HIVE Digital Technologies Ltd.
(formerly, HIVE Blockchain Technologies Ltd.)

Condensed Interim Consolidated Financial Statements
For the three and nine months ended December 31, 2023 and 2022
(In thousands of U.S. dollars)
(Unaudited)

HIVE Digital Technologies Ltd. (formerly, HIVE Blockchain Technologies Ltd.) Condensed Interim Consolidated Statements of Financial Position (In thousands of US dollars) (Unaudited)

Nature of operations (Note 1)
Commitments and contingencies (Note 14)
Subsequent events (Note 26)

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Condensed Interim Consolidated Statements of (Loss) Income and Comprehensive (Loss) Income (In thousands of US dollars, except share and per share data) (Unaudited)

The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Condensed Interim Consolidated Statements of Changes in Equity (In thousands of US dollars, except shares issued) (Unaudited)

 The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Condensed Interim Consolidated Statements of Cash Flows (In thousands of US dollars) (Unaudited)

 The accompanying notes are an integral part of these unaudited condensed interim consolidated financial statements

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

1. Nature of Operations

HIVE Digital Technologies Ltd. (the "Company") was incorporated in the province of British Columbia on June 24, 1987.  The Company is a reporting issuer in each of the Provinces and Territories of Canada and is listed for trading on the TSXV, under the symbol "HIVE.V", as well on the Nasdaq's Capital Markets Exchange under "HIVE", and on the Open Market of the Frankfurt Stock Exchange under "YO0.F".  On July 12, 2023 the Company completed a name change from HIVE Blockchain Technologies Ltd. to HIVE Digital Technologies Ltd.  The Company's head office is located at Suite 855, 789 Pender Street, Vancouver, BC, V6C 1H2, and the Company's registered office is located at Suite 2500, 700 West Georgia Street, Vancouver, BC, V7Y 1B3.

In connection with the Company's change of business filed in September 2017 ("Change of Business"), the Company acquired digital currency mining data center equipment in Iceland.  Following the initial acquisition, the Company acquired additional data center equipment in Iceland and Sweden throughout fiscal 2018.  Phases one and two of Sweden commenced operations on January 15, 2018 and March 31, 2018 respectively, while phase three commenced operations on April 30, 2018.  On April 9, 2020 the Company acquired a data center in Quebec, Canada, and on April 15, 2021 the Company acquired a data center in New Brunswick, Canada. The Company is in the business of providing infrastructure solutions, including the provision of computational capacity to distributed networks, in the blockchain industry.  The Company's operations are focused on the mining and sale of digital currencies to upgrade, expand and scale up its mining operations.  Digital currencies are subject to risks unique to the asset class and different from traditional assets.  Additionally, the Company may at times hold assets with third party custodians or exchanges that are limited in oversight by regulatory authorities.

On May 24, 2023, the Company incorporated a wholly owned subsidiary, Bikupa Real Estate AB, to function as a holding entity to facilitate the acquisition of the data center as detailed in Note 26.

On May 24, 2022, the Company affected the consolidation of its common shares (Note 16) based on one post-consolidation common share for each five pre-consolidated common shares.  The impact was reflected and adjusted such that all common shares and per share amounts have been retroactively restated to reflect the consolidation.

The negative impact on the global supply chain related to the COVID-19 pandemic has presented challenges to the Company including increased shipping costs and delaying obtaining equipment from China on a timely basis.  Additionally, the Company continues to face uncertainty in the availability of equipment from suppliers as it relates to the Company's ASIC equipment.

2. Basis of Presentation and Material Accounting Policies

(a) Statement of Compliance

These unaudited condensed interim consolidated financial statements have been prepared in accordance with IAS 34, "Interim Financial Reporting of the International Financial Reporting Standards" ("IFRS") as issued by the International Accounting Standards Board ("IASB") and follow the same accounting policies and methods of application as the Company's March 31, 2023, annual audited financial statements, unless otherwise noted.  These condensed interim consolidated financial statements do not include all the information required for full annual financial statements and accordingly, they should be read in conjunction with the Company's most recent annual statements.

The condensed interim consolidated financial statements have been prepared on a cost basis except for the convertible loan - derivative component and digital assets that have been measured at fair value. In addition, these condensed interim consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information. The condensed interim consolidated financial statements are presented in United States dollars ("US dollars" or "$"), except where otherwise indicated.

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

2. Basis of Presentation and Material Accounting Policies (continued…)

(a) Statement of Compliance (continued...)

The Company is in the business of the mining and sale of digital currencies to upgrade, expand, and scale up its mining operations, many aspects of which are not specifically addressed by current IFRS guidance.  The Company is required to make judgements as to the application of IFRS and the selection of accounting policies.  The Company has disclosed its presentation, recognition and de-recognition, and measurement of digital currencies, and the recognition of revenue as well as significant assumptions and judgements; however, if specific guidance is enacted by the IASB in the future, the impact may result in changes to the Company's earnings and financial position as presented.

These unaudited condensed interim consolidated financial statements were approved and authorized for issuance by the Board of Directors on February 12, 2024.

(b) New Accounting Standards Adopted by the Company

Amendment to IAS 12 - deferred tax related to assets and liabilities arising from a single transaction

In May 2021, the IASB issued Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12).  The amendments narrowed the scope of the initial recognition exemption to exclude transactions that give rise to equal and offsetting temporary differences.  The amendments are effective for annual periods beginning on or after January 1, 2023, with early adoption permitted.

Amendments to IAS 1, Practice statement 2 and IAS 8

Presentation of Financial Statements was amended to clarify that the classification of liabilities as current or non-current is based on rights that are in existence at the end of the reporting period and specifies that classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability.  The amendments are effective January 1, 2023 with early application permitted.  The amendments are required to be adopted retrospectively.

Amendments to IAS 1, Presentation of financial statements', on classification of liabilities

In February 2021, the IASB issued Definition of Accounting Estimates (Amendments to IAS 8).  The amendments introduced a definition of accounting estimates and included other amendments to help entities distinguish changes in accounting estimates from changes in accounting policies.  The amendments are effective for annual periods beginning on or after January 1, 2023, with early adoption permitted.

Amendments to IAS 1 Amendments to IAS 1 clarify how to classify debt and other liabilities as current or non-current.

The amendments help to determine whether, in the condensed interim consolidated financial statements, debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current.  The amendments also include clarifying the classification requirements for debt an entity might settle by converting it into equity.  Amendments to IAS 1 specify that covenants to be complied with after the reporting date do not affect the classification of debt as current or non-current at the reporting date.  Instead, the amendments require to disclose information about these covenants in the notes to the financial statements. 

The adoption of the amendments listed above did not have a significant impact on the Company's condensed interim consolidated financial statements.

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

2. Basis of Presentation and Material Accounting Policies (continued…)

(c) Future Accounting Standards

Amendments to IAS 21 - Lack of Exchangeability

An entity is impacted by the amendments when it has a transaction or an operation in a foreign currency that is not exchangeable into another currency at a measurement date for a specified purpose. A currency is exchangeable when there is an ability to obtain the other currency (with a normal administrative delay), and the transaction would take place through a market or exchange mechanism that creates enforceable rights and obligations. These amendments are effective for annual periods beginning on or after 1 January 2025 (early adoption is available).

Amendment to IAS 1 - Non-current liabilities with covenants

These amendments clarify how conditions with which an entity must comply within twelve months after the reporting period affect the classification of a liability. The amendments also aim to improve information an entity provides related to liabilities subject to these conditions. These amendments are effective for annual periods beginning on or after 1 January 2024.

Amendment to IFRS 16 - Leases on sale and leaseback

These amendments include requirements for sale and leaseback transactions in IFRS 16 to explain how an entity accounts for a sale and leaseback after the date of the transaction. Sale and leaseback transactions where some or all the lease payments are variable lease payments that do not depend on an index or rate are most likely to be impacted. These amendments are effective for annual periods beginning on or after 1 January 2024.

The Company continues to review changes to IFRS standards.  There are no other pending IFRSs or IFRIC interpretations that are expected to be relevant to the Company's condensed interim consolidated financial statements.

3. Significant Estimates and Judgements

The preparation of the unaudited condensed interim consolidated financial statements necessitates management to make various judgments, estimates, and assumptions regarding the recognition and measurement of assets, liabilities, income, and expenses. These judgments and estimates are based on management's best understanding of future events, circumstances, and potential actions taken by the Company. It should be noted that the actual results may deviate from these assumptions and estimates.

The assessments and underlying assumptions are regularly reviewed. If any revisions are made to the assumptions or estimates and they only affect the current period, they are recognized in that particular period. However, if the revisions impact both the current and future periods, they are recognized in the period of the revision and in subsequent periods.

The significant judgments made by management while applying the Company's accounting policies and the primary sources of estimation uncertainty remain consistent with those outlined in the audited annual consolidated financial statements for the year ended March 31, 2023.

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

4. Investments

As at December 31, 2023 the Company holds a number of investments in both private and public companies. The Company's investment holdings that are not traded in active markets by the Company are considered investments.  Investments are accounted for as financial assets which are initially recognized at fair value and subsequently measured through fair value through profit or loss.

