About HIVE Digital Technologies

HIVE Blockchain Technologies Ltd. (HIVE) engages in the mining and sale of digital currencies. The company has eight wholly owned subsidiaries: HIVE Blockchain Switzerland AG (incorporated under the laws of Switzerland), Bikupa Datacenter AB (incorporated under the laws of Sweden), Bikupa Datacenter 2 AB (incorporated under the laws of Sweden), HIVE Digital Data Ltd. (incorporated under the laws of Bermuda), HIVE Performance Computing Ltd. (incorporated under the laws of Bermuda), Liv Eiendom AS (incorporated under the laws of Norway), 9376-9974 Quebec Inc. (incorporated under the laws of the province of Quebec), and HIVE Atlantic Datacentres Ltd. (incorporated under the laws of the province of New Brunswick). Hive Blockchain Switzerland AG has one wholly owned subsidiary, Hive Blockchain Iceland ehf. (incorporated under the laws of Iceland) and HIVE Performance Computing Ltd. has one wholly owned subsidiary, HIVE Performance Cloud Inc. (incorporated under the laws of the province of Quebec). HIVE is a growth oriented, publicly listed company building a bridge from the blockchain sector to traditional capital markets. The company owns and leases state-of-the-art green energy-powered data centre facilities in Canada, Sweden, and Iceland, which mine newly minted digital currencies like Bitcoin and Ether continuously on the cloud. These operations provide shareholders with exposure to the operating margins of digital currency mining, which is the most profitable application of the company's computing power. As it relates to its GPU (graphics processing unit, a programmable logic chip (processor) specialized for display functions and effective at solving digital currency hashing algorithms) computing equipment, the company is investigating other high efficiency computing applications, such as artificial intelligence and graphic rendering, as well as private blockchain computing, which are becoming more widespread as the blockchain technology grows and develops. Production and Services HIVE maintains six cryptocurrency mining operations as set forth below. The company's operating and maintenance expenses are composed of electricity to power its computing equipment, as well as cooling and lighting, etc. The facilities are strategically located where electricity costs are low due to an abundance of hydro power and geothermal energy. Other site expenses include leasing costs for the facilities, internet access, equipment maintenance and software optimization, and facility security, maintenance and management. The HIVE Lachute Facility The HIVE Lachute Facility is a leased facility and is located in Quebec, Canada and is equipped with approximately 6,800 Bitcoin miners, with an aggregate operating hashrate of approximately 530 PH/s (Petahash per second). The HIVE Lachute Facility utilizes approximately 27 MW (megawatts) of power, with available power capacity of 30 MW. 100% of the Bitcoin mining power is being utilized by HIVE for self-mining. In preparation for the halving, which occurred in mid-May 2020, in April 2020 HIVE acquired this leased facility located in Lachute, Quebec from Cryptologic, which has access to low cost, renewable electricity, available capacity of 30 MW of HVAC and electrical infrastructure that is unique to cryptocurrency mining, systems for power and internet connectivity and operational staff. HIVE has subsequently been investing in next generation mining equipment that can provide positive gross mining margins of Bitcoin rewards; the next halving is scheduled to occur in the first half of calendar 2024. In 2021, HIVE invested in approximately 2,000 next generation SHA-256 Bitmain-manufactured miners with an aggregate operating hashrate of 124 PH/s to scale up mining power and increase the operating efficiency of the facility. In July 2020, HIVE ordered 200 additional new generation Bitmain miners, with an aggregate operating hashpower of 12 PH/s, from an equipment broker, however, with the production and delivery delays that are being experienced at Bitmain, HIVE has requested a refund from the broker due to the uncertainties associated with them. As of March 31, 2022, these refunds had not been settled. In August 2020, the company installed an additional 1,000 new generation miners from manufacturer MicroBT with an aggregate operating hashrate of 93 PH/s. The equipment was initially hosted by HIVE on behalf of an institutional client, and on July 12, 2021 these machines were purchased from this institutional client. The HIVE Sweden Facility The company's operations in Sweden are consisted of the following facilities: The HIVE Sweden Facility, leased facility in Boden, equipped with approximately 17,000 custom, efficient GPU rigs with an aggregate operating hashrate of approximately 5,652 GH/s. The HIVE Sweden Facility mines Ether and utilizes approximately 27 MW of power. Additionally, the HIVE Sweden facility is equipped