bitcoin mining. Digihost’s growth-oriented strategy is
to pursue opportunities to increase mining hashrate and reduce energy costs for Company-owned and third party-hosted miners. The Company’s
operations are focused on validation through mining, hosting solutions and blockchain software solutions. Digihost operates its wholly
owned facilities in upstate New York and Alabama.
The current output from Digihost’s company-owned
miners is approximately 600 PH/s. The Company also rents its available capacity and sells energy to third parties. Digihost’s 60MW
power plant that was acquired during Q1 2023 became fully operational at the end of 2023. The power plant infrastructure includes both
Company-owned miners as well as third-party hosting.
In addition to the output capacity used
directly by Digihost, hosting arrangements will provide third parties with approximately 1.4 PH/s of operating capacity. Presently, Digihost’s
consolidated operating capacity across its three sites represents approximately 90MW of available power and is mining at hashrate of 2
EH/s.
Digihost remains focused on procuring power from
renewable energy sources and those that create zero carbon emissions.
The head office of the Company is located at 2830
Produce Row, Houston, TX 77023.
DIGIHOST TECHNOLOGY INC.
Management’s Discussion & Analysis
For the three months ended March 31, 2024
Mining operation and network overview
Revenue from the Company’s Bitcoin mining
operation is recognized based upon the average Bitcoin price in effect on the day the Bitcoins are mined. Bitcoins are received within
in a 24-hour period from the actual time they are mined. The Bitcoin price is volatile and can change markedly from day to day. This volatility
in price can result in material changes in revenue recorded from period to period.
Network mining difficulty is one of the most significant
competitive conditions the Company faces in its Bitcoin mining operation. Network difficulty is a unitless measure of how difficult it
is to find a hash below a given target. Network difficulty is impacted directly by the price of Bitcoin. As the price of Bitcoin increases
network mining difficulty may increase if more competitors begin to mine Bitcoin, which would result in a decrease in the number of Bitcoins
mined by the Company based upon its existing computing power. As network difficulty rises the costs to the Company to mine Bitcoin also
rises.
The Bitcoin network protocol automatically adjusts
network difficulty by changing the target every 2,016 blocks hashed based on the time it took for the total computing power used in Bitcoin
mining to solve the previous 2,016 blocks such that the average time to solve each block is maintained as close to ten minutes as possible.
Price and network difficulty are positively correlated such that as the price of Bitcoin rises, there is an added incentive for miners
to enter the market, and such increase in miners typically has a proportional increase in network difficulty.
With respect to the conversion of the Company’s
Bitcoin to cash, the Company relies on a third-party service provider to broker sales of its mined Bitcoin. In 2022, the Company began
to monetize a portion of Bitcoin mined to fund the Company’s operating costs and SG&A expenses, thereby mitigating the need
to access equity markets to fund those costs and expenses. This strategy has continued during the entirety of the prior year and to the
date of this MD&A.
A “mining pool” is a service operated
by a mining pool operator that pools the resources of individual miners to share their processing power over a network. Mining pools emerged
in response to the growing difficulty and network hash rate competing for Bitcoin rewards on the Bitcoin blockchain as a way of lowering
costs and reducing the risk of an individual miner’s mining activities. The mining pool operator provides a service that coordinates
the computing power of the independent mining enterprises participating in the mining pool. Mining pools are subject to various risks
such as disruption and down time. In the event that a pool we utilize experiences down time or is not yielding returns, our results may
be impacted.
The Company uses a mining pool that pays Bitcoin
rewards utilizing a “Full-Pay-Per-Share” payout of Bitcoin based on a contractual formula, which calculates payout primarily
based on the hash rate provided by us to the mining pool as a percentage of total network hash rate, along with other inputs. We are entitled
to consideration even if a block is not successfully placed by the mining pool operator. The Company transitioned completely to this type
of mining pool in 2022 and utilized it for the year ended December 31, 2023 and to the date of this MD&A.
Mining Operations
Bitcoin
As of March 31, 2024, the Company held
a total of approximately 40 Bitcoins with an inventory value of $2,910,304 based on the Bitcoin price as of that date per the Gemini exchange.
For the three-month period ended March 31, 2024, Digihost mined a total of approximately 129 Bitcoins compared to a total of approximately
168 Bitcoins for the three-month period ended March 31, 2023, representing a decrease of 23%.
DIGIHOST TECHNOLOGY INC.
Management’s Discussion & Analysis
For the three months ended March 31, 2024
During 2023, the Company entered into
various hosting and colocation agreements to diversify its operations which decreased the amount of coins mined. The impact of this diversification
impacted Q1 2024 mining results as during the prior year these agreements were beginning to ramp up.
Ethereum
As of March 31, 2024, the Company held a total
of nil Ethereum as inventory was converted to cash during Q1 2023.
Updates and Expansion
On February 7, 2023, the Company announced
that it had completed the acquisition of a 60 MW power plant in North Tonawanda, NY. Further to the Company’s initial news release
on March 24, 2021, the terms of the acquisition were amended to reflect an all-cash purchase price. No shares of the Company were issued
in connection with the acquisition.
The acquisition represents a significant
milestone in the Company’s ongoing infrastructure expansion strategy. As a result of the acquisition, the Company’s consolidated
operating capacity across its three sites represents approximately 90MW of available power, representing approximately 2 EH/s of computing
power. The generator capacity will continue flexible operation to ensure that 24/7 dispatchable supply is made available to area residents,
businesses and industry to mitigate impacts of power interruptions in concert with directives of the New York Independent System Operator
(NYISO).
A Mining Operations Agreement was entered
into on February 16, 2023 by and between the Company and Northern Data NY, LLC (“ND”). Under the terms of the agreement, Digihost
agreed to provide the requisite power and ancillary operational functions in order for the digital currency mining equipment on its property
to run efficiently outside of its facilities. The agreement was not renewed by the December 31, 2023, renewal date and expired in April
2024, and a revised agreement was entered into at this time between the parties.
A Colocation Services Agreement was entered into
on April 20, 2023, by and between the Company and Bit Digital USA, Inc. (“Bit”). Under the terms of the agreement, Digihost
will provide hosting services in return for reimbursement of power consumption per the contractual terms.
A Colocation Services Agreement was entered into
on September 21, 2023 by and between the Company and Corner Energy LTD (“Corner”). Under the terms of the agreement, Digihost
will provide hosting services in return for reimbursement of power consumption per the contractual terms.
On March 5, 2024, the Company announced
that it signed a multi-year hosting agreement with one of the world’s leading manufacturers of digital currency mining servers.
Under the agreement, Digihost received an upfront deposit along with 4,640 S19 XPs (21.5W/TH), which equates to approximately 14MW of
hosting. The Company plans to deploy these next generation, highly energy efficient and high-performance miners prior to the next Bitcoin
halving. The deployment will result in an expected hash rate increase of approximately 700 PH/s, bringing Digihost’s total hash
rate to 2.4 EH/s.
Green Initiative
Currently, 93% of the electricity consumed by
Digihost’s grid-based power consumption across two sites in New York State is received from zero carbon generation. Further, more
than 50% of the energy consumed is generated from renewable sources. As Digihost brings online its own Natural Gas fired power generation
facility, the Company will focus on sourcing Renewable Natural Gas (“RNG”) for at least 50% of the Natural Gas consumed at
this site. New York State has a growing RNG ecosystem which is typically produced from anaerobic digesters at local dairy farms or from
landfills.
DIGIHOST TECHNOLOGY INC.
Management’s Discussion & Analysis
For the three months ended March 31, 2024
Current Carbon-Neutrality Efforts & Initiatives
include:
| ● | 100% Carbon Neutral: Digihost plans for 100% of its operations to achieve carbon neutrality with a net-zero
footprint by the end of 2025, and 100% renewable by 2030. |
| ● | Community Solar: Digihost is the anchor subscriber to a 5-megawatt community solar project located in Angola,
NY. This site is situated 30 miles from Digihost’s East Delevan facility and will produce enough renewable electricity to power
more than 2,500 homes annually. Our participation aids in the development of future renewable assets, adds clean energy onto our electricity
grid, and lowers our cost of electricity. |
| ● | Digigreen Initiative: A Digihost initiative focused on immediate steps to create sustainable, environmentally,
and economically sound in-house practices, distinguishing the Company as an industry leader in lowering/eliminating its carbon footprint
while maintaining profitability. |
| ● | Crypto Climate Accord: Digihost has joined a private sector-led initiative for the entire crypto community
focused on decarbonizing the cryptocurrency industry in record time. |
| ● | Proof of Green: Digihost has begun initial research into developing proprietary standards for measuring the
Company’s carbon impact. Using these standards as an environmental audit tool for the various operations, we anticipate being able
to generate accountability reports and to advise Directors and Shareholders on efforts to minimize the Company’s carbon footprint. |
At-the-Market Offering
On March 4, 2022, the Company entered
into an offering agreement with H.C. Wainwright & Co., LLC as agent (the “Agent”), pursuant to which the Company established
an at-the-market equity program (the “ATM Program”). From the commencement of the ATM Program through December 31, 2023, the
Company issued 559,054 subordinate voting shares in exchange for gross proceeds of $1,090,841, at an average share price of $1.79, and
received net proceeds of $1,050,424 after paying commissions of $32,752 to the Agent and incurring $7,692 of other transaction fees.
During the quarter ended March 31, 2024,
the Company issued 3,600 subordinate voting shares in exchange for gross proceeds of $5,457, at an average share price of $1.52, and received
net proceeds of $5,032 after paying commissions of $164 to the Agent and incurring $261 of other transaction fees.
The ATM Program ceased to be available
to the Company in March 2024.
NCIB
During May 2022, Digihost announced that
it had received approval to undertake, at the Company’s discretion, a normal course issuer bid program (“NCIB”) in Canada
to purchase up to 1,219,762 of its subordinate voting shares for cancellation. The NCIB was commenced due to the fact that, from time
to time, the Company may consider that the market price of its subordinate voting shares do not accurately reflect the underlying value
of the Company’s business. The NCIB expired on May 25, 2023. Pursuant to the NCIB, the Company repurchased 165,200 subordinate voting
shares for a total repurchase price of $255,525.
Custodial
services for digital currencies
The Company has a digital custody account
with Gemini Trust Company, LLC (Gemini). Gemini is a digital currency exchange and custodian that allows customers to buy, sell, and store
its digital assets. Gemini holds 100% of the Company’s cryptocurrency assets in hot storage. Gemini is not a related party of the
Company. The Company is not aware of anything with regards to Gemini’s operations that would adversely affect the Company’s
ability to obtain an unqualified audit opinion on its audited financial statements.
DIGIHOST TECHNOLOGY INC.
Management’s Discussion & Analysis
For the three months ended March 31, 2024
The Company has chosen to hold its full
inventory of Company’s cryptocurrency assets with Gemini due to its track record in the industry. Gemini is a New York trust company
regulated by the New York State Department of Financial Services and is the foreign equivalent of a Canadian financial institution (as
that term is defined in National Instrument 45-106 – Prospectus Exemption). Gemini is a qualified custodian under New York
Banking Law and is licensed by the State of New York to custody digital assets. Gemini has not appointed a sub-custodian to hold any of
the Company’s cryptocurrencies. Gemini has US$100M split between US$25M of commercial crime insurance for digital assets held in
online hot wallet and US$75M for offline, cold storage insurance coverage. Although the Company has historically utilized both cold and
hot storage for its digital crypto assets with Gemini, the Company currently holds all its cryptocurrencies custodied with Gemini in hot
storage.
The Company has conducted due diligence
on Gemini and has not identified any material concerns. It routinely reviews and verifies its asset balances on public blockchain explorers.
Management of the Company is not aware of any security breaches or other similar incidents involving Gemini that resulted in lost or stolen
cryptocurrency assets. In the event of an insolvency or bankruptcy of Gemini, the Company would write off as losses any unrecoverable
cryptocurrency assets.
In order to monitor Gemini, the Company
relies on system and organization controls provided by a SOC 2 Type II report, which was undertaken by Deloitte & Touche LLP, an independent
audit firm. A SOC 2 Type II certification and report are viewed as instrumental in providing verification to third parties that appropriate
controls have been put in place to safeguard the Company’s cryptocurrency assets, specifically as it relates to having strict security
and data protection processes and protocols.
In general, a SOC 2 Type II certification
is issued by an outside auditor that evaluates the extent to which a vendor complies with five trust principles based on the systems and
processes in place. These five principles include the following:
| · | “Security”,
which addresses the safeguarding of system resources and assets against unauthorized access; |
| | | |
| · | “Availability”,
which addresses the accessibility of the system as stipulated by the applicable service agreement between vendor and customer; |
| | | |
| · | “Processing
Integrity”, which addresses whether or not a system achieves its purpose; |
| | | |
| · | “Confidentiality”,
which addresses whether access and disclosure of data is restricted to a specified set of persons or organizations; and |
| | | |
| · | “Privacy”,
which addresses the system’s collection, use, retention, disclosure and disposal of personal information in conformity with an
organization’s privacy notice. |
The Company has elected to use Gemini
as its sole custodian as Gemini compiles documented controls that can be provided to the Company, such as the SOC 2 Type II certification.
The Company reviews the SOC 2 Type II report to ensure it maintains a secure technology infrastructure and the security systems designed
to safeguard cryptocurrency assets are operating effectively. To date, the Company has not identified any material concerns based on its
review of the SOC 2 Type II report.
Gemini maintains insurance coverage for
the cryptocurrency held on behalf of the Company in its online hot wallet. The Company is in the process of looking to insure the remainder
of its mined digital currency. Given the novelty of digital currency mining and associated businesses, insurance of this nature is generally
not available, or is uneconomical for the Company to obtain, which leads to the risk of inadequate insurance cover.
DIGIHOST TECHNOLOGY INC.
Management’s Discussion & Analysis
For the three months ended March 31, 2024
On occasion, to mitigate third-party risk,
the Company will hold a portion of its digital currencies in cold storage solutions that are not connected to the internet. The Company’s
digital assets that are held in cold storage are stored in safety deposit boxes at a bank branch. The wallets in which the Company stores
its cryptocurrency assets are not multi-signature wallets; however, the Company secures the 24-word seed phrase, which facilitates recovery
of the wallets should the wallets become lost, stolen or damaged, by partitioning the seed phrase in multiple parts, and securing each
part in a separate location. Each part of the seed phrase is stored in either a safe or safety deposit box, The Company replicates this
security protocol by taking the same 24-word seed phrase, partitioning this into several parts and storing each part in a secure location
in a separate safe or safety deposit box than was used for the first copy of the seed-phrase. This duplication ensures that the digital
currencies held via cold storage solutions will be recoverable by the Company, should the Company’s cold-wallets become lost, stolen
or damaged. During the quarter-ended March 31, 2024 and as of the date of this MD&A, all of the Company’s cryptocurrency assets
are currently held in its Gemini wallets.