The continuity of investments was as follows:

5. Amounts Receivable and Prepaids

* Receivable is conditional upon ruling by the by the Swedish Tax Authority related to an ongoing value added tax process.  If the ruling is favourable, amounts will be received, otherwise, the amounts will not be collectible.  Management has assessed the collectability using a probability model under a range of scenarios and this receivable reflects the results of that process.

** During the period ended December 31, 2023, after examination of the history of claims and payments received from various authorities, together with regulatory challenges, the Company assessed the collectability of its Sales tax receivable balance. As a result, the Company determined that there is uncertainty over the collection of certain amounts, and recorded a provision of $4.9 million for these receivables.

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

6. Digital Currencies

Digital currencies are recorded at their fair value on the date they are received as income from digital currency mining and are revalued to their current market value less costs to sell at each reporting date. 

The Company's holdings of digital currencies consist of the following:

The continuity of digital currencies was as follows:

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

6. Digital Currencies (continued…)

During the three and nine months ended December 31, 2023, the Company sold digital currencies for proceeds totalling $30.7 million and $92.4 million, respectively (December 31, 2022 - $30.9 million and $102.7 million, respectively) and recorded a gain on sale of $5.8 million and $3.0 million, respectively (December 31, 2022 - loss on sale of $3.4 million and $22.2 million, respectively).

The Company reclassified a surplus of $nil from accumulated other comprehensive income (December 31, 2022 - $15.1 million) in connection to the revaluation gain on its digital currencies.

7. Plant and Equipment

During the three and nine month period ended December 31, 2022, the Company recorded an impairment on miner equipment of $38.8 million and $71.4 million, respectively. The impairment was based on an assessment of the performance of the equipment in relation to prevailing replacement costs.  There were no indicators of impairment for the three and nine month period ended December 31, 2023.

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

8. Deposits

The deposits relate to required amounts on account with electricity providers in Sweden and for equipment purchases, consisting of:

The Company is exposed to counterparty risk through the advances made for certain mining equipment ("Deposits") it places with its suppliers in order to secure orders over a set delivery schedule.  The risk of a supplier failing to meet its contractual obligations may result in late deliveries and/or the value of the deposits is not realised as a result of non delivery of equipment or delivery of equipment with reduced quality.  The Company attempts to mitigate this risk by procuring mining hardware from the established suppliers and with whom the Company has existing relationships and knowledge of their reputation in the market.

During the three and nine month period ended December 31, 2023, the Company recorded impairment on the equipment deposits of $nil (December 31, 2022 - $22.7 and $27.3 million, respectively). The impairment is based on the counterparty risk of delivery, efficiency of machines expected use of the machines and the expected quantity and quality of the equipment to be received.

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

9. Convertible Loan

On January 12, 2021, the Company closed its non-brokered private placement of unsecured debentures (the "Debentures"), for aggregate gross proceeds of $15 million with U.S.  Global Investors, Inc.  ("U.S.  Global").  The Executive Chairman of the Company is a director, officer and controlling shareholder of U.S.  Global.

The Debentures mature on the date that is 60 months from the date of issuance, bearing interest at a rate of 8% per annum.  The Debentures will be issued at par, with each Debenture being redeemable by the Company at any time, and convertible at the option of the holder into common shares (each, a "Share") in the capital of the Company at a conversion price of C$15.00 per Share.  Interest is payable monthly and the principal repayments are due quarterly.  In addition, U.S. Global was issued 5.0 million common share purchase warrants (the "Warrants").  Each five whole Warrant entitles U.S. Global to acquire one common at an exercise price of C$15.00 per Share for a period of three years from closing. The Warrants expired unexercised on January 12, 2024 (Note 16).

The Company determined that the Convertible Loan contained an embedded derivative, and that the conversion feature does not qualify as equity as it does not satisfy the "fixed for fixed" requirement as the number of potential common shares to be issued is contingent on a variable carrying amount for the financial liability.  The financial liability is variable because the functional currency of Hive Digital Technologies Ltd.  is Canadian dollars and the Convertible Loan is denominated in US dollars, therefore the number of common shares to be issued depends on the foreign exchange rate at the date of settlement.  Consequently, the conversion feature is classified as a derivative liability.

The Company allocated the proceeds of $15 million first to the derivative component for $8.6 million, with the residual value to the liability component for $6.4 million.  The derivative component was valued on initial recognition using the Black-Scholes option pricing model with the following assumptions: a risk-free interest rate of 0.69%; an expected volatility of 105%; an expected life of 2.71 years; a forfeiture rate of zero; and an expected dividend of zero.

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

9. Convertible Loan (continued…)

Liability Component

Derivative Component

The derivative component is remeasured each reporting period.  As at December 31, 2023, the derivative component was revalued at $0.3 million (March 31, 2023 - $0.5 million) using the Black-Scholes option pricing model with the following assumptions: share price of C$5.97 (March 31, 2023 - C$4.46) an expected weighted average risk-free interest rate of 4.43% (March 31, 2023 - 3.71%); an expected weighted average volatility of 84% (March 31, 2023 - 97%); and an expected weighted average life of 1.23 years (March 31, 2023 - 1.61 years).  For the three and nine months period ended December 31, 2023, the Company recorded a loss in the change in the fair value of the derivative liability of $0.13 million and a gain of $0.15 million, respectively (December 31, 2022 - gain of $0.7 million and gain of $4.9 million, respectively).

10. Accounts Payable and Accrued Liabilities

The components of accounts payable and accrued liabilities are as follows:

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

11. Loans Payable

On March 31, 2021, as part of the sale of the net assets in Boden Technologies AB, the Company incurred a loan payable.  The facility bears interest at the Swedish government borrowing rate plus 1% per annum and has a maturity date of December 31, 2035.  Principal payment plus interest is payable annually.  The loan payable is contingently forgiven based on a favourable ruling from the Swedish Tax Authority on the ongoing value added tax assessment.

A continuity of the loan balances are as follows:

12. Term Loan

As part of the Atlantic acquisition, the Company acquired a $11.0 million (C$13.6 million) term loan.  The facility bears interest at 3.33% per annum and a maturity date of June 30, 2024.  Principal payments of C$0.2 million plus interest is payable monthly.

The term loan has financial ratios and minimum tangible asset covenants that must be maintained by HIVE Atlantic Datacentres Ltd.  As at December 31, 2023, the covenant to maintain a ratio of total debt to tangible net worth equal to or less than 2:1 was not met.  The outstanding balance is presented as a currently liability as at December 31, 2023.  The lender has not requested early repayment of the loan as of the date when these financial statements were approved by the Board of Directors.  The term loan includes an unlimited guarantee from the Company.

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

13. Right of Use Asset and Lease Liability

The Company has lease agreements for its offices, and buildings for its datacenters in Sweden and Quebec, Canada, in addition to electrical equipment in Sweden.

During the three and nine months period ended December 31, 2023, the Company recognized interest expense on the lease liability of $127 and $407, respectively (December 30, 2022 - $148 and $476, respectively) which was recorded within finance expense.

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

13. Right of Use Asset and Lease Liability (continued…)

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

14. Commitments and Contingencies

(a) Service agreements

The Company has a service agreement with an unrelated third party to operate and maintain their data center computing equipment for the purpose of mining crypto currency in Canada, Sweden and Iceland.  As part of the arrangement, proprietary software is installed on the Company's computing equipment to assist in optimizing the use of the equipment.

(b) Power purchase agreement

The Company entered into a supplemental power pricing arrangement that provides a fixed price of electricity consumption each month at the Company's Bikupa Datacenter AB and Bikupa Datacenter 2 AB location in Sweden.  The fixed price agreement was assessed and is being accounted for as an executory contract; electricity costs are expensed as incurred.

(c) Obligations on Mining equipment

The Company had purchase commitments of $14.9 million at the period ended December 31, 2023 (March 31, 2023 - $8.9 million).

Contingencies

(a) Contingent VAT Liability to the Swedish Tax Authority ("STA")

The Company's wholly owned subsidiaries located in Sweden (Bikupa Datacenter AB ("Bikupa") and Bikupa Datacenter 2 AB ("Bikupa 2") received decision notice of assessments ("the decision(s)"), on December 28, 2022, December 21, 2023, and December 22, 2023 for Bikupa and February 14, 2023, and December 21, 2023 for Bikupa 2 respectively, from the Swedish Tax Authority in connection with the application of VAT and its ability to recover input VAT against certain equipment and other charges in a total amount of SEK 411.9 million or approximately $40.9 million.  The assessments cover the period December 2020 to December 2022 for Bikupa, and the period April 2021 to December 2022 for Bikupa 2, expressing the intent to reject the recovery of all the VAT for the periods under assessment and repayment of amounts previously received plus applicable interest.