with approximately 1400 new generation miners mining digital assets in the cloud, generating approximately 120 PH/s. The HIVE Sweden Robertsfors Facility, leased facility in Robertsfors, equipped with approximately 1100 new generation miners mining digital assets in the cloud, generating approximately 60 PH/s. The Hive Sweden Robertsfors Facility utilizes approximately 4MW of power. In July 2019, the company rebooted its operations in Sweden after it had been shut down in February 2019 related to a dispute with Genesis. In August 2019, the company assumed full control of operations at the HIVE Sweden Facility from Genesis and entered into direct agreements with local suppliers, including a strategic partnership with Blockbase to be the facility operator. Blockbase manages Barrage d.o.o. (LLC) (Barrage), which has a team of data center technicians with technical training unique to operating GPUs. This is critical as GPUs require more attention and specialized skill sets to ensure proper maintenance and operation than a data center filled with ASIC (application-specific integrated circuit) chips. The transition of facility operations from Genesis (Genesis Mining Ltd.) to Blockbase (Blockbase Consulting GmbH) was completed in November 2019. The HIVE Iceland Facility The HIVE Iceland Facility is a leased facility and is equipped with approximately 2,450 custom, efficient GPU rigs with an aggregate operating hashrate of approximately 560 GH/s (Gigahashes per second), and mines Ether and Ethereum Classic. In addition, the facility is equipped with approximately 700 ASIC mining rigs with an aggregate operating hash rate of approximately 40 PH/s, and mines Bitcoin. This facility has a maximum capacity of 4.5 MW of power. On June 1, 2020, HIVE assumed full control of its Iceland operation from Genesis and entered into direct agreements with local suppliers, including a strategic partnership with Blockbase to be facility operator for the company's Iceland operation. The HIVE New Brunswick Facility The HIVE New Brunswick Facility was acquired from GPU ONE (GPU.One Holding Inc.) through the purchase of GPU Atlantic (GPU Atlantic Inc.), which has undergone a name change, and is known as HIVE Atlantic Datacentres Ltd. (HIVE Atlantic). HIVE Atlantic is a wholly owned subsidiary of the company and is the owner of the HIVE New Brunswick Facility. This facility has a capacity of 80 MW of power. This facility operates 16,400 new generation ASIC miners, with an aggregate operating hashrate of approximately 1,400 PH/s, utilizing approximately 56 MW of power. When construction is completed, it is expected that this facility will comprise a data center campus of 4 buildings, utilizing approximately 75 MW of power. The first 3 buildings are complete and operating ASIC miners at fully capacity; the 4th building is partially complete and operating ASIC miners at partial capacity. On October 23, 2019, HIVE Atlantic entered into an agreement for the supply of power and energy (the ‘NB Agreement’) with New Brunswick Power Corporation (NB Power). The NB Agreement has a term of ten (10) years. The NB Agreement stipulates that NB Power will supply a total of 15,000kW of Power to HIVE Atlantic, 2,250kW of which NB Power has a contractual obligation to deliver on a continued basis from October 23, 2019 until October 23, 2029, while the 12,750kW of interruptible surplus power can be consumed at HIVE's discretion at the daily spot prices during this same ten (10) year term. Custodial Services for Digital Currencies The company holds its digital currencies in cold storage solutions, which are not connected to the internet, with Fireblocks Ltd., which is headquartered in New York (Fireblocks) and also at Bank Frick & Co. AG (Bank Frick) (‘Bank Frick’ and together with Fireblocks, the ‘Custodians’), which is headquartered in Liechtenstein. The Custodians are responsible only for safeguarding the cryptocurrency assets of the company. Bank Frick is regulated by the Liechtenstein financial market authority and is the foreign equivalent of a Canadian financial institution (as that term is defined in National Instrument 45-106 Prospectus Exemptions). As of March 31, 2022, the company's only material custodian was Fireblocks. The company relies primarily on Fireblocks as it compiles documented controls that can be provided to the company, such as the SOC 2 Type II certification, which are viewed as instrumental in providing verification to third parties that appropriate controls have been put in place. Fireblocks is a wallet infrastructure provider and a digital asset security firm, which was backed in its early stages by the investment arm of Fidelity International Ltd. Fireblocks utilizes multi-party computation technology to secure private keys to assist its customers to securely self-custody and transfer cryptocurrency assets among counterparties, and consequently, does not directly hold the company's cryptocurrency