EBITDA – NON-GAAP MEASURE
“EBITDA” is a metric used by management
which is income (loss) from operations, as reported, before interest, tax, and adjusted for removing other non-cash items, including,
depreciation. Management believes “Adjusted EBITDA” is a useful financial metric to assess its operating performance on a
cash basis before the impact of non-cash items and acquisition related activities.
| | |
Three months ended | |
| | |
2024 | | |
2023 | |
| | |
$ | | |
$ | |
| Income (loss) before other items | |
| 4,844,148 | | |
| (9,093,039 | ) |
| Taxes and Interest | |
| 60,491 | | |
| 159,408 | |
| Depreciation | |
| 3,951,251 | | |
| 3,222,680 | |
| EBITDA | |
| 8,855,890 | | |
| (5,710,951 | ) |
Selected Financial Information
| | |
Period ended
March 31,
2024
($) | | |
Year ended
December 31,
2023
($) | | |
Year ended
December 31,
2022
($) | |
| Revenue | |
| 12,958,319 | | |
| 26,112,908 | | |
| 24,190,060 | |
| Net income (loss) | |
| 4,844,148 | | |
| (21,885,410 | ) | |
| 4,329,342 | |
| Net income (loss) per share – basic and diluted | |
| 0.17 | | |
| (0.77 | ) | |
| 0.16 | |
| | |
Period ended
March 31,
2024
($) | | |
Year ended
December 31, 2023
($) | | |
As at
December 31,
2022
($) | |
| Total assets | |
| 41,236,252 | | |
| 42,147,347 | | |
| 52,599,561 | |
| Total long-term liabilities | |
| 3,444,434 | | |
| 7,636,506 | | |
| 2,169,276 | |
Selected Quarterly Information
A summary of selected information for each of
the eight most recent quarters prepared in accordance with IFRS is as follows:
| | |
| | |
Net Income or (Loss) | |
| Three Months Ended | |
Revenues
($) | | |
Total
($) | | |
Per Share - Basic
($) | | |
Per Share - Diluted
($) | |
| 2024-March 31 | |
| 12,958,319 | | |
| 4,844,148 | | |
| 0.17 | | |
| 0.17 | |
| 2023-December 31 | |
| 7,393,047 | | |
| (9,685,061 | ) | |
| (0.34 | ) | |
| (0.34 | ) |
| 2023-September 30 | |
| 6,991,701 | | |
| 136,060 | | |
| 0.00 | | |
| 0.00 | |
| 2023-June 30 | |
| 6,943,467 | | |
| (3,308,936 | ) | |
| (0.12 | ) | |
| (0.12 | ) |
| 2023-March 31 | |
| 4,784,694 | | |
| (9,027,473 | ) | |
| (0.32 | ) | |
| (0.32 | ) |
| 2022-December 31 | |
| 5,682,019 | | |
| (9,741,906 | ) | |
| (0.36 | ) | |
| (0.36 | ) |
| 2022-September 30 | |
| 3,735,014 | | |
| (1,676,808 | ) | |
| (0.06 | ) | |
| (0.06 | ) |
| 2022-June 30 | |
| 7,460,595 | | |
| 3,577,254 | | |
| 0.13 | | |
| 0.13 | |
The Company is generally not subject to seasonality.
Factors that may impact revenues and profitability include Bitcoin price, network difficulty, the price of power, foreign currency fluctuations
and the Company’s hashrate.
DIGIHOST TECHNOLOGY INC.
Management’s Discussion & Analysis
For the three months ended March 31, 2024
Results of Operations
For the three months ended March 31, 2024,
compared to the three months ended March 31, 2023:
For the three months ended March 31, 2024, the
Company’s net income was $4,844,148 compared to a net loss of $9,093,039 for the three months ended March 31, 2023. Highlights of
the quarter include:
Revenue
Revenue from Bitcoin mining was $6,810,389 for
the three months ended March 31, 2024, compared to $3,809,066 for the period ended March 31, 2023.
For the three-month period ended March 31, 2024,
the Company self-mined a total of approximately 129 Bitcoins at an average Bitcoin price of US$53,576 (from Gemini) compared to the three-month
period ended March 31, 2023, in which the Company mined approximately 168 Bitcoins at an average price of Bitcoin of US$22,883. The increase
in the price of Bitcoin in comparison to the prior year was the most significant factor in the rise in revenue from Bitcoin mining.
During 2023, the Company began diversifying its
revenue streams by entering into the Colocation and Sale of Electricity agreements mentioned above in this MD&A. By entering into
these contracts, the Company was able to utilize its existing infrastructure and power supply and receive consistent payment for consumption.
From these agreements, the Company recognized
revenue from colocation service agreements of $1,426,931 for the quarter ended March 31, 2024 (2023: $nil) and $3,378,820 from the sale
of electricity (2023: $nil). The two colocation service agreements were in place from April 2023 and September 2023, respectively, while
the mining operations agreement was executed in February 2023.
The Company also recognized revenue from the sale
of energy of $1,342,179 for the quarter, compared to $295,281 in 2023, as the Company acquired a 60MW power plant during Q1 2023. Revenue
from this acquisition of a business is recognized each month through the operations of the plant through its available capacity that can
be sold, and actual generation of power sold.
Cost of Sales
The Company’s cost of sales was $12,951,133
for the three-month period ended March 31, 2024, compared to $1,660,600 for the three-month period ended March 31, 2023.
Depreciation and amortization expense increased
by $758,571 as the assets related to the Company’s acquisition of the power plant were put into use during the first half of 2023.
The Company also placed into service additional infrastructure buildout and mining equipment during 2023 which impacted the quarters expense
when compared to the prior period
Cost of revenue increased by $6,313,157 as compared
to the prior year due primarily to the costs associated with the power plant of 5,100,386 (2022: $nil) which included fuel and gas costs
of $3.2m, carbon emission costs of $1.1m, contract labor of $400k, and general repair and maintenance costs.
Miner and lease hosting agreement expense decreased
by $638,689 as the Company’s prior agreements expired during Q1 2023
General, Administrative & Other Expenses
The Company’s general and administrative
expenses were $839,683 for the three-month period ended March 31, 2024, compared to 872,580 in the same period of 2023.
The primary movements in the current period versus
the quarter ended March 31, 2023, were due to:
| · | Gain
on sale of digital currencies in the prior year of $873,271 (2024: $398,357). |
| | | |
| · | Change
in fair value of amount owing for Miner Lease Agreement in the prior period of $225,102 (2023: $nil). |
| | | |
| · | Gain
on revaluation of digital currencies in the current period of $247,464 (2023: $10,443). |
| | | |
| · | FX
gain of $1,417,874 in the current period versus a loss $47,363 in the prior period. |
Other income/expense items of note in the current
year include the revaluation of the warrant liabilities which resulted in a gain of $4.06 million (2023: loss of $5.62 million).
DIGIHOST TECHNOLOGY INC.
Management’s Discussion & Analysis
For the three months ended March 31, 2024
Cash flows
Operating Activities
Cash provided by operating activities for the
quarter ended March 31, 2024, was $1,503,880 as compared to cash provided of $3,020,130 for the quarter ended March 31, 2023. The difference
is primarily attributed to the decrease in digital currency items on a comparative basis (-$2,087,420 versus $2,106,476), change in warrant
liability (-$4,057,770 versus $5,617,304) and fluctuations in foreign exchanges of (-$1,418,411 versus $47,246).
Investing Activities
Cash used in investing activities for the quarter
ended March 31, 2024, was $nil as compared to $4,869,470 for the quarter ended March 31, 2023. In the prior year, cash of $4,599,666 was
used for the purchase of the power plant, $769,754 was used for the purchase of equipment, with $499,950 was received from the sale of
equipment.
Financing Activities
Cash used by financing activities for the quarter
ended March 31, 2024, was $531,488, as compared to cash provided of $820,557 for the quarter ended March 31, 2023. The drivers of the
balance in the current period were proceeds of shares issued for cash of $5,457, offset by repayment of loans of $499,865 and lease payments
of $37,080. In the prior year, the Company received proceeds from a loan payable of $691,500 and proceeds of shares issued for cash of
$365,463, partly offset by repayment of loans of $200,406 and lease payments of $36,000.
.
Liquidity and Financial Position
As of March 31, 2024, the Company had a working
capital balance of $194,149, including digital currencies of $2,910,304. The Company commenced earning revenue from digital currency mining
in mid-February 2020; however, it has limited operating history, and there can be no assurance that the Company’s historical performance
will be indicative of its future performance.
The Company’s ability to continue as a going
concern is dependent on the Company’s ability to efficiently mine and liquidate digital currencies, manage operational expenses,
and raise additional funds through debt or equity financing.
Capital Resources
The Company’s capital management objective
is to provide the financial resources that will enable Digihost to maximize the return to its shareholders while also enhancing its cost
of capital. In order to achieve this goal, the Company monitors its capital structure and adjusts as required in response to an ever-changing
economic environment and the various risks to which the Company is exposed. The Company’s approach for attaining this objective
is to preserve a flexible capital structure that optimizes the cost of capital at a satisfactory level of risk, to maintain its ability
to meet financial obligations as they come due, and to ensure the Company has appropriate financial resources to fund its organic and
acquisitive growth.
The Company anticipates that its existing financial
resources will be sufficient to put into operation all previously announced acquisitions of mining hardware along with the infrastructure
needed to support the power plant acquisition. In order to achieve its future business objectives, the Company may need to liquidate or
borrow against the Bitcoin that have been accumulated as of the date hereof as well as Bitcoin generated from ongoing operations, which
may or may not be possible on commercially attractive terms or at all.
DIGIHOST TECHNOLOGY INC.
Management’s Discussion & Analysis
For the three months ended March 31, 2024
The Company presently anticipates that additional
financing may be required to acquire additional power generation facilities in the future in order to meet the Company’s objective
of hashing at total of 6 EH/s of power by the end of 2024. The Company also anticipates that additional financing could be required to
purchase the next generation miners required to utilize its maximum capacity and is looking for attractive Joint Venture and Hosting Colocation
deals in order to help expand its capital position.
Digihost may manage its capital structure by issuing
equity, seeking financing through loan products, adjusting capital spending, entering into beneficial hosting or colocation agreements,
or disposing of assets.
Notes Receivable and Related Party Transactions
Promissory Notes Receivable
In December 2021, the Company entered into an
agreement for a Secured Convertible Promissory Note (“Note”) with principal of $800,000. The Note accrues interest at a rate
of 6% per annum, with 3% payable in cash every calendar quarter and 3% payable in notes (note 5). The Note is convertible at the Company’s
option into Series C Preferred Stock of the issuer. If the Note is not converted into shares by the Company, all unpaid and accrued interest
are due on Maturity Date of December 21, 2026. The Notes are secured by the assets of the issuer. As at March 31, 2024, the fair value
of the Note was estimated to be $850,685.
Loan Payable
The Company entered into a loan agreement with
Doge Capital LLC (“Doge”), a company controlled by the chief executive officer, dated February 6, 2023, whereby Doge lent the
Company the equivalent value of 30 Bitcoins, being $691,500 and the Company agreed to repay Doge 36 Bitcoins as full repayment of the
loan. The Company shall repay Doge 3 Bitcoins per month for 12 consecutive months with the first payment due on March 1, 2023 and the
remaining 11 payments due on the first day of each successive month. As at March 31, 2024, this loan was fully repaid.
Related Party Transactions
Parties are considered to be related if one party
has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial
and operating decisions. Parties are also considered to be related if they are subject to common control. Related parties include key
management personnel and may be individuals or corporate entities. A transaction is considered to be a related party transaction when
there is a transfer of resources or obligations between related parties. Related party transactions are recorded at the exchange amount,
being the amount agreed to between the related parties.
Key management personnel are those persons having
authority and responsibility for planning, directing, and controlling the activities of the Company, directly or indirectly. Key management
personnel include the Company’s executive officers and members of the Board of Directors.
Remuneration of key management personnel of the
Company was as follows:
| | |
Three Months ended
March 31,
2024 | | |
Three Months ended
March 31,
2023 | |
| Professional fees (1) | |
| 27,692 | | |
| 75,330 | |
| Salaries (1) | |
| 219,180 | | |
| 211,900 | |
| Share based compensation (2) | |
| 241,808 | | |
| 371,742 | |
| Total | |
$ | 488,680 | | |
$ | 658,972 | |
| (1) | Represents the professional fees and salaries paid to officers
and directors. |
| (2) | Represents the share-based compensation for officers and
directors. |
DIGIHOST TECHNOLOGY INC.
Management’s Discussion & Analysis
For the three months ended March 31, 2024
Share Capital
As at March 31, 2024, the Company has 29,333,749
subordinate voting shares outstanding.
As at March 31 2024, the Company had issued 692,170
stock options, 1,568,158 restricted share units and 7,225,855 warrants.
Off-Balance Sheet Arrangements
As at the date
of this MD&A, the Company did not have any off-balance sheet arrangements.
Adoption of new accounting policies
(a) Basis
of consolidation
These consolidated financial statements include
the accounts of Digihost and its wholly owned subsidiary: Digihost International, Inc. Subsidiaries are consolidated from the date of
acquisition, being the date on which the Company obtains control, and continues to be consolidated until the date that such control ceases.
Control is achieved when an investor has power over an investee to direct its activities, exposure to variable returns from an investee,
and the ability to use the power to affect the investor’s returns. All inter-company transactions and balances have been eliminated upon
consolidation.
(b) Functional
and presentation currency
These financial statements are presented in United
States Dollars. The functional currency of Digihost is the Canadian dollar and the functional currency of Digihost International, Inc.
is the United States Dollars. All financial information is expressed in United States Dollars, unless otherwise stated.
(c) Foreign
currency translation
Monetary assets and liabilities denominated in
foreign currencies are translated to United States dollars at exchange rates in effect at the reporting date. Non-monetary assets and
liabilities are translated at historical exchange rates at the respective transaction dates. Revenue and expenses are translated at the
rate of exchange at each transaction date. Gains or losses on translation are included in foreign exchange expense.
The results and financial position of an entity
whose functional currency are translated into a different presentation currency are treated as follows:
| ● | assets
and liabilities are translated at the closing rate at the reporting date; |
| ● | income
and expenses for each income statement are translated at average exchange rates at the dates of the period; and |
| ● | all
resulting exchange differences are recognized in other comprehensive income as cumulative translation adjustments. |
DIGIHOST TECHNOLOGY INC.
Management’s Discussion & Analysis
For the three months ended March 31, 2024
(d) Revenue
recognition
The Company recognizes revenue under IFRS 15,
“Revenue from Contracts with Customers” (“IFRS 15”).
To determine revenue recognition for contracts
with customers, the Company performs the following five steps: (i) identify the contract with the customer, (ii) identify the performance
obligations in the contract, (iii) determine the transaction price, including variable consideration to the extent that it is probable
that a significant future reversal will not occur, (iv) allocate the transaction price to the respective performance obligations
in the contract, and (v) recognize revenue when (or as) the Company satisfies the performance obligation.
The Company recognizes revenue when it transfers
its goods and services to customers in an amount that reflects the consideration to which the Company expects to be entitled in such exchange.
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 IFRS 15’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).
If a good or service is not distinct, the good
or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.