The Company filed a formal appeal in connection with the December 28, 2022 Bikupa decision on February 9, 2023; however, there can be no guarantee that the Company will achieve a favourable outcome in its appeal.  A formal appeal for Bikupa 2 in relation to the February 14, 2023 decision was filed on March 10, 2023 by the Company.  The Company engaged an independent legal firm and independent audit firm in Sweden with expertise in these matters to assist in the appeal process.  The Company does not believe that the decision has merit because in management's opinion and those of the Company's independent advisors, the decision is not compatible with the current applicable law and therefore the amount claimed to be owed by the Company is not probable.  According to general principles regarding the placement of the burden of proof, it is up to the Swedish Tax Agency to provide sufficient evidence in support of its decision.  It is the Company's opinion, the Swedish Tax Agency has not substantiated their claim.  We are not aware of any precedent cases, authoritative literature, or other statement that supports the STA's position. The cases are currently in the County Administrative Court.

It is not yet known when this dispute will be resolved; the due process following appeals and the court ruling could extend beyond a year.  Furthermore, given that the industry is rapidly developing, there can be no guarantee that changes to the laws or policies of Sweden will not have a negative impact on the Company's tax position with respect to the eligibility of the claimed VAT.  (Note 21 Uncertain Tax Positions).

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

14. Commitments and Contingencies (continued…)

(a) Contingent VAT Liability to the Swedish Tax Authority ("STA") (continued…)

If the Company is unsuccessful in its appeal, the full amount could be payable including other items such as penalties and interest that may accrue to the Company.  The Company will continue to assess these matters. At the period end, the Company has not recorded any amounts payable to the STA in connection with the decisions. The Company continues to monitor the activities of the claim with the STA. As at December 31, 2023, the Company has not received any additional communication from the STA.

(b) Litigation

From time to time, the Company is involved in routine litigation incidental to the Company's business.  Management believes that adequate provisions have been made where required and the ultimate resolution with respect to any claim will not have a material adverse effect on the financial position or results of the operations of the Company.

15. Related Party Transactions

The Company entered into the following related party transactions not otherwise disclosed in these condensed interim consolidated financial statements:

a) As at December 31, 2023, the Company had $9.5 due to the CFO (March 31, 2023 - $12 combined due to the CEO and CFO) for the reimbursement of expenses included in accounts payable and accrued liabilities.

b) As at December 31, 2023, the Company had $nil (March 31, 2023 - $nil) due to a company controlled by Frank Holmes, a director of the Company included in accounts payable and accrued liabilities.  For the three and nine months period ended December 31, 2023, the Company paid $60 and $188, respectively (December 31, 2022 - $74 and $252, respectively) to this company for marketing services.

Key Management Compensation

Key management personnel include those persons having authority and responsibility for planning, directing and controlling the activities of the Company as a whole.  The Company has determined that key management personnel consist of members of the Company's Board of Directors and corporate officers. 

For the three and nine months period ended December 31, 2023, key management compensation includes salaries and wages paid to key management personnel and directors of $335 and $944, respectively (December 31, 2022 - $489 and $1.2 million, respectively) and share-based payments of $443 and $4.4 million, respectively (December 31, 2022 - $2.1 million and $3.3 million, respectively).

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

16. Equity

(a) Authorized

Unlimited common shares without par value

Unlimited preferred shares without par value

(b) Issued and fully paid common shares

On May 24, 2022, the Company proceeded with the consolidation of its common shares on the basis of five (5) pre-Consolidation Common Shares for one (1) post-Consolidation Common Shares.  The common shares, options, warrants and RSU's have been retroactively adjusted for impact of the share consolidation by the Company.

During the period ended December 31, 2023, the Company:

• On May 10, 2023, the Company entered into an equity distribution agreement ("May 2023 Equity Distribution Agreement").  Under the May 2023 Equity Distribution Agreement, the Company may, from time to time, sell up to $100 million of common shares in the capital of the Company (the "May 2023 ATM Equity Program").
  
  The Company issued 1,374,700 common shares (the "May 2023 ATM Shares") pursuant to the May 2023 ATM Equity Program for gross proceeds of C$9.0 million ($6.8 million).  The May 2023 ATM shares were sold at prevailing market prices, for an average price per May 2023 ATM Share of C$6.55.  Pursuant to the May 2023 Equity Distribution Agreement, a cash commission of $0.2 million on the aggregate gross proceeds raised was paid to the agent in connection with its services under the May 2023 Equity Distribution Agreement. In addition, the Company incurred $162 in fees related to its May 2023 ATM Equity Program. The May 2023 Equity Distribution Agreement was terminated as of August 16, 2023.
  
  
• On August 17, 2023, the Company entered into an equity distribution agreement ("August 2023 Equity Distribution Agreement").  Under the August 2023 Equity Distribution Agreement, the Company may, from time to time, sell up to $90 million of common shares in the capital of the Company (the "August 2023 ATM Equity Program").
  
  The Company issued 6,175,140 common shares (the "August 2023 ATM Shares") pursuant to the August 2023 ATM Equity Program for gross proceeds of C$32.9 million ($24.4 million).  The August 2023 ATM shares were sold at prevailing market prices, for an average price per August 2023 ATM Share of C$5.33.  Pursuant to the August 2023 Equity Distribution Agreement, a cash commission of $0.7 million on the aggregate gross proceeds raised was paid to the agent in connection with its services under the August 2023 Equity Distribution Agreement. In addition, the Company incurred $246 in fees related to its August 2023 ATM Equity Program.
  
  
• Issued 453,150 common shares upon the exercise of restricted share units (Note 16(e)).
  
  
• Issued 22,500 common shares for proceeds of C$127 ($96) pursuant to the exercise of 22,500 options at a price of C$5.66 per option.
  
  
• Issued 345,566 common shares in connection with acquisition of assets (Note 26).

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

16. Equity (continued…)

(c) Stock options

The Company has established a rolling Stock Option Plan (the "Plan").  Under the Plan, the number of shares reserved for issuance may not exceed 10% of the total number of issued and outstanding shares and, to any one optionee, may not exceed 5% of the issued shares on a yearly basis.  The maximum term of each option shall not be greater than 10 years.  The exercise price of each option shall not be less than the market price of the Company's shares at the date of grant.  Options granted to consultants performing investor relations activities shall vest over a minimum of 12 months with no more than a quarter of such options vesting in any 3-month period.  All other options vest at the discretion of the Board of Directors.

Following is a summary of changes in stock options outstanding for the period ended December 31, 2023:

The stock options outstanding and exercisable as at December 31, 2023, are as follows:

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

16. Equity (continued…)

(d) Warrants

Following is a summary of changes in warrants outstanding for the period ended December 31, 2023:

The warrants outstanding and exercisable as at December 31, 2023, are as follows:

* On January 12, 2021, the Company closed its non-brokered private placement of unsecured debentures (the "Debentures"), for aggregate gross proceeds of $15 million with U.S.  Global Investors, Inc. (Note 9).  In addition, U.S. Global was issued 5.0 million common share purchase warrants (the "Warrants").  Each five whole Warrant entitles U.S. Global to acquire one common at an exercise price of C$15.00 per Share for a period of three years from closing. The warrants expired unexercised subsequent to the period ended December 31, 2023.

** On November 30, 2021, the Company completed an agreement with Stifel GMP as lead underwriter and sole book runner to include a syndicate of underwriters (the "Underwriters"), whereby the Underwriters will purchase, on a bought-deal basis, 3,834,100 special warrants of the Company (the "2021 Special Warrants") at a price of C$30.00 per Special Warrant for aggregate gross proceeds to the Company of C$115 million (the "Offering").  On January 12, 2022, each 2021 Special Warrant was deemed to be exercised into one Unit comprised of one common share of the Company and one-half of one common share purchase warrant (each whole common share purchase warrant being a "Warrant").  Each Warrant is exercisable for one share on or before May 30, 2024, at an exercise price of C$30.00 per Share.

*** On December 1, 2021, the Company issued 106,677 warrants as consideration for an investment in Titan.io.  Each Warrant is exercisable for one share on or before September 15, 2024, at an exercise price of C$30.00 per Share.

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

16. Equity (continued…)

(d) Warrants (continued...)

**** On December 28, 2023, the Company completed a bought-deal financing of 5,750,000 special warrants of the Company (the "2023 Special Warrants") at a price of C$5.00 per Special Warrant for aggregate gross proceeds to the Company of C$28.75 million (the "Offering").  Each 2023 Special Warrant entitles the holder to receive without payment of additional consideration, one unit of the Company upon exercise consisting of one common share and one-half of common share purchase warrant. Each whole warrant entitles the holder thereof to purchase one common share of the Company at an exercise price of C$6.00 per whole warrant until December 28, 2026 (Note 28). 

In consideration of services, the Underwriters received a cash commission of C$1.725 million, and 345,000 broker warrants. Each broker warrant entitles the holder to acquire one common share of the Company at an exercise price of C$5.00 per broker warrant until December 28, 2026. The broker warrants were valued at $1.28 million using the Black-Scholes option pricing model with the following assumptions: a risk-free interest rate of 3.51%, an expected volatility of 100%, an expected life of 3 years, a forfeiture rate of zero; and an expected dividend of zero. The Company also incurred C$257 in professional and other fees associated with the 2023 Special Warrant financing.

