Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read together with our combined financial statements and the related notes and the other financial information included elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual business, financial condition, and results of operations could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Annual Report, particularly under "Item 1A. Risk Factors." See also "Cautionary Note Regarding Forward-Looking Statements" elsewhere in this Annual Report. Our historical results are not necessarily indicative of the results that may be expected for any period in the future.

Overview

Our business objective is Bitcoin accumulation, and we aim to pursue that goal through a multi-pronged strategy that combines efficient Bitcoin mining, disciplined Bitcoin reserve expansion, and focused ecosystem engagement. We believe Bitcoin represents an emerging institutional-grade asset class that lacks a clear category leader in the form of a scaled, publicly traded platform purpose-built around Bitcoin accumulation, network participation, and ecosystem development. We are building American Bitcoin with the objective of becoming that platform.

2025 Highlights

Basis of Presentation

References to "we," us," our," and similar terms herein refer to:

On March 31, 2025, Hut 8, ADC, and the stockholders of ADC entered into a Contribution and Stock Purchase Agreement, pursuant to which Hut 8 contributed to ADC substantially all of Hut 8's wholly-owned ASIC miners, in exchange for newly issued Class B Common Stock of ADC, representing 80% of the total and combined voting power and 80% of the issued and outstanding equity interests of ADC after giving effect to the issuance. In connection with the Transactions, ADC was renamed American Bitcoin Corp. and became a majority-owned subsidiary of Hut 8.

Until the effectiveness of the Transactions on March 31, 2025, we historically operated as the "ASIC Compute" sub-segment of Hut 8's "Compute" segment and not as a standalone company; therefore, separate financial statements had not historically been prepared for us prior to April 1, 2025. Our Combined Financial Statements represent the historical assets, liabilities, operations, and cash flows directly attributable to us starting April 1, 2025; the prior periods have been prepared on a carveout basis through the use of a management approach from Hut 8's Consolidated Financial Statements and accounting records and are presented on a standalone basis as if the operations had been conducted independently from Hut 8.

Following the effectiveness of the Transactions on March 31, 2025, we began operating as a standalone entity with our own accounting and financial records; therefore, starting April 1, 2025, our results of operations are the results directly attributed to our standalone operations rather than the Bitcoin mining operations of Hut 8. Our Combined Balance Sheets as of December 31, 2025 reflects the assets and liabilities that we directly own or are legally obligated to satisfy post-Transactions.

Prior to the effectiveness of the Transactions on March 31, 2025, all revenues and costs, as well as assets and liabilities directly associated with Hut 8's Bitcoin mining sub-segment activities were included in our Combined Financial Statements, including Hut 8's strategic Bitcoin reserve (which remained with Hut 8 following the effectiveness of the Transactions). Additional costs allocated to us include corporate general and administrative expenses, which consisted of various categories, including but not limited to: employee compensation and benefits, professional services, facilities and corporate office expenses, information technology, interest expenses, and stock-based compensation. The corporate and general administrative expenses allocated were primarily based on a percentage of revenue basis that was considered to be a reasonable reflection of the utilization of the services provided or benefit received during the periods presented, depending on the nature of the service received. Management believes the assumptions underlying our Combined Financial Statements, including the expense methodology and resulting allocation, are reasonable for all periods presented. However, the allocations may not include all of the actual expenses that would have been incurred by us had we operated as a standalone entity during such periods and may not reflect our results of operations, financial position, and cash flows had we been a standalone company during the periods presented. Actual costs that might have been incurred had we been a standalone company would depend on a number of factors, including our organizational structure, what corporate functions we might have performed directly or outsourced, and strategic decisions we might have made in areas such as executive management, legal, and other professional services, and certain corporate overhead functions. These costs also may not be indicative of the expenses that we may incur in the future or would have incurred if we had obtained these services from a third party.

All intracompany transactions within our operations prior to the effectiveness of the Transactions on March 31, 2025 have been eliminated. All intercompany transactions between us and Hut 8 on or before March 31, 2025 are considered to be effectively settled in our Combined Financial Statements at the time the transactions are recorded. The total net effect of these intercompany transactions considered to be settled are reflected in our Combined Statement of Cash Flows within financing activities and in our Combined Balance Sheets as net Hut 8 investment. At March 31, 2025, as described in the description of the Transactions above, the total net Hut 8 investment has been settled.