The transaction price is the amount of consideration
to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised
in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity
must consider the effects of all of the following:
| ● | Constraining
estimates of variable consideration |
| ● | The
existence of a significant financing component in the contract |
| ● | Consideration
payable to a customer |
Variable consideration is included in the transaction
price only to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not
occur when the uncertainty associated with the variable consideration is subsequently resolved. The transaction price is allocated to
each performance obligation on a relative standalone selling price basis. The transaction price allocated to each performance obligation
is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.
| ● | Digital
currency mining: The Company’s revenue is derived from providing computing power (hashrate) to mining pools. The Company has entered
into arrangements, as amended from time to time, with mining pool operators to provide computing power to the mining pools. The provision
of computing power to mining pools is an output of the Company’s ordinary activities. The Company has the right to decide the point
in time and duration for which it will provide computing power. As a result, the Company’s enforceable right to compensation only
begins when, and continues as long as, the Company provides computing power to the mining pool. The contracts can be terminated at any
time by either party without substantive compensation to the other party for such termination. Upon termination, the mining pool operator
(i.e., the customer) is required to pay the Company any amount due related to previously satisfied performance obligations. Therefore,
the Company has determined that the duration of the contract is less than 24 hours and that the contract continuously renews throughout
the day. The Company has determined that this renewal right is not a material right as the terms, conditions, and compensation amounts
are at then market rates. There is no significant financing component in these transactions. |
DIGIHOST TECHNOLOGY INC.
Management’s Discussion & Analysis
For the three months ended March 31, 2024
In exchange for providing computing power, which
represents the Company’s only performance obligation, the Company is entitled to non-cash consideration in the form of cryptocurrency,
calculated under one of two payout methods, depending on the mining pool. The payout method used by the mining pool in which the Company
participated is the Full Pay Per Share (“FPPS”) . This payout method contains three components, (i) a fractional share of
the fixed cryptocurrency award from the mining pool operator (referred to as a “block reward”), (ii) transaction fees generated
from (paid by) blockchain users to execute transactions and distributed (paid out) to individual miners by the mining pool operator, and
(iii) mining pool operating fees retained by the mining pool operator for operating the mining pool. The Company’s total compensation
is the sum of the Company’s share of (a) block rewards and (b) transaction fees, less (c) mining pool operating fees.
| ● | Block
rewards are calculated as follows under the FPPS method. The block reward earned by the Company is calculated by the mining pool operator
based on the proportion of hashrate the Company contributed to the mining pool to the total network hashrate used in solving the current
algorithm. The Company is entitled to its relative share of consideration even if a block is not successfully added to the blockchain
by the mining pool. |
| ● | Transaction
fees refer to the total fees paid by users of the network to execute transactions. Under FPPS, the Company is entitled to a pro-rata
share of the total network transaction fees. The transaction fees paid out by the mining pool operator to the Company is based on the
proportion of hashrate the Company contributed to the mining pool to the total network hashrate. The Company is entitled to its relative
share of consideration even if a block is not successfully added to the blockchain by the mining pool. |
| ● | Mining
pool operating fees are charged by the mining pool operator for operating the mining pool as set forth in a rate schedule to the mining
pool contract. The mining pool operating fees reduce the total amount of compensation the Company receives and are only incurred to the
extent that the Company has generated mining revenue pursuant to the mining pool operators’ payout calculation. |
Because the consideration to which the Company
expects to be entitled for providing computing power is entirely variable (block rewards, transaction fees and pool operating fees), as
well as being non-cash consideration, the Company assesses the estimated amount of the variable non-cash consideration to which it expects
to be entitled for providing computing power at contract inception and subsequently, to determine when and to what extent it is highly
probable that a significant reversal in the amount of cumulative revenue recognized will not occur once the uncertainty associated with
the variable consideration is subsequently resolved. For each contract under the FPPS payout method, the Company recognizes the non-cash
consideration on the same day that control of the contracted service transfers to the mining pool operator, which is the same day as the
contract inception. For the contract under both the FPPS payout method, the Company measures non-cash consideration at the cryptocurrency
spot price at the beginning of the day on the date of contract inception, as determined by the Company’s principal market, which
is Gemini.
| ● | Colocation
services: The Company recognizes revenue from its colocation services when it satisfies performance obligations by transferring the control
of services, which include power provision and space rental, to customers. Revenue is recognized monthly in an amount that reflects actual
power consumption, as per contractual terms, and any fixed maintenance fees are recognized over time as services are rendered to customers,
aligning the recognition of revenue with the delivery of services. |
| ● | Sale
of electricity: The Company recognizes revenue from the sale of energy when it has satisfied its performance obligation, which occurs
as the energy is provided to the customer. The Company supplies the requisite power and ancillary operational functions in order for
the digital currency mining equipment on its property to run efficiently outside of its facilities. Revenue is recorded monthly based
on the actual consumption of energy by the customer, at the price determined by the contract. This reflects the Company’s performance
and the customer’s consumption benefits, with variable consideration being recognized in the period it is due. |
DIGIHOST TECHNOLOGY INC.
Management’s Discussion & Analysis
For the three months ended March 31, 2024
| ● | Sale
of energy: The Company, in its capacity as an agent, recognizes revenue from the sale of energy on a net basis in accordance with IFRS
15. Revenue is recorded upon the satisfaction of the performance obligation, specifically at the point when control of the energy is
transferred to the end customer. This key moment reflects the Company’s fulfillment of its contractual duties. The revenue recognized
is determined by subtracting the profit share remitted to the principal from the gross energy sales. |
(e) Digital
currencies
Digital currencies consist of Bitcoin and Ethereum.
Digital currencies meet the definition of intangible assets in IAS 38 Intangible Assets as they are identifiable non-monetary assets without
physical substance. They are initially recorded at cost and the revaluation method is used to measure the digital currencies subsequently.
Where digital assets are recognized as revenue, the fair value of the Bitcoin received is considered to be the cost of the digital assets.
Under the revaluation method, increases in fair value are recorded in other comprehensive income, while decreases are recorded in profit
or loss. The Company revalues its digital currencies at the end of each quarter. There is no recycling of gains from other comprehensive
income to profit or loss. However, to the extent that an increase in fair value reverses a previous decrease in fair value that has been
recorded in profit or loss, that increase is recorded in profit or loss. Decreases in fair value that reverse gains previously recorded
in other comprehensive income are recorded in other comprehensive income. Gains and losses on digital currencies sold between revaluation
dates are included in profit or loss.
Digital currencies are measured at fair value
using the quoted price on the Gemini Exchange. Gemini serves as the principal market. The Company believes any price difference amongst
the principal market and an aggregated price to be immaterial. Management considers this fair value to be a Level 2 input under IFRS 13
Fair Value Measurement fair value hierarchy as the price on this source represents a quote of the currency on an active market.
(f) Property,
plant, and equipment
Details as to the Company’s policies for
property, plant and equipment are as follows:
| Asset |
|
Measurement
Basis |
|
Amortization
Method |
|
Amortization
Rate |
| Data miners |
|
Cost |
|
Straight-line |
|
12 - 36 months |
| Equipment |
|
Cost |
|
Straight-line |
|
36 - 120 months |
| Leasehold Improvement |
|
Cost |
|
Straight-line |
|
120 months |
| Powerplant in use |
|
Cost |
|
Straight-line |
|
480 months |
Property, plant, and equipment are recorded at
cost less accumulated depreciation. Cost includes all expenditures incurred to bring assets to the location and condition necessary for
them to be operated in the manner intended by management.
Subsequent costs are included in the asset’s
carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with
the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of any replaced parts is derecognized.
All other repairs and maintenance are charged to profit or loss during the fiscal period in which they are incurred.
Gains and losses on disposal are determined by
comparing the proceeds with the carrying amount and are recognized in profit or loss.
DIGIHOST TECHNOLOGY INC.
Management’s Discussion & Analysis
For the three months ended March 31, 2024
(g) Intangible
assets
intangible assets that qualify for separate recognition
are recognized as intangible assets at their fair values. Right of use of an electric power facility is depreciated over 13 years.
(h) Impairment
of non-financial assets
The Company reviews the carrying amounts of its
non-financial assets, including property, plant, and equipment, when events or changes in circumstances indicate the assets may not be
recoverable. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment
loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable
amount of the cash generating unit to which the asset belongs. Assets carried at fair value, such as digital currencies, are excluded
from impairment analysis.
Recoverable amount is the higher of fair value
less costs of disposal and value in use. In assessing value in use, the estimated future cash flows to be derived from continuing use
of the asset or cash generating unit are discounted to their present value using a pre-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. Fair value less costs of disposal is the amount obtainable
from the sale of an asset or cash generating unit in an arm’s length transaction between knowledgeable, willing parties, less the
cost of disposal. When a binding sale agreement is not available, fair value less costs of disposal is estimated using a discounted cash
flow approach with inputs and assumptions consistent with those of a market participant. If the recoverable amount of an asset or cash
generating unit is estimated to be less than its carrying amount, the carrying amount of the asset or cash generating unit is reduced
to its recoverable amount. An impairment loss is recognized immediately in net income. Where an impairment loss subsequently reverses,
the carrying amount of the asset or cash generating unit is increased to the revised estimate of its recoverable amount, such that the
increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized.
(i) Leases
and right-of-use assets
All leases are accounted for by recognizing a
right-of-use asset and a lease liability except for:
| ● | Leases
of low value assets; and |
| ● | Leases
with a duration of twelve months or less. |
Lease liabilities are measured at the present
value of the contractual payments due to the lessor over the lease term, with the discount rate determined by the incremental borrowing
rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they
depend on an index or rate. In such cases, the initial measurement of the lease liability assumes the variable element will remain unchanged
throughout the lease term. Other variable lease payments are expensed in the period to which they relate.
On initial recognition, the carrying value of
the lease liability also includes:
| ● | Amounts
expected to be payable under any residual value guarantee; |
| ● | The
exercise price of any purchase option granted if it is reasonably certain to assess that option; and |
| ● | Any
penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of termination option being exercised. |
Right-of-use assets are initially measured at
cost, which includes the initial amount of the lease liability, reduced for any lease incentives received, and increased for:
| ● | Lease
payments made at or before commencement of the lease; |
| ● | Initial
direct costs incurred; and |
| ● | The
amount of any provision recognised where the Company is contractually required to dismantle, remove, or restore the leased asset. |
DIGIHOST TECHNOLOGY INC.
Management’s Discussion & Analysis
For the three months ended March 31, 2024
Lease liabilities, on initial measurement, increase
as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made.
Right-of-use assets are amortized on a straight-line
basis over the remaining term of the lease or over the remaining economic life of the asset if this is judged to be shorter than the lease
term.
When the Company revises its estimate of the term
of any lease, it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted
at the same discount rate that applied on lease commencement. The carrying value of lease liabilities is similarly revised when the variable
element of future lease payments dependent on a rate or index is revised. In both cases an equivalent adjustment is made to the carrying
value of the right-of-use asset, with the revised carrying amount being amortised over the remaining (revised) lease term or recorded
in profit or loss if the right-of-use asset is reduced to zero.
(j) Goodwill
The Company measures goodwill as the fair value
of the cost of the acquisition less the fair value of the identifiable net assets acquired, all measured as of the acquisition date. Goodwill
is carried at cost less accumulated impairment losses.
(k) Share
capital and equity
Share capital represents the amount received on
the issue of shares, less issuance costs, net of any underlying income tax benefit from these issuance costs. When warrants are issued
in connection with shares, the Company uses the residual method for allocating fair value to the shares and then to warrants.
Contributed surplus include the value of outstanding
warrants and stock options. When warrants and stock options are exercised, the related compensation cost and value are transferred to
share capital.
Deficits include all current and prior year losses.
Digital currency revaluation reserve includes
gains and losses from the revaluation of digital currencies, net of tax.
Cumulative translation reserve includes foreign
currency translation differences arising from the translation of financial statements of foreign entities into United States dollars.
(l) Share-based
compensation
The granting of stock options to employees, officers,
directors, or consultants of the Company requires the recognition of share-based compensation expense with a corresponding increase in
contributed surplus in shareholders’ equity. The fair value of stock options that vest immediately are recorded as share-based compensation
expense at the date of the grant. The expense for stock options that vest over time is recorded over the vesting period using the graded
method, which incorporates management’s estimate of the stock options that are not expected to vest. For stock options where vesting
is subject to the completion of performance milestones, the estimate for completion of the milestone is reviewed at each reporting date
for any change in the estimated vesting date, and to the extent there is a material change in the vesting date estimate, the amortization
to be recognized is recalculated for the new timeline estimate and adjusted on a prospective basis in the current period. The effect of
a change in the number of stock options expected to vest is a change in an estimate and the cumulative effect of the change is recognized
in the period when the change occurs. On exercise of a stock option, the consideration received, and the estimated fair value previously
recorded in contributed surplus is recorded as an increase in share capital.
DIGIHOST TECHNOLOGY INC.
Management’s Discussion & Analysis
For the three months ended March 31, 2024
Stock options awarded to consultants are measured
based on the fair value of the goods and services received unless that fair value cannot be estimated reliably. If the fair value of the
goods and services cannot be reliably measured, then the fair value of the equity instruments granted is used to recognize the expense.
Critical accounting judgements, estimates and
assumption.
The preparation of these financial statements
in conformity with IFRS requires management to make certain estimates, judgments and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and reported amounts of expenses during the reporting period. Actual outcomes
could differ from these estimates. These financial statements include estimates that, by their nature, are uncertain. The impacts of such
estimates are pervasive throughout the financial statements and may require accounting adjustments based on future occurrences. Revisions
to accounting estimates are recognized in the period in which the estimate is revised and future periods if the revision affects both
current and future periods. These estimates are based on historical experience, current and future economic conditions, and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
Significant assumptions about the future that
management has made that could result in a material adjustment to the carrying amounts of assets and liabilities, in the event that actual
results differ from assumptions made, relate to, but are not limited to, the following:
Significant judgements
(i) Income
from digital currency mining
The Company recognizes income from digital currency
mining from the provision of transaction verification services within digital currency networks, commonly termed “cryptocurrency
mining”. As consideration for these services, the Company receives digital currency from each specific network in which it participates
(“coins”). Income from digital currency mining is measured based on the fair value of the coins received. The fair value is
determined using the spot price of the coin on the date of receipt. The coins are recorded on the statement of financial position, as
digital currencies, at their fair value less costs to sell and re- measured at each reporting date. Revaluation gains or losses, as well
as gains or losses on the sale of coins for traditional (fiat) currencies are included in profit or loss in accordance with the Company’s
treatment of its digital currencies as a traded commodity.
There is currently no specific definitive guidance
in IFRS or alternative accounting frameworks for the accounting for the mining and strategic selling of digital currencies and management
has exercised significant judgement in determining appropriate accounting treatment for the recognition of income from digital currency
mining for mining of digital currencies. Management has examined various factors surrounding the substance of the Company’s operations,
including the stage of completion being the completion and addition of a block to a blockchain and the reliability of the measurement
of the digital currency received.
(ii) Going
concern
The assessment of the Company’s ability to continue
as a going concern involves judgment regarding future funding available for its operations and working capital requirements as discussed
in note 1.
