Digi Power X (DGXX) risk factors, FY2025 10-K

Risks Related to the Corporation’s Business

1. 01We operate in a rapidly evolving industry and have an evolving business model and strategy, which includes our focus on diversification into operating data centers to drive the expansion of sustainable energy assets, as well as maintaining our bitcoin mining and hosting activities
2. 02To stay current within the digital assets industry that is rapidly evolving, we expect the services and products offered by industry participants, including ourselves, to evolve and, thus, that our business model may need to evolve
3. 03The markets in which we participate are highly competitive, and, as we enter new markets, we are competing against companies with greater resources and capitalization
4. 04Our expansion into AI and HPC may divert resources from our core bitcoin mining operations, limit our power capacity for mining, and introduce operational complexity
5. 05We have engaged in, and in the future may engage in, strategic transactions and other arrangements that could disrupt our business, cause dilution to our shareholders, reduce our financial resources and harm our operating results
6. 06The diversification of our business by utilizing power at our facilities to support HPC and other AI-driven processes may not be profitable and may not occur on our expected timeline
7. 07Our continued development of Tier III data centers and other infrastructure projects could involve significant risks to our business
8. 08If we do not accurately predict our facility requirements, it could have a material adverse effect on our business, financial condition, and results of operations
9. 09The Corporation is subject to risks associated with the Corporation’s need for significant electrical power and for such electrical power to be available at commercially feasible rates. Government regulators may potentially restrict the ability of electricity suppliers to provide electricity to mining operations
10. 10The Corporation’s business may be adversely impacted by technological obsolescence and difficulty in obtaining hardware
11. 11As we develop our data center services, we may depend on significant customers
12. 12The bitcoin block reward halves approximately every four years, which reduces the number of bitcoin the Corporation would receive from solving blocks
13. 13The Corporation’s profitability depends, in part, upon the hashrate of its miners and of the network as well as network difficulty, any adverse changes in which could reduce the ability of the Corporation to remain competitive
14. 14If the award of coins for solving blocks and transaction fees are not sufficiently high, miners (other than the Corporation) may not have an adequate incentive to continue mining and may cease their mining operations, which could adversely impact the Corporation’s mining operations
15. 15The Corporation is reliant on a mining pool operator
16. 16If the Corporation ceases to participate in a mining pool and instead mines independently, it may be subject to certain additional risks, and the impact of existing risks may be heightened
17. 17There is a possibility of cryptocurrency mining algorithms transitioning to proof of stake validation and other mining related risks, which could make the Corporation less competitive and ultimately adversely affect the Corporation’s business and the value of its shares
18. 18The Corporation may be unable to obtain additional financing on acceptable terms or at all
19. 19The Corporation may be required to sell its cryptocurrency portfolio to pay for expenses
20. 20The value of cryptocurrencies may be subject to momentum pricing
21. 21The price of coins may be affected by the sale of coins by other vehicles investing in coins or tracking cryptocurrency markets
22. 22Cryptocurrency exchanges and other trading venues are relatively new and, in most cases, largely unregulated and may therefore be more exposed to fraud and failure
23. 23The further development and acceptance of the cryptographic and algorithmic protocols governing the issuance of and transactions in cryptocurrencies is subject to a variety of factors that are difficult to evaluate
24. 24Currently, bitcoins and/or other cryptocurrencies are not widely used in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect the Corporation’s operations, investment strategies, and profitability
25. 25The Corporation’s cryptocurrency inventory may be exposed to cybersecurity threats and hacks
26. 26The Corporation’s coins may be subject to loss, theft or restriction on access
27. 27The loss or destruction of a digital private key required to access the Corporation’s digital wallets may be irreversible. The Corporation’s loss of access to its private keys or its experience of data loss relating to the Corporation’s digital wallets could adversely affect its investments
28. 28Cryptocurrency transactions are irrevocable and stolen or incorrectly transferred coins may be irretrievable. As a result, any incorrectly executed or fraudulent coin transactions could adversely affect the Corporation’s investments
29. 29The Corporation’s operations, investment strategies and profitability may be adversely affected by competition from other methods of investing in cryptocurrencies
30. 30The increase in interest and demand for cryptocurrencies has led to a shortage of mining hardware as individuals purchase equipment for mining at home
31. 31Banks may not provide banking services, or may cut off banking services, to businesses that provide cryptocurrency-related services or that accept cryptocurrencies as payment
32. 32Crises may motivate large-scale purchases of cryptocurrencies, which could increase the price of cryptocurrencies rapidly. This may increase the likelihood of a subsequent price decrease as crisis-driven purchasing behavior wanes, adversely affecting the value of the Corporation’s cryptocurrency inventory
33. 33Any use of emerging technologies like AI, machine learning and generative artificial intelligence could lead to unintended consequences and result in reputational harm and litigation
34. 34Increased scrutiny and changing expectations from stakeholders with respect to the Corporation’s ESG practices and the impacts of climate change may result in additional costs or risks
35. 35Exposure to environmental liabilities and hazards may result in the imposition of fines, penalties and restrictions on the Corporation

