Document:

Exhibit 4.13

 

  

 

HUT
8 MINING CORP.

 

Management’s
Discussion and Analysis

 

For
the year ended December 31, 2020

    1 

     

    

Hut
8 Mining Corp. 

Management’s Discussion and Analysis 

For the year ended December 31, 2020

 

Introduction

 

This
Management’s Discussion and Analysis (“MD&A”) is dated March 24, 2021 and should be read in conjunction
with the audited consolidated financial statements and Annual Information Form for the year ended December 31, 2020 and 2019 of
Hut 8 Mining Corp. each of which is available on SEDAR at www.sedar.com (“Hut 8” or the “Company”).

 

In
this MD&A, unless the context otherwise requires, all references to “we”, “us”, “our”,
 “Hut 8”, and “the Company” refer to Hut 8 Mining Corp. and its subsidiaries, all references to “digital
assets” refer to bitcoin and all references to “Management” refer to the directors and executive officers of
the Company.

 

Unless
otherwise stated, results are reported in Canadian dollars. The Company applies International Financial Reporting Standards (“IFRS”),
as issued by the International Accounting Standards Board and interpretations issued by the IFRS Interpretations Committee. In
the opinion of management, all adjustments considered necessary for a fair presentation have been included. The results presented
in the MD&A are not necessarily indicative of the results that may be expected for any future period.

 

Cautionary
Note Regarding Forward-Looking Information

 

This
MD&A contains certain forward-looking information and forward-looking statements, as defined in applicable securities laws
(collectively referred to herein as “forward-looking statements”). These statements relate to future events or the
Company’s future performance. All statements other than statements of historical fact are forward-looking statements. Often,
but not always, forward-looking statements can be identified by the use of words such as “plans”, “expects”,
 “is expected”, “budget”, “scheduled”, “estimates”, “continues”, “forecasts”,
 “projects”, “predicts”, “intends”, “anticipates” or “believes”, or
variations of, or the negatives of, such words and phrases, or state that certain actions, events or results “may”,
 “could”, “would”, “should”, “might” or “will” be taken, occur or be
achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results
to differ materially from those anticipated in such forward-looking statements. The forward-looking statements in this MD&A
speak only as of the date of this MD&A or as of the date specified in such statement.

 

Inherent
in forward-looking statements are risks, uncertainties and other factors beyond the Company’s ability to predict or control.
Such risks include, without limitation, credit risks; fluctuating interest rates; the Company not being able to meet its financial
obligation as they become due; changes in foreign exchange rates; concentration of exposures within the same category; fluctuation
in the price of bitcoin and the speculative nature of bitcoin; the security of bitcoin networks; and the Company’s dependence
on the price of bitcoin. For a complete list of the factors that could affect the Company, please make reference to those risk
factors referenced in “Risk Factors” of the Annual Information Form of the Company dated March 24, 2021. Readers
are cautioned that such risk factors, uncertainties and other factors are not exhaustive. Actual results and developments are
likely to differ, and may differ materially, from those expressed or implied by the forward-looking statements contained in this
MD&A.

 

Forward-looking
statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially
from those anticipated in such forward-looking statements. The forward-looking statements in this MD&A speak only as of the
date of this MD&A or as of the date specified in such statement. Specifically, this MD&A includes, but is not limited
to, forward-looking statements regarding: the growth of the Company; the Company’s implementation of its business plan;
the Company’s ability to meet its working capital needs at the current level for the next twelve-month period; revenue expectations;
management’s outlook regarding future trends; sensitivity analysis on financial instruments, which may vary from amounts
disclosed; and general business and economic conditions.

 

All
forward-looking statements herein are qualified by this cautionary statement. Accordingly, readers should not place undue
reliance on forward-looking statements. The Company undertakes no obligation to update publicly, or otherwise revise, any
forward-looking statements, whether as a result of new information or future events or otherwise, except as may be required
by law. If the Company does update one or more forward-looking statements, no inference should be drawn that it will make any
further updates.

    2 

     

    
Hut
8 Mining Corp. 

Management’s Discussion and Analysis

For the year ended December 31, 2020

 

Non-IFRS
Measures

 

This
MD&A makes reference to certain measures that are not recognized under IFRS and do not have a standardized meaning prescribed
by IFRS. They are therefore unlikely to be comparable to similar measures presented by other companies. The Company uses non-IFRS
measures including “EBITDA,” “EBITDA margin,” “Adjusted EBITDA,” “Adjusted EBITDA margin,”
 “Mining Profit,” and “Cost per Bitcoin” as additional information to complement IFRS measures by providing
further understanding of the Company’s results of operations from Management’s perspective.

 

Throughout
this MD&A, the following terms are used, which do not have a standardized meaning under IFRS.

 

EBITDA
(Earnings before Interest, Taxes, Depreciation, and Amortization)

 

		●	“EBITDA”
represents net income or loss excluding net finance income or expense, income tax or recovery, depreciation, and amortization.

