Exhibit No.
|
Description
|
Press Release of Hut 8 Mining Corp., dated August 14, 2023
|
|
Unaudited Condensed Consolidated Interim Financial Statements for the six months ended June 30, 2023 and 2022
|
|
Management’s Discussion and Analysis for the three and six months ended June 30, 2023
|
|
Form 52-109F2 – Certification of Interim Filings (CEO)
|
|
Form 52-109F2 – Certification of Interim Filings (CFO)
|
HUT 8 MINING CORP.
|
|||
By:
|
/s/ Jaime Leverton
|
||
Name:
|
Jaime Leverton
|
||
Title:
|
Chief Executive Officer
|
||
Date: August 14, 2023
|
• |
Revenue decreased by $24.6 million to $19.2 million during the quarter ended June 30, 2023 compared to $43.8 million during the quarter ended June 30, 2022 (“Q2 2022”).
|
• |
The Company mined 399 Bitcoin in the quarter ended June 30, 2023, an approximately 58% decrease compared to the quarter ended June 30, 2022, primarily due to an increase in average Bitcoin network difficulty resulting in decrease in
Bitcoin mined, the impact of the suspension of operations at the Company’s North Bay Facility, and ongoing electrical issues at the Company’s Drumheller facility.
|
• |
The Company’s high performance computing (“HPC”) operations generated $4.2 million of primarily monthly recurring revenue in Q2 2023 compared to $4.7 million in Q2 2022 as a result of the discontinuation of certain low-margin products
and service offerings, customer churn, which were partially offset by new sales. The new sales do not reflect the newly signed five-year agreement with Interior Health, as the revenue earned from the agreement will commence later in 2023.
|
• |
As previously reported, the Company encountered issues at the Drumheller site, primarily stemming from high energy input levels that have been causing miners to fail. This has materially reduced operations, which are currently at
approximately 20% of our installed hash rate at the site. The team has implemented new custom firmware across all miner models designed to lower the power supply’s maximum output voltage, ensured our equipment operates within safe
limits, increased repair staff, added an additional repair centre shift, and procured new hardware to expedite repairs and accelerate the speed at which we bring miners back online. The electrical issues at the Drumheller site have been
compounded by high energy rates which further increased curtailment at the site.
|
• |
The Company’s installed hashrate was 2.6 EH/s (excluding the Company’s North Bay facility) as of June 30, 2023 compared to 2.6 EH/s as of March 31, 2023.
|
For the periods ended June 30
|
Three Months Ended
|
Six Months Ended
|
||||||||||||||
(CAD thousands, except per share amounts)
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
Operating results
|
||||||||||||||||
Digital assets mined
|
399
|
946
|
874
|
1,888
|
||||||||||||
Financial results
|
||||||||||||||||
Total revenue
|
$
|
19,183
|
$
|
43,845
|
$
|
38,204
|
$
|
97,178
|
||||||||
Net (loss) income
|
(16,713
|
)
|
(88,067
|
)
|
91,790
|
(32,359
|
)
|
|||||||||
Mining Profit (i)
|
3,200
|
14,906
|
5,790
|
47,813
|
||||||||||||
Adjusted EBITDA (i)
|
(2,690
|
)
|
(98,136
|
) |
133,340
|
|
(71,027
|
) |
||||||||
Per share
|
||||||||||||||||
Net income - basic
|
$
|
(0.08
|
)
|
$
|
(0.49
|
)
|
$
|
0.42
|
$
|
(0.19
|
)
|
|||||
Net income - diluted
|
$
|
(0.08
|
)
|
$
|
(0.49
|
)
|
$
|
0.40
|
$
|
(0.19
|
)
|
As at
|
||||||||
(CAD thousands)
|
June 30,
2023
|
December 31,
2022
|
||||||
Financial position
|
||||||||
Cash
|
$
|
26,687
|
$
|
30,515
|
||||
Total digital assets
|
368,942
|
203,627
|
||||||
Total assets
|
557,549
|
412,937
|
||||||
Total liabilities
|
86,383
|
61,547
|
||||||
Total shareholders’ equity
|
471,166
|
351,390
|
||||||
Working Capital (ii)
|
345,314
|
215,490
|
•
|
Revenue decreased by $24.6 million to $19.2 million during the quarter ended June 30, 2023 compared to $43.8 million during the quarter ended June 30, 2022 (“Q2 2022”). The
Company mined 399 Bitcoin in the quarter ended June 30, 2023, an approximately 58% decrease compared to the quarter ended June 30, 2022, primarily due to an increase in average Bitcoin network difficulty resulting in decrease in Bitcoin
mined, halt in the Company’s graphic processing units (“GPU”) mining activities due to the Ethereum network’s change in consensus mechanism from proof-of-work to proof-of-stake during the third quarter of 2022, the impact of the
suspension of operations at the Company’s North Bay Facility, and ongoing electrical issues at the Company’s Drumheller facility which continued from the fourth quarter of 2022. Revenue from the Company’s digital asset mining operations
also declined as a result of lower Digital Asset Revenue per Bitcoin Mined(i) due to the decrease in the daily average closing Bitcoin price in the current quarter versus the comparative quarter. The Company’s high
performance computing operations generated $4.2 million of primarily monthly recurring revenue in Q2 2023 compared to $4.7 million in Q2 2022 as a result of the discontinuation of certain low-margin products and service offerings,
customer churn, which were partially offset by new sales. The new sales do not reflect the newly signed five-year agreement with Interior Health, as the revenue earned from the agreement will commence later in 2023.
|
• |
Cost of revenue consists of site operating costs and depreciation. The cost of revenue was $23.8 million for the second quarter of 2023 compared to $47.7 million in the same period in 2022. Site operating costs consist primarily of
electricity costs as well as personnel, network monitoring, and equipment repair and maintenance costs at our digital asset mining and high performance computing operations. Site operating costs for the quarter ended June 30, 2023 were
$14.3 million, of which $11.8 million were attributable to our mining operations and $2.5 million were attributable to our high performance computing operations. The site operating costs for the quarter ended June 30, 2022 were $26.8
million, of which $24.5 million were attributable to our mining operations and $2.3 million were attributable to our high performance computing operations. The Mining Cost per Bitcoin(i) for the second quarter of 2023 was $29,551
per Bitcoin, compared to $25,611 per Bitcoin in the prior year for the same quarter. The increase was due to higher power consumption per Bitcoin mined and ongoing electrical issues at the Drumheller facility, which was partially offset by
the Company’s decision to curtail, lower average energy prices, and increased efficiencies in the miners deployed compared to prior year same quarter. The increase in site operating costs related to the high performance computing operations
is primarily due to increased repairs and maintenance to improve the Company’s facilities. Depreciation expense decreased to $9.5 million during the second quarter of 2023 compared to $20.9 million in the same quarter of 2022, primarily
driven by the lower net book value of digital asset mining assets after the recognition of non-cash impairment charge during the fourth quarter of 2022 as part of annual impairment testing.
|
• |
Net loss was $16.7 million and net loss per share was $0.08 for the three months ended June 30, 2023, compared to net loss of $88.1 million and net loss per share of $0.49 for the same period in 2022. The change was primarily driven by
the lower non-cash revaluation loss on digital assets recorded to income or loss, partially offset by the lower non-cash gain on revaluation of warrant liability, resulting in lower net loss. Additionally, the net loss per share was lower
due to greater weighted average number of shares outstanding for earnings per share purposes under International Accounting Standards 33.
|
• |
Mining Profit(i) was $3.2 million for the quarter ended June 30, 2023, compared to $14.9 million in the prior year’s quarter. The decrease in Mining Profit (i) compared to the prior year’s quarter is
mainly due to the decrease in price of Bitcoin, lower quantity of Bitcoin mined due to increased Bitcoin network difficulty, halt in the Company’s GPU mining activities due to the Ethereum network’s change in consensus mechanism from
proof-of-work to proof-of-stake during the third quarter of 2022, impact of the suspension of operations at the Company’s North Bay Facility, and the ongoing electrical issues at the Company’s Drumheller facility noted above, and was
partially offset by lower average power prices.
|
• |
Adjusted EBITDA(i) was negative $2.7 million for the quarter ended June 30, 2023, compared to a negative Adjusted EBITDA(i) of $98.1 million in the prior year’s quarter, primarily driven by a lower loss on
revaluation of digital assets, partially offset by a lower digital asset Mining Profit(i), and the aforementioned electrical issues at the Company’s Drumheller facility. Contributions from HPC operations were offset by lower
margins in digital asset mining operations.