Prior to the effectiveness of the Transactions on March 31, 2025, our equity balance in our Combined Financial Statements represents the excess of total liabilities over assets. Net Hut 8 investment is primarily impacted by contributions from Hut 8 that are the result of net funding provided by or distributed to Hut 8.

Prior to the effectiveness of the Transactions on March 31, 2025, cash was managed through bank accounts controlled and maintained by Hut 8. We did not have legal ownership of any bank accounts containing cash balances prior to March 31, 2025. As such, cash held in commingled accounts with Hut 8 is presented within net Hut 8 investment on our Combined Balance Sheets. Subsequent to March 31, 2025, we have set up our own legally separate bank accounts to appropriately directly settle our liabilities and to manage our own cash.

Prior to the effectiveness of the Transactions on March 31, 2025, we were not a co-obligor on Hut 8's third-party, long-term debt obligations nor were we expected to pay any portion of Hut 8's third-party, long-term debt. However, proceeds from Hut 8's third-party debts were used to finance our purchase of Bitcoin miners or directly used for our Bitcoin mining-related activities and were therefore included in our Combined Financial Statements. While we are not a legal obligor, certain Bitcoin mining assets of ours were pledged as collateral as disclosed in Note 5.Digital Assets. Following the effectiveness of the Transactions on March 31, 2025, we are no longer connected to any of Hut 8's third-party debt obligations.

The Combined Financial Statements included in this Annual Report have been prepared in accordance with generally accepted accounting principles, in the United States ("GAAP").

Bitcoin Mining

We generate revenue from Bitcoin rewards by providing computation services to third-party mining pool operators, which combine the computing power of Bitcoin miners to increase the chance of solving a block and getting paid by the network. We provide the service of performing computations of our Bitcoin miners to these mining pool operators and receive in return a payout of Bitcoin based on a contractual formula which primarily calculates the computing power provided to the mining pool as a percentage of the total computing power of the network, regardless of whether the mining pool actually receives the Bitcoin award from the network.

As of December 31, 2025, we operated our Bitcoin miners at four sites under the MCSA with Hut 8:

Kearney (Kearney, Nebraska) and Granbury (Granbury, Texas)

Until April 30, 2024, we also had Bitcoin mining operations hosted at sites in Kearney, Nebraska and Granbury, Texas.

Medicine Hat (Medicine Hat, Alberta) and Salt Creek (Orla, Texas)

During February and March 2025, mining activity at our Medicine Hat and Salt Creek sites was reduced due to a planned fleet upgrade, which was completed on April 4, 2025. The upgrade resulted in the deployment of higher efficiency Bitcoin miners, improving the efficiency of our Bitcoin mining operations.

Vega (Amarillo, Texas)

In August 2025, we entered into service orders with Hut 8 pursuant to the MCSA and MMSA to host additional Bitcoin miners at Hut 8's Vega site in Amarillo, Texas, most of which were delivered in August with the remainder delivered in September 2025. Prior to August 2025, we did not mine at Hut 8's Vega site.

Drumheller (Drumheller, Alberta)

We previously mined Bitcoin at Hut 8's site in Drumheller, Alberta, which had been non-operational since March 2024. In March 2026, Hut 8 completed the reenergization of the Drumheller site, where we expect to deploy 11,298 Bitcoin miners to resume Bitcoin mining operations.

Key Factors Affecting ABTC's Performance

Price of Bitcoin

Our business is heavily dependent on the price of Bitcoin, which is traded globally and has historically experienced significant volatility. We generate revenue from Bitcoin rewards we earn through third-party mining pool operators and Bitcoin we acquire through at-market purchases and strategic transactions to further build our strategic reserve. Under ASU 2023-08, Intangibles-Goodwill and Other-Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets("ASU 2023-08"), Bitcoin is revalued at its fair value at the end of each reporting period, with changes to fair value recognized in net (loss) income. As a result, fluctuations in the price of Bitcoin may significantly impact our results of operations.

Bitcoin network difficulty and hashrate

Our business is not only impacted by the volatility in Bitcoin prices, but also by increases in the competition for Bitcoin production, specifically for Bitcoin mining. This increased competition is described as the network hashrate resulting from the growth in the overall quantity and quality of miners working to solve blocks on the Bitcoin blockchain, and the difficulty index associated with the secure hashing algorithm employed in solving the blocks. Increased difficulty reduces the mining proceeds of the equipment proportionally and eventually requires Bitcoin miners, like us, to upgrade our equipment to remain profitable and compete effectively with other miners. Conversely, a decline in network hashrate results in a decrease in difficulty, increasing mining proceeds and profitability.

