NOTE 25: ADDITIONAL DETAILS TO THE STATEMENTS OF OPERATIONS

Disaggregated revenues

Cost of revenues

Inventories

During the year ended December 31, 2025, the cost of electrical component inventory and waste, limestone and fuel oil recognized as an expense and included in cost of revenues was $44,257 (years ended December 31, 2024 and 2023: $3,392 and $3,320, respectively).

Energy costs are net of RECs and WTCs

During the year ended December 31, 2025, RECs amounted to $17,076, and the WTCs amounted to $5,687, (years ended December 31, 2024 and 2023: RECs and WTCs were nil), all of which offset energy expenses in the cost of revenues.

Customs duties

During the year ended December 31, 2025, infrastructure expenses included $9,244 of customs duties in connection with the importation of Miners in 2021 (years ended December 31, 2024 and 2023: nil).

In 2021, the Company imported Miners into Washington state, United States, that the vendor located in China claimed originated in Malaysia. In early 2022, U.S. Customs and Border Protection (“CBP”) challenged the origination of the Miners, asserting that the Miners were manufactured in China, and notified the Company of a potential assessment of a U.S. importation duty of 25%.

During the third quarter of 2023 and the first quarter of 2025, the Company submitted supporting documentation to CBP in defense of its position that the Miners were manufactured outside China and the associated custom duties in the amount of $9,424 do not apply. In 2024, the Company paid $180 of the custom duties resulting in an amount of $9,244 related to the potential assessment.

In August 2025, the Company received a response letter from the CBP indicating that customs duties are required under the circumstances. During the year ended December 31, 2025, the Company paid $11,882 to the CBP with a corresponding expense of $9,244 recognized as costs of revenues relating to the customs duties and $2,658 recognized as other expense (income) relating to interest and penalties.

Canadian sales tax recovery

In April 2024, the Company received confirmation from the provincial tax authorities that Canadian sales taxes paid from February 5, 2022 onwards are refundable. Between February 5, 2022, the date on which the new cryptocurrency sales tax legislation came into effect, and April 2024, the Company filed monthly sales tax refund claims totaling approximately $24,400 (CAD$33,000) that were not paid to the Company, pending the finalization of the legislation. The refund relates to sales taxes incurred on various expenditures including, but not limited to, electricity costs, cost of property, plant and equipment, professional services, etc.

During the year ended December 31, 2024, the Company recognized sales tax recoveries of $22,200 related to prior years (2022 and 2023) and $2,200 related to the period from January to April 2024. The amounts were presented as direct adjustments to the related expenses and asset categories. During the year ended December 31, 2024, the full $24,400 of sales tax claims were refunded by the Canadian tax authorities.

In addition to previously not receiving its Canadian sales tax refund claims, the Company was self-assessing sales taxes payable when appropriate. During the year ended December 31, 2024, the Company reversed $9,560 of government remittances previously included in PPE and accrued in accounts payable and accrued expenses, as disclosed in Note 16. Of this amount, $5,360 was recognized as a decrease to cost of revenues, $520 was recognized as a decrease to general and administrative expense and $3,680 was recognized as a decrease to PPE.

General and administrative expenses

Other expense

Gain on extinguishment of long-term debt

In February 2022, Backbone Mining entered into an equipment financing agreement for gross proceeds of $32,000 collateralized by 6,100 Bitmain S19j Pro Miners referred to as the “BlockFi Loan”. The net proceeds received by the Company were $30,994 after capitalizing origination, closing and other transaction fees of $1,006. In December 2022, Backbone Mining ceased making installment payments, which constituted a default under the loan agreement, and the BlockFi Loan was classified as current.

In February 2023, the Company entered into a settlement agreement with BlockFi pursuant to which an outstanding equipment financing obligation with a carrying amount of $20,330 was settled for cash consideration of $7,750. As a result, the Company recognized a gain on extinguishment of long-term debt of $12,580 recognized in Gain on extinguishment of long-term debt in the consolidated statements of operations during the year ended December 31, 2023. Upon settlement, all assets previously pledged as collateral were released.