HIVE Digital Technologies Ltd.

Good morning, everyone, and thank you for joining us today for our webcast announcing high blockchain technology results for the second quarter, and it's September 30th, 2020. My name is Holly Schoenfeld. Except for the statements of historical fact, this presentation contains forward-looking information within the meaning of the applicable Canadian securities legislation that is based on expectations, estimates, and assumptions as of the date of this presentation. And please see the corresponding slide number two up on your screen for full disclosures. Now, I'm pleased to welcome the presenters for today's program, Frank Holmes, Interim Executive Chairman, Darcy DeBarris, Chief Financial Officer, and Tobias Edel, Director. And now, I would like to hand the presentation over to Frank to start us off.

Well, thank you, Holly, and thank you to all you shareholders out there listening that have been loyal through all the challenges you've had to deal with. I'm really proud and thrilled to share with you. We've weathered that storm and that almost difficulties in the winter and then the largest shareholder, all these changes could have been done without Darcy and Tobias. Tobias is on. Tobias is a musician, he is a violinist extraordinaire, he's a tax lawyer, and he's been very helpful for us with everything we've done in Europe. And the restructuring, repositioning of high blockchain technology to be able to announce our record revenue and earnings. I'm thrilled to share that with you. So let's go quickly. As you can see, like a gold stock, when gold goes up, gold stocks historically have more volatility and they far overperform. Massive business to show you. You can see the appearance at a spectacular move this year, but nothing like high this year for the shareholders. Next please. And we're also going to need it when it comes to stock price performance. We have the biggest market cap, but I noticed that the rise has surpassed us. But when it comes to liquidity and it comes to overall performance, and the breadth of our shareholders around the world, I was clearly responded to that audience of investors that do not want to open up an account with a wallet and have to put their own Bitcoin, Ethereum into it, that they're using us as the proxy. And I think, too, the sort of interest in Hive is that we are the largest Ethereum producer is an industrial scale that's a public company for traders and investors to go into. Clearly, this is a attractive and wide and new audience for traders and investors. But never forget the DNA volatility and every asset class is only a volatility. And as you can see, the S&P is plus or minus 1%. But when it comes to Bitcoin, it's plus or minus 5%. And interestingly enough, over the 10-day trading period, the highest volatility of gold stocks, oil, you name it, it is Bitcoin. And Ethereum is just slightly greater volatility than Bitcoin itself. So it's important that if you're going to this asset class or you're a new shareholder contemplating high, that you reset the DNA of its volatility. We move with the price action of Ethereum and Bitcoin. Next, please. Bitcoin price increases following most recent halving. As you can see, if you go back at this time period of the golden cross, where the 50-day moving average crossed above the 20-day, it happened basically 10 days after the Bitcoin halving, but there were still so many negative people out there, and that you can see Bitcoin is slowly climbing that wall of worry and doubt. Price returns falling, Bitcoin having. This is an example of what took place in the previous runs and where we are today when you look at data since the having took place. So this is spectacular performance and there's a lot of reason for it. There are many more Bitcoin wallets. There are many more retail traders and investors globally and institutions have come into Bitcoin in the past four years. Now I'll turn it over to Darcy to give you a deep down on the financial review and what's driving our successes. Darcy? Thank you, Frank. As you can see here, we're looking at our capital structure. As we've had before, our key shareholder is still Genesis Mining, 15.9%. This is based on the most recent and available public disclosure that we provided by Genesis to the markets and provided through the requirements on CDAR. And you can see what our issued note standing is. Next slide please. Throughout the quarter, we're continuing to have Ethereum driving our production and business, both in Iceland and Sweden. The year-over-year increase in Ethereum mining has been driven by this reboot in Sweden of the mining facilities that we took over in July of 2019 from our former Genesis Mining, who was running the facilities for us. On the Bitcoin side, we do have lower than what we've had in the past, and that is because we got out of our Petahat cloud mining Bitcoin contract that we had because it was unprofitable moving forward. Next slide. Here we have a look at our income from digital currency mining quarter over quarter, comparing it to the following previous year. And this quarterly income from digital currency mining represents five shyest and best ever quarterly results at $13.0 million for the second quarter of 2021. And this increase in income versus the same quarter in fiscal 2020 was primarily due to higher Ether prices during