Block reward and halving

The current Bitcoin reward for solving a block is 3.125 Bitcoin. The Bitcoin network is programmed such that the Bitcoin block reward is halved every 210,000 blocks mined, or approximately every four years. This reduction in reward spreads out the release of Bitcoin over a long period of time as fewer Bitcoin are mined with each halving event. Bitcoin halving events impact the number of Bitcoin we mine which, in turn, may have a potential impact on our results of operations. The last halving event occurred in April 2024, and the next halving event is expected to occur in 2028.

Power costs

Power costs are a significant component of our cost to mine a Bitcoin. Power costs can be highly volatile and sensitive to various factors outside of our control. We are subject to variable power prices and market rate fluctuations through our MCSA with Hut 8, through which power costs are incurred as a pass-through expense. Increased power costs impact the profitability of our Bitcoin mining operations.

Non-GAAP Financial Measures

In addition to our results determined in accordance with GAAP, we rely on Adjusted EBITDA to evaluate our business, measure our performance, and make strategic decisions. Adjusted EBITDA is a non-GAAP financial measure. We define Adjusted EBITDA as net loss or income, adjusted for impacts of interest expense, income tax benefit or provision, depreciation and amortization, loss on sale of property and equipment, gain on derivatives, gain on warrant liability, gain on debt extinguishment, the removal of non-recurring transactions, loss from discontinued operations, net of income tax benefit, stock-based compensation expense, and foreign exchange loss in the period presented. You are encouraged to evaluate each of these adjustments and the reasons that our Board and management team consider them appropriate for supplemental analysis.

Our Board and management team use Adjusted EBITDA to assess our financial performance because it allows them to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense and income), asset base (such as depreciation and amortization), and other items (such as non-recurring transactions) that impact the comparability of financial results from period to period.

Net (loss) income is the GAAP measure most directly comparable to Adjusted EBITDA. In evaluating Adjusted EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in such presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that its future results will be unaffected by unusual or non-recurring items. There can be no assurance that we will not modify the presentation of Adjusted EBITDA in the future, and any such modification may be material. Adjusted EBITDA has important limitations as an analytical tool and you should not consider Adjusted EBITDA in isolation or as a substitute for analysis of our results as reported under GAAP. Because Adjusted EBITDA may be defined differently by other companies in our industry, its definition of this non-GAAP financial measure may not be comparable to similarly titled measures of other companies, thereby diminishing its utility.

For a reconciliation to our most directly comparable financial measure calculated and presented in accordance with GAAP, please see "-Results of Operations" below.

Results of Operations

Years Ended December 31, 2025 and 2024

Adjusted EBITDA reconciliation:

Revenue

Revenue was $185.2 million and $71.5 million for the years ended December 31, 2025 and 2024, respectively. This $113.7 million increase was primarily driven by improved mining efficiencies at the Medicine Hat and Salt Creek sites following our fleet upgrade. The upgrade included the installation of higher-efficiency machines and targeted infrastructure enhancements at Hut 8's sites to support higher rack-level power density. In addition, deployment of Bitcoin miners at the Vega site in August and September 2025 added approximately 14.86 EH/s to our mining fleet. As a result, Bitcoin production increased to 1,789 Bitcoin during the year ended December 31, 2025, compared to 1,184 Bitcoin during the year ended December 31, 2024. Average revenue per Bitcoin mined also increased to approximately $103,521 during the year ended December 31, 2025 compared to $60,436 during the year ended December 31, 2024.

Cost of revenue

Cost of revenue was $92.0 million and $39.5 million for the years ended December 31, 2025 and 2024, respectively. This $52.5 million increase was primarily due to higher uptime resulting from the fleet upgrade that was completed in April 2025 at the Medicine Hat and Salt Creek sites. It was also driven by our deployment of the Bitcoin miners at the Vega site in August and September 2025, which added approximately 14.86 EH/s to our mining fleet.

Depreciation and amortization

Depreciation and amortization expense was $58.2 million and $22.7 million for the years ended December 31, 2025 and 2024, respectively. The $35.5 million increase was primarily attributable to higher depreciation expense resulting from the fleet upgrade and the deployment of the Bitcoin miners at the Vega site in August and September 2025, which increased our depreciable asset base.