|
For the periods ended June 30
|
Three Months Ended
|
Six Months Ended
|
||||||||||||||
(CAD thousands)
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
Gross (loss) profit
|
$
|
(4,651
|
)
|
$
|
(3,841
|
)
|
$
|
(10,858
|
)
|
$
|
12,614
|
|||||
Add (deduct):
|
||||||||||||||||
Revenue from hosting
|
–
|
–
|
–
|
(751
|
)
|
|||||||||||
Revenue from high performance computing
|
(4,192
|
)
|
(4,711
|
)
|
(8,687
|
)
|
(8,001
|
)
|
||||||||
Site operating costs attributable to hosting and high performance computing
|
2,551
|
2,554
|
4,984
|
4,682
|
||||||||||||
Depreciation
|
9,492
|
20,904
|
20,351
|
39,269
|
||||||||||||
Mining Profit
|
$
|
3,200
|
$
|
14,906
|
$
|
5,790
|
$
|
47,813
|
For the periods ended June 30
|
Three Months Ended
|
Six Months Ended
|
||||||||||||||
(CAD thousands)
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
Net (loss) income
|
$
|
(16,713
|
)
|
$
|
(88,067
|
)
|
$
|
91,790
|
$
|
(32,359
|
)
|
|||||
|
||||||||||||||||
Add (deduct):
|
||||||||||||||||
Net finance expense
|
1,437
|
1,543
|
2,869
|
2,835
|
||||||||||||
Depreciation and amortization
|
9,669
|
21,247
|
20,705
|
39,841
|
||||||||||||
Share based payment
|
2,477
|
1,977
|
5,512
|
3,276
|
||||||||||||
Foreign exchange (gain) loss
|
(298
|
)
|
(27
|
)
|
(291
|
)
|
684
|
|||||||||
One-time transaction costs
|
2,887
|
–
|
15,175
|
1,611
|
||||||||||||
North Bay decommissioning costs
|
245
|
–
|
919
|
–
|
||||||||||||
Deferred income tax (recovery) expense
|
(2,055
|
)
|
8,472
|
(3,127
|
)
|
9,593
|
||||||||||
Sales tax expense
|
–
|
–
|
–
|
913
|
||||||||||||
Gain on revaluation of warrants
|
(339
|
)
|
(43,281
|
)
|
(212
|
)
|
(97,421
|
)
|
||||||||
Adjusted EBITDA
|
$
|
(2,690
|
)
|
$
|
(98,136
|
)
|
$
|
133,340
|
$
|
(71,027
|
)
|
For the three months ended
(CAD thousands, except per Bitcoin amounts)
|
June 30, 2023
Q2
|
June 30, 2022
Q2
|
||||||
Revenue
|
$
|
19,183
|
$
|
43,845
|
||||
Deduct:
|
||||||||
Revenue from high performance computing
|
(4,192
|
)
|
(4,711
|
)
|
||||
Digital asset revenue
|
14,991
|
39,134
|
||||||
Divided by:
|
||||||||
Number of Bitcoin mined
|
399
|
946
|
||||||
Digital Asset Revenue per Bitcoin Mined
|
$
|
37,571
|
$
|
41,368
|
For the periods ended June 30
|
Three Months Ended
|
Six Months Ended
|
||||||||||||||
(CAD thousands, except per Bitcoin amounts)
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
Cost of revenue
|
$
|
(23,834
|
)
|
$
|
(47,686
|
)
|
$
|
(49,062
|
)
|
$
|
(84,564
|
)
|
||||
Add (deduct):
|
||||||||||||||||
Site operating costs attributable to high performance computing and hosting
|
2,551
|
2,554
|
4,984
|
4,682
|
||||||||||||
Depreciation
|
9,492
|
20,904
|
20,351
|
39,269
|
||||||||||||
Mining cost
|
(11,791
|
)
|
(24,228
|
)
|
(23,727
|
)
|
(40,613
|
)
|
||||||||
Divided by:
|
||||||||||||||||
Number of Bitcoin mined
|
399
|
946
|
874
|
1,888
|
||||||||||||
Mining Cost per Bitcoin
|
$
|
(29,551
|
)
|
$
|
(25,611
|
)
|
$
|
(27,148
|
)
|
$
|
(21,511
|
)
|
• |
New Hut’s expected installed self-mining capacity has increased from the previously disclosed 7.02 EH/s to 7.5 EH/s at mining facilities in Medicine Hat and Drumheller in Alberta; Niagara Falls, New York; Kearney, Nebraska; and Granbury
and King Mountain, Texas upon the close of the Transaction. The improvement is due to the energization of additional miners at USBTC’s sites.
|
• |
The 1.7 EH/s installed self-mining capacity at the King Mountain, Texas site is owned by the King Mountain Joint Venture in which USBTC has a 50% membership interest alongside a leading energy partner.
|
As at
|
Note
|
June 30, 2023
|
December 31, 2022
(Audited)
|
|||||||||
Assets
|
||||||||||||
Current assets
|
||||||||||||
Cash
|
$
|
26,687
|
$
|
30,515
|
||||||||
Accounts receivable and other
|
2,116
|
1,589
|
||||||||||
Digital assets – held in custody
|
7
|
334,764
|
203,627
|
|||||||||
Digital assets – pledged as collateral
|
7, 9
|
34,178
|
–
|
|||||||||
Deposits and prepaid expenses
|
6 |
5,552
|
9,892
|
|||||||||
403,297
|
245,623
|
|||||||||||
Non-current assets
|
||||||||||||
Plant and equipment
|
8 |
113,258
|
124,959
|
|||||||||
Deposits and prepaid expenses
|
6 |
26,213
|
27,220
|
|||||||||
Intangible assets and goodwill
|
14,781
|
15,135
|
||||||||||
Total assets
|
$
|
557,549
|
$
|
412,937
|
||||||||
Liabilities and shareholders’ equity
|
||||||||||||
Current liabilities
|
||||||||||||
Accounts payable and accrued liabilities
|
$
|
22,281
|
$
|
13,916
|
||||||||
Lease liabilities
|
4,010
|
4,325
|
||||||||||
Loans payable
|
9 |
31,692
|
11,892
|
|||||||||
57,983
|
30,133
|
|||||||||||
Non-current liabilities
|
||||||||||||
Lease liabilities
|
21,013
|
16,973
|
||||||||||
Loans payable
|
9 |
7,387
|
14,229
|
|||||||||
Warrant liability
|
–
|
212
|
||||||||||
Total liabilities
|
86,383
|
61,547
|
||||||||||
Shareholders’ equity
|
||||||||||||
Share capital
|
10 |
773,587
|
767,641
|
|||||||||
Warrants
|
79
|
2,122
|
||||||||||
Contributed surplus
|
14,318
|
12,700
|
||||||||||
Accumulated deficit
|
(339,283
|
)
|
(431,073
|
)
|
||||||||
AOCI - Unrealized gain on digital asset revaluation
|
7 |
22,465
|
–
|
|||||||||
Total shareholders’ equity
|
471,166
|
351,390
|
||||||||||
Total liabilities and shareholders’ equity
|
$
|
557,549
|
$
|
412,937
|
Three Months Ended
|
Six Months Ended
|
|||||||||||||||||||
For the periods ended June 30
|
Note
|
2023
|
2022
|
2023
|
2022
|
|||||||||||||||
Revenue
|
13 |
$
|
19,183
|
$
|
43,845
|
$
|
38,204
|
$
|
97,178
|
|||||||||||
Cost of revenue
|
14 |
(23,834
|
)
|
(47,686
|
)
|
(49,062
|
)
|
(84,564
|
)
|
|||||||||||
Gross (loss) profit
|
(4,651
|
)
|
(3,841
|
)
|
(10,858
|
)
|
12,614
|
|||||||||||||
General and administrative expenses
|
15 |
(12,539
|
)
|
(12,278
|
)
|
(36,885
|
)
|
(23,812
|
)
|
|||||||||||
(Loss) gain on disposition of digital assets
|
7 |
(565
|
)
|
–
|
4,390
|
–
|
||||||||||||||
Operating loss
|
(17,755
|
)
|
(16,119
|
)
|
(43,353
|
)
|
(11,198
|
)
|
||||||||||||
Foreign exchange gain (loss)
|
298
|
27
|
291
|
(684
|
)
|
|||||||||||||||
Net finance expense
|
(1,437
|
)
|
(1,543
|
)
|
(2,869
|
)
|
(2,835
|
)
|
||||||||||||
Amortization
|
(177
|
)
|
(343
|
)
|
(354
|
)
|
(572
|
)
|
||||||||||||
Gain on revaluation of warrant liability
|
339
|
43,281
|
212
|
97,421
|
||||||||||||||||
Net (loss) income before tax and revaluation on digital assets
|
(18,732
|
)
|
25,303
|
(46,073
|
)
|
82,132
|
||||||||||||||
(Loss) gain on revaluation of digital assets
|
7 |
(36
|
)
|
(104,898
|
)
|
134,736
|
(104,898
|
)
|
||||||||||||
Deferred income tax recovery (expense)
|
2,055
|
(8,472
|
)
|
3,127
|
(9,593
|
)
|
||||||||||||||
Net (loss) income
|
$
|
(16,713
|
)
|
$
|
(88,067
|
)
|
$
|
91,790
|
$
|
(32,359
|
)
|
|||||||||
Other comprehensive (loss) income
|
||||||||||||||||||||
Items that will not be reclassified to net (loss) income
|
||||||||||||||||||||
Revaluation gain (loss) on digital assets, net of tax
|
7 |
14,760
|
(98,591
|
)
|
22,465
|
(103,540
|
)
|
|||||||||||||
Total comprehensive (loss) income
|
$
|
(1,953
|
)
|
$
|
(186,658
|
)
|
$
|
114,255
|
$
|
(135,899
|
)
|
|||||||||
Net (loss) income per share:
|
||||||||||||||||||||
Basic
|
$
|
(0.08
|
)
|
$
|
(0.49
|
)
|
$
|
0.42
|
$
|
(0.19
|
)
|
|||||||||
Diluted
|
$
|
(0.08
|
)
|
$
|
(0.49
|
)
|
$
|
0.40
|
$
|
(0.19
|
)
|
|||||||||
Weighted average number of shares outstanding:
|
||||||||||||||||||||
Basic
|
221,279,766
|
178,013,476
|
221,118,780
|
174,258,330
|
||||||||||||||||
Diluted
|
221,279,766
|