(e) Restricted share-units

The Company has established a Restricted Share Unit Plan (the "RSU Plan").  Under the RSU Plan, together with any other share compensation arrangement, the number of shares reserved for issuance may not exceed 10% of the total number of issued and outstanding shares and, to any one optionee, may not exceed 5% of the issued shares on a yearly basis.  Currently, the RSU Plan has a limit of 2 million shares, which is not rolling.  The Board may in its own discretion, at any time, and from time to time, grant RSUs to any employee, director or consultant of the Company or its subsidiaries (collectively, "Eligible Person"), other than persons conducting investor relations activities, from time to time by the Board, subject to the limitations set forth in the RSU Plan.  The Board may designate one or more performance periods under the RSU Plan.  In respect of each designated performance period and subject to the terms of the RSU Plan, the Board may from time to time establish the grant date and grant to any Eligible Person one or more RSUs as the Board deems appropriate. 

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

16. Equity (continued…)

(e) Restricted share-units (continued...)

The fair value of restricted shares units (RSUs) is generally measured as the grant date price of the Company's share.

Following is a summary of changes in restricted share units outstanding for the period ended December 31, 2023:

(f) Share-based compensation

During the three and nine months period ended December 31, 2023, $0.2 million and $3.6 million, respectively (December 31, 2022 - $0.83 million and $2.6 million, respectively) of share-based compensation expense was recognized in relation to the vesting of options, and $0.43 million and $3.0 million (December 31, 2022 - $1.73 million and $2.86 million, respectively) of share-based compensation expense was recognized in relation to the vesting of RSUs.

During the period ended December 31, 2023, the Company:

• On July 6, 2023 granted 620,000 stock options to employees and officers with an exercise price of C$6.86 per share and an expiry date of July 6, 2028, which fully vested on July 24, 2023.

During the period ended December 31, 2023, the Company did not grant any RSUs.

17. Loss per Share

Income per common share represents net income for the year divided by the weighted average number of common shares outstanding during the period. 

Diluted income per share is calculated by dividing the applicable net income by the sum of the weighted average number of common shares outstanding and all additional common shares that would have been outstanding if potentially dilutive common shares had been issued during the period.

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

17. Loss per Share (continued…)

18. Finance Expense

Finance expenses were comprised of the following for the period ended:

19. General and Administrative Expenses

General and administrative expenses were comprised of the following for the period ended:

20. Cost of sales

Cost of sales were comprised of the following for the period ended:

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

21. Financial Instruments and Risk Management

The fair values of investments were measured using the cost, market or income approaches.  The investments measured at fair value are classified into one of the three levels in the fair value hierarchy according to the relative reliability of the inputs used to estimate the fair values, with the designation based upon the lowest level of input that is significant to the fair value measurement.  The three levels of the fair value hierarchy are:

Level 1 Inputs: Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.

Level 2 Inputs: Quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not active, or other observable inputs other than quoted prices.

Level 3 Inputs: Unobservable inputs for the asset or liability (Unobservable inputs reflect management's assumptions on how market participants would price the asset or liability based on the information available).

Valuation of Assets that use Level 2 Inputs ("Level 2 Assets").  The fair value of Level 2 Assets would use the quoted price from the exchanges which the Company most frequently uses, with no adjustment.

The Company is exposed, in varying degrees, to a variety of financial related risks.  The fair value of the Company's financial instruments, including cash, amounts receivable, and accounts payable approximates their carrying value due to their short-term nature.  The type of risk exposure and the way in which such exposure is managed is provided as follows:

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

21. Financial Instruments and Risk Management (continued…)

At the period end the Company classified its financial assets into the following levels:

Valuation of Assets / Liabilities that use Level 1 Inputs ("Level 1 Assets / Liabilities").  Consists of the Company's investments in common stock, where quoted prices in active markets are available. 

Valuation of Assets / Liabilities that use Level 2 Inputs ("Level 2 Assets / Liabilities").  Consists of the Company's digital currencies, where quoted prices in active markets are available.  The fair value is determined by the volume-weighted average of prices across principal exchanges as of 12:00 AM UTC, per coinbase.com.

Valuation of Assets / Liabilities that use Level 3 Inputs ("Level 3 Assets / Liabilities").  Consists of the Company's investments in preferred stock, convertible notes and common stock.  For the Company's common stock investments:

• Various Black Scholes models were utilized; and
• A prior transaction approach was used for others; some adjusted.

A verified prior transaction is initially given 100% weighting in a fair value conclusion (if completed at arm's length), but subsequently such weighting is adjusted based on the merits of newly observed data.  As a result, in the absence of disconfirming data, an unadjusted prior transaction price may not be considered "stale" for months or, in some cases, years.

Level 3 Continuity

The following is a reconciliation of Level 3 assets and liabilities:

The carrying values of the Company's cash, amounts receivable, accounts payable, term loan and loans payable approximate fair value due to their short maturities.  The carrying value of the Company's lease liability is measured as the present value of the discounted future cash flows.

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

21. Financial Instruments and Risk Management (continued…)

Credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss.  The Company's primary exposure to credit risk is on its cash held in bank accounts as at December 31, 2023.  The majority of cash is deposited in bank accounts held primarily with one major bank in Canada so there is a concentration of credit risk.  This risk is managed by using a major bank that is a high credit quality financial institution as determined by rating agencies.

For the security of its digital currencies, the Company uses the services of two institutions through custodial agreements, one located in Liechtenstein and another in the United States.

The Company is exposed to credit risk related to amounts receivable from the Swedish government related to VAT filings and from the Canadian and Quebec governments related to the sales tax filings.  Refer to Note 5 for the at risk balances.

The amounts receivable for VAT filings are currently being withheld by the STA as a result of the decision notice of assessments received for both Bikupa and Bikupa 2 (Note 14).  The uncertainty surrounding the resolution of the dispute gives rise to potential credit risk, as there is the possibility that the Company may not be able to fully collect the outstanding amounts from the Swedish government.

The amounts receivable for sales tax filings are currently being withheld by the Canadian and Quebec governments as a result of legislative changes to the Excise Tax Act surrounding mining activities in respect of crypto assets. The uncertainty surrounding the legislative changes gives rise to potential credit risk, as there is the possibility that the Company may not be able to fully collect the outstanding amounts from the respective Canadian and Quebec governments as applicable.

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due.  The Company manages liquidity risk by maintaining cash balances to ensure that it is able to meet its short term and long-term obligations as and when they fall due.  The Company manages company-wide cash projections centrally and regularly updates projections for changes in business and fluctuations caused by digital currency prices and exchange rates.

HIVE is primarily engaged in the cryptocurrency mining industry, a highly volatile market with significant inherent risk. Declines in the market prices of cryptocurrencies, an increase in the difficulty of cryptocurrency mining, delays in the delivery of mining equipment, changes in the regulatory environment and other adverse changes in the industry can significantly and negatively impact the Company's operations and cash flows and its ability to maintain sufficient liquidity to meet its financial obligations.  Adverse changes to the factors mentioned above have impacted the recoverability of the Company's digital assets and property, and equipment, resulting in impairment losses being recorded.

The Company currently settles its financial obligations out of cash and digital assets. The Company has a planning and budgeting process to help determine the funds required to support the Company's normal spending requirements on an ongoing basis and its expansionary plans.  At current BTC prices, the Company's existing cash resources and the proceeds from any sale of its treasury and mined BTC will be sufficient to fund its capital investments and support its growth objectives.  If the BTC price declines significantly, the Company would be required to raise additional funds from external sources to meet these requirements.  Refer to details in Note 16 for the Company's ATM Equity Programs.

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

21. Financial Instruments and Risk Management (continued…)

As at December 31, 2023, the contractual maturities of financial and other liabilities, including estimated interest payments, are as follows:

Foreign currency risk

Currency risk relates to the risk that the fair values or future cash flows of the Company's financial instruments will fluctuate because of changes in foreign exchange rates.  Exchange rate fluctuations affect the costs that the Company incurs in its operations as well as the currency in which the Company has historically raised capital. 

The Company's presentation currency is the US dollar, major purchases are transacted in US dollars, while financing to date has been completed in Canadian and US dollars.  As the Company operates in an international environment, some of the Company's financial instruments and transactions are denominated in currencies other than an entity's functional currency.  A portion of the Company's general and administrative costs are incurred mainly in currencies separate from each entity's functional currency, such as Swiss Francs, the Euro, the Swedish Krona, and Icelandic Krona.  The fluctuation of these currencies in relation to the US dollar will consequently impact the profitability of the Company and may also affect the value of the Company's assets and liabilities and the amount of shareholders' equity. 

The Company's net monetary position in the significant foreign currencies as of December 31, 2023 is summarized below with the effect on earnings before tax of a 10% fluctuation of each currency relative to the functional currency of the entity holding it to the US dollar:

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates.  The Company's exposure to interest rate risk is limited and only relates to its ability to earn interest income on cash balances at variable rates.  Changes in short term interest rates will not have a significant effect on the fair value of the Company's cash account.  The interest rate on the Company's loans is fixed in nature and have limited exposure to changes in interest rates.