(iii) Leases
– incremental borrowing rate
Judgment is applied when determining the incremental
borrowing rate used to measure the lease liability of each lease contract, including an estimate of the asset-specific security impact.
The incremental borrowing rate should reflect the interest rate the Company would pay to borrow at a similar term and with similar security.
DIGIHOST TECHNOLOGY INC.
Management’s Discussion & Analysis
For the three months ended March 31, 2024
(iv) Income,
value added, withholding and other taxes
The Company is subject to income, value added,
withholding and other taxes. Significant judgment is required in determining the Company’s provisions for taxes. There are many transactions
and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Company recognizes
liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. The determination of the Company’s
income, value added, withholding and other tax liabilities requires interpretation of complex laws and regulations. The Company’s interpretation
of taxation law as applied to transactions and activities may not coincide with the interpretation of the tax authorities. All tax related
filings are subject to government audit and potential reassessment subsequent to the financial statement reporting period. Where the final
tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the tax related
accruals and deferred income tax provisions in the period in which such determination is made.
Significant estimates
(i) Determination
of asset and liability fair values and allocation of purchase consideration
Significant business combinations require judgements
and estimates to be made at the date of acquisition in relation to determining the relative fair value of the allocation of the purchase
consideration over the fair value of the assets. The information necessary to measure the fair values as at the acquisition date of assets
acquired requires management to make certain judgements and estimates about future events, including but not limited to availability of
hardware and expertise, future production opportunities, future digital currency prices and future operating costs.
(ii) Useful
lives of property, plant, and equipment
Depreciation of data miners and equipment are
an estimate of its expected life. In order to determine the useful life of computing equipment, assumptions are required about a range
of computing industry market and economic factors, including required hashrates, technological changes, availability of hardware and other
inputs, and production costs.
(iii) Digital
currency valuation
Digital currencies consist of cryptocurrency denominated
assets (note 4) and are included in current assets. Digital currencies are carried at their fair value determined by the spot rate less
costs to sell. The digital currency market is still a new market and is highly volatile; historical prices are not necessarily indicative
of future value; a significant change in the market prices for digital currencies would have a significant impact on the Company’s
earnings and financial position.
(iv) Impairment
of goodwill
Determining whether goodwill is impaired requires
an estimation of the recoverable amount of the CGU. Such recoverable amount corresponds, for the purpose of impairment assessment, to
the higher of the value in use or the fair value less costs of disposal of the CGU to which goodwill has been allocated. The value in
use calculation requires management to estimate future cash flows expected to arise from the CGU and a suitable discount rate in order
to calculate present value. The key assumptions required for the value in use estimation are described in note 8 of the year-end financial
statements.
For the value in use approach, the values assigned
to key assumptions reflect past experience and external sources of information that are deemed accurate and reliable. The value in use
is categorized as Level 3 in the fair value hierarchy described under IFRS 13, Fair Value Measurement, as one or more key assumption used
is based on unobservable data requiring the use of judgement.
DIGIHOST TECHNOLOGY INC.
Management’s Discussion & Analysis
For the three months ended March 31, 2024
Disclosure of Internal Controls
Management has established processes to provide
it with sufficient knowledge to support representations that it has exercised reasonable diligence to ensure that (i) the consolidated
financial statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or that
is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of and for the periods
presented by the financial statements, and (ii) the consolidated financial statements fairly present in all material respects the financial
condition, results of operations and cash flow of the Company, as of the date of and for the periods presented.
In contrast to the certificate required for non-venture
issuers under National Instrument 52-109 - Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”),
the Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls
and procedures (“DC&P”) and internal control over financial reporting (“ICFR”), as defined in NI 52-109. In
particular, the certifying officers filing such certificate are not making any representations relating to the establishment and maintenance
of:
| (i) | controls and other procedures designed to provide reasonable
assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted
under securities legislation is recorded, processed, summarized, and reported within the time periods specified in securities legislation;
and |
| (ii) | a process to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with the issuer’s
GAAP (IFRS). |
The Company’s certifying officers are responsible
for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in the
certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and
implement on a cost-effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability,
transparency and timeliness of interim and annual filings and other reports provided under securities legislation.
Factors Impacting Profitability
Market Price of Bitcoin: The Company’s
business is heavily dependent on the spot price of Bitcoin. The prices of cryptocurrencies, including Bitcoin, have experienced substantial
volatility, meaning that high or low prices may be based on speculation and incomplete information, subject to rapidly changing investor
sentiment, and influenced by factors such as technology, regulatory void or changes, fraudulent actors, manipulation, and media reporting.
Bitcoin (as well as other cryptocurrencies) may have value based on various factors, including, but not limited to, their acceptance as
a means of exchange by consumers and producers, scarcity, and market demand, all of which are beyond the Company’s control.
Halving: Further affecting the industry,
particularly for the Bitcoin blockchain, the Bitcoin 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 Bitcoin, which uses a proof-of-work consensus algorithm.
At a predetermined block, the mining reward is cut in 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 three 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; and (3) on May 11, 2020,at block height
630,000, when the reward was reduced to its current level of 6.25 Bitcoin per block. The most recent halving for the Bitcoin blockchain
occurred in April 2024 at block height 840,000. Halvings will continue to occur until the total amount of Bitcoin currency rewards issued
reaches approximately 21million and the theoretical supply of new Bitcoin is exhausted, which is expected to occur around the year 2140.
Many factors influence the price of Bitcoin, and potential increases or decreases in prices in advance of or following a future halving
is unknown.
DIGIHOST TECHNOLOGY INC.
Management’s Discussion & Analysis
For the three months ended March 31, 2024
Network Hash Rate and Difficulty: 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
hash rate, relative to the global network hash rate (i.e., the aggregate amount of computing power devoted to supporting the Bitcoin blockchain
at a given time).As demand for Bitcoin has increased, the global network hash rate has increased rapidly, and as greater adoption of Bitcoin
occurs, we expect the demand for new Bitcoin will likewise increase as more mining companies are drawn into the industry by this increased
demand. Further, as a greater number of increasingly powerful miners have been deployed, the network difficulty for Bitcoin has consequently
also increased. 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 (approximately every 2 weeks) so that the average time between each block validation remains approximately ten minutes. A
high difficulty means that more computing power will be required in order to solve a block and earn a new Bitcoin reward, which, in turn,
makes the Bitcoin network more secure by limiting the possibility of one miner or mining pool gaining control of the network. Therefore,
as new and existing miners deploy additional hash rate, the global network hash rate will continue to increase, meaning a miner’s
share of the global network hash rate (and therefore its chance of earning Bitcoin rewards) will decline if it fails to deploy additional
hash rate at pace with the industry.
Risk Factors
An investment in the securities of the Company
is highly speculative and involves numerous and significant risks. Such investment should be undertaken only by investors whose financial
resources are sufficient to enable them to assume these risks and who have no need for immediate liquidity in their investment. Prospective
investors should carefully consider the risk factors that have affected, and which in the future are reasonably expected to affect, the
Company and its financial position. Please refer to the section entitled “Risk Factors” in the Company’s Annual Information
Form for the fiscal year ended December 31, 2023, dated April 2, 2024 available on SEDAR + at www.sedarplus.ca and the Risk Factors contained
the Company’s various filings on SEDAR + and on EDGAR at www.sec.gov/edgar.
Cautionary Note Regarding Forward-Looking Information
This MD&A contains certain forward-looking
information and forward-looking statements, as defined in applicable securities laws (collectively referred to herein as “forward-looking
statements”). These statements relate to future events or the Company’s future performance. All statements other than statements
of historical fact are forward-looking statements. Often, but not always, forward-looking statements can be identified by the use of words
such as “plans”, “expects”, “is expected”, “budget”, “scheduled”, “estimates”,
“continues”, “forecasts”, “projects”, “predicts”, “intends”, “anticipates”
or “believes”, or variations of, or the negatives of, such words and phrases, or statements that certain actions, events or
results “may”, “could”, “would”, “should”, “might” or “will” be
taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors that could cause
actual results to differ materially from those anticipated in such forward-looking statements. The forward-looking statements in this
MD&A speak only as of the date of this MD&A or as of the date specified in such statement. The following table outlines certain
significant forward-looking statements contained in this MD&A and provides the material assumptions used to develop such forward-looking
statements and material risk factors that could cause actual results to differ materially from the forward-looking statements. In particular,
this MD&A contains forward-looking statements pertaining to the following:
| ● | the
impact of the Bitcoin Halving in May 2024 on the price of Bitcoin and the normalization after the Bitcoin Halving to pre-Bitcoin Halving
profitability levels; |
| ● | future
debt levels, financial capacity, liquidity, and capital resources; |
| ● | anticipated
future sources of funds to meet working capital requirements; |
| ● | future
capital expenditures and contractual commitments; |
| ● | expectations
respecting future financial results; |
DIGIHOST TECHNOLOGY INC.
Management’s Discussion & Analysis
For the three months ended March 31, 2024
| ● | expectations
regarding benefits of certain transactions and capital investments; |
| ● | the
Company’s objectives, strategies, and competitive strengths and growth strategy, including the ability to develop and build out
the infrastructure in North Carolina; |
| ● | expectations
with respect to future opportunities; |
| ● | expectations
with respect to the Company’s financial position; |
| ● | the
Company’s capital expenditure programs and future capital requirements; |
| ● | capital
resources and the Company’s ability to raise capital; |
| ● | industry
conditions pertaining to the cryptocurrency industry; and |
| ● | the
other factors discussed under “Risk Factors”. |
This list of factors should not be construed as
exhaustive.
Additional Information
Additional information concerning the Company
is available on SEDAR + at www.sedarplus.ca and on EDGAR at www.sec.gov/edgar.
Exhibit 99.2
DIGIHOST
TECHNOLOGY INC.
CONDENSED
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(EXPRESSED
IN UNITED STATES DOLLARS)
(UNAUDITED)
Digihost
Technology Inc.
Condensed
Interim Consolidated Statements of Financial Position
(Expressed in United States Dollars) (Unaudited)
| | |
As at
March 31,
2024 Unaudited | | |
As at
December 31,
2023
Audited | |
| ASSETS | |
| | |
| |
| Current assets | |
| | |
| |
| Cash | |
$ | 1,313,665 | | |
$ | 341,273 | |
| Digital currencies (note 3) | |
| 2,910,304 | | |
| 822,884 | |
| Amounts receivable and other assets (note 5) | |
| 725,778 | | |
| 867,257 | |
| Income tax receivable | |
| - | | |
| 168,337 | |
| Total current assets | |
| 4,949,747 | | |
| 2,199,751 | |
| | |
| | | |
| | |
| Property, plant and equipment (note 6) | |
| 29,480,730 | | |
| 33,386,684 | |
| Right-of-use assets (note 7) | |
| 2,322,949 | | |
| 2,366,115 | |
| Intangible asset (note 8) | |
| 1,152,491 | | |
| 1,184,798 | |
| Amounts receivable and other assets (note 5) | |
| 2,479,650 | | |
| 2,159,314 | |
| Promissory note receivable (note 9) | |
| 850,685 | | |
| 850,685 | |
| Total assets | |
$ | 41,236,252 | | |
$ | 42,147,347 | |
| | |
| | | |
| | |
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |
| | | |
| | |
| | |
| | | |
| | |
| Current liabilities | |
| | | |
| | |
| Accounts payable and accrued liabilities | |
$ | 4,047,209 | | |
$ | 4,510,757 | |
| Income tax payable | |
| 50,255 | | |
| - | |
| Lease liabilities (note 10) | |
| 118,437 | | |
| 110,651 | |
| Loans payable (note 11) | |
| 278,065 | | |
| 253,630 | |
| Mortgage payable (note 12) | |
| 261,632 | | |
| 389,064 | |
| Total current liabilities | |
| 4,755,598 | | |
| 5,264,102 | |
| | |
| | | |
| | |
| Deposits payable | |
| 1,855,317 | | |
| 1,486,184 | |
| Lease liabilities (note 10) | |
| 302,165 | | |
| 336,863 | |
| Loans payable (note 11) | |
| - | | |
| 356,710 | |
| Warrant liabilities (note 13) | |
| 1,286,952 | | |
| 5,456,749 | |
| Total liabilities | |
| 8,200,032 | | |
| 12,900,608 | |
| | |
| | | |
| | |
| Shareholders’ equity | |
| | | |
| | |
| Share capital (note 14) | |
| 44,256,853 | | |
| 42,503,660 | |
| Contributed surplus | |
| 13,967,348 | | |
| 15,468,823 | |
| Cumulative translation adjustment | |
| (3,534,832 | ) | |
| (2,228,447 | ) |
| Deficit | |
| (21,653,149 | ) | |
| (26,497,297 | ) |
| Total shareholders’ equity | |
| 33,036,220 | | |
| 29,246,739 | |
| Total liabilities and shareholders’ equity | |
$ | 41,236,252 | | |
$ | 42,147,347 | |
Nature
of operations and going concern (note 1)
The
accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
Digihost
Technology Inc.
Condensed
Interim Consolidated Statements of Comprehensive Income (Loss)
(Expressed in United States Dollars) (Unaudited)
| Three Months Ended March 31, | |
2024 | | |
2023 | |
| Revenue | |
| | |
| |
| Digital currency mining (note 3) | |
$ | 6,810,389 | | |
$ | 3,809,066 | |
| Colocation services (note 3(3)) | |
| 1,426,931 | | |
| - | |
| Sale of electricity (note 3(3)) | |
| 3,378,820 | | |
| - | |
| Sale of energy (note 4) | |
| 1,342,179 | | |
| 295,281 | |
| Total revenue | |
| 12,958,319 | | |
| 4,104,347 | |
| | |
| | | |
| | |
| Cost of digital currency mining | |
| | | |
| | |
| Cost of revenue | |
| (8,999,882 | ) | |
| (2,686,725 | ) |
| Depreciation and amortization | |
| (3,951,251 | ) | |
| (3,222,680 | ) |
| Miner lease and hosting agreement (note 3(3)) | |
| - | | |
| (638,689 | ) |
| Gross profit (loss) | |
| 7,186 | | |
| (2,443,747 | ) |
| | |
| | | |
| | |
| Expenses | |
| | | |
| | |
| Office and administrative expenses | |
| (573,263 | ) | |
| (467,372 | ) |
| Professional fees | |
| (362,805 | ) | |
| (373,734 | ) |
| Regulatory fees | |
| (34,956 | ) | |
| (83,264 | ) |
| Foreign exchange gain (loss) | |
| 1,417,874 | | |
| (47,363 | ) |
| Gain (loss) on sale of digital currencies (note 3) | |
| 398,357 | | |
| 873,271 | |
| Change in fair value of loan payable | |
| (19,730 | ) | |
| (164,796 | ) |
| Other income (expense) | |
| 13,003 | | |
| 6,833 | |
| Change in fair value of amount owing for Miner Lease Agreement | |
| - | | |
| (225,102 | ) |
| Share based compensation (note 16) | |
| (246,261 | ) | |
| (401,496 | ) |
| Gain on revaluation of digital currencies (note 3) | |
| 247,464 | | |
| 10,443 | |
| Operating income (loss) | |
| 846,869 | | |
| (3,316,327 | ) |
| Revaluation of warrant liabilities (note 13) | |
| 4,057,770 | | |
| (5,617,304 | ) |
| Net financial expenses (note 19) | |
| (10,236 | ) | |
| (159,408 | ) |
| Net income (loss) before income taxes | |
| 4,894,403 | | |
| (9,093,039 | ) |
| Income tax expense | |
| (50,255 | ) | |
| - | |
| Net income (loss) for the period | |
| 4,844,148 | | |
| (9,093,039 | ) |
| Other comprehensive income (loss) | |
| | | |
| | |
| Items that will be reclassified to net income Foreign currency translation adjustment | |
| (1,306,385 | ) | |
| 49,483 | |
| Total comprehensive income (loss) for the period | |
$ | 3,537,763 | | |
$ | (9,043,556 | ) |
| Basic income
(loss) per share (note 17) | |
$ | 0.17 | | |
$ | (0.32 | ) |
| Diluted
income (loss) per share (note 17) | |
$ | 0.17 | | |
$ | (0.32 | ) |
The
accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
Digihost
Technology Inc.