178,013,476
|
229,415,622
|
174,258,330
|
For the six months ended June 30
|
2023
|
2022
|
||||||
Cash provided by (used in):
|
||||||||
Operating activities:
|
||||||||
Net income (loss)
|
$
|
91,790
|
$
|
(32,359
|
)
|
|||
Change in non-cash operating items:
|
||||||||
Digital assets mined
|
(29,517
|
)
|
(88,426
|
)
|
||||
Depreciation and amortization
|
20,705
|
39,841
|
||||||
Gain on disposition of digital assets
|
(4,390
|
)
|
–
|
|||||
(Gain) loss on revaluation of digital assets
|
(134,736
|
)
|
104,898
|
|||||
Gain on revaluation of warrant liability
|
(212
|
)
|
(97,421
|
)
|
||||
Share based payments
|
5,512
|
3,276
|
||||||
Deferred income tax (recovery) expense
|
(3,127
|
)
|
9,593
|
|||||
Net finance expense and other
|
2,869
|
2,835
|
||||||
Foreign exchange (gain) loss
|
(291
|
)
|
684
|
|||||
(51,397
|
)
|
(57,079
|
)
|
|||||
Proceeds from the sale of digital assets
|
29,244
|
–
|
||||||
Net change in working capital (note 16)
|
11,569
|
1,315
|
||||||
Net cash used in operating activities
|
(10,584
|
)
|
(55,764
|
)
|
||||
Investing activities
|
||||||||
Purchase of plant and equipment
|
(3,472
|
)
|
(102,390
|
)
|
||||
Deposits and prepaid expenses
|
973
|
46,972
|
||||||
Purchase of digital assets (note 7)
|
(325
|
)
|
–
|
|||||
Business acquisition
|
–
|
(30,174
|
)
|
|||||
Net cash used in investing activities
|
(2,824
|
)
|
(85,592
|
)
|
||||
Financing activities
|
||||||||
Proceeds from loan payable, net of financing costs (note 9)
|
19,188
|
–
|
||||||
Repayment of loan payable for financed equipment
|
(5,908
|
)
|
(11,051
|
)
|
||||
Proceeds from issuance of common shares,net of issuance cost
|
9
|
75,931
|
||||||
Proceeds from exercise of warrants and options
|
–
|
14
|
||||||
Finance income received
|
5
|
831
|
||||||
Finance expense paid
|
(1,909
|
)
|
(3,428
|
)
|
||||
Payment of lease obligations
|
(1,776
|
)
|
(919
|
)
|
||||
Net cash provided by financing activities
|
9,609
|
61,378
|
||||||
Decrease in cash
|
(3,799
|
)
|
(79,978
|
)
|
||||
Cash, beginning of period
|
30,515
|
140,127
|
||||||
Effect of movement in exchange rates on cash held in foreign currencies
|
(29
|
)
|
(17
|
)
|
||||
Cash, end of period
|
$
|
26,687
|
$
|
60,132
|
For the six months ended June 30, 2023
|
Number of
shares
|
Share capital
|
Warrants
|
Contributed
surplus
|
Accumulated
deficit
|
Accumulated other
comprehensive
income
|
Total
|
|||||||||||||||||||||
Balance, January 1, 2023
|
220,547,442
|
$
|
767,641
|
$
|
2,122
|
$
|
12,700
|
$
|
(431,073
|
)
|
$
|
–
|
$
|
351,390
|
||||||||||||||
Net income
|
–
|
–
|
–
|
–
|
91,790
|
–
|
91,790
|
|||||||||||||||||||||
Other comprehensive income
|
–
|
–
|
–
|
–
|
–
|
22,465
|
22,465
|
|||||||||||||||||||||
Comprehensive income
|
–
|
–
|
–
|
–
|
91,790
|
22,465
|
114,255
|
|||||||||||||||||||||
Other equity movements
|
||||||||||||||||||||||||||||
Shares issued on vesting of RSU
|
1,058,453
|
5,937
|
–
|
(5,937
|
)
|
–
|
–
|
–
|
||||||||||||||||||||
Shares issued under employee stock purchase plan
|
5,813
|
9
|
–
|
–
|
–
|
–
|
9
|
|||||||||||||||||||||
Expiry of warrants
|
–
|
–
|
(2,043
|
)
|
2,043
|
–
|
–
|
–
|
||||||||||||||||||||
Share based payments
|
–
|
–
|
–
|
5,512
|
–
|
–
|
5,512
|
|||||||||||||||||||||
Balance, June 30, 2023
|
221,611,708
|
$
|
773,587
|
$
|
79
|
$
|
14,318
|
$
|
(339,283
|
)
|
$
|
22,465
|
$
|
471,166
|
For the six months ended June 30, 2022
|
Number of
shares
|
Share capital
|
Warrants
|
Contributed
surplus
|
Accumulated
deficit
|
Accumulated other
comprehensive
income
|
Total
|
|||||||||||||||||||||
Balance, January 1, 2022
|
169,590,061
|
$
|
636,597
|
$
|
2,163
|
$
|
11,928
|
$
|
(188,260
|
)
|
$
|
103,540
|
$
|
565,968
|
||||||||||||||
Net loss
|
–
|
–
|
–
|
–
|
(32,359
|
)
|
–
|
(32,359
|
)
|
|||||||||||||||||||
Other comprehensive loss
|
–
|
–
|
–
|
–
|
–
|
(103,540
|
)
|
(103,540
|
)
|
|||||||||||||||||||
Comprehensive income
|
–
|
–
|
–
|
–
|
(32,359
|
)
|
(103,540
|
)
|
(135,899
|
)
|
||||||||||||||||||
Other equity movements
|
||||||||||||||||||||||||||||
Shares issued for equity raises
|
22,098,392
|
75,905
|
–
|
–
|
–
|
–
|
75,905
|
|||||||||||||||||||||
Shares issued on exercise of RSU
|
292,500
|
1,345
|
–
|
(1,345
|
)
|
–
|
–
|
–
|
||||||||||||||||||||
Shares issued on exercise of DSU
|
76,296
|
574
|
–
|
(574
|
)
|
–
|
–
|
–
|
||||||||||||||||||||
Shares issued under employee stock purchase plan
|
6,387
|
26
|
–
|
–
|
–
|
–
|
26
|
|||||||||||||||||||||
Shares issued on exercise of warrants
|
863
|
3
|
(2
|
)
|
–
|
–
|
–
|
1
|
||||||||||||||||||||
Shares issued on exercise of options
|
3,333
|
11
|
–
|
(5
|
)
|
–
|
–
|
6
|
||||||||||||||||||||
Expiry of broker warrants
|
–
|
–
|
(39
|
)
|
39
|
–
|
–
|
–
|
||||||||||||||||||||
Share based payments
|
–
|
–
|
–
|
3,276
|
–
|
–
|
3,276
|
|||||||||||||||||||||
Balance, June 30, 2022
|
192,067,832
|
$
|
714,461
|
$
|
2,122
|
$
|
13,319
|
$
|
(220,619
|
)
|
$
|
–
|
$
|
509,283
|
HUT 8 MINING CORP.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
For the six months ended June 30, 2023 and 2022
(In thousands of Canadian dollars, except for per share amounts)
|
1. |
Nature of presentation:
|
2. |
Basis of presentation
|
3. |
Selected significant accounting policies:
|
(a) |
Revenue recognition
|
HUT 8 MINING CORP.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
For the six months ended June 30, 2023 and 2022
(In thousands of Canadian dollars, except for per share amounts)
|
- |
Identify the contract with a customer;
|
- |
Identify the performance obligations in the contract;
|
- |
Determine the transaction price, which is the total consideration provided by the customer;
|
- |
Allocate the transaction price among the performance obligations in the contract based on their relative fair values; and
|
- |
Recognize revenue when (or as) the Company satisfies a performance obligation.
|
i. |
Revenues from digital asset mining
|
ii. |
Revenues from hosting
|
iii. |
Revenues from high performance computing
|
- |
Monthly recurring revenue (“MRR”) from high performance computing services are recognized as service revenue ratably over the enforceable term of individual contracts which is typically the stated term. The Company satisfies its
performance obligation as these services are made available over time. The Company believes this method to be the best representation of transfer of services as it is consistent with industry practice to measure satisfaction through passage
of time.
|
- |
Transaction price is determined as the list price of services (net of discounts) that the Company delivers to its customers, taking into account the term of each individual contract, and the ability to enforce and collect the
consideration.
|
- |
Revenue from installation services, which are not treated as distinct performance obligations, are recognized over the enforceable term of individual contracts consistent with the schedule of MRR discussed above.
|
- |
Usage revenue (overage and consumption-based services) is recorded as service revenue in the month the usage is incurred/service is consumed by the customer, based on a fixed agreed upon amount per unit consumed.
|
HUT 8 MINING CORP.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
For the six months ended June 30, 2023 and 2022
(In thousands of Canadian dollars, except for per share amounts)
|
- |
Invoices are typically issued at the beginning of each month for MRR services and at the end of each month for usage revenue.