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

21. Financial Instruments and Risk Management (continued…)

Price risk

Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices, other than those arising from interest rate risk or foreign currency risk.  The Company is not exposed to any significant price risks with respect to its financial instruments.

Loss of access risk

The loss of access to the private keys associated with the Company's digital currency holdings may be irreversible and could adversely affect an investment.  Digital currencies are controllable only by an individual that possesses both the unique public key and private key or keys relating to the "digital wallet" in which the digital currency is held.  To the extent a private key is lost, destroyed or otherwise compromised and no backup is accessible the Company may be unable to access the digital currencies.

Irrevocability of transactions

Digital currency transactions are irrevocable and stolen or incorrectly transferred digital currencies may be irretrievable.  Once a transaction has been verified and recorded in a block that is added to the blockchain, an incorrect transfer or theft generally will not be reversible, and the Company may not be capable of seeking compensation.

Regulatory oversight risk

Regulatory changes or actions may restrict the use of digital currencies or the operation of digital currency networks or exchanges in a manner that adversely affects investments held by the Company.

Digital asset risk

Digital currencies are measured at fair value less cost to sell.  Digital currency prices are affected by various forces including global supply and demand, interest rates, exchanges rates, inflation or deflation and the political and economic conditions.  Further, digital currencies have no underlying backing or contracts to enforce recovery of invested amounts.  The profitability of the Company is related to the current and future market price of digital currencies; in addition, the Company may not be able to liquidate its holdings of digital currencies at its desired price if necessary.  Investing in digital currencies is speculative, prices are volatile and market movements are difficult to predict.  Supply and demand for such currencies change rapidly and are affected by a variety of factors, including regulation and general economic trends.  Digital currencies have a limited history, their fair values have historically been volatile and the value of digital currencies held by the Company could decline rapidly.  A decline in the market prices of digital currencies could negatively impact the Company's future operations.  Historical performance of digital currencies is not indicative of their future performance. 

Many digital currency networks are online end-user-to-end-user networks that host a public transaction ledger (blockchain) and the source code that comprises the basis for the cryptographic and algorithmic protocols governing such networks.  In many digital currency transactions, the recipient or the buyer must provide its public key, which serves as an address for a digital wallet, to the seller.  In the data packets distributed from digital currency software programs to confirm transaction activity, each party to the transaction must sign transactions with a data code derived from entering the private key into a hashing algorithm, which signature serves as validation that the transaction has been authorized by the owner of the digital currency.  This process is vulnerable to hacking and malware and could lead to theft of the Company's digital wallets and the loss of the Company's digital currency. 

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

21. Financial Instruments and Risk Management (continued…)

While the Company does not store cryptocurrency on an exchange, the public failure of cryptocurrency exchanges appears to affect the value of cryptocurrencies and the cryptocurrency and crypto mining industries as a whole. As noted above, digital currency transactions are irrevocable. There are no governmental bodies that backstop the security of cryptocurrencies against theft or loss. A general loss of confidence in the technology that underlies the cryptocurrency industry, or a loss of confidence in the industry, itself, could substantially devalue our Bitcoin holdings and threaten the viability of our cryptocurrency mining business.

Digital currencies are loosely regulated and there is no central marketplace for exchange.  Supply is determined by a computer code, not a central bank.  Additionally, exchanges may suffer from operational issues, such as delayed execution, that could have an adverse effect on the Company. 

Additionally, to the extent that the digital asset exchanges representing a substantial portion of the volume in digital asset trading are involved in fraud or experience security failures or other operational issues, such digital asset exchanges' failures may result in loss or less favorable prices of digital currencies, or may adversely affect the Company, its operations and its investments.

Safeguarding of digital assets

The Company utilizes the Fireblocks platform which provides the Company a secure medium to access its digital wallets and transact with reputable, exchanges on sales of its digital assets. At the period end the Company utilised the Fireblocks platform for 98% of its digital currencies associated with its operations.  Fireblocks, with locations in New York and Tel Aviv, utilizes a secure hot vault and secure transfer environment to help establish connections between the Company's wallets and exchanges.  Fireblocks utilizes multi-party computation ("MPC") protection layers to distribute private key secrets across multiple locations to ensure there is no single point of failure associated with the private keys.  The use of MPC ensures private key shards are never concentrated to a single device at any point in time.  The Company utilizes the Fireblocks Policy Engine to designate transaction approval policies for digital assets held within the Fireblocks portal.  As such, administrators configure automated rules to ensure all transactions are disbursed based on the asset sent, total value of the transaction, source and destination of funds and signor requirements.  All transactions initiated from Fireblocks that fail to meet the Company's predefined criteria per the engine policy are automatically rejected.  All internal wallets owned by the Company and external wallets for addresses of the Company's counterparties require multiple approvals in accordance with our whitelisting policy.  As such, the Company settles with counterparties or entities without the risk of losing funds due to deposit address attacks or errors.  Fireblocks is SOC 2 Type II certified for the defined period and undergoes a SOC 2 review on an annual basis.  The Company reviews the Fireblocks SOC 2 report to ensure they maintain a secure technology infrastructure and that their systems are designed and operating effectively.  Additionally, the Company reviews its own complementary user entity controls in conjunction with the Fireblocks controls to ensure that applicable trust services criteria can be met.  Fireblocks maintains an insurance policy which has coverage for technology, cyber, and professional liability and is rated "A" by A.M.  Best based on the strength of the policy and has had no known security breaches or incidents reported to date. 

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

21. Financial Instruments and Risk Management (continued…)

Digital asset mining risk

The digital asset mining industry has seen rapid growth and innovation.  In this environment of rapid change, there is no assurance that the Company will be able to compete effectively.  The Company's expenses may be greater than we anticipate, and our investments to make the Company more efficient or to gain digital asset mining market share may not outpace our competitors.  Moreover, the cost of gaining efficiency and maintaining or enhancing profit margins may be more than the Company can support given its overall strategy of holding Bitcoin, the currency in which our operating profits are generated.  Among the factors that affect our position are the following.

ASIC and GPU miners and other necessary hardware for mining are subject to malfunction, technological obsolescence, shortages in the global supply chain and difficulty and cost in obtaining new hardware.  In this context, we note that much has been said in the media about the widespread availability of GPU based mining machines as former Ethereum miners shut down their operations.  The machines that HIVE requires are ASIC mining machines that are designed and built for Bitcoin mining, which is our main focus.  As a result, any major malfunction out of the typical range of downtime for normal maintenance and repair of our Bitcoin mining systems could cause a significant disruption in our ability to continue mining, which could result in lower yields and harm our digital asset mining market share.  New ASIC miners can be costly and may be in short supply.

There can be no assurances that the most efficient ASIC mining hardware will be readily available when we identify the need for it.  We face competition in acquiring mining machines from major manufacturers and, at a given time, mining machines may only be available for pre-order months in advance.  As a result of competition for the latest generation ASIC mining machines, or if we unexpectedly need to replace our mining machines due to a faulty shipment or other failure, we may not be able to secure replacement machines at reasonable costs on a timely basis.

Proof-of-work mining operations (such as the mining operations required to mine Bitcoin) consume significant amounts of electricity, and recently, there has been increased focus on, and public debate surrounding, the negative environmental, social and governance considerations associated with such operations.  Regulatory changes or actions in foreign jurisdictions may affect the Company's business or restrict the use of one or more digital assets, mining activity or the operation of their networks or the digital asset exchange market in a manner that adversely affects the Company's business.  If regulators or public utilities take actions that restrict or otherwise impact mining activities, there may be a significant decline in such activities, which could adversely affect digital asset networks, the Company's business and the market price of the Company's common shares.  Because Bitcoin is a leading crypto currency, all of the foregoing risk factors may apply especially to Bitcoin, which is central to our business.

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

21. Financial Instruments and Risk Management (continued…)

The Company's business strategy currently focuses on mining Bitcoin and prior to the Merge Ethereum, and our hardware is limited to mining using current proof-of-work protocols.  There could be developments in proof of work protocols, or other competing validation methods or processes that render such business strategy obsolete or out of favor generally.  Proof-of-stake is an alternative method of validating digital asset transactions.  Proof-of-stake methodology does not rely on resource intensive calculations to validate transactions and create new blocks in a blockchain.  Instead, the validator of the next block on a blockchain is determined, sometimes randomly, based on a methodology in the blockchain software.  Rewards, and sometimes penalties, are issued based on the amount of digital assets a user has "staked" in order to become a validator.  As a result of the Merge, on September 15, 2022, Ethereum shifted to a proof-of-stake validation method, and the Company stopped mining Ethereum.  Should Bitcoin also shift from a proof-of-work validation method to a proof-of-stake or other method, the transaction verification process (i.e., "mining" or "validating") may render our mining business less competitive or less profitable.  While we are not aware of how the Bitcoin blockchain could be so fundamentally modified, we have seen applications that offer sidechain alternatives to mining Bitcoin directly on the Bitcoin blockchain but that are integrated with the Bitcoin blockchain.  To date, such efforts that we are aware of have been directed at increasing the volume and speed of Bitcoin transaction processing. 