Condensed Interim Consolidated Statements of Cash Flows
(Expressed in United States Dollars) (Unaudited)
| Three Months Ended March 31, | |
2024 | | |
2023 | |
| Operating activities | |
| | |
| |
| Net income (loss) for the period | |
$ | 4,844,148 | | |
$ | (9,093,039 | ) |
| Adjustments for: | |
| | | |
| | |
| Digital currencies items (note 20) | |
| (2,087,420 | ) | |
| 2,106,476 | |
| Interest income accrual | |
| (6,000 | ) | |
| - | |
| Depreciation of right-of-use assets | |
| 43,166 | | |
| 43,083 | |
| Depreciation and amortization | |
| 3,938,260 | | |
| 3,209,688 | |
| Interest on lease liabilities | |
| 30,596 | | |
| 27,108 | |
| Change in fair value of amount owing for Miner Lease Agreement | |
| - | | |
| 225,102 | |
| Share based compensation | |
| 246,261 | | |
| 401,496 | |
| Change in warrant liability | |
| (4,057,770 | ) | |
| 5,617,304 | |
| Interest accrued on loan payable | |
| - | | |
| 138,300 | |
| Change in fair value of loan payable | |
| 19,730 | | |
| 164,796 | |
| Income tax expense | |
| 50,255 | | |
| - | |
| Foreign exchange loss (gain) | |
| (1,418,411 | ) | |
| 47,246 | |
| Working capital items (note 20) | |
| (98,935 | ) | |
| 132,570 | |
| Net cash provided by operating activities | |
| 1,503,880 | | |
| 3,020,130 | |
| | |
| | | |
| | |
| Investing activities | |
| | | |
| | |
| Purchase of property, plant and equipment | |
| - | | |
| (769,754 | ) |
| Proceeds from sale of property, plant and equipment | |
| - | | |
| 499,950 | |
| Business combination (note 4) | |
| - | | |
| (4,599,666 | ) |
| Net cash used in investing activities | |
| - | | |
| (4,869,470 | ) |
| | |
| | | |
| | |
| Financing activities | |
| | | |
| | |
| Repayment of mortgage | |
| (133,500 | ) | |
| (133,500 | ) |
| Proceeds of shares issued for cash | |
| 5,457 | | |
| 365,463 | |
| Proceeds from loans payable | |
| - | | |
| 691,500 | |
| Repayment of loans payable | |
| (366,365 | ) | |
| (66,906 | ) |
| Lease payments | |
| (37,080 | ) | |
| (36,000 | ) |
| Net cash (used in) provided by financing activities | |
| (531,488 | ) | |
| 820,557 | |
| | |
| | | |
| | |
| Net change in cash | |
| 972,392 | | |
| (1,028,783 | ) |
| Cash, beginning of period | |
| 341,273 | | |
| 1,850,622 | |
| Cash, end of period | |
$ | 1,313,665 | | |
$ | 821,839 | |
The
accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
Digihost
Technology Inc.
Condensed
Interim Consolidated Statement of Changes in Shareholders’ Equity
(Expressed
in United States Dollars) (Unaudited)
| | |
Number
of shares (note 14) | | |
| | |
| | |
Cumulative | | |
Digital currency | | |
| | |
| |
| | |
Subordinate
voting shares | | |
Proportionate
voting shares | | |
Share
capital | | |
Contributed
surplus | | |
Translation
Adjustment | | |
revaluation
reserve | | |
Deficit | | |
Total | |
| Balance,
December 31, 2022 | |
| 27,842,204 | | |
| 3,333 | | |
$ | 39,602,634 | | |
$ | 15,675,828 | | |
$ | (3,491,583 | ) | |
$ | - | | |
$ | (4,611,887 | ) | |
$ | 47,174,992 | |
| Shares
issued for cash | |
| 233,466 | | |
| - | | |
| 365,462 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 365,462 | |
| Restricted
share units converted to common shares | |
| 479,582 | | |
| - | | |
| 1,827,782 | | |
| (1,827,782 | ) | |
| - | | |
| - | | |
| - | | |
| - | |
| Share
based compensation | |
| - | | |
| - | | |
| - | | |
| 401,496 | | |
| - | | |
| - | | |
| - | | |
| 401,496 | |
| Transaction
with owners | |
| 28,555,252 | | |
| 3,333 | | |
| 41,795,878 | | |
| 14,249,542 | | |
| (3,491,583 | ) | |
| - | | |
| (4,611,887 | ) | |
| 47,941,950 | |
| Foreign
currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| 49,483 | | |
| - | | |
| - | | |
| 49,483 | |
| Net
loss for the period | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (9,093,039 | ) | |
| (9,093,039 | ) |
| Total
comprehensive loss for the period | |
| - | | |
| - | | |
| - | | |
| - | | |
| 49,483 | | |
| - | | |
| (9,093,039 | ) | |
| (9,043,556 | ) |
| Balance,
March 31, 2023 | |
| 28,555,252 | | |
| 3,333 | | |
$ | 41,795,878 | | |
$ | 14,249,542 | | |
$ | (3,442,100 | ) | |
$ | - | | |
$ | (13,704,926 | ) | |
$ | 38,898,394 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Balance,
December 31, 2023 | |
| 28,878,740 | | |
| 3,333 | | |
| 42,503,660 | | |
| 15,468,823 | | |
| (2,228,447 | ) | |
| - | | |
| (26,497,297 | ) | |
| 29,246,739 | |
| Shares
issued for cash (note 14(b)(i)) | |
| 3,600 | | |
| - | | |
| 5,457 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 5,457 | |
| Restricted
share units converted to common shares | |
| 451,409 | | |
| - | | |
| 1,747,736 | | |
| (1,747,736 | ) | |
| - | | |
| - | | |
| - | | |
| - | |
| Share
based compensation | |
| - | | |
| - | | |
| - | | |
| 246,261 | | |
| - | | |
| - | | |
| - | | |
| 246,261 | |
| Transaction
with owners | |
| 29,333,749 | | |
| 3,333 | | |
| 44,256,853 | | |
| 13,967,348 | | |
| (2,228,447 | ) | |
| - | | |
| (26,497,297 | ) | |
| 29,498,457 | |
| Foreign
currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,306,385 | ) | |
| - | | |
| - | | |
| (1,306,385 | ) |
| Net
loss for the period | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 4,844,148 | | |
| 4,844,148 | |
| Total
comprehensive income (loss) for the period | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,306,385 | ) | |
| - | | |
| 4,844,148 | | |
| 3,537,763 | |
| Balance,
March 31, 2024 | |
| 29,333,749 | | |
| 3,333 | | |
$ | 44,256,853 | | |
$ | 13,967,348 | | |
$ | (3,534,832 | ) | |
$ | - | | |
$ | (21,653,149 | ) | |
$ | 33,036,220 | |
The
accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements.
Digihost
Technology Inc.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2024
(Expressed
in United States Dollars) (Unaudited)
| 1. | Nature of operations and going
concern |
Digihost
Technology Inc. (the “Company” or “Digihost”) and its subsidiaries, Digihost International, Inc., DGX Holding, LLC,
and World Generation X, LLC (together the “Company”) is a blockchain technology company with operations in cryptocurrency mining
and also a supplier of energy through its recent acquisition of a power plant. The head office of the Company is located at 2830 Produce
Row, Houston, TX, 77023.
These
unaudited condensed interim consolidated financial statements of the Company were reviewed, approved and authorized for issue by the
Board of Directors on May 14, 2024.
Going
Concern
These
unaudited condensed interim consolidated financial statements have been prepared on the basis of accounting principles applicable to
a going concern, which assume that the Company will continue in operation and will be able to realize its assets and discharge its liabilities
in the normal course of operations. In assessing whether the going concern assumption is appropriate, management takes into account all
available information about the future, which is at least, but not limited to twelve months from the end of the reporting period. The
use of these principles may not be appropriate.
As
at March 31, 2024, the Company has a positive working capital of $194,149 (December 31, 2023 - working capital deficiency of $3,064,351).
The current working capital is not sufficient to meet the Company’s requirements and business growth initiatives. The Company’s
ability to continue as a going concern depends upon its ability generate positive cashflows from its operations and to raise additional
financing. Even if the Company has been successful in the past in raising financings, there is no assurance that it will manage to obtain
additional financing in the future.
These
material uncertainties may cast significant doubt regarding the Company’s ability to continue as a going concern. These consolidated
financial statements do not include any adjustments or disclosures that may be necessary should the Company not be able to continue as
a going concern. If this were the case, these adjustments could be material.
| 2. | Material accounting policies |
| (a) | Statement of compliance |
The
Company applies IFRS as issued by the International Accounting Standards Board (“IASB”) and interpretations issued by the
IFRS Interpretations Committee. These unaudited condensed interim consolidated financial statements have been prepared in accordance
with International Accounting Standard 34 - Interim Financial Reporting. Accordingly, they do not include all of the information required
for full annual financial statements.
The
policies applied in these unaudited condensed interim consolidated financial statements are based on IFRS issued and outstanding as of
May 14, 2024, the date the Board of Directors approved the statements. The same accounting policies and methods of computation are followed
in these unaudited condensed interim consolidated financial statements as compared with the most recent annual financial statements as
at and for the year ended December 31, 2023. Any subsequent changes to IFRS that are given effect in the Company’s annual financial
statements for the year ending December 31, 2024 could result in restatement of these unaudited condensed interim consolidated financial
statements.
Digihost
Technology Inc.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2024
(Expressed
in United States Dollars) (Unaudited)
| 2. | Material
accounting policies (continued) |
| (b) | Standards,
amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Company. |
At
the date of authorization of these unaudited condensed interim consolidated financial statements, several new, but not yet effective,
standards and amendments to existing standards, and interpretations have been published by the IASB. None of these standards or amendments
to existing standards have been adopted early by the Company. Management anticipates that all relevant pronouncements will be adopted
for the first period beginning on or after the effective date of the pronouncement. New standards, amendments and interpretations not
adopted in the current year have not been disclosed as they are not expected to have a material impact on the Company’s unaudited
condensed interim consolidated financial statements.
| (c) | Critical accounting judgements, estimates
and assumptions |
The
preparation of these financial statements in conformity with IFRS Accounting Standards requires management to make certain estimates,
judgments and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported
amounts of expenses during the reporting period. Actual outcomes could differ from these estimates. These financial statements include
estimates that, by their nature, are uncertain. The impacts of such estimates are pervasive throughout the financial statements, and
may require accounting adjustments based on future occurrences. Revisions to accounting estimates are recognized in the year in which
the estimate is revised and future years if the revision affects both current and future years. These estimates are based on historical
experience, current and future economic conditions and other factors, including expectations of future events that are believed to be
reasonable under the circumstances.
Significant
assumptions about the future that management has made that could result in a material adjustment to the carrying amounts of assets and
liabilities, in the event that actual results differ from assumptions made, relate to, but are not limited to, the following:
Significant
judgements
| (i) | Income from digital currency
mining |
The
Company recognizes income from digital currency mining from the provision of transaction verification services within digital currency
networks, commonly termed “cryptocurrency mining”. As consideration for these services, the Company receives digital currency
from each specific network in which it participates (“coins”). Income from digital currency mining is measured based on the
fair value of the coins received. The fair value is determined using the spot price of the coin on the date of contract inception. The
coins are recorded on the statement of financial position, as digital currencies, at their fair value less costs to sell and re- measured
at each reporting date. Revaluation gains or losses, as well as gains or losses on the sale of coins for traditional (fiat) currencies
are included in profit or loss in accordance with the Company’s treatment of its digital currencies as a traded commodity.
There
is currently no specific definitive guidance in IFRS or alternative accounting frameworks for the accounting for the mining and strategic
selling of digital currencies and management has exercised significant judgement in determining appropriate accounting treatment for
the recognition of income from digital currency mining for mining of digital currencies. Management has examined various factors surrounding
the substance of the Company’s operations, including the stage of completion being the completion and addition of a block to a
blockchain and the reliability of the measurement of the digital currency received.
| (ii) | Leases – incremental borrowing
rate |
Judgment
is applied when determining the incremental borrowing rate used to measure the lease liability of each lease contract, including an estimate
of the asset-specific security impact. The incremental borrowing rate should reflect the interest rate the Company would pay to borrow
at a similar term and with similar security.
Digihost
Technology Inc.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2024
(Expressed
in United States Dollars) (Unaudited)
| 2. | Material
accounting policies (continued) |
Significant
judgements (continued)
The
assessment of the Company’s ability to continue as a going concern involves judgment regarding future funding available for its operations
and working capital requirements as discussed in Note 1.
| (iv) | Income, value added, withholding
and other taxes |
The
Company is subject to income, value added, withholding and other taxes. Significant judgment is required in determining the Company’s
provisions for taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary
course of business. The Company recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes
will be due. The determination of the Company’s income, value added, withholding and other tax liabilities requires interpretation of
complex laws and regulations. The Company’s interpretation of taxation law as applied to transactions and activities may not coincide
with the interpretation of the tax authorities. All tax related filings are subject to government audit and potential reassessment subsequent
to the financial statement reporting period. Where the final tax outcome of these matters is different from the amounts that were initially
recorded, such differences will impact the tax related accruals and deferred income tax provisions in the year in which such determination
is made.
Significant
estimates
| (i) | Determination of asset and liability
fair values and allocation of purchase consideration |
Significant
business combinations require judgements and estimates to be made at the date of acquisition in relation to determining the relative
fair value of the allocation of the purchase consideration over the fair value of the assets. The information necessary to measure the
fair values as at the acquisition date of assets acquired requires management to make certain judgements and estimates about future events,
including but not limited to availability of hardware and expertise, future production opportunities, future digital currency prices
and future operating costs.
| (ii) | Useful lives of property, plant
and equipment |
Depreciation
of data miners and equipment are an estimate of its expected life. In order to determine the useful life of computing equipment, assumptions
are required about a range of computing industry market and economic factors, including required hashrates, technological changes, availability
of hardware and other inputs, and production costs.
| (iii) | Digital currency valuation |
Digital
currencies consist of cryptocurrency denominated assets (note 3) and are included in current assets. Digital currencies are carried at
their fair value determined by the spot rate less costs to sell. The digital currency market is still a new market and is highly volatile;
historical prices are not necessarily indicative of future value; a significant change in the market prices for digital currencies would
have a significant impact on the Company’s earnings and financial position.