the quarter. And these higher Ether received was partially as a result of the sharp increase in transaction fees received as part of DeFi All of this, as I mentioned earlier, partially offset by a decline in the production of the Bitcoin mining stemming from the shutdown of the prior cloud mining agreements in Q3 fiscal 2020. Our gross mining margin, which equates to our revenues minus direct operating and maintenance costs, increased substantially in absolute dollars and remained strong as a percentage of revenues The growth mining margin is also partially dependent on various external network factors. These include the mining difficulty, the amount of digital currency rewards that the miners receive, and of course, the market price of the digital currencies at the time of mining. Next slide, please. As you can see, and same as what we had in Q1, The Ethereum mining margins have enabled Hive blockchain to make our initial acquisition into the Bitcoin mining space and gives us the opportunity to diversify our business, which we did in April of this year by purchasing the Lachute Bitcoin mining facility in Quebec. As I mentioned before, this is and profitability. This is a huge accomplishment for the IAF team across the board, and it's coming from the focus that we've been putting since myself and Frank sort of started this, as we called it, IAF 2.0, focusing on the operations and focusing on the reduction of costs. The gross mining margin and tested EBITDA are non-IFRS figures, which I want to make sure I'm highlighting. to everybody on the call. The net income for the first quarter of fiscal 20, sorry, for the second quarter of fiscal 2021 was $9.2 million. This is a huge increase, obviously, from what we had in the prior quarter. And as discussed before, this gross profit, the adjusted EBITDA and net income, this is all as a result of our concerted efforts to reduce our operating costs take advantage of the opportunities that have been given to us and the biggest thing is when we were able to take control of our facilities and bring them under our own umbrella and control our costs, and also we've been very fortunate to take advantage of the higher average digital currency prices that we experienced this quarter versus what was experienced in the markets the prior year. Next slide, please. Great. Thanks, Darcy. I'll come back to Darcy and then down to Toby. But we reported earlier this year in September at the end of the month that the Ethereum mining production is driven by DeFi demand. Some of these additional transaction fees that we've been able to receive, they're a big benefit to anyone mining Ethereum. And we've had several of them during the quarter, these bonuses. So what's really important to recognize is that when some of these DeFi, decentralized finance models, are actually going out and buying Ethereum, people take Ethereum and deposit it into an investment vehicle to turn around and get securities or Ethereum lending against Ethereum and Asian Re-Yield. And what I have done is also taken a number of Ethereum supply out of the market, which is an important part whenever you take a look at as copper today is making an eight-year high. Well, predominantly just because there's been supply-side restrictions along with the rebuild in demand. And that's why I think this is happening here. There's a rebuild in demand for Ethereum, and they're going to continue And if you go by the way, the point telegraph. Cointelegraph is always pinging you, and it's always sending you new information, and you won't believe how many articles, if you're not aware, on this sort of build-out of DeFi as an industry, as a subset of the blockchain. And it reminds me of what took place when Ethereum ran to $1,400. And the backbone of that was ICOs, all these initial coin offerings, all backed by Ethereum as sort of a collateral behind them. And that drove Ethereum prices. So the resurgence of DeFi is another very significant factor supporting the long term demand for Ethereum. In my opinion, this is a visual that you can get from various chart services and basically it shows you some of the transactions and bonuses you get. And as you can see here, what Darcy talked about is that during the quarter, there were several of these transaction bonuses, and even coming into this quarter. So it's very public on what those benefits are for investors. Next, please. Healthy balance sheet, as you can see, the cash on hand, cash receivable, digital currencies. Darcy and I were chatting about this yesterday, and how much of that's improved from a year ago. And so our overall economic position has been much stronger, and we needed that. What's happened has been a big challenge that's going to take place, which is a big benefit because we're ahead of that curve. It is called a DAG file. And a DAG file is basically that long piece of blockchain that has to get validated on a regular basis. And it's getting so long and so big that the four gigabyte memory chips just can't process it. And it's going to start slowing down your rewards. So you're going to be non-competitive. And I think by the end of February, these four gigabyte chips are going to be basically no longer viable for mining Ethereum. So during this quarter, we've been taking a lot of our cash and deploying an upgrade. We mentioned this on previous presentations, but