The aggregate computing power of the global Bitcoin and Ethereum networks has generally grown over time, and we expect it to continue to grow in the future.  The barriers to entry for new Bitcoin miners are relatively low, which can give rise to additional capacity from competing miners.  As the hash rate in the Bitcoin network increases, the amount of Bitcoin earned per unit of hash rate decreases.  The Bitcoin protocol responds to increasing total hash rate by increasing the "difficulty" of Bitcoin mining.  If this "difficulty" increases at a significantly higher rate, we would need to increase our hash rate at the same rate in order to maintain market share and generate equivalent block rewards.  Therefore, in order to maintain or increase our market share, we may be required to make significant capital expenditures.

Any decrease in the Company's effective market share would result in a reduction in our share of block rewards and transaction fees, which could adversely affect our financial performance and financial position.

There is also a risk that the Company could be negative affected by a Bitcoin halving event.  Halving is a process designed to control the overall supply and reduce the risk of inflation in Bitcoin.  At a predetermined block, the mining reward is cut in half.  The next Bitcoin halving is expected to occur in April 2024.  While Bitcoin prices have had a history of price fluctuations around Bitcoin halvings, there is no guarantee that the price change will be favorable or would compensate for the reduction in mining reward.  If Bitcoin price and difficulty do not maintain or continue their trend of adjusting to pre-Bitcoin halving profitability levels over time, or the period of market normalization after the Bitcoin halving to pre-Bitcoin halving profitability levels is too long, there is a risk that the Bitcoin halving will render the Company unprofitable for a sustained time period. In addition, a sustained reduction in Bitcoin price could affect the value of our ASIC mining fleet which is engineered for Bitcoin mining with the result that substantial write downs are required for this equipment. These events could result in the Company being unable to continue as a going concern.

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

21. Financial Instruments and Risk Management (continued…)

Uncertain tax positions

Various foreign jurisdictions have, and may continue to adopt laws, regulations or directives that affect a digital asset network, the digital asset markets, and their users, particularly digital asset exchanges and service providers that fall within such jurisdictions' regulatory scope.  For example, if China or other foreign jurisdictions were to ban or continue to otherwise restrict mining activity, including by regulating or limiting manufacturers' ability to produce or sell semiconductors or hard drives in connection with mining, it would have a material adverse effect on digital asset networks, the digital asset market, and as a result, impact our business.

A number of foreign jurisdictions have recently taken regulatory action aimed at digital asset activities.  China has made transacting in digital currencies illegal for Chinese citizens in mainland China, and additional restrictions may follow.  As recently as September 2021, China's central bank has further restricted digital asset-related activities, stating that activity by overseas digital asset exchanges, and services offering trading, order matching, and token issuance and derivatives, constitute illegal activity.  Both China and South Korea have banned initial coin offerings entirely and regulators in other jurisdictions, including Canada, Singapore, and Hong Kong, have opined that initial coin offerings may constitute securities offerings subject to local securities regulations.  In September 2021, the Chinese government announced issued a complete ban that restricts digital currencies trading and mining activities, citing concerns about high energy consumption and its desire to promote financial stability.  Regulators in the Inner Mongolia and other regions of China have proposed regulations that would create penalties for companies engaged in digital currency mining activities and introduce heightened energy saving requirements on industrial parks, data centers and power plants providing electricity to digital currency miners.  The effect of the China ban was a movement of those miners and their hashrates out of China and into other countries.  The United Kingdom's Financial Conduct Authority published final rules in October 2020 banning the sale of derivatives and exchange traded notes that reference certain types of digital currencies, contending that they are "ill-suited" to retail investors citing extreme volatility, valuation challenges and association with financial crime.

Foreign laws, regulations or directives may conflict with those of the jurisdiction we operate in and may negatively impact the acceptance of one or more digital assets by users, merchants and service providers and may therefore impede the growth or sustainability of the digital asset economy in the European Union, China, Japan, Russia and the United States and globally, or otherwise negatively affect the value of digital assets that we invest in.  The effect of any future regulatory change on our business or the digital assets that we invest in is impossible to predict, but such change could be substantial and adverse to our investment and trading strategies, the value of our assets and our investment value.

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

22. Digital Currency and Risk Management

Digital currencies are measured using Level 2 inputs (Note 21).

Digital currency prices are affected by various forces including global supply and demand, interest rates, exchange rates, inflation or deflation and the global political and economic conditions.  The profitability of the Company is directly related to the current and future market price of coins; in addition, the Company may not be able liquidate its inventory of digital currency at its desired price if required.  A decline in the market prices for coins could negatively impact the Company's future operations.  The Company has not hedged the conversion of any of its coin sales or future mining of digital currencies. 

Digital currencies have a limited history and the fair value historically has been very volatile.  Historical performance of digital currencies is not indicative of their future price performance.  The Company's digital currencies currently mainly consist of Bitcoin and Ethereum Classic.  The table below shows the impact for every 5% variance in the price of each of these digital currencies on the Company's earnings before tax, based on their closing prices at December 31, 2023.

23. Capital Management

The Company manages its capital to maintain its ability to continue as a going concern and to provide returns to shareholders and benefits to other stakeholders.  The capital structure of the Company consists of equity comprised of issued share capital and reserves.

The Company manages its capital structure and adjusts it in light of economic conditions.  The Company, upon approval from its Board of Directors, will balance its overall capital structure through new share issues, commencement of ATM Equity Programs, the sale of digital currencies or by undertaking other activities as deemed appropriate under the specific circumstances.

The Company is subject to externally imposed capital requirements due to its term loan (Note 12).  The Company's overall strategy with respect to capital risk management remains unchanged from the prior year.

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

24. Segmented Information

The Company operates in one segment, the mining and sale of digital currencies.  External revenues are attributed by geographical location, based on the country from which services are provided.

The Company's plant and equipment are located in the following jurisdictions:

25. Revision

Reclassification from accumulated other comprehensive income for digital currency sales

During the preparation of the March 31, 2023 year end consolidated financial statements, the Company identified a revision to the amounts to be reclassified from accumulated other comprehensive income for digital currency sales and revaluation of the digital currencies. The Company identified that due to the decrease in digital currencies during the period ended December 31, 2022, the surplus in accumulated other comprehensive income should have been reclassified to reflect the realisation of amounts from disposal. The revision impacted the condensed interim consolidated statement of loss and comprehensive loss with a decrease in the revaluation loss on digital currencies and increase in the recognized loss on sale of digital currencies as indicated below.

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

25. Revision (continued…)

The table below summarizes the revised condensed interim consolidated financial statements for December 31, 2022:

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

26. Asset Acquisition

On November 29, 2023, the Company acquired a data center in Sweden. In consideration, the Company issued 345,566 common shares of the Company to the vendor, made a cash payment totalling $647 and $500 in holdback common shares payable that are included in accounts payable and accrued liabilities as at December 31, 2023 (Note 10). The Company also incurred $140 in acquisition costs.

The $500 holdback common shares payable shall be paid at the later of: (i) the six month anniversary of the closing date; and (ii) the date on which any claims made by the Company within six months of the closing date relating to a breach of warranty under the property transfer agreement have been finally settled, and shall be composed of such number of Common Shares equal to $500,000 less any amount payable by the Vendor to the Company in respect of such claim.

The Company determined that this transaction is an asset acquisition as the assets acquired did not constitute a business as defined by IFRS 3. The following table summarizes the consideration transferred, the estimated fair value of the identifiable assets acquired and liabilities assumed as the date of the acquisition:

27. Comparative Figures

Certain figures in the comparative period condensed interim consolidated statements of financial position, condensed interim consolidated statements of (loss) income and comprehensive (loss) income, condensed interim consolidated statements of changes in equity and condensed interim consolidated statements of cash flows have been reclassified to meet the current presentation. 

HIVE Digital Technologies Ltd.  (formerly, HIVE Blockchain Technologies Ltd.) Notes to the Condensed Interim Consolidated Financial Statements For the three and nine months ended December 31, 2023, and 2022 (In thousands of US dollars unless otherwise indicated) (Unaudited)

28. Subsequent Events

Subsequent to December 31, 2023, the Company issued 2,064,378 common shares (the "August 2023 ATM Shares") pursuant to the 2023 ATM Second Equity Program for gross proceeds of C$11.1 million ($8.3 million).  The August 2023 ATM shares were sold at prevailing market prices, for an average price per August 2023 ATM Share of C$5.37. Pursuant to the August 2023 Equity Distribution Agreement, a cash commission of $248 on the aggregate gross proceeds raised was paid to the agent in connection with its services under the August 2023 Equity Distribution Agreement.

Subsequent to December 31, 2023, the Company issued 165,750 common shares under the RSU plan upon the exercise of restricted share units.

On January 5, 2024, the Company granted 241,976 restricted share units to employees, consultants and officers of the Company with a fair value of C$5.56 per share and vesting on January 5, 2025.

On January 12, 2024, the Company granted 16,000 restricted share units to an officer of the Company with a fair value of C$4.84 per share and vesting on January 12, 2025.