 

		●	“Adjusted
EBITDA” represents EBITDA adjusted to exclude share-based compensation, fair value loss or gain on revaluation of digital
assets, write-offs, and costs associated with one-time transactions (such as listing fees).

 

		●	“Adjusted
EBITDA Margin” represents Adjusted EBITDA as a percentage of revenue.

 

EBITDA
is used to show ongoing profitability without the impact of non-cash accounting policies, capital structure, and taxation. This
provides a consistent comparable metric for profitability.

 

“Mining
Profit” represents gross profit (revenue less cost of revenue), excluding depreciation. “Mining Profit Margin”
represents Mining Profit as a percentage of revenue. Mining Profit and Mining Profit Margin show the cash expenses against the
revenue without the impact of non-cash accounting policies such as depreciation.

 

“Cost
per Bitcoin” represents cost of revenue excluding depreciation, divided by the number of bitcoin mined in the period. This
metric is commonly referenced in the bitcoin mining industry and, in Management’s estimation, is important to gain an understanding
of the profitability in reference to the price of bitcoin.

    3 

     

    

Hut
8 Mining Corp. 

Management’s Discussion and Analysis 

For the year ended December 31, 2020

 

Company

 

Hut
8 is a bitcoin mining company with industrial scale operations in Alberta, Canada. Hut 8 provides investors with an opportunity
to have direct exposure to bitcoin through both its bitcoin mining operation and by holding its bitcoin balance. By owning Hut
8, investors are provided an option to avoid the technical complexity or constraints of purchasing the underlying cryptocurrency.
Investors avoid the need to create online wallets, wire money offshore, and safely store their bitcoin.

 

For
its mining activities, Hut 8 utilizes the BlockBox Data Center AC (“BlockBox”) which is modular, portable, and more
easily upgradeable to the next generation of silicon technology. The BlockBox is customizable to difference types of mining equipment.

 

The
Company was incorporated under the laws of the Province of British Columbia on June 9, 2011. Its registered office is located
at Suite 2500, Park Place, 666 Burrard St, Vancouver, BC, Canada V6C 2X8, and the corporate headquarters are located at 130 King
St. W, Suite 1800, Toronto, ON, Canada, M5X 2A2. The Company’s financial year ends on December 31. The Company’s common
shares are listed under the symbol “HUT” on the Toronto Stock Exchange and as “HUTMF” on the OTCQX Exchange.

 

Industry
Overview

 

Bitcoin

 

Bitcoin
is a digital currency that allows peer-to-peer transactions globally over the internet. Bitcoin is independent of any central
authority, such as a bank or government. Instead, bitcoin is governed by a pre- programmed algorithm called Secure Hash Algorithm
256 (SHA-256) that is backed by millions of computers across the world called “miners”. Bitcoin miners record transactions
and check their authenticity. While fiat currencies are controlled by central banks and governments, bitcoin miners are spread
out across the world and store transactions on the blockchain (described further below) which is a digital public ledger that
can be accessed by anyone. This global and transparent system is referred to as decentralized control as the management of bitcoin
does not have a central point of failure or attack.

 

Unlike
fiat currencies, which have an unlimited supply which is controlled by governments and central banks, the supply of bitcoin is
controlled by the SHA-256 to keep its availability scarce and total supply fixed. To date, approximately 18.5 million bitcoin
exist and only 21 million bitcoin will ever exist. It is expected that all bitcoin will be mined by 2140. Due to the scarcity
and computational power required to mine bitcoin, it is often referred to as “digital gold”.

 

Blockchain

 

The
bitcoin blockchain is a cloud-based digital public ledger where bitcoin transactions are grouped together and represented as a
block in a network chain, containing all relevant transaction details. The bitcoin blockchain is maintained by a community of
miners. All transactions on the blockchain are transparent and designed to make it extremely difficult to add, remove or change
data without being detected by users.

 

Bitcoin
Mining

 

Mining
is the process of verifying bitcoin transactions by solving a computationally difficult encrypted code, called a “hash”.
The hash rate is the number of attempts at solving the encryption code the equipment can process per second. Miners use equipment
that produces a high hash rate, as it results in more attempts at solving the encrypted code. The average hash rate for a two-week
period determines the network difficulty rate, which is set every two weeks. The network difficulty is a measure of how difficult
it is to solve a block. This computational process of decrypting the code through hashing is referred to as proof of work. Bitcoin
miners use Application Specific Integrated Circuit (“ASIC”) computing chips to compete with each other to correctly
solve the encryption code.

    4 

     

    
Hut
8 Mining Corp. 

Management’s Discussion and Analysis 

For the year ended December 31, 2020

 

The
power and efficiency of the ASIC chip to produce a high number of hashes is essential to successfully mining. When a miner is successful
in solving the code, a block containing transactions is validated and incorporated into the blockchain resulting in an economic incentive
payment for the miner in the amount of 6.25 newly minted bitcoins plus potential transaction fees. This incentive payment halves every
four years, the most recent of which occurred on May 11, 2020.