there's been a big spike. And operating all of our facilities, we're still halfway there, more than halfway there, but we've still got a long way to go for us. And so we think by the end of January, we'll have fully rebooted every one of our four gigabyte chips to be replaced by eight. and be able to participate. Now, what will that mean for us is that we believe that most of the world is mining Ethereum on four-gigabyte memory chips. They're going to fade away. They're going to be a non-event. And therefore, the difficulty is going to drop. And our presence within mining is going to be even bigger. And the reason why I say this is because this is on previous cycles when technology all of a sudden whips out the competition. Now, I want to turn over to Tobias. Tobias Evel is a very important basing in the ground floor of the launch and the creation of Genesis Mining. Then he turned around as the creation of Hive. He is a tax lawyer and has tremendous depth and experience in crypto and also capital markets in Europe. And so one of the big parts he's helped push us along in this direction as we've taken control of our destiny is the ESG strategy, and which is becoming more and more important as you look at securities and ETF fund flows and mutual fund flows, is it wins our position. And one of the big parts is that we only use green energy in what we're seeing in in Sweden, we started in Iceland, and now in Canada, in Quebec, and hopefully we get this transaction closed with GPU1 at the final due diligence, and that will give us, once again, a green energy interview in New Brunswick. But I want to turn this over to Toby to talk about this ESG strategy for millennials and social issues. As you can see, next video, please. why it's important for those investors. Toby, you're in charge here. Thank you so much, Frank. And I'm really excited to participate in this webcast now and to bring that news to you shareholders. Because when we went public three years ago, we had a great vision about cryptocurrencies and also about the sustainability of this company, about a strategy including a sustainable business and using energy only from hydropower production, so green energy. But what we did now in the last quarters, we even bring this vision of sustainability really to reality, which is very exciting. We're not only using electricity from hydropower. Our facility is located right beside the hydropower station, the hydropower turbines. What we're also doing is now that we are working together with the hydropower electricity production to spend our availability and ability to reduce the energy demand for the grid. So what is the problem? The problem is that green energy is very promising for the world, but in particular, hydropower production is not fast enough for the always changing supply and demand in the electricity grid. So, you know, the The demand is always changing from minute to minute even, and the electricity producers are making forecasts of it, but these forecasts are not always in the bandwidth as they have been anticipated. And now, so the lead time of hydropower turbines is something like 15 minutes or so to ramp up electricity production. And so now we said with the hydropower production, okay, we can step in here and fill that gap, because the hydropower turbines, they can't ramp up in seconds and in 15 minutes only, but we can switch down our computers in seconds. And so I'm explaining this to you to give you an understanding what we're doing. We are working together with the hydropower production and we are spending the full capacity of our facility, which is 17 megawatts, to reduce our electricity demand within seconds. So we are receiving When actually the supply of electricity and demand of electricity is out of the bandwidth, we're receiving signals from the electricity producer in some kind of routers or so, and we are switching down the computers in seconds, and we are selling this availability of making electricity available to the market. And we are getting compensation for that, of course. So we are even making a profit with it. We are buying the electricity actually below the market price, below all participants in the market. And we are doing something very exciting and very great because what we are doing is actually as a consequence, we are making the base supply of electricity in the grid possible for many, many more megawatts, not only that 17 megawatts, but with a multiplier of maybe 5, 10 or 15 available for the whole electricity grid. And that is really an exciting piece of our sustainable strategy. And that's what I wanted to share with you. And we are very proud of it. And what is also good for the companies, we are getting with the compensation, we are buying the electricity now for the next year at around about 1.3 US dollar cent. And that makes the facility in Sweden definitely profitable anyhow. Thank you, Toby. You know, what Toby's done for us, it was create a hedging process that you can hedge your costs in Sweden and something with the new management team. And he's basically pioneered that for us, the relationships. And he did it last year successfully and significantly dropped our costs, probably the lowest of all the public mining companies. And now with this lesson, what, 1.6 cents you said is our cost? We locked in the price for the next year at 1.7, but taking into