On February 2, 2024, each 2023 Special Warrant was deemed to be exercised into one unit comprised of one common share of the Company and one-half of one common share purchase warrant. Each whole warrant entitles the holder thereof to purchase one common share of the Company at an exercise price of C$6.00 per whole warrant until December 28, 2026. 

HIVE Digital Technologies Ltd. (formerly, HIVE Blockchain Technologies Ltd.) Management's Discussion and Analysis of Financial Condition and Results of Operations For the three and nine months ended December 31, 2023 (In thousands of US Dollars, except share amounts)

The following discussion is management's assessment and analysis of the results of operations, cash flows and financial condition of HIVE Digital Technologies Ltd. ("HIVE" or the "Company") on a consolidated basis for the three and nine months ended December 31, 2023, and should be read in conjunction with the accompanying unaudited condensed interim consolidated financial statements and related notes for the three and nine months ended December 31, 2023.

These documents and additional information regarding the business of the Company are available on the System for Electronic Document Analysis and Retrieval ("SEDAR+") at www.sedarplus.ca, the Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system maintained by the Securities and Exchange Commission (the "SEC") at www.sec.gov/EDGAR and the Company's website at www.hivedigitaltechnologies.com.  The preparation of financial data is in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB") and all figures are reported in United States dollars unless otherwise indicated.

This Management's Discussion & Analysis contains information up to and including February 12, 2024.

BUSINESS OVERVIEW

HIVE Digital Technologies Ltd. is a growth-oriented company listed on the TSX Venture Exchange ("TSXV"), the NASDAQ Capital Markets Exchange ("NASDAQ") and on the Open Market of the Frankfurt Stock Exchange. Our primary business is operating data centers, the computing power of which is used for high performance computing ("HPC") and the mining of cryptocurrencies.  Because the Company substantially holds Bitcoin and monetizes (or converts into Bitcoin) other cryptocurrencies that it derives from its mining operations, we view the Company as a bridge between the Bitcoin blockchain sector and traditional capital markets.  Our cryptocurrency assets provide shareholders with exposure to the operating margins of digital currency mining as well as a portfolio of Bitcoin.

HIVE operates "green" energy-powered data center facilities in Canada, Sweden, and Iceland.  Our references to "green" energy are to our energy agreements with producers of hydroelectric power in Sweden and Canada, and hosting agreements with suppliers in Iceland where the hosting facilities are powered by hydroelectric or geothermal power.  One of our key objectives in locating our facilities where they are is to avoid using energy derived from fossil fuels.  Our facilities are connected to local power grids that are controlled by local authorities.  As a result, we do not control the sourcing of our power, which may include energy from any source on the grid.  However, the close proximity of our facilities to hydroelectric and geothermal based power generating plants, makes it highly probable that most or all of the energy we use for our data centers is coming from those hydroelectric and geothermal plants, which is the basis for our saying that our operations are "green."

The Company's major data centers along with operational hashrate which totals 3.85 EH/s, operational and secured power as of January 31, 2024 is summarized as follows:

* Data center used for HPC / AI compute only.

HIVE Digital Technologies Ltd. (formerly, HIVE Blockchain Technologies Ltd.) Management's Discussion and Analysis of Financial Condition and Results of Operations For the three and nine months ended December 31, 2023 (In thousands of US Dollars, except share amounts)

Currently, the majority of our data center power is being utilized by HIVE to generate mining rewards that are paid in Bitcoin and occasionally other cryptocurrencies that we convert into Bitcoin. We retain our Bitcoin in segregated, secure storage wallets with Fireblocks Inc. ("Fireblocks"), a third-party provider that specializes in secure crypto storage.  See "DIGITAL CURRENCY AND RISK MANAGEMENT" below.  We have not pledged or staked our Bitcoin assets as collateral against debt or other obligations of any kind.  Our Bitcoin is not stored on any exchange.  Our Bitcoin is never "staked" for mining purposes (see definition of "Proof-of-Stake" below) or loaned to any third party.

The Company recognizes the majority of its revenue from the provision of transaction verification services, known as 'cryptocurrency mining', for which the Company receives digital currencies and records them at their fair value on the date received.  The Company's revenue is being diversified through our expansion into data center operations which support HPC and AI based applications.

Change of Name

On July 12, 2023, the Company changed its name from HIVE Blockchain Technologies Ltd. to HIVE Digital Technologies Ltd.  The change represents HIVE's evolving focus on revenue opportunities made possible by HIVE's large inventory of Nvidia Graphics Processing Unit ("GPU") cards in combination with emerging technologies, including artificial intelligence ("AI"), machine learning, advanced data analysis and HPC.

HIVE expects to maintain a strong presence in Bitcoin mining, however going forward HIVE will diversify its business by utilizing its approximately 38,000 GPU-based cards to build systems that can provide computational power on a massive scale.  In addition, the Company intends to branch out into the rental of GPU server clusters via marketplaces and is exploring the development of a new cloud service offering.  This cloud service is designed to offer to users a selection of options to access computing resources ranging from a virtual instance of a single GPU, to a "bare-metal" server equipped with up to 10 GPUs to clusters of multiple servers.  The term, "bare metal" refers to instances where a user rents a physical machine from our facility that is not shared with any other tenants.  Bare metal servers provide the high-performance capabilities of dedicated hardware combined with the flexibility and scalability of a cloud service.  Pricing will likely be based upon the level of computing power accessed.  Marketing for the cloud services is expected to be directed at small and medium-sized businesses as an efficient and cost-effective alternative, offering potential substantial savings in comparison to other major cloud service providers.

FINANCIAL SUMMARY

1 Non-IFRS measure. A reconciliation to its nearest IFRS measures is provided under "Reconciliations of Non-IFRS Financial Performance Measures" below.

The Company is a reporting issuer in each of the Provinces and Territories of Canada and is a reporting issuer under the Securities Exchange Act of 1934 in the United States.  The Company's shares are listed for trading on the TSXV, under the symbol "HIVE.V", as well as on the NASDAQ Capital Markets Exchange under "HIVE" and on the Open Market of the Frankfurt Stock Exchange under the symbol "YO0.F".  The Company's head office is located at Suite 855, 789 West Pender Street, Vancouver, BC, V6C 1H2, and its registered office is located at Suite 2500, 700 West Georgia Street, Vancouver, BC, V7Y 1B3.

HIVE Digital Technologies Ltd. (formerly, HIVE Blockchain Technologies Ltd.) Management's Discussion and Analysis of Financial Condition and Results of Operations For the three and nine months ended December 31, 2023 (In thousands of US Dollars, except share amounts)

DEFINED TERMS

HIVE Digital Technologies Ltd. (formerly, HIVE Blockchain Technologies Ltd.) Management's Discussion and Analysis of Financial Condition and Results of Operations For the three and nine months ended December 31, 2023 (In thousands of US Dollars, except share amounts)

OUTLOOK

Operations

The Bitcoin protocol is such that every 210,000 blocks the mining rewards are cut in half (a "Halving").  As the next Halving approaches, which is currently expected in April 2024, the Company will continue to make opportunistic investments to upgrade its ASICs and infrastructure, to improve our fleet efficiency and to maximise hashrate. In addition to our cryptocurrency mining operations, the Company has continued its efforts to expand its facilities to offer HPC services to companies in the gaming, artificial intelligence and graphics rendering industries.

During the period ended December 31, 2023, the Company has taken the 6 MW at our Boden, Sweden leased facility allocated to our GPUs to mine alternative cryptocurrencies which produced approximately 130 PH/s of Bitcoin mining capacity and installed new ASIC miners received during the quarter to operate at a higher efficiency and hash rate resulting in higher gross margins. The GPU cards are currently offline and expected to be used in our expansion efforts to offer HPC services.

The Company notes that as at December 31, 2023 it had 4.08 EH/s operational, however, due to maintenance work at the New Brunswick facility there has been a temporary decrease in total operational hashrate as at January 31, 2024.

On January 2, 2024, the Company mutually agreed to the early termination of its service agreement for its facility in Blonduos Iceland, and thus 100 PH/s of ASICs are being relocated to the Keflavik, Iceland facility. The Company is currently considering whether to expand the facility in Keflavik to add these ASICs back into operation.

High performance computing

The Company has continued to develop and expand its HPC business, which implements the Company's fleet of GPUs in enterprise grade CPU servers, operating in Tier 3 data centers. These GPU's operate with redundancy and are utilized for rental on GPU on-demand marketplaces, where end users are typical performing Large Language Model ("LLM") computations, such as inference and fine-tuning. The Company's fleet of GPUs used for this purpose include the NVIDIA A4000 with 16GB of vRAM, the A5000 with 24GB of vRAM and A40 with 48GB of vRAM. Subsequent to the period ended December 31, 2023, the Company also acquired 96 NVIDIA H100 GPUs.