General and administrative expenses

General and administrative ("G&A") expenses were $33.4 million and $34.5 million for the years ended December 31, 2025 and 2024, respectively. This $1.1 million decrease was primarily driven by a $7.0 million decrease in share-based payments and a $1.6 million decrease in restructuring costs. These decreases were partially offset by a $7.8 million increase in transaction costs related to the Mergers.

Loss (gain) on digital assets

Loss on digital assets was $227.1 million for the year ended December 31, 2025 compared to gains on digital assets of $509.3 million for the year ended December 31, 2024. In connection with the Transactions on March 31, 2025, Hut 8's Bitcoin remained with Hut 8. As a result, immediately following the effectuation of the Transactions, we held no Bitcoin on our balance sheet. Starting April 1, 2025, we began to build our own strategic Bitcoin reserve. The loss on digital assets for the year ended December 31, 2025 was primarily attributable to the decline in the price of Bitcoin, which decreased from approximately $93,354 as of December 31, 2024 to approximately $87,498 as of December 31, 2025. Additionally, the price of Bitcoin at the time of Transactions on March 31, 2025 was approximately $82,534 per Bitcoin, which represents a decrease from the price as of December 31, 2024, and resulted in a $112.4 million loss in digital assets recognized for the period of time up to the Transactions during the twelve months ended December 31, 2025. In contrast, gains on digital assets of $509.3 million for the year ended December 31, 2024 were driven by an increase in the price of Bitcoin from approximately $42,288 as of December 31, 2023 to approximately $93,354 as of December 31, 2024.

Other income

Other income was $56.7 million and $9.3 million for the years ended December 31, 2025 and 2024, respectively. The $47.4 million increase was primarily driven by a $49.5 million increase in gain on derivatives related to the Bitcoin redemption option with Bitmain. This increase was partially offset by a $6.0 million decrease in gain on debt extinguishment related to a loan recognized in the prior year. In addition, interest expense decreased by $3.5 million as we no longer incurred interest expense following the completion of the Transactions on March 31, 2025.

Income tax benefit (provision)

Income tax benefit was $18.1 million for the year ended December 31, 2025 compared to an income tax provision of $59.6 million for the year ended December 31, 2024. The $77.7 million increase in income tax benefit was primarily due to the loss on digital assets for the year ended December 31, 2025, which was driven by Hut 8 retaining a portion of its Bitcoin on its standalone balance sheet and a decrease in the market price of Bitcoin during the period. This loss reduced pre-tax income and, in turn, increased the income tax benefit recognized for the period.

Loss from discontinued operations

Loss from discontinued operations was nil and $4.8 million for the years ended December 31, 2025 and 2024, respectively. On March 6, 2024, we announced the closure of Hut 8's Drumheller site in Alberta, Canada in connection with restructuring and optimization initiatives designed to strengthen financial performance. The $4.8 million loss primarily consisted of a $3.1 million impairment of long-term assets and $3.3 million of operating losses associated with the site closure, partially offset by a $1.6 million income tax benefit. During March 2026, Hut 8 completed the reenergization of the Drumheller site after resolving voltage issues and supporting our higher-efficiency of Bitcoin miners.

Years Ended December 31, 2024 and 2023

Adjusted EBITDA reconciliation:

Revenue

Revenue was $71.5 million and $65.0 million for the years ended December 31, 2024 and 2023, respectively. This $6.5 million increase was primarily driven by an increase in the average revenue per Bitcoin mined to $60,436 from $30,398 for the years ended December 31, 2024 and 2023, respectively. This increase was partially offset by a reduction in Bitcoin mined (we mined 1,184 Bitcoin during the year ended December 31, 2024 versus 2,138 Bitcoin mined during the year ended December 31, 2023), due to an increase in network difficulty and the halving event in April 2024 reducing block rewards from 6.25 to 3.125 Bitcoin per block.

Cost of revenue

Cost of revenue was $39.5 million and $43.6 million for the years ended December 31, 2024 and 2023, respectively. This $4.1 million decrease was primarily due to relocating the Bitcoin miner fleet from higher cost hosted sites to lower cost self-mining sites and the deployment of Hut 8's proprietary energy curtailment software, Reactor.

Depreciation and amortization

Depreciation and amortization expense was $22.7 million and $14.4 million for the years ended December 31, 2024 and 2023, respectively. This $8.3 million increase was primarily driven by assets acquired in the combination of Hut 8 Mining Corp. and U.S. Data Mining Group, Inc., which was completed on November 30, 2023 (the "Hut Business Combination"), as we recognized twelve months of combined company depreciation in 2024, compared to one month of combined company depreciation in 2023. Additionally, depreciation increased due to management's operational efficiency review, which resulted in a change in useful life of our MicroBT M31S and M31S+ and Canaan Avalon miners from four years to five months, resulting in increased depreciation for the year ended December 31, 2024.