account our compensation that we're getting the electricity cheaper than the rest of the market, cheaper than the spot price, we're ending up in something like 1.3 US dollar cents per kilowatt hour. Thank you, Toby. What's important, I think, for investors to recognize in this sort of carbon footprint concerns on what we're doing and how we help the community, when everyone in the morning switches on their air dryers in the cold northern Sweden in the winter, there's a huge spike in demand. And so the timeline and the infrastructure is totally We can download, go down from 20 megawatts down to one megawatt for only minutes and maybe an hour. But we get compensated for that and then immediately boot up faster than what they can do. And it's our flexibility with our support that we're helping the community. We're helping the overall. And what does that mean for Sweden? It means less infrastructure spending, which is billions of dollars, billions. And so we are a big contributor to the overall ecosystem for recycling of green energy. Next please. So earlier this year during COVID, we announced a reshoot acquisition. The Quebec, it's been a slow build-out for numerous reasons. And fortunately, their land has just been sold, new landlords, and we think that will also help fast-track our growth. But the biggest issue has been COVID. And what you're seeing, if you want to get equipment coming over from Asia, the timelines where people wrote checks for millions of dollars, and they couldn't get the equipment for not weeks. But months, six months out, and there was some equipment that we had paid for, and I think we just cut 19 S19s or 17 S19s installed because they just showed up, and we should have had those in July, and it was a part of a bigger order. So the delivery mechanism, the production mechanism coming out of Asia, The cargo, the shipping of cargo is really creating supply chain tensions for every product, for all products. But we are experiencing that. So the process of building up Quebec has been slower than we anticipated. But nevertheless, we've been... Adopting and getting more equipment and we hopefully to get this thing upgraded in the next 3 months to completely finish what the shoot is. And I think that that's an important part now. In this. ESG strategy coming back. These are some of the slides, I think we just missed them on the floor here. But I think the reason why I'm reiterating this, this ESG is just so important today and I know I have some fellow fund managers listening and who are ESG compliant and other ones are just pure looking at the growth and revenue and cash flow. If you look at ETF fund flows, ESG just picks up stocks. It's just amazing to see this direction that's taking place and I think going forward for the branding, strategy applied is to really make sure that investors, and the next bit will show you that we are very focused on green energy. And that's another part of what we're happy that we are controlling our destiny because we found out that our other strategic partner was using coal energy in other countries. And so that was never our vision. We wanted to stay purely focused on green energy. And now we're doing everything as Toby pointed out to become really conscientious of how we can help. Another part of this whole program, but it's a while out, I think, is the thought processes in Sweden was taking our heat and taking the excess heat we have for mining at a 20 megawatt facility and using that to build greenhouses that were then you would be able to use to grow tomatoes and grow lettuce and cabbage, et cetera, and therefore you wouldn't have to ship stuff up from Spain, prices would be cheaper for local citizens, and also you would lower that overall carbon footprint. So we are doing a lot into that idea of planning and thinking about it, and so stay tuned to that because I think we have an exciting story to share with you. Now, it's also really exciting for me to share with you is that Hive blockchain has entered into an agreement to buy GPU1's new 50 megawatt campus at the data center in New Brunswick. It's an interesting transaction. It shares to the shareholders. And it's predominantly a commitment to build out and complete the last building, the facility, which is a de minimis amount of money in the scheme of getting this 50 megawatts up and fully full throttle by the first quarter of 2021. But I really want to thank the team. Sibeli Cox is the founder. He's a special advisor. And I'm sure he's on this call. But what Hive needs going to our next level? is a great team of honest, ethical, professional people. And this is just a great team. One thing about this ecosystem I found in the crypto world, it makes money promoters always get the bad rap out of Vancouver. It makes them all look like choir boys. It really is a hard thing to find in that crypto space. I was just so disappointed and so many scams, everybody knew about people hacking, et cetera, but getting really straight up professionals like Savelli's been able to put together is a significant sort of high to Jettison's position and to take it to the thousandth pedahash of Bitcoin mining in the future. Our footprint there is still small when we take a look at the total number of Bitcoins that we're mining. In the scheme of other peers or only Bitcoin, we're the dominant Ethereum player, and I look forward