COVID-19 and Upgrade Program

As the urgency of the impact of the COVID-19 virus has diminished, HIVE nonetheless maintains preparedness.  At any time, HIVE can implement various measures to protect its employees and partners and prevent disruption to operations, in each case in alignment with local governments as well as national and international agency recommendations.  These measures may include ceasing non-essential travel and having employees work remotely where possible.  During the COVID pandemic, the Company was able to maintain normal uptime of its cryptocurrency mining operations and its data centers, as well as its supply chain, with only minimal disruption.  The Company operates with a lean administrative structure and has few employees, as cryptocurrency mining is not a human capital-intensive industry.  The Company's data centers are located in sparsely populated areas near the Arctic Circle in Europe, in rural Quebec and in New Brunswick near the border of Maine.  Most management operations can be accomplished remotely, and any necessary equipment maintenance can be achieved by minimal staff utilizing personal protective equipment and maintaining physical distancing.  The Company continues to caution that current global uncertainty with respect to the spread of the COVID-19 virus and emerging variants and its effect on the broader global economy may have a significant negative effect on the Company.  While the future impact of the COVID-19 virus on the Company remains unknown, another rapid spread of the COVID-19 virus and its variants could have a material adverse effect on global economic activity and could result in volatility and disruption to global supply chains, operations, mobility of people and the financial markets, which could affect interest rates, credit ratings, credit risk, inflation, business, financial conditions, results of operations and other factors relevant to the Company.

HIVE Digital Technologies Ltd. (formerly, HIVE Blockchain Technologies Ltd.) Management's Discussion and Analysis of Financial Condition and Results of Operations For the three and nine months ended December 31, 2023 (In thousands of US Dollars, except share amounts)

The Russian Invasion of Ukraine

On February 24, 2022, Russia invaded Ukraine.  While it is impossible to predict what affect the conflict in Ukraine could have on the Company's operations in Sweden, the increased energy prices across Europe resulting from the conflict have been buffered partially by HIVE having forward energy agreements for the purchase of electricity.  These energy hedging contracts allow HIVE to purchase a fixed quantity of power ("MW"), for a fixed period of time (number of months). As a result, if the index spot price increases, HIVE can rely on a previously agreed upon fixed energy price to continue operations. Furthermore, HIVE monitors the hashrate economics of its operations to determine our earnings from digital asset mining in dollars per megawatt-hour ("MWHR").  Under certain circumstances, it may be more profitable for HIVE to sell back to the grid its energy rights (since HIVE receives the proceeds of energy sold at index spot pricing, with the cost being the fixed price from the energy hedged contract).  Under such circumstances, HIVE may elect to sell its energy rights in favour of mining digital assets.  Our Swedish data centers utilize approximately up to 37.5 MW of renewable hydroelectric energy, which represents approximately 28% of our global overall capacity of hydroelectric and geothermal energy.

HIVE Digital Technologies Ltd. (formerly, HIVE Blockchain Technologies Ltd.) Management's Discussion and Analysis of Financial Condition and Results of Operations For the three and nine months ended December 31, 2023 (In thousands of US Dollars, except share amounts)

Ethereum Mining Industry Revenues of U.S. dollars per Day for each 1 Megahash per second of computing power;

August 1, 2021 - September 15, 2022

Source: bitinfocharts.com

• HIVE's crypto mining fleet consists of GPU based machines (formerly used to mine Ethereum) and ASIC based machines that are used to mine Bitcoin.  HIVE's Ethereum mining using proof-of-work consensus ceased as of September 15, 2022, when the "Merge" took place and Ethereum shifted to proof-of-stake consensus.  Consequently, revenues from Ethereum mining ceased as of that date.  Leading up to that date, Ethereum mining economics were consistent between the $0.02 per Megahash per day to $0.03 per Megahash per day range.  Since then a portion of our GPU based machines were repurposed to use a unique algorithm to optimize profitability in mining cryptocurrency other than Bitcoin, the profits from which are paid out in Bitcoin.  As a result, after the Ethereum Merge, the Company's fleet of GPU based machines were producing an equivalent of 350 PH/s to 400 PH/s of Bitcoin mining capacity.  This is in addition to the Bitcoin mining capacity from HIVE's ASIC fleet.  Therefore, at the time, approximately 25 MW of HIVE's GPU based operating capacity was receiving payout in Bitcoin. Currently, HIVE is operating approximately 6.0 MW of Nvidia GPUs to mine with approximately 130.0 PH/s of Bitcoin mining capacity.  As our high performance computing business grows, we will allocate more of our GPU based machines to serving that aspect of our business.

• Using an optimization algorithm, HIVE is able to more profitably mine an assortment of coins with its GPU fleet than if it was only mining a single coin (such as Ethereum Classic).  The assortment of coins which HIVE mines using its GPU fleet varies over time and is chosen on the basis of profit optimization.  As a consequence of the Company's technical advancements, we believe HIVE has a competitive edge in generating revenue from GPU machine based operations.  As of November 2023, HIVE's fleet of Nvidia GPU are generating approximately $50-60/MWHR using a profit-switching algorithm, mining the most profitable alt-coins, from which HIVE is then paid in Bitcoin.

• HIVE is transitioning its GPU based fleet, previously used for Ethereum mining, to cloud and high performance computing.

HIVE Digital Technologies Ltd. (formerly, HIVE Blockchain Technologies Ltd.) Management's Discussion and Analysis of Financial Condition and Results of Operations For the three and nine months ended December 31, 2023 (In thousands of US Dollars, except share amounts)

Bitcoin Mining Industry Revenues of U.S. dollars per Day for each 1 Terahash per second of computing power for the 24-month period from January 2022 to January 2024:

Source: bitinfocharts.com

• Bitcoin mining economics recovered from a bearish range of approximately $0.065 to $0.085 per Terahash per second ("TH/s") per day during most of the quarter (July 2023 to September 2023) to $0.07 to $0.12 per TH/s in October 2023 to December 2023, however, after Bitcoin fell to the low $40,000 range in late December 2023, this resulted in hash price trending to $0.08 per TH/s in January 2024.

• We note the breakeven operating cost for miners depends on the electricity price as well as machine efficiencies, which have seen improvements with newer generation mining machines.  For example, with Bitcoin mining economics having Difficulty at 75.5 trillion seen in January 2024 and a Bitcoin price of $42,000 (which would correlate to a hash price of $0.07 per TH/s per day or $70 per PH/s per day), an ASIC miner that has an efficiency of 30 Joules per Terahash ("J/TH") can be expected to generate mining revenues of approximately $0.097 per kWh approximately, establishing the breakeven operating cost.  Under the same Difficulty and Bitcoin price, a miner that contains an ASIC with an efficiency of 40 J/TH can be expected to generate revenues of approximately $0.073 per kWh.  Therefore, if the operating costs of a miner (in this example) are below $0.07 per kWh, the miner is profitable.  When there is enough downward pressure on profitability, it is generally the case that miners with higher electricity or operating costs and/or miners operating machines with lower efficiency with a higher breakeven price, will be not be able to operate profitably, and these miners may pause their operations, causing the network hashrate and the difficulty to decrease. The halving event is anticipated in late April 2024, after which the aforementioned break even prices will fall by half at first, and then the Bitcoin mining network Difficulty will stabilize based on the global average break even prices based on energy costs ($/KWHR) and machine efficiencies (J/TH), and Bitcoin price.

HIVE Digital Technologies Ltd. (formerly, HIVE Blockchain Technologies Ltd.) Management's Discussion and Analysis of Financial Condition and Results of Operations For the three and nine months ended December 31, 2023 (In thousands of US Dollars, except share amounts)

The average monthly Bitcoin market data from April 2023 to December 2023 was as follows:

Sources: Coinmarketcap.com, Glassnode.com, Blockchain.com

The average monthly Bitcoin market data from April 2022 to March 2023 was as follows:

Sources: Coinmarketcap.com, Glassnode.com, Blockchain.com

For reference, the following chart shows Bitcoin price vs Bitcoin miners' revenues (in Bitcoin block rewards and transaction fees) vs block difficulty* for the 24-month period from January 2022 to January 2024:

Source: Glassnode.com

* Block Difficulty - A relative measure of how difficult it is to find a new block. The difficulty is adjusted periodically as a function of how much hashing power has been deployed by the network of miners.

HIVE Digital Technologies Ltd. (formerly, HIVE Blockchain Technologies Ltd.) Management's Discussion and Analysis of Financial Condition and Results of Operations For the three and nine months ended December 31, 2023 (In thousands of US Dollars, except share amounts)

The block reward is how new Bitcoin is "minted" or brought into the economy. These rewards, which started at 50 Bitcoin at inception of the network in 2009, halve every 210,000 blocks, with the Halving that occurred on May 11, 2020, resulting in a reward of 6.25 Bitcoin per block vs 12.5 immediately prior to the 2020 Halving. The next Halving which will reduce the reward to 3.125 Bitcoin per block is currently projected to happen in April 2024.

After the April 2024 Halving event, the total number of Bitcoins available to miners per day will fall from 900 to 450 per day. HIVE is preparing for this by upgrading and expanding our fleet of miners.

Industry subject to evolving regulatory and tax landscape

Both the regulatory and tax landscape for digital companies is evolving.  The changing regulatory landscape applies to sectors that are based on blockchain, distributed ledgers, technology and the mining, use, sale and holding of tokens, or digital currencies, and the blockchain technology networks that support them.