Impairment
of data miners was estimated based on the recoverable amount of mining equipment based on current market prices and hash rate power per
miner type. The recoverable amount represents the higher value between an asset’s fair value less costs to sell and its value in use.
Hash rate power refers to the computational power of the mining equipment, which directly affects the mining efficiency and potential
revenue generation. As the market prices for mining equipment and hash rate power can vary significantly over time, these factors are
considered in estimating the recoverable amount of the assets. The current market prices for mining equipment are obtained from various
sources, including manufacturers, distributors, and marketplaces for used equipment. Management reviews and compares these prices regularly
to ensure the accuracy and relevance of the data.
Digihost
Technology Inc.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2024
(Expressed
in United States Dollars) (Unaudited)
The
Company’s holdings of digital currencies consist of the following:
| | |
As
at
March 31,
2024 | | |
As
at
December 31,
2023 | |
| Bitcoin | |
$ | 2,910,304 | | |
$ | 822,884 | |
The
continuity of digital currencies was as follows:
| | |
Number
of
Bitcoin | | |
Amount | | |
Number
of
Ethereum | | |
Amount | | |
Total
Amount | |
| Balance, December 31, 2022 | |
| 111 | | |
$ | 1,842,177 | | |
| 801 | | |
$ | 958,480 | | |
$ | 2,800,657 | |
| Bitcoin mined(2) | |
| 640 | | |
| 18,128,241 | | |
| - | | |
| - | | |
| 18,128,241 | |
| Bitcoin received from colocation services(3) | |
| 6 | | |
| 185,819 | | |
| - | | |
| - | | |
| 185,819 | |
| Bitcoin received for electricity sales(3) | |
| 18 | | |
| 538,197 | | |
| - | | |
| - | | |
| 538,197 | |
| Digital currencies traded for cash | |
| (655 | ) | |
| (18,018,987 | ) | |
| (801 | ) | |
| (1,245,993 | ) | |
| (19,264,980 | ) |
| Digital currencies paid for services | |
| (20 | ) | |
| (433,492 | ) | |
| - | | |
| - | | |
| (433,492 | ) |
| Digital currencies for loan repayment | |
| (30 | ) | |
| (883,622 | ) | |
| - | | |
| - | | |
| (883,622 | ) |
| Bitcoin remitted to Northern Data(2) | |
| (51 | ) | |
| (1,204,463 | ) | |
| - | | |
| - | | |
| (1,204,463 | ) |
| Gain on sale of digital currencies | |
| - | | |
| 658,023 | | |
| - | | |
| 287,513 | | |
| 945,536 | |
| Revaluation adjustment(1) | |
| - | | |
| 10,991 | | |
| - | | |
| - | | |
| 10,991 | |
| Balance, December 31, 2023 | |
| 19 | | |
| 822,884 | | |
| - | | |
| - | | |
| 822,884 | |
| Bitcoin mined for Digihost | |
| 129 | | |
| 6,810,389 | | |
| - | | |
| - | | |
| 6,810,389 | |
| Bitcoin received from colocation services(3) | |
| 4 | | |
| 228,935 | | |
| - | | |
| - | | |
| 228,935 | |
| Bitcoin received for electricity sales(3) | |
| 12 | | |
| 633,011 | | |
| - | | |
| - | | |
| 633,011 | |
| Digital currencies paid for services | |
| (5 | ) | |
| (276,051 | ) | |
| - | | |
| - | | |
| (276,051 | ) |
| Digital currencies traded for cash | |
| (113 | ) | |
| (5,681,325 | ) | |
| - | | |
| - | | |
| (5,681,325 | ) |
| Digital currencies for loan repayment | |
| (6 | ) | |
| (273,360 | ) | |
| - | | |
| - | | |
| (273,360 | ) |
| Loss on sale of digital currencies | |
| - | | |
| 398,357 | | |
| - | | |
| - | | |
| 398,357 | |
| Revaluation adjustment(1) | |
| - | | |
| 247,464 | | |
| - | | |
| - | | |
| 247,464 | |
| Balance, March 31, 2024 | |
| 40 | | |
$ | 2,910,304 | | |
| - | | |
$ | - | | |
$ | 2,910,304 | |
| (1) | Digital
assets held are revalued each reporting period based on the fair market value of the price
of Bitcoin and Ethereum on the reporting date. As at March 31, 2024, the price of Bitcoin
was $71,306 (December 31, 2023 - $42,244) resulting in total revaluation gain of $247,464. |
| (2) | During
the year ended December 31, 2021, the Company entered into a Miner Lease Agreement and a
hosting services agreement with Northern Data, NY LLC, pursuant to which the parties have
agreed to split a portion of the mining rewards received and energy costs incurred for the
miners put in service pursuant to these agreements. The Miner Lease Agreement was terminated
on February 15, 2023. |
| (3) | During
the year ended December 31, 2023, the Company entered into a Mining Operations Agreement
with Northern Data NY, LLC, and Colocation Services Agreements with both Corner Energy Ltd.
and Bit Digital USA, Inc. Pursuant to these agreements, the parties have agreed to split
a portion of the energy costs and mining rewards received incurred for the power consumed
by the miners put in service at the Company’s respective sites pursuant to these agreements.
As at March 31, 2024, the Company is owed $244,558 from these parties related to these agreements
(December 31, 2023 - $565,680). |
Digihost
Technology Inc.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2024
(Expressed
in United States Dollars) (Unaudited)
On
February 7, 2023, the Company completed the acquisition of a 60 MW power plant in North Tonawanda, New York for a total consideration
of $4,749,666 of which $150,000 was paid in previous years. The transaction was accounted for as a business combination under IFRS 3,
Business Combinations. The Company completed this business combination as part of its ongoing infrastructure expansion strategy and increase
its available computing power. Operation of the plant will help support the local utility power grid for reliability and the plant will
be readily available for residential and commercial consumers during peak periods of demand.
At
the date of acquisition, the Company determined the fair value of the net identified net assets as follows:
| Total
final consideration paid in cash | |
$ | 4,749,666 | |
| Identified
fair value of net assets acquired: | |
| | |
| Prepaids and deposits | |
| 418,287 | |
| Land | |
| 530,000 | |
| Power plant infrastructure | |
| 4,643,800 | |
| PPA capacity liability | |
| (213,100 | ) |
| Accounts payable | |
| (218,621 | ) |
| Loan payable | |
| (410,700 | ) |
| | |
$ | 4,749,666 | |
| 5. | Amounts receivable and other assets |
| | |
As
at
March 31,
2024 | | |
As
at
December 31,
2023 | |
| Deposits | |
$ | 2,479,650 | | |
$ | 2,297,314 | |
| Prepaid expenses | |
| 135,286 | | |
| 115,577 | |
| Accounts receivable | |
| 368,155 | | |
| 565,680 | |
| Other receivable | |
| 168,337 | | |
| - | |
| Interest
receivable (note 9) | |
| 54,000 | | |
| 48,000 | |
| | |
| 3,205,428 | | |
| 3,026,571 | |
| Long-term deposits and
prepaid expenses | |
| (2,479,650 | ) | |
| (2,159,314 | ) |
| | |
$ | 725,778 | | |
$ | 867,257 | |
Digihost Technology Inc.
Notes to Condensed Interim Consolidated Financial Statements
Three Months Ended March 31, 2024
(Expressed in United States Dollars) (Unaudited)
| 6. | Property, plant and equipment |
| | |
Land
and buildings | | |
Data
miners | | |
Equipment
and other | | |
Leasehold
improvement | | |
Equipment in
construction | | |
Power
plant in
use | | |
Total | |
| Cost | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| December 31,
2022 | |
$ | 3,658,510 | | |
$ | 30,404,111 | | |
$ | 8,223,529 | | |
$ | 1,079,542 | | |
$ | 14,343,701 | | |
$ | - | | |
$ | 57,709,393 | |
| Additions | |
| 827,230 | | |
| 1,491,668 | | |
| 688,868 | | |
| - | | |
| - | | |
| - | | |
| 3,007,766 | |
| Disposal | |
| - | | |
| - | | |
| (499,950 | ) | |
| - | | |
| - | | |
| - | | |
| (499,950 | ) |
| Write-off | |
| - | | |
| - | | |
| (1,363,941 | ) | |
| - | | |
| - | | |
| - | | |
| (1,363,941 | ) |
| Transfer
asset in use | |
| - | | |
| - | | |
| 14,343,701 | | |
| - | | |
| (14,343,701 | ) | |
| - | | |
| - | |
| Acquired
in business combination (note 4) | |
| 530,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 4,643,800 | | |
| 5,173,800 | |
| December
31, 2023 | |
| 5,015,740 | | |
| 31,895,779 | | |
| 21,392,207 | | |
| 1,079,542 | | |
| - | | |
| 4,643,800 | | |
| 64,027,068 | |
| March
31, 2024 | |
$ | 5,015,740 | | |
$ | 31,895,779 | | |
$ | 21,392,207 | | |
$ | 1,079,542 | | |
$ | - | | |
$ | 4,643,800 | | |
$ | 64,027,068 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Accumulated
depreciation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| December 31, 2022 | |
$ | - | | |
$ | 12,937,550 | | |
$ | 2,664,346 | | |
$ | 296,264 | | |
$ | - | | |
$ | - | | |
$ | 15,898,160 | |
| Depreciation | |
| - | | |
| 9,825,482 | | |
| 4,483,977 | | |
| 105,318 | | |
| - | | |
| 327,447 | | |
| 14,742,224 | |
| December
31, 2022 | |
| - | | |
| 22,763,032 | | |
| 7,148,323 | | |
| 401,582 | | |
| - | | |
| 327,447 | | |
| 30,640,384 | |
| Depreciation | |
| 83,831 | | |
| 2,361,459 | | |
| 1,345,030 | | |
| 26,330 | | |
| - | | |
| 89,304 | | |
| 3,905,954 | |
| December
31, 2023 | |
$ | 83,831 | | |
$ | 25,124,491 | | |
$ | 8,493,353 | | |
$ | 427,912 | | |
$ | - | | |
$ | 416,751 | | |
$ | 34,546,338 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Net
carrying value | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| As
at December 31, 2023 | |
$ | 5,015,740 | | |
$ | 9,132,747 | | |
$ | 14,243,884 | | |
$ | 677,960 | | |
$ | - | | |
$ | 4,316,353 | | |
$ | 33,386,684 | |
| | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| As
at March 31, 2024 | |
$ | 4,931,909 | | |
$ | 6,771,288 | | |
$ | 12,898,854 | | |
$ | 651,630 | | |
$ | - | | |
$ | 4,227,049 | | |
$ | 29,480,730 | |
| | |
As
at
March 31,
2024 | | |
As
at December 31,
2023 | |
| Balance, beginning of period | |
$ | 2,366,115 | | |
$ | 2,538,447 | |
| Depreciation | |
| (43,166 | ) | |
| (172,332 | ) |
| Balance, end of period | |
$ | 2,322,949 | | |
$ | 2,366,115 | |
Intangible
asset relates to the right-of-use of an electric power facility.
| | |
As
at
March 31,
2024 | | |
As
at
December 31,
2023 | |
| Balance, beginning of period | |
$ | 1,184,798 | | |
$ | 1,314,028 | |
| Amortization | |
| (32,307 | ) | |
| (129,230 | ) |
| Balance, end of period | |
$ | 1,152,491 | | |
$ | 1,184,798 | |
Digihost Technology Inc.
Notes to Condensed Interim Consolidated Financial Statements
Three Months Ended March 31, 2024
(Expressed in United States Dollars) (Unaudited)
| 9. | Promissory note receivable |
In
December 2021, the Company entered into an agreement for a Secured Convertible Promissory Note (“Note”) with principal of
$800,000. The Note accrues interest at a rate of 6% per annum, with 3% payable in cash every calendar quarter and 3% payable in notes
(note 5). The Note is convertible at the Company’s option into Series C Preferred Stock of the issuer. If the Note is not converted
into shares by the Company, all unpaid and accrued interest are due on Maturity Date of December 21, 2026. The Notes are secured by the
assets of the issuer. As at March 31, 2024, the fair value of the Note was estimated to be $850,685.
| | |
As
at
March 31,
2024 | | |
As
at
December 31,
2023 | |
| Balance, beginning of period | |
$ | 850,685 | | |
$ | 806,000 | |
| Payments received | |
| - | | |
| (6,000 | ) |
| Fair value adjustment | |
| - | | |
| 50,685 | |
| Balance, end of period | |
$ | 850,685 | | |
$ | 850,685 | |
The continuity
of the lease liabilities are presented in the table below:
| | |
As at
March 31,
2024 | | |
As at
December 31,
2023 | |
| Balance, beginning of period | |
$ | 447,514 | | |
$ | 547,471 | |
| Interest | |
| 10,168 | | |
| 46,923 | |
| Lease payments | |
| (37,080 | ) | |
| (146,880 | ) |
| Balance, end of period | |
$ | 420,602 | | |
$ | 447,514 | |
| Current portion | |
$ | 118,437 | | |
$ | 110,651 | |
| Non-current portion | |
| 302,165 | | |
| 336,863 | |
| Total lease liabilities | |
$ | 420,602 | | |
$ | 447,514 | |
Maturity analysis - contractual undiscounted cash flows
| As at March 31, 2024 | |
| |
| Less than one year | |
$ | 152,399 | |
| One to five years | |
| 332,156 | |
| Total undiscounted lease
obligations | |
$ | 484,555 | |
Digihost Technology Inc.