|
(b) |
Goodwill
|
(c) |
Intangible assets
|
Customer relationships
|
6 years
|
4.
|
Change in estimate
|
5. |
Business combination with U.S. Data Mining Group, Inc.
|
HUT 8 MINING CORP.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
For the six months ended June 30, 2023 and 2022
(In thousands of Canadian dollars, except for per share amounts)
|
6. |
Deposits and prepaid expenses
|
As at
|
June 30, 2023
|
December 31, 2022
|
||||||
Current
|
||||||||
Prepaid insurance
|
$
|
442
|
$
|
1,778
|
||||
Prepaid electricity
|
257
|
3,191
|
||||||
Deposits related to power purchase agreement
|
3,000
|
3,000
|
||||||
Miscellaneous deposits
|
1,853
|
1,923
|
||||||
Total current deposits and prepaid expenses
|
$
|
5,552
|
$
|
9,892
|
||||
Non-current
|
||||||||
Deposits related to power purchase agreement
|
17,000
|
17,000
|
||||||
Deposits related to operating site development
|
829
|
902
|
||||||
Deposits related to electricity supply under
electricity supply agreement
|
7,529
|
8,522
|
||||||
Other
|
855
|
796
|
||||||
Total non-current deposits and prepaid expenses
|
$
|
26,213
|
$
|
27,220
|
7. |
Digital assets
|
Amount
|
Number of digital assets
|
|||||||||||||||
As at
|
June 30,
2023
|
December 31,
2022
|
June 30,
2023
|
December 31,
2022
|
||||||||||||
Digital assets – Bitcoin held in custody
|
$
|
334,475
|
$
|
203,627
|
8,289
|
9,086
|
||||||||||
Digital assets – Filecoin held in custody
|
289
|
–
|
55,008
|
–
|
||||||||||||
Total digital assets – held in custody
|
$
|
334,764
|
$
|
203,627
|
63,297
|
9,086
|
||||||||||
Digital assets – Bitcoin pledged as collateral
|
34,178
|
–
|
847
|
–
|
||||||||||||
Total digital assets
|
$
|
368,942
|
$
|
203,627
|
64,144
|
9,086
|
Amount
|
Number of Bitcoin
|
|||||||
Total digital assets – Bitcoin, January 1, 2022
|
$
|
323,946
|
5,518
|
|||||
Bitcoin mined
|
133,040
|
3,568
|
||||||
Revaluation of digital assets
|
(253,359
|
)
|
–
|
|||||
Total digital assets – Bitcoin, December 31, 2022
|
$
|
203,627
|
9,086
|
|||||
Bitcoin mined
|
29,517
|
874
|
||||||
Bitcoin traded for cash
|
(29,244
|
)
|
(824
|
)
|
||||
Gain on disposition of digital assets
|
4,390
|
–
|
||||||
Revaluation of digital assets – Bitcoin
|
160,363
|
–
|
||||||
Total digital assets – Bitcoin, June 30, 2023
|
$
|
368,653
|
9,136
|
HUT 8 MINING CORP.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
For the six months ended June 30, 2023 and 2022
(In thousands of Canadian dollars, except for per share amounts)
|
Amount
|
Number of Filecoin
|
|||||||
Total digital assets – Filecoin, December 31, 2022
|
$
|
–
|
–
|
|||||
Purchase of Filecoin for cash
|
325
|
55,008
|
||||||
Revaluation of digital assets – Filecoin
|
(36
|
)
|
–
|
|||||
Total digital assets – Filecoin, June 30, 2023
|
$
|
289
|
55,008
|
HUT 8 MINING CORP.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
For the six months ended June 30, 2023 and 2022
(In thousands of Canadian dollars, except for per share amounts)
|
8. |
Plant and equipment
|
Mining
infrastructure
|
Mining servers
|
Data centre
infrastructure
|
Computer and
network
equipment
|
Leasehold
improvements
|
Right-of-use
assets
|
Total
|
||||||||||||||||||||||
Cost
|
||||||||||||||||||||||||||||
Balance, January 1, 2022
|
$
|
46,707
|
$
|
173,227
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
964
|
$
|
220,898
|
||||||||||||||
Additions
|
35,229
|
157,176
|
444
|
6,297
|
572
|
13,632
|
213,350
|
|||||||||||||||||||||
Acquired through business acquisition
|
–
|
–
|
8,815
|
4,531
|
287
|
9,606
|
23,239
|
|||||||||||||||||||||
Balance, December 31, 2022
|
81,936
|
330,403
|
9,259
|
10,828
|
859
|
24,202
|
457,487
|
|||||||||||||||||||||
Additions
|
75
|
–
|
467
|
3,368
|
170
|
4,570
|
8,650
|
|||||||||||||||||||||
Balance, June 30, 2023
|
$
|
82,011
|
$
|
330,403
|
$
|
9,726
|
$
|
14,196
|
$
|
1,029
|
$
|
28,772
|
$
|
466,137
|
||||||||||||||
Accumulated Depreciation and Impairment
|
||||||||||||||||||||||||||||
Balance, January 1, 2022
|
$
|
27,887
|
$
|
96,595
|
$
|
–
|
$
|
–
|
$
|
–
|
$
|
290
|
$
|
124,772
|
||||||||||||||
Depreciation
|
5,177
|
81,820
|
1,222
|
2,083
|
160
|
3,418
|
93,880
|
|||||||||||||||||||||
Impairment
|
25,999
|
87,877
|
–
|
–
|
–
|
–
|
113,876
|
|||||||||||||||||||||
Balance, December 31, 2022
|
59,063
|
266,292
|
1,222
|
2,083
|
160
|
3,708
|
332,528
|
|||||||||||||||||||||
Depreciation
|
1,652
|
14,374
|
588
|
2,182
|
165
|
1,390
|
20,351
|
|||||||||||||||||||||
Balance, June 30, 2023
|
$
|
60,715
|
$
|
280,666
|
$
|
1,810
|
$
|
4,265
|
$
|
325
|
$
|
5,098
|
$
|
352,879
|
||||||||||||||
Net book value as of
|
||||||||||||||||||||||||||||
December 31, 2022
|
$
|
22,873
|
$
|
64,111
|
$
|
8,037
|
$
|
8,745
|
$
|
699
|
$
|
20,494
|
$
|
124,959
|
||||||||||||||
June 30, 2023
|
$
|
21,296
|
$
|
49,737
|
$
|
7,916
|
$
|
9,931
|
$
|
704
|
$
|
23,674
|
$
|
113,258
|
HUT 8 MINING CORP.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
For the six months ended June 30, 2023 and 2022
(In thousands of Canadian dollars, except for per share amounts)
|
9. |
Loans payable
|
10. |
Equity
|
(a) |
Share capital
|
Number of shares
|
Amount
|
|||||||
Balance, January 1, 2022
|
169,590,061
|
$
|
636,597
|
|||||
Shares issued for equity raises, net of issuance cost ($3,197)
|
49,646,368
|
124,771
|
||||||
Shares issued for RSUs and DSUs
|
1,273,795
|
6,175
|
||||||
Shares issued under employee stock purchase plan
|
33,022
|
84
|
||||||
Shares issued for exercise of options
|
3,333
|
11
|
||||||
Shares issued on exercise of warrants
|
863
|
3
|
||||||
Balance, December 31, 2022
|
220,547,442
|
$
|
767,641
|
|||||
Shares issued for RSUs and DSUs
|
1,058,453
|
5,937
|
||||||
Shares issued under employee stock purchase plan
|
5,813
|
9
|
||||||
Balance, June 30, 2023
|
221,611,708
|
$
|
773,587
|
HUT 8 MINING CORP.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
For the six months ended June 30, 2023 and 2022
(In thousands of Canadian dollars, except for per share amounts)
|
(b) |
Incentive plan
|
Number of
options
|
Weighted average
exercise price
|
|||||||
Balance, January 1, 2022
|
546,667
|
$
|
5.13
|
|||||
Exercised (i)
|
(3,333
|
)
|
1.80
|
|||||
Forfeited
|
(63,334
|
)
|
6.32
|
|||||
Balance, December 31, 2022
|
480,000
|
5.00
|
||||||
Expired
|
(365,000
|
)
|
5.00
|
|||||
Options outstanding, June 30, 2023
|
115,000
|
$
|
5.00
|
|||||
Options exercisable, June 30, 2023
|
115,000
|
$
|
5.00
|
(i) |
The options exercised comprise of 3,333 options with an exercise price of $1.80 and underlying common share price of $7.23 at the time of exercise.
|
11. |
Financial instruments and risk management
|
Level 1: |
Unadjusted quoted prices in active markets for identical assets and liabilities;
|
Level 2: |
Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly from observable market data; and
|
Level 3: |
Inputs that are not based on observable market data.