General and administrative expenses

G&A expenses were $34.5 million and $34.2 million for the years ended December 31, 2024 and 2023, respectively. This $0.3 million increase was primarily driven by a $3.8 million increase in salary and benefits due to added headcount to support our growth, as well as a result of having twelve months of combined company expenses in 2024, compared to one month of combined company expenses in 2023. Additionally, there was a $1.5 million increase in insurance expense as a result of expanded insurance coverage for the assets acquired in the Hut Business Combination and a $1.6 million increase in restructuring expenses after the completion of Hut Business Combination. These increases were partially offset by (i) a $7.4 million decrease resulting from a non-recurring state tax expense related to Bitcoin miners at mining locations in Texas recognized in 2023 and (ii) a $1.8 million decrease in professional fees due to lower transaction-related costs in 2024.

Gains on digital assets

Gains on digital assets were $509.3 million and $33.5 million for the years ended December 31, 2024 and 2023, respectively. This increase was due to the increased Bitcoin prices as of December 31, 2024 compared to the prior year period. The price of Bitcoin as of December 31, 2024 was approximately $93,354 compared to approximately $42,288 as of December 31, 2023.

Other income

Other income was $9.3 million for the year ended December 31, 2024 compared to other income of $14.6 million for the year ended December 31, 2023. This $5.3 million reduction in other income was primarily driven by a $17.7 million decrease in gain on debt extinguishment related to a conversion of approximately $37.9 million of debt outstanding with Anchorage as of September 27, 2024 (the "Anchorage Debt"), which resulted in a gain of approximately $6.0 million of Hut 8's equity in 2024 compared to $23.7 million debt extinguishment related to a loan with NYDIG recorded in 2023. These decreases were partially offset by a $6.8 million gain on derivatives due to an increase in the mark-to-market value of our call options and Bitcoin redemption option and a $5.3 million decrease in interest expense due to lower average borrowings resulting from the conversion of the Anchorage Debt in 2024.

Income tax (provision) benefit

Income tax provision was $59.6 million for the year ended December 31, 2024 compared to income tax benefit of $18.8 million for the year ended December 31, 2023. This increase was primarily due to deferred taxes related to the gain on the fair value of our Bitcoin holdings, in addition to higher taxable income for the year ended December 31, 2024.

Liquidity and Capital Resources

Prior to the Transactions on March 31, 2025, we operated as the "Bitcoin mining" sub-segment of Hut 8's "Compute" segment and not as a standalone company; therefore, our primary sources of liquidity included cash from Hut 8, proceeds from sales of Bitcoin, Hut 8's strategic Bitcoin reserve, and capital raised from investors.

Subsequent to the effectuation of the Transactions, our primary sources of liquidity included capital raised from investors, including equity sales and our strategic Bitcoin reserve, which we started to accumulate following the effectiveness of the Transactions on April 1, 2025. Our primary cash needs are for Bitcoin purchases to pursue our Bitcoin accumulation strategy, working capital to support our operations and growth, and equipment financing, including the purchase of additional Bitcoin miners.

On June 27, 2025, we issued and sold 159,537,377 shares of our Class A common stock for aggregate gross proceeds in cash and Bitcoin of approximately $220.1 million, and aggregate net proceeds of approximately $215.3 million after deducting certain fees and expenses incurred in connection with the issuance, including aggregate commissions of $4.8 million. $10.0 million worth of the shares were sold for consideration of Bitcoin in lieu of cash at an exchange rate of one Bitcoin to $104,000.

On September 3, 2025, we entered into a Controlled Equity Offering Sales Agreement to establish the 2025 ATM, allowing us to offer and sell up to $2.1 billion of our Class A common stock from time to time. As of December 31, 2025, we issued and sold 65,485,198 shares of Class A common stock under our 2025 ATM for gross proceeds of $240.5 million. From January 1, 2026 to March 25, 2026, we issued and sold 83,955,130 shares of Class A common stock under our 2025 gross proceeds of $110.8 million.

Our ability to meet our anticipated cash requirements will depend on various factors including our ability to maintain our existing business, compete with existing and new competitors in existing and new markets and offerings, pursue strategic transactions, access public and private capital markets, and respond to global and domestic economic, political, social conditions, and their impact on demand for our offerings.