Notes to Condensed Interim Consolidated Financial Statements
Three Months Ended March 31, 2024
(Expressed in United States Dollars) (Unaudited)
| | |
As
at
March 31,
2024 | | |
As
at
December 31,
2023 | |
| Balance, beginning of the period | |
$ | 610,340 | | |
$ | - | |
| New loans(1) | |
| - | | |
| 691,500 | |
| Loan assumed in business acquisition(2) | |
| - | | |
| 410,700 | |
| Repayment of loans | |
| (366,365 | ) | |
| (1,027,754 | ) |
| Interest | |
| 14,360 | | |
| 225,373 | |
| Fair value adjustment | |
| 19,730 | | |
| 310,521 | |
| Balance, end of the period | |
| 278,065 | | |
| 610,340 | |
| Long-term loans payable | |
| - | | |
| (356,710 | ) |
| | |
$ | 278,065 | | |
$ | 253,630 | |
| (1) | The
Company entered into a loan agreement with Doge Capital LLC (“Doge”), a company controlled by the chief executive officer,
dated February 6, 2023, whereby Doge lent the Company the equivalent value of 30 Bitcoins, being $691,500 and the Company agreed to repay
Doge 36 Bitcoins as full repayment of the loan. The Company shall repay Doge 3 Bitcoins per month for 12 consecutive months with the
first payment due on March 1, 2023 and the remaining 11 payments due on the first day of each successive month. As at March 31, 2024,
this loan was fully repaid. |
| (2) | Upon
the closing of the Power Plant transaction (note 4), the Company assumed loan agreement with Niagara Mohawk Power Corporation dated September
1, 2020. The Company is required to make minimum payments of $2,500 per month, with the outstanding balance of $nil. As the outstanding
principal balance has not paid in full as of September 6, 2023, interest shall accrue on the outstanding balance as of that date and
each subsequent month thereafter at the rate for overdue payments described as in National Grid’s Electricity Tariff for Service
Classification No 6. |
In
June 2022, the Company’s incremental borrowing rate applied was estimated to be 7% per annum. The mortgage does not bear interest,
is repayable by monthly instalments of $44,500 and matures in September 2024. The mortgage is secured by the powerplant in progress with
a net book value of $2,651,500.
| | |
As
at
March 31,
2024 | | |
As
at
December 31,
2023 | |
| Balance, beginning of period | |
$ | 389,064 | | |
$ | 877,127 | |
| Interest | |
| 6,068 | | |
| 45,937 | |
| Payments | |
| (133,500 | ) | |
| (534,000 | ) |
| Balance, end of period | |
$ | 261,632 | | |
$ | 389,064 | |
| Current portion | |
$ | 261,632 | | |
$ | 389,064 | |
| Non-current portion | |
| - | | |
| - | |
| Total
mortgage payable | |
$ | 261,632 | | |
$ | 389,064 | |
Digihost Technology Inc.
Notes to Condensed Interim Consolidated Financial Statements
Three Months Ended March 31, 2024
(Expressed in United States Dollars) (Unaudited)
| 12. | Mortgage payable (continued) |
Maturity
analysis - contractual undiscounted cash flows
| As at March 31, 2024 | |
| |
| Less than
one year | |
$ | 267,000 | |
| Total undiscounted mortgage
obligations | |
$ | 267,000 | |
Due
to the characteristics of certain warrants, the fixed-for-fixed condition is not met. Therefore the Company records these warrants as
financial liabilities measured at fair value upon initial recognition. At each subsequent reporting date, the warrants are re-measured
at fair value and the change in fair value is recognized through profit or loss. Upon warrant exercise, the fair value previously recognized
in warrant liabilities is transferred from warrant liabilities to share capital.
The
following table summarizes the changes in the warrant liabilities for the Company’s warrants for the period ending March 31, 2024
and December 31, 2023:
| | |
Number of
warrants | | |
Amount | |
| Balance, December 31, 2022 | |
| 9,098,514 | | |
$ | 821,697 | |
| Revaluation of warrant liabilities | |
| - | | |
| 4,522,523 | |
| Foreign currency translation | |
| - | | |
| 112,529 | |
| Balance, December 31, 2023 | |
| 9,098,514 | | |
| 5,456,749 | |
| Warrants expired | |
| (1,872,659 | ) | |
| - | |
| Revaluation of warrant liabilities | |
| - | | |
| (4,057,770 | ) |
| Foreign currency translation | |
| - | | |
| (112,027 | ) |
| Balance, March 31, 2024 | |
| 7,225,855 | | |
$ | 1,286,952 | |
The
fair value of the Company’s warrants has been determined using the Black-Scholes pricing model and the following weighted average
assumptions:
| | |
As
at
March 31,
2024 | | |
As
at
December 31,
2023 | |
| Spot price (in CAD$) | |
$ | 1.91 | | |
$ | 3.06 | |
| Risk-free interest rate | |
| 4.20 | % | |
| 3.91 | % |
| Expected annual volatility | |
| 92 | % | |
| 123 | % |
| Expected life (years) | |
| 0.96 | | |
| 1.00 | |
| Dividend | |
| nil | | |
| nil | |
Digihost Technology Inc.
Notes to Condensed Interim Consolidated Financial Statements
Three Months Ended March 31, 2024
(Expressed in United States Dollars) (Unaudited)
| 13. | Warrant liabilities (continued) |
The
following table reflects the Company’s warrants outstanding and exercisable as at March 31, 2024.
| Expiry
date | |
Warrants
outstanding
and
exercisable | | |
Weighted
average
exercise price
(CAD$) | |
| June 18, 2024 | |
| 2,083,334 | | |
| 5.97 | |
| April 9, 2025 | |
| 2,112,773 | | |
| 7.11 | |
| September 9, 2025 | |
| 3,029,748 | | |
| 6.25 | |
| | |
| 7,225,855 | | |
| 6.42 | |
The following
table reflects the Company’s warrants outstanding and exercisable as at December 31, 2023:
| Expiry date | |
Warrants
outstanding
and
exercisable | | |
Weighted
average
exercise price
(CAD$) | |
| March 16, 2024 | |
| 1,872,659 | | |
| 9.42 | |
| June 18, 2024 | |
| 2,083,334 | | |
| 5.97 | |
| April 9, 2025 | |
| 2,112,773 | | |
| 7.11 | |
| September 9, 2025 | |
| 3,029,748 | | |
| 6.25 | |
| | |
| 9,098,514 | | |
| 7.04 | |
| a) | Authorized
share capital |
Unlimited
subordinate voting shares without par value and conferring 1 vote per share.
Unlimited
proportionate voting shares without par value, conferring 200 votes per share, convertible at the holder’s option into subordinate
voting shares on a basis of 200 subordinate voting shares for 1 proportionate voting shares.
| b) | Subordinate voting shares and proportionate
voting shares issued |
Three
months ended March 31, 2024
(i)
During the three months ended March 31, 2024, the Company issued 3,600 subordinate voting shares at an average share price of $1.5158
for a total aggregate of $5,457 pursuant to the at-the-market equity program.
Three
months ended March 31, 2023
(ii)
During the three months ended March 31, 2023, the Company issued 233,466 subordinate voting shares at an average share price of $1.5654
for a total aggregate of $365,462 pursuant to the at-the-market equity program.
Digihost Technology Inc.
Notes to Condensed Interim Consolidated Financial Statements
Three Months Ended March 31, 2024
(Expressed in United States Dollars) (Unaudited)
| | |
Number of
Warrants | | |
Weighted Average
Exercise Price (CAD$) | |
| Balance, December 31, 2022 and March 31, 2023 | |
| 1,025,816 | | |
| 7.81 | |
| Balance, December 31, 2023 | |
| 1,025,816 | | |
| 7.81 | |
| Expired | |
| (249,688 | ) | |
| 10.01 | |
| Balance, March 31, 2024 | |
| 776,128 | | |
| 7.11 | |
The following table reflects the warrants issued and outstanding as of March 31, 2024:
| Number of | | |
| | |
Weighted Average | | |
|
| Warrants Outstanding | | |
Exercise Price (CAD$) | | |
Contractual Life (years) | | |
Expiry Date |
| | 222,222 | | |
| 6.75 | | |
| 0.47 | | |
June 18, 2024(1) |
| | 311,526 | | |
| 8.025 | | |
| 1.27 | | |
April 9, 2025(1) |
| | 242,380 | | |
| 6.25 | | |
| 1.69 | | |
September 9, 2025(1) |
| | 776,128 | | |
| 7.11 | | |
| 0.92 | | |
|
The following table reflects the warrants issued and outstanding as of December 31, 2023:
Number
of
Warrants Outstanding | | |
Exercise
Price (CAD$) | | |
Weighted
Average Contractual Life
(years) | | |
Expiry
Date |
| | 249,688 | | |
| 10.01 | | |
| 1.21 | | |
March 16, 2024(1) |
| | 222,222 | | |
| 6.75 | | |
| 1.47 | | |
June 18, 2024(1) |
| | 311,526 | | |
| 8.025 | | |
| 2.27 | | |
April 9, 2025(1) |
| | 242,380 | | |
| 6.25 | | |
| 2.69 | | |
September 9, 2025(1) |
| | 1,025,816 | | |
| 7.81 | | |
| 0.94 | | |
|
Digihost Technology Inc.
Notes to Condensed Interim Consolidated Financial Statements
Three Months Ended March 31, 2024
(Expressed in United States Dollars) (Unaudited)
| 16. | Stock options and restricted
share units |
The
Company has a stock option plan whereby the maximum number of shares subject to the plan, in the aggregate, shall not exceed 10% of the
Company’s issued and outstanding shares. The exercise price shall be no less than the discount market price as determined in accordance
with TSXV policies.
The
following table reflects the continuity of stock options for the periods presented below:
| | |
Number
of Stock Options | | |
Weighted
Average Exercise
Price (CAD$) | |
| Balance,
December 31, 2022 and March 31, 2023 | |
| 1,191,834 | | |
| 5.11 | |
| Balance,
December 31, 2023 and March 31, 2024 | |
| 692,170 | | |
| 5.09 | |
The
following table reflects the stock options issued and outstanding as of March 31, 2024:
| Expiry
Date | |
Exercise Price
(CAD$) | | |
Weighted
Average
Remaining
Contractual
Life (years) | | |
Number
of
Options
Outstanding | | |
Number
of
Options
Vested
(exercisable) | | |
Number
of
Options
Unvested | |
| February 14, 2025 | |
| 2.88 | | |
| 0.88 | | |
| 258,334 | | |
| 258,334 | | |
|
- | |
| January 5, 2026 | |
| 3.75 | | |
| 1.77 | | |
| 183,498 | | |
| 183,498 | | |
| - | |
| February 24, 2026 | |
| 13.92 | | |
| 1.90 | | |
| 50,000 | | |
| 50,000 | | |
| - | |
| March 25, 2026 | |
| 7.47 | | |
| 1.98 | | |
| 116,668 | | |
| 116,668 | | |
| - | |
| May 17, 2026 | |
| 7.35 | | |
| 2.13 | | |
| 55,001 | | |
| 55,001 | | |
| - | |
| June 22, 2026 | |
| 4.20 | | |
| 2.23 | | |
| 28,669 | | |
| 28,669 | | |
| - | |
| | |
| 5.09 | | |
| 1.53 | | |
| 692,170 | | |
| 692,170 | | |
| - | |
The
following table reflects the stock options issued and outstanding as of December 31, 2023:
| Expiry
Date | |
Exercise Price
(CAD$) | | |
Weighted
Average
Remaining
Contractual
Life (years) | | |
Number
of
Options
Outstanding | | |
Number
of
Options
Vested
(exercisable) | | |
Number
of
Options
Unvested | |
| February 14, 2025 | |
| 2.88 | | |
| 1.13 | | |
| 258,334 | | |
| 258,334 | | |
| - | |
| January 5, 2026 | |
| 3.75 | | |
| 2.02 | | |
| 183,498 | | |
| 183,498 | | |
| - | |
| February 24, 2026 | |
| 13.92 | | |
| 2.15 | | |
| 50,000 | | |
| 50,000 | | |
| - | |
| March 25, 2026 | |
| 7.47 | | |
| 2.23 | | |
| 116,668 | | |
| 116,668 | | |
| - | |
| May 17, 2026 | |
| 7.35 | | |
| 2.38 | | |
| 55,001 | | |
| 55,001 | | |
| - | |
| June 22, 2026 | |
| 4.20 | | |
| 2.48 | | |
| 28,669 | | |
| 28,669 | | |
| - | |
| | |
| 5.09 | | |
| 1.78 | | |
| 692,170 | | |
| 692,170 | | |
| - | |
Digihost
Technology Inc.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2024
(Expressed
in United States Dollars) (Unaudited)
| 16. | Stock options and restricted
share units (continued) |
| (b) | Restricted share units |
The Company
has an RSU plan whereby the there is a fixed cap of shares that can be granted under the plan. The exercise price shall be no less than
the discount market price as determined in accordance with TSXV policies.
The following
table reflects the continuity of RSUs for the periods ended March 31, 2024 and December 31, 2023:
| | |
Number of
RSUs | |
| Balance, December 31, 2022 | |
| 1,439,250 | |
| Granted (i) | |
| 77,232 | |
| Converted | |
| (479,582 | ) |
| Balance, March 31, 2023 | |
| 1,036,900 | |
| | |
| | |
| Balance, December 31, 2023 | |
| 1,036,900 | |
| Granted (ii) | |
| 1,086,000 | |
| Cancelled | |
| (103,333 | ) |
| Converted | |
| (451,409 | ) |
| Balance, March 31, 2024 | |
| 1,568,158 | |
| (i) | During
the three months ended March 31, 2023, the Company granted 77,232 RSUs to advisors. These
RSUs vest one year from the date of grant. The grant date fair value of the RSUs was $120,386. |
| (ii) | During
the three months ended March 31, 2024, the Company granted 1,086,000 RSUs officers, directors,
employees and advisors. These RSUs vest third on each of the first, second and third anniversaries
of the date of grant. The grant date fair value of the RSUs was $2,275,613. |
For
the three months ended March 31, 2024, the Company recorded share based compensation for these RSU’s of $246,261, (three months ended
March 31, 2023 - $401,496).
| 17. | Income
(loss) per share |
| | |
Three
Months Ended
March 31, | |
| | |
2024 | | |
2023 | |
| Net income
(loss) for the period | |
$ | 4,844,148 | | |
$ | (9,093,039 | ) |
| Net income (loss) per
share - basic and diluted | |
$ | 0.17 | | |
$ | (0.32 | ) |
| Weighted average number of shares outstanding
- basic and diluted | |
| 29,245,155 | | |
| 28,315,111 | |
| (i) | Diluted
income per share does not include the effect of warrants and stock options as they are anti-dilutive. |
Digihost
Technology Inc.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2024
(Expressed
in United States Dollars) (Unaudited)
| 18. | Related
party transactions |
Parties
are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant
influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject
to common control. Related parties include key management personnel and may be individuals or corporate entities. A transaction is considered
to be a related party transaction when there is a transfer of resources or obligations between related parties. Related party transactions
are recorded at the exchange amount, being the amount agreed to between the related parties.
Key
management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of
the Company, directly or indirectly. Key management personnel include the Company’s executive officers and members of the Board
of Directors.