inventory. Fireblocks stores two of the company's three key shares on servers located in the United States and operated by Microsoft Azure, a cloud computing service operated by Microsoft Corporation, and International Business Machines Corporation; the company maintains the third key share in the secure enclave of authorized user's mobile devices. All three key shares are required in order to execute a transfer of cryptocurrency from the cold storage wallet. As of March 31, 2022, the company had elected to maintain 99% of its cryptocurrency with Fireblocks primarily due to the comfort provided by the SOC 2 Type II certification performed by EY, and for which Fireblocks undergoes a review on an annual basis. Such reports are not applicable to Bank Frick or other large cryptocurrency custodians at this time. 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. As of March 31, 2022, the company had not identified any material concerns based on its review of the SOC 2 Type II report. Fireblocks also maintains an insurance policy, which covers technology, cyber, and professional liability. The company is not aware of any security breaches or incidents involving Fireblocks, or of any other limitations on Fireblocks' insurance. Business and Strategy The company's business is to create value from maintaining the infrastructure behind Blockchain whereby HIVE's strength is the computing power intense blockchains under the consensus principle ‘proof of work’. Therefore the strategy of the company is to expand its computing power and its operations in the highly efficient activities in the ‘proof of work’ blockchains whereby a sustainable carbon footprint of all operations and a high efficiency energy usage is an indispensable part of the strategy of the company and also its competitiveness and its responsibility as data center operator. Sale of Kolos On May 10, 2021, the company sold Kolos Norway AS (Kolos), a subsidiary located in Norway, to the local community under a share purchase agreement. Power Contracts and Economic Dependence Power All of HIVE's locations are powered by sustainable energy, being renewable hydroelectricity or geothermal energy. HIVE Sweden Facility The company has an arrangement with Vattenfall AB, a power supply company based in Sweden, to receive electricity priced at the hourly spot rate until December 31, 2024. The electricity is being obtained for the purpose of powering the company's data centre at the HIVE Sweden Facility. The company has a supplemental power pricing arrangement that was entered into in order to fix 20 MW of electricity consumption for the months January through December 2022 at a set price, and an additional 4 MW for the months of July through September 2022. HIVE has separate lease, data centre, Internet access and facility management agreements in place with other parties for other aspects of site operations and maintenance. HIVE Iceland Facility At the HIVE Iceland Facility, the company has an initial two-year agreement effective June 1, 2020 with atNorth (atNorth ehf.) for hosting and related colocation services, including power usage (as well as hosting, shelving, datacentre operations and maintenance, and security). HIVE Lachute Facility In Quebec, the company has a lease agreement until June 30th, 2028, which include access to the property owner's electricity services subscription with Hydro-Quebec. HIVE New Brunswick Facility The company owns its land and infrastructure at the HIVE New Brunswick Facility, including its substation. The company is expecting 4,300 new generation miners and an additional 430 PH/s at the HIVE New Brunswick Facility by December 31st, 2022. Progress for Various Buildings & Production Capacity The company has approximately 1,450 PH/s of Bitcoin mining capacity, and is on track to add approximately 430 PH/s of ASIC deliveries to its operations and various buildings by the end of December 31, 2022. Foreign Operations As of March 31, 2022, the company's foreign operations primarily included the company's digital currency mining operations at the HIVE Sweden Facility, the Bikupa Datacentre 2, and the HIVE Iceland Facility and Bermuda subsidiary, HIVE Digital Data Ltd. Competition The largest competitor operating in the same space as HIVE in North America is Hut 8 Mining Corp. There are several other companies competing in HIVE's industry, including HyperBlockInc.; Atlas Blockchain Group Inc.; Riot Blockchain, Inc.; MGT Capital Investments Inc.; Marathon Digital Holdings Inc.; Bitfarms Ltd.; Argo Blockchain Plc; CryptoStar Corp.; Digihost Technology Inc.; Skychain Technologies Inc.; DMG Blockchain Solutions Inc.; Link Global Technologies Inc.; and Skyledger Tech Corp. History The company was incorporated in the province of British Columbia in 1987 under the Business Corporations Act (British Columbia). It was formerly known as Leeta Gold Corp. and changed its name to HIVE Blockchain Technologies Ltd. in 2017.