|
HUT 8 MINING CORP.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
For the six months ended June 30, 2023 and 2022
(In thousands of Canadian dollars, except for per share amounts)
|
June 30, 2023
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Fair value carried through profit and loss
|
||||||||||||||||
Deposits
|
$
|
30,211
|
$
|
–
|
$
|
–
|
$
|
30,211
|
||||||||
Fair value carried at amortized cost
|
||||||||||||||||
Loan payable
|
–
|
(40,580
|
)
|
–
|
(40,580
|
)
|
||||||||||
December 31, 2022
|
Level 1
|
Level 2
|
Level 3
|
Total
|
||||||||||||
Fair value through profit and loss
|
||||||||||||||||
Warrant liability
|
$
|
–
|
$
|
212
|
$
|
–
|
$
|
212
|
||||||||
Deposits
|
31,347
|
–
|
–
|
31,347
|
||||||||||||
Fair value carried at amortized cost
|
||||||||||||||||
Loan payable
|
$
|
–
|
$
|
(27,125
|
)
|
$
|
–
|
$
|
(27,125
|
)
|
12. |
Digital assets and risk management
|
HUT 8 MINING CORP.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
For the six months ended June 30, 2023 and 2022
(In thousands of Canadian dollars, except for per share amounts)
|
13. |
Revenue
|
Three months ended
|
Six months ended
|
|||||||||||||||
For the periods ended June 30
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
Digital assets mined
|
$
|
14,991
|
$
|
39,134
|
$
|
29,517
|
$
|
88,426
|
||||||||
Hosting fees
|
–
|
–
|
–
|
751
|
||||||||||||
High performance computing
|
4,192
|
4,711
|
8,687
|
8,001
|
||||||||||||
Total revenue
|
$
|
19,183
|
$
|
43,845
|
$
|
38,204
|
$
|
97,178
|
14. |
Cost of revenue
|
Three months ended
|
Six months ended
|
|||||||||||||||
For the periods ended June 30
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
Site operating costs
|
$
|
(14,342
|
)
|
$
|
(26,782
|
)
|
$
|
(28,711
|
)
|
$
|
(45,295
|
)
|
||||
Depreciation
|
(9,492
|
)
|
(20,904
|
)
|
(20,351
|
)
|
(39,269
|
)
|
||||||||
Total cost of revenue
|
$
|
(23,834
|
)
|
$
|
(47,686
|
)
|
$
|
(49,062
|
)
|
$
|
(84,564
|
)
|
15. |
General and administrative expenses
|
Three months ended
|
Six months ended
|
|||||||||||||||
For the periods ended June 30
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
One-time transaction costs
|
$
|
(2,887
|
)
|
$
|
–
|
$
|
(15,175
|
)
|
$
|
(1,611
|
)
|
|||||
Share based payments
|
(2,477
|
)
|
(1,977
|
)
|
(5,512
|
)
|
(3,276
|
)
|
||||||||
Salary and benefits
|
(2,094
|
)
|
(1,869
|
)
|
(4,179
|
)
|
(3,786
|
)
|
||||||||
Insurance expense
|
(1,179
|
)
|
(1,344
|
)
|
(2,863
|
)
|
(2,425
|
)
|
||||||||
General, marketing, office and other
|
(1,373
|
)
|
(2,036
|
)
|
(3,016
|
)
|
(3,281
|
)
|
||||||||
Sales tax expense
|
(530
|
)
|
(2,024
|
)
|
(1,973
|
)
|
(5,187
|
)
|
||||||||
Professional fees
|
(1,530
|
)
|
(2,312
|
)
|
(2,732
|
)
|
(3,009
|
)
|
||||||||
Decommissioning costs
|
(245
|
)
|
–
|
(919
|
)
|
–
|
||||||||||
Investor relations and regulatory
|
(224
|
)
|
(716
|
)
|
(516
|
)
|
(1,237
|
)
|
||||||||
Total general and administrative expense
|
$
|
(12,539
|
)
|
$
|
(12,278
|
)
|
$
|
(36,885
|
)
|
$
|
(23,812
|
)
|
16. |
Supplementary cash flow information
|
For the six months ended June 30
|
2023
|
2022
|
||||||
Accounts receivable and other
|
$
|
(472
|
)
|
$
|
(1,110
|
)
|
||
Prepaid expenses
|
3,732
|
1,039
|
||||||
Accounts payable and accrued liabilities
|
8,309
|
1,386
|
||||||
Net change in working capital
|
$
|
11,569
|
$
|
1,315
|
Non-cash transactions
|
||||||||
For the six months ended June 30
|
2023
|
2022
|
||||||
Shares issued on vesting of RSU
|
$
|
5,937
|
$
|
1,345
|
||||
Shares issued on vesting of DSU
|
–
|
574
|
||||||
Derecognition of warrants upon expiry
|
2,043
|
39
|
HUT 8 MINING CORP.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
For the six months ended June 30, 2023 and 2022
(In thousands of Canadian dollars, except for per share amounts)
|
17. |
Litigation with North Bay facility power provider and leasehold provider
|
HUT 8 MINING CORP.
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
For the six months ended June 30, 2023 and 2022
(In thousands of Canadian dollars, except for per share amounts)
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
Management’s Discussion and Analysis
|
3
|
Forward-looking Statements
|
4
|
Significant Factors Affecting our Performance
|
6
|
Part I – Company and Highlights
|
||
Company
|
8
|
|
2023 second quarter summary
|
8
|
|
2023 second quarter highlights
|
9
|
|
Part II – Review of Financial Results
|
||
2023 second quarter operating results summary
|
12
|
|
Analysis of second quarter 2023, financial results
|
12 |
|
Analysis of six months ended June 30, 2023 financial results
|
14 |
|
Summary of quarterly information
|
16 |
|
Part III – Non-IFRS Measures and Ratios
|
||
Non-IFRS measures and ratios
|
18
|
|
Part IV – Financial Condition, Liquidity and Capital Resources
|
||
Cash flow information
|
21
|
|
Dividends
|
21
|
|
Financial position
|
22
|
|
Capital resources
|
23
|
|
Part V – Risks
|
||
Risks and uncertainties
|
25
|
|
Part VI – Accounting Policies, Critical Accounting Estimates and Internal Controls
|
||
Accounting estimates and judgments
|
26
|
|
Management’s report on disclosure controls and procedures and Internal Control
Over Financial Reporting
|
26
|
|
Abbreviations
|
28 |
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
For the periods ended June 30
|
Three Months Ended
|
Six Months Ended
|
||||||||||||||
(CAD thousands, except per share amounts)
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
Financial results
|
||||||||||||||||
Total revenue
|
$
|
19,183
|
$
|
43,845
|
$
|
38,204
|
$
|
97,178
|
||||||||
Net (loss) income
|
(16,713
|
)
|
(88,067
|
)
|
91,790
|
(32,359
|
)
|
|||||||||
Mining Profit (i)
|
3,200
|
14,906
|
5,790
|
47,813
|
||||||||||||
Adjusted EBITDA (i)
|
(2,690
|
)
|
(98,136
|
) |
133,340
|
|
(71,027
|
) |
||||||||
Per share
|
||||||||||||||||
Net (loss) income – basic
|
$
|
(0.08
|
)
|
$
|
(0.49
|
)
|
$
|
0.42
|
$
|
(0.19
|
)
|
|||||
Net (loss) income – diluted
|
$
|
(0.08
|
)
|
$
|
(0.49
|
)
|
$
|
0.40
|
$
|
(0.19
|
)
|
|||||
Operating results
|
||||||||||||||||
Digital assets mined
|
399
|
946
|
874
|
1,888
|
(i) |
These items are non-IFRS measures or ratios and should not be considered a substitute or alternative for IFRS measures. see “Non-IFRS Measures and Ratios” section in this MD&A below. Certain comparative figures have been restated
where necessary to conform with current period presentation.
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
•
|
Revenue decreased by $24.6 million to $19.2 million during the quarter ended June 30, 2023 compared to $43.8 million during the quarter ended June 30, 2022. The Company mined 399 Bitcoin in the quarter
ended June 30, 2023, an approximately 58% decrease compared to the quarter ended June 30, 2022, primarily due to an increase in average Bitcoin network difficulty resulting in a decrease in Bitcoin mined, halt in the Company’s graphic
processing units (“GPU”) mining activities due to the Ethereum network’s change in consensus mechanism from proof-of-work to proof-of-stake during the third quarter of 2022, the impact of the suspension of operations at the Company’s
North Bay Facility, and ongoing electrical issues at the Company’s Drumheller facility which continued from the fourth quarter of 2022. Revenue from the Company’s digital asset mining operations also declined as a result of lower
Digital Asset Revenue per Bitcoin Mined(i) due to the decrease in the daily average closing Bitcoin price in the current quarter versus the comparative quarter. The Company’s high performance computing operations generated
$4.2 million of primarily monthly recurring revenue in Q2 2023 compared to $4.7 million in Q2 2022 as a result of the discontinuation of certain low-margin products and service offerings, customer churn, which were partially offset by
new sales. The new sales do not reflect the newly signed five-year agreement with Interior Health, as the revenue earned from the agreement will commence later in 2023.
|
• |
As previously reported, the Company encountered issues at the Drumheller site, primarily stemming from high energy input levels that have been causing miners to fail. This has materially reduced operations, which are currently at
approximately 20% of our installed hash rate at the site. Remediation began in March 2023 and gained momentum in April 2023 as the team implemented new custom firmware across all miner models designed to lower the power supply’s maximum
output voltage, ensuring our equipment operates within safe limits. We have increased repair staff, added an additional repair centre shift, and have procured new hardware to expedite repairs and accelerate the speed at which we bring
miners back online, and expect to have restoration complete by the fourth quarter of 2023, barring no further substantial site issues. The electrical issues at the Drumheller site have been compounded by high energy rates which further
increased curtailment at the site.