Remuneration
of key management personnel of the Company was as follows:
| | |
Three Months Ended
March 31, | |
| | |
2024 | | |
2023 | |
| Professional fees (1) | |
$ | 27,692 | | |
$ | 75,330 | |
| Salaries (1) | |
| 219,180 | | |
| 211,900 | |
| Share based compensation(2) | |
| 241,808 | | |
| 371,742 | |
| | |
$ | 488,680 | | |
$ | 658,972 | |
| (1) | Represents
the professional fees and salaries paid to officers and directors. |
| (2) | Represents
the share based compensation for officers and directors. |
| 19. | Additional information on the
nature of comprehensive income (loss) components |
| | |
Three
Months Ended
March 31, | |
| | |
2024 | | |
2023 | |
| Expenses for employee benefits | |
| | |
| |
| Operating and maintenance
costs | |
$ | 166,547 | | |
$ | 183,517 | |
| Professional fees | |
| 27,692 | | |
| 75,330 | |
| Salaries | |
| 219,180 | | |
| - | |
| Share based compensation | |
| 246,261 | | |
| 401,496 | |
| | |
$ | 659,680 | | |
$ | 660,343 | |
| | |
| | | |
| | |
| Net
financial expenses | |
| | | |
| | |
| Interest on loans | |
$ | - | | |
$ | 132,300 | |
| Interest from promissory note receivable | |
| (6,000 | ) | |
| - | |
| Interest
on lease liabilities | |
| 16,236 | | |
| 27,108 | |
| | |
$ | 10,236 | | |
$ | 159,408 | |
Digihost
Technology Inc.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2024
(Expressed
in United States Dollars) (Unaudited)
| 20. | Cash flow supplemental information |
| | |
Three Months Ended
March 31, | |
| | |
2024 | | |
2023 | |
| Digital currencies items | |
| | |
| |
| Digital currencies mined | |
$ | (6,810,389 | ) | |
$ | (3,809,066 | ) |
| Bitcoin received from colocation services | |
| (228,935 | ) | |
| - | |
| Bitcoin received for electricity sales | |
| (633,011 | ) | |
| - | |
| Miner lease and hosting | |
| - | | |
| 625,261 | |
| Services paid in digital currencies | |
| 276,051 | | |
| 212,766 | |
| Loss (gain) on sale of digital currencies | |
| (398,357 | ) | |
| (873,271 | ) |
| Digital currencies for loan repayment | |
| 273,360 | | |
| 66,906 | |
| Digital currencies traded for cash | |
| 5,681,325 | | |
| 5,894,323 | |
| Loss
(gain) on revaluation of digital currencies | |
| (247,464 | ) | |
| (10,443 | ) |
| | |
$ | (2,087,420 | ) | |
$ | 2,106,476 | |
| | |
| | | |
| | |
| Working
capital items | |
| | | |
| | |
| Amounts receivable and prepaid expenses | |
$ | (172,857 | ) | |
$ | (656,725 | ) |
| Accounts payable and accrued liabilities | |
| (463,548 | ) | |
| 713,233 | |
| Income tax receivable | |
| 168,337 | | |
| 76,062 | |
| Deposit
payable | |
| 369,133 | | |
| - | |
| | |
$ | (98,935 | ) | |
$ | 132,570 | |
The
Company has three operating segments being cryptocurrency mining, sales of energy and colocation services located in the United States.
| Three
Months Ended March 31, 2024 | |
Cryptocurrency
mining | | |
Sales
of
energy | | |
Colocation
services | | |
Total | |
| Revenue | |
$ | 4,880,563 | | |
$ | 6,650,825 | | |
$ | 1,426,931 | | |
$ | 12,958,319 | |
| Cost of revenue | |
| (3,428,616 | ) | |
| (4,225,676 | ) | |
| (1,345,590 | ) | |
| (8,999,882 | ) |
| Depreciation and amortization | |
| (3,623,804 | ) | |
| (327,447 | ) | |
| - | | |
| (3,951,251 | ) |
| Gross profit (loss) | |
| (2,078,768 | ) | |
| 1,756,275 | | |
| 329,679 | | |
| 7,186 | |
| Net
profit (loss) | |
| 2,632,167 | | |
| 1,882,302 | | |
| 329,679 | | |
| 4,844,148 | |
| Three
Months Ended March 31, 2023 | |
Cryptocurrency
mining | | |
Sales
of
energy | | |
Colocation
services | | |
Total | |
| Revenue | |
$ | 3,809,066 | | |
$ | 295,281 | | |
$ | - | | |
$ | 4,104,347 | |
| Cost of revenue | |
| (2,233,246 | ) | |
| (269,962 | ) | |
| - | | |
| (2,503,208 | ) |
| Depreciation and amortization | |
| (3,222,680 | ) | |
| - | | |
| - | | |
| (3,222,680 | ) |
| Miner lease and hosting agreement | |
| (638,689 | ) | |
| - | | |
| - | | |
| (638,689 | ) |
| Gross profit | |
| (2,443,747 | ) | |
| - | | |
| - | | |
| (2,443,747 | ) |
| Net
income | |
| (9,093,039 | ) | |
| - | | |
| - | | |
| (9,093,039 | ) |
Digihost
Technology Inc.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2024
(Expressed
in United States Dollars) (Unaudited)
| 21. | Segmented
reporting (continued) |
The
operations of the Company are located in two geographic locations, Canada and the United States. Geographic segmentation is as follows:
| As at March 31, 2024 | |
Canada | | |
United States | | |
Total | |
| Current assets | |
$ | - | | |
$ | 4,949,747 | | |
$ | 4,949,747 | |
| Non-current assets | |
| - | | |
| 36,286,505 | | |
| 36,286,505 | |
| Total assets | |
$ | - | | |
$ | 41,236,252 | | |
$ | 41,236,252 | |
| As
at December 31, 2023 | |
Canada | | |
United States | | |
Total | |
| Current assets | |
$ | 30,078 | | |
$ | 2,169,673 | | |
$ | 2,199,751 | |
| Non-current assets | |
| - | | |
| 39,947,596 | | |
| 39,947,596 | |
| Total
assets | |
$ | 30,078 | | |
$ | 42,117,269 | | |
$ | 42,147,347 | |
The
Company manages its capital to maintain its ability to continue as a going concern and to provide returns to shareholders and benefits
to other stakeholders. The capital structure of the Company consists of equity comprised of issued share capital, reserves and loans
payable. The Company manages its capital structure and makes adjustments to it in light of economic conditions. The Company, upon approval
from its Board of Directors, will balance its overall capital structure through new share issuances or by undertaking other activities
as deemed appropriate under the specific circumstances. The Company is not subject to externally imposed capital requirements and the
Company’s overall strategy with respect to capital risk management remains unchanged from the year ended December 31, 2023.
| 23. | Financial
instruments and risk management |
Fair
value
The
fair value of the Company’s financial instruments, including cash, amounts receivable and accounts payable and accrued liabilities
approximates their carrying value due to their short-term nature. Mortgage payable and deposit payable are due to arm’s length third
parties, the fair values of these payables are measured using relevant market input (Level 3). The fair values of mortgage payable and
deposit payable was calculated using actualized cash flows using market rates in effect at the balance sheet date. Reasonable changes
to key assumptions would not have a significant impact. Promissory note receivable is due from an arm’s length third party, the fair
value of this note is measured using relevant market input (Level 3). Digital currencies, amount owing to Northern Data and loan payable
are measured at fair value using the quoted price on Gemini Exchange (Level 2). Warrant liabilities are measured at fair value using
the Black-Scholes pricing model (Level 2) (see note 13).
Risks
Credit
risk
Credit
risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial
loss. The Company’s primary exposure to credit risk is on its cash, amounts receivable and promissory note receivable. The cash
is deposited in a bank account held with one major bank in the United States so there is a concentration of credit risk. This risk is
managed by using a major bank that is a high credit quality financial institution as determined by rating agencies. The Company believes
no impairment is necessary in respect of amounts receivable, deposits and promissory note receivable as balances are monitored on a regular
basis with the result that exposure to bad debt is insignificant.
Digihost
Technology Inc.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2024
(Expressed
in United States Dollars) (Unaudited)
| 23. | Financial
instruments and risk management (continued) |
Liquidity
risk
Liquidity
risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages liquidity
risk by maintaining cash balances to ensure that it is able to meet its short term and long-term obligations as and when they fall due.
The Company manages cash projections and regularly updates projections for changes in business and fluctuations cause in digital currency
prices and exchange rates.
The
following table summarizes the expected maturity of the Company’s significant financial liabilities and other liabilities based
on the remaining period from the balance sheet date to the contractual maturity date:
| |
Payments
by period | |
| As
at March 31, 2024 | |
Less
than
1 year | | |
1-3
years | | |
4-5
years | | |
More
than
5 years | | |
Total | | |
Carrying
Value | |
| Accounts
payable and accrued liabilities | |
$ | 4,047,209 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 4,047,209 | | |
$ | 4,047,209 | |
| Amount
owing to Northern Data | |
| 50,255 | | |
| - | | |
| - | | |
| - | | |
| 50,255 | | |
| 50,255 | |
| Deposit
payable | |
| - | | |
| 1,855,317 | | |
| - | | |
| - | | |
| 1,855,317 | | |
| 1,855,317 | |
| Lease
liabilities | |
| 151,286 | | |
| 316,325 | | |
| 54,024 | | |
| - | | |
| 521,635 | | |
| 420,602 | |
| Mortgage
payable | |
| 267,000 | | |
| - | | |
| - | | |
| - | | |
| 267,000 | | |
| 261,632 | |
| Loan
payable | |
| 278,065 | | |
| - | | |
| - | | |
| - | | |
| 278,065 | | |
| 278,065 | |
| | |
$ | 4,793,815 | | |
$ | 2,171,642 | | |
$ | 54,024 | | |
$ | - | | |
$ | 7,019,481 | | |
$ | 6,913,080 | |
| |
Payments
by period | |
| As
at December 31, 2023 | |
Less
than
1 year | | |
1-3
years | | |
4-5
years | | |
More
than
5 years | | |
Total | | |
Carrying
Value | |
| Accounts
payable and accrued liabilities | |
$ | 4,510,757 | | |
$ | - | | |
$ | - | | |
$ | - | | |
$ | 4,510,757 | | |
$ | 4,510,757 | |
| Deposit
payable | |
| - | | |
| 1,486,184 | | |
| - | | |
| - | | |
| 1,486,184 | | |
| 1,486,184 | |
| Lease
liabilities | |
| 151,286 | | |
| 316,325 | | |
| 54,024 | | |
| - | | |
| 521,635 | | |
| 447,514 | |
| Mortgage
payable | |
| 400,500 | | |
| - | | |
| - | | |
| - | | |
| 400,500 | | |
| 389,064 | |
| Loan
payable· | |
| 253,630 | | |
| 356,710 | | |
| - | | |
| - | | |
| 610,340 | | |
| 610,340 | |
| | |
$ | 5,316,173 | | |
$ | 2,159,219 | | |
$ | 54,024 | | |
$ | - | | |
$ | 7,529,416 | | |
$ | 7,443,859 | |
Foreign
currency risk
Currency
risk relates to the risk that the fair values or future cash flows of the Company’s financial instruments will fluctuate because
of changes in foreign exchange rates. Exchange rate fluctuations affect the costs that the Company incurs in its operations.
As
the Company operates in an international environment, some of the Company’s financial instruments and transactions are denominated
in currencies other than an entity’s functional currency. The fluctuation of the Canadian dollar in relation to the US dollar will
consequently impact the profitability of the Company and may also affect the value of the Company’s assets and liabilities and
the amount of shareholders’ equity. As at March 31, 2024 and December 31, 2023, the foreign currency risk was considered minimal.
Digihost
Technology Inc.
Notes
to Condensed Interim Consolidated Financial Statements
Three
Months Ended March 31, 2024
(Expressed
in United States Dollars) (Unaudited)
| 23. | Financial
instruments and risk management (continued) |
Digital
currency risk
Digital
currency prices are affected by various forces including global supply and demand, interest rates, exchange rates, inflation or deflation
and the global political and economic conditions. The profitability of the Company is directly related to the current and future market
price of digital currencies; in addition, the Company may not be able liquidate its holdings of digital currencies at its desired price
if required. A decline in the market prices for digital currencies could negatively impact the Company’s future operations. The
Company has not hedged the conversion of any of its sales of digital currencies.
Digital
currencies have a limited history and the fair value historically has been very volatile. Historical performance of digital currencies
is not indicative of their future price performance. The Company’s digital currencies currently consist of Bitcoin.
At
March 31, 2024, had the market price of the Company’s holdings of Bitcoin increased or decreased by 10% with all other variables
held constant, the corresponding asset value increase or decrease respectively would amount to $291,030 (December 31, 2023 - $82,288).
Exhibit 99.3
FORM 52-109F2
CERTIFICATION
OF INTERIM FILINGS
FULL CERTIFICATE
I, Michel Amar, Chief Executive Officer of Digihost
Technology Inc., certify the following:
| 1. | Review: I have reviewed the interim financial report
and interim MD&A (together, the “interim filings”) of Digihost Technology Inc. (the “issuer”) for
the interim period ended March 31, 2024. |
| 2. | No misrepresentations: Based on my knowledge, having
exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material
fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made,
with respect to the period covered by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised
reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly
present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for
the periods presented in the interim filings. |
| 4. | Responsibility: The issuer’s other certifying
officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control
over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’
Annual and Interim Filings, for the issuer. |
| 5. | Design: Subject to the limitations, if any, described
in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim
filings |
| (a) | designed DC&P, or caused it to be designed under our
supervision, to provide reasonable assurance that |
| (i) | material information relating to the issuer is made known
to us by others, particularly during the period in which the interim filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its
annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized
and reported within the time periods specified in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with the issuer’s GAAP. |
| 5.1 | Control framework: The control framework the issuer’s
other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). |
| 5.2 | ICFR – material weakness relating to design:
N/A |
| 5.3 | Limitation on scope of design: N/A |
| 6. | Reporting changes in ICFR: The issuer has disclosed
in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2024 and
ended on March 31, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
| Date: May 14, 2024 |
|
| |
|
| “Michel Amar” |
|
| Michel Amar |
|
| Chief Executive Officer |
|
Exhibit 99.4
FORM 52-109F2
CERTIFICATION
OF INTERIM FILINGS
FULL CERTIFICATE
I, Paul Ciullo, Chief Financial Officer of Digihost
Technology Inc., certify the following:
| 1. | Review: I have reviewed the interim financial report
and interim MD&A (together, the “interim filings”) of Digihost Technology Inc. (the “issuer”) for
the interim period ended March 31, 2024. |
| 2. | No misrepresentations: Based on my knowledge, having
exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material
fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made,
with respect to the period covered by the interim filings. |
| 3. | Fair presentation: Based on my knowledge, having exercised
reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly
present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for
the periods presented in the interim filings. |
| 4. | Responsibility: The issuer’s other certifying
officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control
over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’
Annual and Interim Filings, for the issuer. |
| 5. | Design: Subject to the limitations, if any, described
in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim
filings |
| (a) | designed DC&P, or caused it to be designed under our
supervision, to provide reasonable assurance that |
| (i) | material information relating to the issuer is made known
to us by others, particularly during the period in which the interim filings are being prepared; and |
| (ii) | information required to be disclosed by the issuer in its
annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized
and reported within the time periods specified in securities legislation; and |
| (b) | designed ICFR, or caused it to be designed under our supervision,
to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with the issuer’s GAAP. |
| 5.1 | Control framework: The control framework the issuer’s
other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). |
| 5.2 | ICFR – material weakness relating to design:
N/A |
| 5.3 | Limitation on scope of design: N/A |
| 6. | Reporting changes in ICFR: The issuer has disclosed
in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on January 1, 2024 and
ended on March 31, 2024 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR. |
| Date: May 14, 2024 |
|
| |
|
| “Paul Ciullo” |
|
| Paul Ciullo |
|
| Chief Financial Officer |
|
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