Risks Related to Government Regulation

1. 36Regulatory changes or actions may alter the nature of an investment in the Corporation or restrict the use of cryptocurrencies in a manner that adversely affects the Corporation’s operations
2. 37Current regulation regarding the exchange of bitcoins under the CEA by the CFTC is unclear; to the extent we become subject to regulation by the CFTC in connection with our exchange of bitcoin, we may incur additional compliance costs, which may be significant
3. 38It may be illegal now, or in the future, to mine, acquire, own, hold, sell or use bitcoin or other cryptocurrencies, participate in blockchains or utilize similar cryptocurrency assets in one or more countries, the ruling of which could adversely affect us
4. 39Changing environmental regulation and public energy policy may expose our business to new risks
5. 40If we fail to qualify for certain state government tax incentives or to comply with local tax regulations, we may suffer financial losses
6. 41The regulatory landscape surrounding HPC, AI and bitcoin mining operations is evolving rapidly, and the Corporation anticipates increased scrutiny and potential regulation in the near and long term. These developments may affect the Corporation’s business and operations in ways that are difficult to predict
7. 42Regulations and taxes that target energy could increase our costs and adversely affect our business
8. 43The Corporation’s loss of foreign private issuer status requires the Corporation to comply with more extensive reporting requirements and to bear the associated costs of the same
9. 44The Corporation’s success is largely dependent on the performance of the Corporation’s management and executive officers
10. 45The Corporation may be unable to attract, develop and retain its key personnel and ensure adequate succession planning
11. 46Uninsured or uninsurable risks could result in significant financial liabilities
12. 47The Corporation does not currently pay cash dividends, and, therefore, the Corporation’s shareholders will not be able to receive a return on their SV Shares unless they sell them
13. 48The market price for SV Shares may be volatile, and there is no guarantee that an active or liquid market will be sustained for the SV Shares
14. 49There are significant legal, accounting and financial costs of being a publicly traded company, which costs may reduce the resources available for the Corporation to deploy on its cryptocurrency mining operations
15. 50Directors and officers may have a conflict of interest between their duties owed to the Corporation and their interest in other personal or business ventures
16. 51The Corporation may be subject to litigation arising out of its operations
17. 52The Corporation has a limited history of operations and is in the early stage of development
18. 53Ineffective management of growth could result in a failure to sustain the Corporation’s progress
19. 54The Corporation may be subject to tax liabilities and consequences that could reduce the Corporation’s profitability
20. 55If the Corporation is characterized as a passive foreign investment company, U.S. shareholders may suffer adverse consequences
21. 56The Corporation may have varying degrees of financial risk exposure relating to the currency risk and volatility. The Corporation may raise funds and subsequently exchange such funds to another currency, which could result in costly currency exchange fees