|
• |
Net loss for the quarter ended June 30, 2023 was $16.7 million, compared to net loss of $88.1 million in the prior year’s quarter. The current quarter net loss was primarily driven by the $17.8 million operating loss, whereas the prior
year period’s net loss was primarily driven by the $16.1 million operating loss, $104.9 million non-cash loss on revaluation of digital assets, $8.5 million deferred income tax expense, partially offset by a $43.3 million non-cash gain on
revaluation of warrant liability.
|
• |
Mining Profit(i) was $3.2 million for the quarter ended June 30, 2023, compared to $14.9 million in the prior year’s quarter. The decrease in Mining Profit(i) compared to the prior year’s
quarter is mainly due to the decrease in price of Bitcoin, lower quantity of Bitcoin mined due to increased Bitcoin network difficulty, halt in the Company’s GPU mining activities due to the Ethereum network’s change in consensus mechanism
from proof-of-work to proof-of-stake during the third quarter of 2022, impact of the suspension of operations at the Company’s North Bay Facility, and the ongoing electrical issues at the Company’s Drumheller facility noted above, and was
partially offset by lower average power prices.
|
• |
Adjusted EBITDA(i) was negative $2.7 million for the quarter ended June 30, 2023, compared to a negative Adjusted EBITDA(i) of $98.1 million in the prior year’s quarter, primarily driven by a lower loss on
revaluation of digital assets, partially offset by a lower digital asset Mining Profit(i), and the aforementioned electrical issues at the Company’s Drumheller facility. Contributions from HPC operations were offset by lower
margins in digital asset mining operations.
|
• |
Net loss per share was $0.08 during the quarter ended June 30, 2023, compared to net loss per share of $0.49 for the same quarter in 2022. The lower net loss per share reflects a lower non-cash revaluation loss on digital assets,
partially offset by the non-cash revaluation gain on warrant liability, recorded in the quarter ended June 30, 2023 compared to the quarter ended June 30, 2022.
|
(i) |
These items are non-IFRS measures or ratios and should not be considered a substitute or alternative for IFRS measures. see “Non-IFRS Measures and Ratios” section in this MD&A below. Certain comparative figures have been restated
where necessary to conform with current period presentation.
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
• |
The Company entered into a $65.8 million (US$50 million) credit facility with Coinbase Credit, Inc. (“Coinbase”) on June 26, 2023. The loan facility bears interest at a rate of 5.0% plus the greater of (i) the US Federal Funds Target
Rate – Upper Bound and (ii) 3.25%. On or prior to a drawdown, the Company is required to pledge, as collateral, Bitcoin with custodian Coinbase Custody Trust Company, LLC., held in a segregated custody account under the Company’s ownership,
such that the loan-to-value ratio of principal outstanding of the loan and the fair value of collateral is equal to or less than 60%.
|
• |
The Company’s installed hashrate was 2.6 EH/s (excluding the Company’s North Bay Facility) as of June 30, 2023 compared to 2.5 EH/s as of December 31, 2022.
|
• |
On January 25, 2023, the Company filed a statement of claim in the Ontario Superior Court of Justice against VPC and Bay Power, as defendants. VPC was the Company’s power provider for the North Bay Facility. Pursuant to a power
purchase agreement in respect of the North Bay Facility dated October 22, 2021 (the “PPA”), VPC would design, construct, own, operate, and maintain certain power generation facilities at the North Bay Facility, and Hut 8 would purchase
energy from the North Bay Facility on the terms set out in the PPA. In connection with entering into of the PPA, the Company entered into (i) a lease agreement dated October 27, 2021 by and among the Company and Validus (the “Lease
Agreement”), and (ii) a design-build stipulated price contract dated October 21, 2021 between the Company and VPC.
|
• |
On February 6, 2023, the Company entered into a business combination agreement (the “Business Combination Agreement”) by and among the Company, U.S. Data Mining Group, Inc., a Nevada corporation doing business as “US Bitcoin Corp”
(“USBTC”), and Hut 8 Corp., a Delaware corporation (“New Hut”). Pursuant to the Business Combination Agreement, (i) Hut 8 and Hut 8 Holdings, will, as part of a court-sanctioned plan of arrangement (the “Arrangement”) under the Business
Corporations Act (British Columbia), be amalgamated to continue as one British Columbia corporation (“Hut Amalco”), with the capital of Hut Amalco being the same as the capital of Hut 8 (the “Amalgamation”), (ii) following the Amalgamation,
and pursuant to the Arrangement, each common share of Hut Amalco (other than any shares held by dissenting shareholders) will be exchanged for 0.2000 of a share of New Hut common stock, which will effectively result in a consolidation of
the Common Shares on a 5:1 basis and (iii) following the completion of the Arrangement, a newly-formed direct wholly-owned Nevada subsidiary of New Hut will merge with and into USBTC, with each share of common and preferred stock of USBTC,
being exchanged for 0.6716 of a share of New Hut common stock in a merger executed under the laws of the State of Nevada (the “Merger”, and together with the Arrangement, the “Business Combination”). As a result of the Business Combination,
both Hut Amalco and USBTC will become wholly-owned subsidiaries of New Hut. New Hut intends to list its shares on Nasdaq Stock Exchange (“Nasdaq”) and the Toronto Stock Exchange (the “TSX”) under the trading symbol “HUT” following the
completion of the Business Combination, subject to the approval of Nasdaq and the TSX.
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
•
|
On August 11, 2023, the Company announced that it has entered into a transaction support agreement (the “Support Agreement”) with Macquarie Equipment Finance Ltd. (“Macquarie”) a subsidiary of Macquarie Group Limited, in support of
an opportunity to potentially acquire certain assets of VPC and VPC’s subsidiaries (collectively, the “Validus Entities”). VPC was previously a supplier of energy to the Company’s mining facility in North Bay, Ontario. Macquarie is a
secured creditor of the Validus Entities under an existing secured lease and participation agreement.
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
For the periods ended June 30
|
Three months ended
|
Six months ended
|
||||||||||||||||||||||||||||||
(CAD thousands, except per share amounts)
|
2023
|
2022
|
$ Change
|
%
Change
|
2023
|
2022
|
$ Change
|
%
Change |
||||||||||||||||||||||||
Revenue
|
$
|
19,183
|
$
|
43,845
|
$
|
(24,662
|
)
|
(56
|
%)
|
$
|
38,204
|
$
|
97,178
|
$
|
(58,974
|
)
|
(61
|
%)
|
||||||||||||||
Cost of revenue
|
(23,834
|
)
|
(47,686
|
)
|
23,852
|
(50
|
%)
|
(49,062
|
)
|
(84,564
|
)
|
35,502
|
(42
|
%)
|
||||||||||||||||||
Gross (loss) profit
|
(4,651
|
)
|
(3,841
|
)
|
(810
|
)
|
21
|
%
|
(10,858
|
)
|
12,614
|
(23,472
|
)
|
(186
|
%)
|
|||||||||||||||||
Gross (loss) profit margin
|
(24
|
%)
|
(9
|
%)
|
(28
|
%)
|
13
|
%
|
||||||||||||||||||||||||
General and administrative expenses
|
(12,539
|
)
|
(12,278
|
)
|
(261
|
)
|
2
|
%
|
(36,885
|
)
|
(23,812
|
)
|
(13,073
|
)
|
55
|
%
|
||||||||||||||||
(Loss) gain on disposition of digital assets
|
(565
|
)
|
–
|
(565
|
)
|
–
|
4,390
|
–
|
4,390
|
–
|
||||||||||||||||||||||
Operating (loss) income
|
(17,755
|
)
|
(16,119
|
)
|
(1,636
|
)
|
10
|
%
|
(43,353
|
)
|
(11,198
|
)
|
(32,155
|
)
|
287
|
%
|
||||||||||||||||
Foreign exchange gain (loss)
|
298
|
27
|
271
|
1004
|
%
|
291
|
(684
|
)
|
975
|
(143
|
%)
|
|||||||||||||||||||||
Net finance expense
|
(1,437
|
)
|
(1,543
|
)
|
106
|
(7
|
%)
|
(2,869
|
)
|
(2,835
|
)
|
(34
|
)
|
1
|
%
|
|||||||||||||||||
Amortization
|
(177
|
)
|
(343
|
)
|
166
|
(48
|
%)
|
(354
|
)
|
(572
|
)
|
218
|
(38
|
%)
|
||||||||||||||||||
Gain on revaluation of warrant liability
|
339
|
43,281
|
(42,942
|
)
|
(99
|
%)
|
212
|
97,421
|
(97,209
|
)
|
(100
|
%)
|
||||||||||||||||||||
(Loss) gain on revaluation of digital assets
|
(36
|
)
|
(104,898
|
)
|
104,862
|
(100
|
%)
|
134,736
|
(104,898
|
)
|
239,634
|
(228
|
%)
|
|||||||||||||||||||
Net (loss) income before tax
|
(18,768
|
)
|
(79,595
|
)
|
60,827
|
(76
|
%)
|
88,663
|
(22,766
|
)
|
111,429
|
(489
|
%)
|
|||||||||||||||||||
Deferred income tax recovery (expense)
|
2,055
|
(8,472
|
)
|
10,527
|
(124
|
%)
|
3,127
|
(9,593
|
)
|
12,720
|
(133
|
%)
|
||||||||||||||||||||
Net (loss) income
|
(16,713
|
)
|
(88,067
|
)
|
71,354
|
(81
|
%)
|
91,790
|
(32,359
|
)
|
124,149
|
(384
|
%)
|
|||||||||||||||||||
Net (loss) income per share:
|
||||||||||||||||||||||||||||||||
- basic
|
$
|
(0.08
|
)
|
$
|
(0.49
|
)
|
$
|
0.42
|
$
|
(0.19
|
)
|
|||||||||||||||||||||
- diluted
|
$
|
(0.08
|
)
|
$
|
(0.49
|
)
|
$
|
0.40
|
$
|
(0.19
|
)
|
• |
Revenue decreased by $24.6 million to $19.2 million for the quarter ended June 30, 2023. The Company’s digital asset mining operations mined 399 Bitcoin and generated $15.0 million of revenue, versus 946 Bitcoin mined and $39.1 million
of revenue in the prior year period. The decrease in revenue from digital asset mining operations was due to the approximately 9% decrease in the daily average closing Bitcoin price (approximately $37,600 for the current year quarter
compared to approximately $41,400 in the prior year period), halt in the Company’s GPU mining activities due to the Ethereum network’s change in consensus mechanism from proof-of-work to proof-of-stake during the third quarter of 2022,
the impact of the suspension of operations at the Company’s North Bay Facility, and increase in Bitcoin network average difficulty of approximately 67% compared to prior year quarter. Additionally, the Company mined a lower quantity of
Bitcoin due to the ongoing electrical issues and increased energy rates at the Company’s Drumheller facility.