We believe that cash flows generated from capital raised from investors and the Bitcoin on our balance sheet will meet our anticipated cash requirements in the short-term and long-term.

Cash Flows

The following table summarizes our cash flows for the year ended December 31, 2025 and 2024:

Operating Activities

Net cash used in operating activities was $79.6 million and $54.0 million for the years ended December 31, 2025 and 2024, respectively. Net cash used in operating activities for the year ended December 31, 2025 resulted primarily from a net loss of $153.2 million, partially offset by deduction of non-cash adjustments of $24.9 million and favorable changes in working capital of $48.6 million. Net cash used in operating activities for the year ended December 31, 2024 resulted primarily from net income of $428.9 million, adjusted for non-cash items of $(494.6) million and unfavorable changes in working capital of $11.7 million.

Investing Activities

Net cash used in investing activities totaled $398.3 million for the year ended December 31, 2025 and primarily reflects (i) $405.1 million of Bitcoin purchases, partially offset by $3.4 million in proceeds from the sale of Bitcoin, (ii) $2.5 million in proceeds from the sale of property and equipment, and (iii) $0.9 million acquired as part of the Mergers. Net cash used in investing activities totaled $66.6 million for the year ended December 31, 2024 and primarily reflects (i) $100.7 in purchases of digital assets, (ii) $29.1 million in deposits paid to purchase property and equipment, and (iii) $6.6 million in purchases of property and equipment, partially offset by $69.8 million in proceeds from Bitcoin sales.

Financing Activities

Net cash provided by financing activities was $481.7 million for the year ended December 31, 2025, which primarily consisted of (i) $237.7 million in net proceeds from the issuance of our Class A common stock through the our 2025 ATM, (ii) $205.3 million in net cash proceeds from the issuance and sale of our Class A common stock through a Common Stock Purchase Agreement for a private placement with certain accredited investors, and (iii) $38.6 million of net Hut 8 investment. Net cash provided by financing activities was $120.6 million for the year ended December 31, 2024, primarily consisted of $132.1 million of net Hut 8 investment, partially offset by $11.5 million in loan repayments.

Critical Accounting Policies and Estimates

Our management's discussion and analysis of our financial condition and results of operations is based on our Combined Financial Statements, which have been prepared in accordance with GAAP. The preparation of these Combined Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses. We evaluate our estimates and assumptions on an ongoing basis and base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for the judgments we make about the carrying value of assets and liabilities that are not readily apparent from other sources. Because these estimates can vary depending on the situation, actual results may differ from these estimates. Making estimates and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyond our control. Should any of these estimates and assumptions change or prove to have been incorrect, it could have a material impact on our results of operations, financial position, and statement of cash flows.

While our significant accounting policies and estimates are described in more detail in Note 2. Significant Accounting Policies and Recent Accounting Pronouncementsin our Combined Financial Statements included elsewhere in this Annual Report, we believe the following accounting policies and estimates are most critical to understanding and evaluating this management discussion and analysis:

Digital Assets

Accounting for digital assets requires significant judgment, including classification, measurement, presentation, and the determination of fair value. Digital assets pledged as collateral, including under arrangements with Bitmain, require additional judgment in evaluating the appropriate accounting treatment, including whether such assets remain recognized on our Combined Balance Sheets. Pledged digital assets remain recognized because we retain ownership and continue to be exposed to changes in market value.

Long-lived Assets

Property, plant, and equipment are recorded at cost, net of accumulated depreciation. Judgment is necessary in estimating our various assets' useful lives. This includes evaluating our own usage experience with our currently owned miners, the rate of technological advancement, and market-related factors such as the price of Bitcoin and the Bitcoin network hashrate, which impact the value of the miners. Depreciation is computed using the straight-line method over the estimated useful lives of the miners. Changes in depreciation, generally accelerated depreciation, are determined and recorded when estimates of the remaining useful lives or residual values of long-term assets change.

We review our long-lived assets, including property, plant, and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset, or asset group, may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted cash flows expected to be generated by the asset. Significant judgment is used when estimating future cash flows, particularly the price of Bitcoin and the network hashrate. Any impairment loss recorded is measured as the amount by which the carrying value of the assets exceeds the fair value of the assets. Should our estimates of useful lives, undiscounted cash flows, or asset fair values change, additional and potentially material impairments may be required, which could have a material impact on our reported financial results.