to closing this transaction so that these young superstars can come and help build over this vision. So as you can see, this is a picture of a GP1 facility, and it's just a scene of the art, building up access to additional 50 megawatts of low-cost green energy. I'm going to jump to something else that's important, and we're seeing this in data points, that the number of Bitcoin addresses holding greater than one or equal to one Bitcoin share has continued to grow. It's grown even with... the sort of winter that we had in Bitcoin. And that means with broader adopters, and that's very, very bullish if you apply what's called Metcalfe's Law to the idea and the concept of price projection of where Bitcoin has the potential to go to. And I think next year is going to be a shortage of equipment, and so having the equipment and being able to build out an access tool will be very, very important for that growth profile, which I think we're in a strong position to be able to execute on. The next visual is just another previous halving of Bitcoin, seeing what took place, what the exponential moves are, as you can see on this visual. The next is Ethereum 2.0. You know, this headwind of going from proof of work to proof of stake. I have heard of this story since I first launched Ethereum mining in Iceland in my first investment and going into high blockchain back in September of 2017. And as always, this was going to happen tomorrow. Ethereum was a bad coin to be mining. It was nothing but a negative headwind by several institutions. And what's interesting is that it hasn't happened. It hasn't happened. And just now, today, is the proof of stake. The nodes of Ethereum have surpassed Bitcoin because people are now... pushing in their Ethereum to be able to get a yield on their Ethereum. But once they do that, they can never get back to their Ethereum. They can only get a yield on that node. So that means their supply of Ethereum is shrinking. And based on my experience in the commodity world, if you have demand is growing on a modest basis and you have supply contracting on a modest basis, you get tremendous upside movement in that particular commodity. And I think that that's important for investors to appreciate that when will you go from proof of work to proof of stake to 100% and talking to industry leaders and experts that are in the Ethereum space. One of our directors, Olivier, has put in contact and spoken to people that are on a recent Ethereum project. And he said it's going to take Three to four years before that's going to be a serious issue. And I think that Hi, not only is the biggest Ethereum producer, and upgrading now all of its GPU memory chips, will be in a very strategic position to be a major player in the mining of Ethereum. And then as we build up our inventory, then we'll have a huge staking node for it. So these last few business issues tell you that the money supply, the G20, you know, finance ministers and treasury central bankers seem to last longer than many presidents and prime ministers. And they have their own country club, as they do on a regular basis. And what's important is that they're all fighting COVID-19 in 2020. And you're seeing a conservative money printing. Incredible. It's not just the U.S. you hear about it. It's a global phenomenon. And you're seeing the adoption of Bitcoin and Ethereum growing with this. And those are alternative asset classes. and they're getting the attention of other institutions, like Paul Tudor Jones. They started buying Bitcoin last year. It's been known for its world in commodities. It's all of a sudden becoming a crypto enthusiast and putting capital to work. And when you take a look at overall blockchain spending, it's expected to grow the next five years by 60%. I mean, that's just a huge tagger. The last visual here is to show you all that high blockchain trading volume has been trending up. Yesterday, I think it was at 20 million shares. So we're very happy and thank all of those shareholders that have stayed with us. And please recognize that we correlate with Ethereum and Bitcoin price action over past years. If you look at our daily basis now, it used to be 70%, and I think it pushes up something like 92%, the day-to-day price action. And we fell, we fell from our highs, all because Ethereum fell and Bitcoin fell. And Bitcoin has come back up. Ethereum is at a... a bigger move uh for us that we think that ethereum is going to do a big touch up with bitcoin on a relative basis and this is only going to benefit high as we're positioned uh over the next three months to complete our build out to eight gigabyte chips and um we think as i said earlier that all the four gigabyte memory chips will fall inside the difficulty will drop the profit margins will rise And that's what we are excited about in our growth opportunities. We have a couple other virtuals you can look at later. It's just showing you the enthusiasm, the open interest, and just thank you all for being loyal and the shareholders, and thank you. Now some questions.

Yes. As Frank mentioned, we're going to open it up to questions right now. And just as a reminder, you can enter questions in the control panel on your screen, but we already have a few that we would like to address. The first one being, Frank, maybe you can speak to this. Are there any plans for a NASDAQ listing?