|
• |
The Company’s high performance computing operations generated $4.2 million of primarily recurring revenue in the quarter compared to $4.7 million in the comparative quarter with the decrease primarily attributed to the discontinuation of
certain low-margin products and service offerings and customer churn, which were partially offset by new sales.
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
• |
Site operating costs consist primarily of electricity costs as well as personnel, network monitoring, and equipment repair and maintenance costs at our digital asset mining and high performance computing operations. Site operating costs
for the quarter ended June 30, 2023, were $14.3 million, of which $11.8 million were attributable to our mining operations and $2.5 million were attributable to our high performance computing operations. The site operating costs for the
quarter ended June 30, 2022 were $26.8 million, of which $24.5 million were attributable to our mining operations and $2.3 million were attributable to our high performance computing operations.
|
- |
The Mining Cost per Bitcoin(i) for the second quarter of 2023 was $29,551 per Bitcoin, compared to $25,611 per Bitcoin in the prior year for the same quarter. The increase was due to higher power consumption per
Bitcoin mined and ongoing electrical issues at the Drumheller facility, which was partially offset by the Company’s decision to curtail, lower average energy prices and increased efficiencies in the miners deployed compared to prior year
same quarter.
|
- |
The increase in site operating costs related to the high performance computing operations is primarily due to increased repairs and maintenance to improve the Company’s facilities.
|
• |
Depreciation expense decreased to $9.5 million during the second quarter of 2023 compared to $20.9 million in the same quarter of 2022, primarily driven by the lower net book value of digital asset mining assets after the recognition of
a non-cash impairment charge during the fourth quarter of 2022 as part of annual impairment testing.
|
• |
General and administrative expenses increased by $0.3 million, the increase is primarily driven by higher one-time transaction costs and was partially offset by lower sales tax expense and professional fees.
|
- |
$2.9M in one-time transaction costs in the second quarter of 2023 are costs related to the Business Combination, compared to $nil transaction costs incurred in the second quarter of 2022 as the acquisition of the high performance
computing business had been completed in the first quarter of 2022.
|
- |
Sales tax expense decreased by $1.5 million due to decreased taxable purchases in the second quarter of 2023 compared to the same period in the prior year.
|
- |
Professional fees decreased by $0.8 million due to lower expenditure on the implementation of the new ERP system in the second quarter of 2023 compared to the same period in prior year, as the Company completed the first phase of the
implementation of new ERP system in the quarter ended June 30, 2022.
|
(i) |
These items are non-IFRS measures or ratios and should not be considered a substitute or alternative for IFRS measures. see “Non-IFRS Measures and Ratios” section in this MD&A below. Certain comparative figures have been restated
where necessary to conform with current period presentation.
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
• |
Revenue decreased by $59.0 million to $38.2 million for the six months ended June 30, 2023, compared to $97.2 million for the six months ended June 30, 2022. The Company’s digital asset mining operations mined 874 Bitcoin and generated
$29.5 million of revenue, versus 1,888 Bitcoin mined and $88.4 million of revenue in the prior year period. The decrease in revenue from digital asset mining operations was due to the approximately 27% decrease in the daily average
closing Bitcoin price (approximately $33,800 for the current year period compared to approximately $47,200 in the prior year period), halt in the Company’s GPU mining activities due to the Ethereum network’s change in consensus mechanism
from proof-of-work to proof-of-stake during the third quarter of 2022, the impact of the suspension of operations at the Company’s North Bay Facility, and increase in Bitcoin network average difficulty of approximately 59% compared to
prior year period. Additionally, the Company mined a lower quantity of Bitcoin due to the ongoing electrical issues and increased energy rates at the Company’s Drumheller facility.
|
• |
The Company’s high performance computing operations generated $8.6 million of primarily recurring revenue in the current period compared to $8.0 million in the comparative period with the increase primarily due to six full months of
operations in the six months ended June 30, 2023 compared to five months of operations in the six months ended June 30, 2022. The Company completed the high performance computing business acquisition on January 31, 2022. This increase was
partially offset by a decrease in revenue caused by the discontinuation of certain low-margin products and service offerings and customer churn, which were partially offset by new sales.
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
• |
Site operating costs consist primarily of electricity costs as well as personnel, network monitoring, and equipment repair and maintenance costs at our digital asset mining and high performance computing operations. Site operating costs
for the six months ended June 30, 2023, were $28.7 million, of which $23.7 million were attributable to our mining operations and $5.0 million were attributable to our high performance computing operations. The site operating costs for the
six months ended June 30, 2022 were $45.3 million, of which $41.4 million were attributable to our mining operations and $3.9 million were attributable to our high performance computing operations.
|
- |
The Mining Cost per Bitcoin(i) for the six months ended June 30, 2023 was $27,148 per Bitcoin, compared to $21,511 per Bitcoin in the prior year period. The increase was due to higher power consumption per Bitcoin
mined and ongoing electrical issues at the Drumheller facility, which was partially offset by overall decrease in average energy prices and the Company’s decision to curtail and increased efficiencies in the miners deployed compared to the
prior year period.
|
- |
The increase in site operating costs related to the high performance computing operations is primarily due to increased repairs and maintenance to improve the Company’s facilities and the impact of the timing of the acquisition of the
high performance computing operations as previously mentioned, with six full months of operations in the current period 2023 versus five months of operations in the 2022 comparative period.
|
• |
Depreciation expense decreased to $20.4 million during the six months ended June 30, 2023 compared to $39.3 million in the same period in 2022, primarily driven by the lower net book value of digital asset mining assets after the
recognition of non-cash impairment charge during the fourth quarter of 2022 as part of annual impairment testing.
|
• |
General and administrative expenses increased by $13.1 million, the increase is primarily driven by higher one-time transaction costs, share based payments, decommissioning costs, and was partially offset by lower sales tax expense and
investor relations and regulatory costs.
|
- |
Included in one-time transaction costs during the six months ended June 30, 2023 are $15.2 million of costs related to the Business Combination, compared to the $1.6 million of transaction costs incurred related to the acquisition of
high performance computing business in the prior year period.
|
- |
$0.9 million in decommissioning expenses related to the North Bay Facility were incurred during the six months ended June 30, 2023 as a result of the suspension of operations from the ongoing dispute with Validus.
|
- |
Share-based payments related to share-based compensation increased from $3.3 million to $5.5 million as a result of long-term incentive plan grants made during the year ended December 31, 2022 to support the Company’s growth, headcount
and operations, and to retain talent.
|
- |
Sales tax expense decreased by $3.2 million due to decreased taxable purchases during the six months ended June 30, 2023 compared to the prior year period.
|
- |
Investor relations and regulatory costs decreased by $0.7 million due to reduced activity in the capital markets during the 6-months ended June 30, 2023 compared to 6-months ended June 30, 2022.
|
(i) |
These items are non-IFRS measures or ratios and should not be considered a substitute or alternative for IFRS measures. see “Non-IFRS Measures and Ratios” section in this MD&A below. Certain comparative figures have been restated
where necessary to conform with current period presentation.
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
For the three months ended
|
June 30,
2023 Q2
|
March 31,
2023
Q1
|
Dec 31,
2022
Q4
|
Sep 30,
2022
Q3
|
Jun 30,
2022
Q2
|
Mar 31,
2022
Q1
|
Dec 31,
2021
Q4
|
Sep 30,
2021
Q3
|
||||||||||||||||||||||||
Revenue
|
$
|
19,183
|
$
|
19,021
|
$
|
21,833
|
$
|
31,671
|
$
|
43,845
|
$
|
53,333
|
$
|
57,901
|
$
|
50,341
|
||||||||||||||||
Net (loss) income
|
(16,713
|
)
|
108,503
|
(186,668
|
)
|
(23,786
|
)
|
(88,067
|
)
|
55,708
|
(111,178
|
)
|
23,374
|
|||||||||||||||||||
Net (loss) income per share:
|
||||||||||||||||||||||||||||||||
- Basic
|
$
|
(0.08
|
)
|
$
|
0.49
|
$
|
(0.90
|
)
|
$
|
(0.12
|
)
|
$
|
(0.49
|
)
|
$
|
0.33
|
$
|
(0.67
|
)
|
$
|
0.16
|
|||||||||||
- Diluted
|
$
|
(0.08
|
)
|
$
|
0.47
|
$
|
(0.90
|
)
|
$
|
(0.12
|
)
|
$
|
(0.49
|
)
|
$
|
0.31
|
$
|
(0.67
|
)
|
$
|
0.15
|
(i) |
These items are non-IFRS measures or ratios and should not be considered a substitute or alternative for IFRS measures. see “Non-IFRS Measures and Ratios” section in this MD&A below. Certain comparative figures have been restated
where necessary to conform with current period presentation.
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
(i) |
These items are non-IFRS measures or ratios and should not be considered a substitute or alternative for IFRS measures. see “Non-IFRS Measures and Ratios” section in this MD&A below. Certain comparative figures have been restated
where necessary to conform with current period presentation.
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
For the periods ended June 30
|
Three Months Ended
|
Six Months Ended
|
||||||||||||||
(CAD thousands)
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
Gross (loss) profit
|
$
|
(4,651
|
)
|
$
|
(3,841
|
)
|
$
|
(10,858
|
)
|
$
|
12,614
|
|||||
Add (deduct):
|
||||||||||||||||
Revenue from hosting
|
–
|
–
|
–
|
(751
|
)
|
|||||||||||
Revenue from high performance computing
|
(4,192
|
)
|
(4,711
|
)
|
(8,687
|
)
|
(8,001
|
)
|
||||||||
Site operating costs attributable to high performance computing and hosting
|
2,551
|
2,554
|
4,984
|
4,682
|
||||||||||||
Depreciation
|
9,492
|
20,904
|
20,351
|
39,269
|
||||||||||||
Mining Profit
|
$
|
3,200
|
$
|
14,906
|
$
|
5,790
|
$
|
47,813
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
For the periods ended June 30
|
Three Months Ended
|
Six Months Ended
|
||||||||||||||
(CAD thousands)
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
Net (loss) income
|
$
|
(16,713
|
)
|
$
|
(88,067
|
)
|
$
|
91,790
|
$
|
(32,359
|
)
|
|||||
|
||||||||||||||||
Add (deduct):
|
||||||||||||||||
Net finance expense
|
1,437
|
1,543
|
2,869
|
2,835
|
||||||||||||
Depreciation and amortization
|
9,669
|
21,247
|
20,705
|
39,841
|
||||||||||||
Share based payment
|
2,477
|
1,977
|
5,512
|
3,276
|
||||||||||||
Foreign exchange (gain) loss
|
(298
|
)
|
(27
|
)
|
(291
|
)
|
684
|
|||||||||
One-time transaction costs
|
2,887
|
–
|
15,175
|
1,611
|
||||||||||||
North Bay decommissioning costs
|
245
|
–
|
919
|
–
|
||||||||||||
Deferred income tax (recovery) expense
|
(2,055
|
)
|
8,472
|
(3,127
|
)
|
9,593
|
||||||||||
Sales tax expense
|
–
|
–
|
–
|
913
|
||||||||||||
Gain on revaluation of warrants
|
(339
|
)
|
(43,281
|
)
|
(212
|
)
|
(97,421
|
)
|
||||||||
Adjusted EBITDA
|
$
|
(2,690
|
)
|
$
|
(98,136
|
)
|
$
|
133,340
|
$
|
(71,027
|
)
|
For the three months ended
(CAD thousands, except per Bitcoin amounts)
|
June 30,
2023
Q2
|
March 31,
2023
Q1
|
Dec 31,
2022
Q4
|
Sep 30,
2022
Q3
|
Jun 30,
2022
Q2
|
Mar 31,
2022
Q1
|
Dec 31,
2021
Q4
|
Sep 30,
2021
Q3
|
||||||||||||||||||||||||
Revenue
|
$
|
19,183
|
$
|
19,021
|
$
|
21,833
|
$
|
31,671
|
$
|
43,845
|
$
|
53,333
|
$
|
57,901
|
$
|
50,341
|
||||||||||||||||
Add (deduct):
|
||||||||||||||||||||||||||||||||
Revenue from hosting
|
–
|
–
|
–
|
–
|
–
|
(751
|
)
|
(2,352
|
)
|
(2,406
|
)
|
|||||||||||||||||||||
Revenue from high performance computing
|
(4,192
|
)
|
(4,495
|
)
|
(4,487
|
)
|
(4,403
|
)
|
(4,711
|
)
|
(3,290
|
)
|
–
|
–
|
||||||||||||||||||
Digital asset revenue
|
14,991
|
14,526
|
17,346
|
27,268
|
39,134
|
49,292
|
55,549
|
47,935
|
||||||||||||||||||||||||
Divided by:
|
||||||||||||||||||||||||||||||||
Number of Bitcoin mined
|
399
|
475
|
698
|
982
|
946
|
942
|
789
|
905
|
||||||||||||||||||||||||
Digital Asset Revenue per Bitcoin Mined
|
$
|
37,571
|
$
|
30,581
|
$
|
24,851
|
$
|
27,768
|
$
|
41,368
|
$
|
52,327
|
$
|
70,364
|
$
|
52,967
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
For the periods ended June 30
|
Three Months Ended
|
Six Months Ended
|
||||||||||||||
(CAD thousands, except per Bitcoin amounts)
|
2023
|
2022
|
2023
|
2022
|
||||||||||||
Cost of revenue
|
$
|
(23,834
|
)
|
$
|
(47,686
|
)
|
$
|
(49,062
|
)
|
$
|
(84,564
|
)
|
||||
Add (deduct):
|
||||||||||||||||
Site operating costs attributable to high performance computing and hosting
|
2,551
|
2,554
|
4,984
|
4,682
|
||||||||||||
Depreciation
|
9,492
|
20,904
|
20,351
|
39,269
|
||||||||||||
Mining cost
|
(11,791
|
)
|
(24,228
|
)
|
(23,727
|
)
|
(40,613
|
)
|
||||||||
Divided by:
|
||||||||||||||||
Number of Bitcoin mined
|
399
|
946
|
874
|
1,888
|
||||||||||||
Mining Cost per Bitcoin
|
$
|
(29,551
|
)
|
$
|
(25,611
|
)
|
$
|
(27,148
|
)
|
$
|
(21,511
|
)
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
For the six months ended June 30
|
2023
|
2022
|
||||||
Net cash (used in) provided by:
|
||||||||
Operating activities
|
$
|
(10,584
|
)
|
$
|
(55,764
|
)
|
||
Investing activities
|
(2,824
|
)
|
(85,592
|
)
|
||||
Financing activities
|
9,609
|
61,378
|
||||||
Decrease in cash
|
$
|
(3,799
|
)
|
$
|
(79,978
|
)
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
As at
|
June 30, 2023
|
December 31, 2022
|
||||||
Cash
|
$
|
26,687
|
$
|
30,515
|
||||
Accounts receivable and other
|
2,116
|
1,589
|
||||||
Digital assets – held in custody
|
334,764
|
203,627
|
||||||
Digital assets – pledged as collateral
|
34,178
|
–
|
||||||
Current and long-term deposits and prepaid expenses
|
31,765
|
37,112
|
||||||
Plant and equipment
|
113,258
|
124,959
|
||||||
Intangible assets and goodwill
|
14,781
|
15,135
|
||||||
Accounts payable and accrued liabilities
|
22,281
|
13,916
|
||||||
Current and long-term lease liabilities
|
25,023
|
21,298
|
||||||
Current and long-term loans payable
|
39,079
|
26,121
|
||||||
Warrant liability
|
–
|
212
|
||||||
Total shareholders’ equity
|
471,166
|
351,390
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
As at
|
June 30, 2023
|
December 31, 2022
|
||||||
Cash
|
$
|
26,687
|
$
|
30,515
|
||||
Loans payable
|
39,079
|
26,121
|
||||||
Shareholders’ equity
|
471,166
|
351,390
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
HUT 8 MINING CORP.
Management’s Discussion and Analysis
For the three and six months ended June 30, 2023
(In thousands of Canadian Dollars, except per share amounts)
|
EH/s |
exahash per second
|
PH/s
|
petahash per second
|
MW |
megawatts
|
ASIC |
application-specific integrated circuit
|
GPU |
graphics processing unit
|
1. |
Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Hut 8 Mining Corp. (the “issuer”) for the interim period ended
June 30, 2023.
|
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 April 1, 2023 and ended
on June 30, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
|
(signed) “Jaime Leverton”
|
|
Jaime Leverton
|
|
Chief Executive Officer
|
1. |
Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Hut 8 Mining Corp. (the “issuer”) for the interim period ended
June 30, 2023.
|
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 April 1, 2023 and ended
on June 30, 2023 that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.
|
(signed) “Shenif Visram”
|
|
Shenif Visram
|
|
Chief Financial Officer
|
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