 

When
mining Bitcoin, Hut 8 measures the output to process in computer hash rates. For example, one PH/s processes one quadrillion hashes
per second that constantly attempts to solve the bitcoin cryptology code and receive the bitcoin incentive payment.

 

Hut
8 Custody of Bitcoin

 

For
the protection of its bitcoin on behalf of shareholders, Hut 8 does not self-custody its bitcoin. Instead, Hut 8 uses the services
of BitGo Trust Company Inc. (“BitGo”). BitGo has US$100 million of insurance backing its digital asset custody and
one of the highest levels of regulatory certifications in the market. Hut 8 utilizes both cold and hot storage for bitcoin with
BitGo. Hut 8 has in place sufficient internal controls and processes with respect to the storage and transfer of bitcoin which
includes multiple layers of approvals. The Company does not detail this internal control process due to confidentiality and security
concerns.

 

Hut
8 continues to explore new ways to enhance the custody of its bitcoin and improve security for shareholders.

 

Summary

 

Fiscal
2020 was a year of transition for Hut 8 and the bitcoin industry in general. The first three quarters of 2020 were difficult for
many bitcoin mining companies, including Hut 8, as the industry experienced a significant decline in the bitcoin price in mid-March
to below US$4,000 and the bitcoin halving event that occurred in mid-May, 2020, where the bitcoin block reward decreased from
12.5 to 6.25 bitcoins per block (the “Bitcoin Halving Event”). Despite this, the institutional interest grew throughout
2020 and into 2021. For the 2020 calendar year, the bitcoin price increased by 303% (compared to the 2019 calendar year) while
the network difficulty rate only increased by 35%, with most of the increase in bitcoin price taking effect in the last quarter
of 2020, marking a positive close to the year for the industry.

 

Hut
8 focused in early 2020 to restructure its agreements with Bitfury Holding B.V. (“Bitfury”), which beneficially owns
in the aggregate approximately 20.95% of the common shares of Hut 8 as of the date of the MD&A, to provide the Company more
autonomy and the ability to purchase bitcoin mining equipment from any manufacturer. There was also a transition during the year
to transfer all the site operations form being run externally by Bitfury, to bringing all operations and staff in house to Hut
8. This reduced costs significantly for the Company and also increased the quality and control of the Company’s operation.

 

The
Company also closed an oversubscribed prospectus offering for gross proceeds of $8.3 million on June 25, 2020. The net proceeds
of this offering were used to purchase latest generation equipment from MicroBT, a prominent bitcoin manufacturer, and was installed
between September 2020 and January 2021.

 

Hut
8 also became the first Company to successfully exit the TSX SandBox program (the “TSX Sandbox”), after being the
first Company to enter the TSX SandBox in 2019, thereby solidifying the Company’s status as a TSX listed company. Shortly
after, on December 31, 2020, Hut 8 appointed Jaime Leverton as CEO who has a strong track record in the datacentre space and technology.

 

Hut
8 saw a strong start to 2021 with the bitcoin price increasing by an additional 90% from December 31, 2020, while the network
difficulty increased by only 15%. On January 13, 2021, the Company further strengthened its balance sheet through the closing
of a $77.5 million offering with institutional investors. Hut 8 also fully repaid its debt with Genesis Global Capital, LLC (“Genesis”)
of US$20 million and all bitcoin collateral was returned. The Company began to further leverage its balance sheet by announcing
a yield account with Genesis where Hut 8 is able to earn 4% in annual interest from 1,000 bitcoin.

    5 

     

    
Hut
8 Mining Corp. 

Management’s Discussion and Analysis 

For the year ended December 31, 2020

 

During
a time in the industry where bitcoin mining equipment manufacturers are constrained by supply, the Company was able to announce
equipment financing to purchase 5,400 M30S units that is planned to be delivered between January 2021 and June 2021, of which
400 units have already been installed in January 2021.

 

In
Management’s view, for fiscal 2020 Hut 8 maintained its strategy to continue to modernize its bitcoin mining production
and hold as much bitcoin as possible on its balance sheet.

 

Selected
Annual Financial Information

 

	 	 	Year
    ended December 31,	 
	 	 	2020	 	 	2019	 	 	2018	 
	Revenue	 	$	40,710,527	 	 	$	81,990,119	 	 	$	49,439,100	 
	Site operating costs	 	 	(39,727,850	)	 	 	(45,448,549	)	 	 	(24,873,528	)
	Mining profit	 	 	982,677	 	 	 	36,541,570	 	 	 	24,565,572	 
	Mining profit margin	 	 	2	%	 	 	45	%	 	 	50	%
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Depreciation	 	 	(21,264,918	)	 	 	(33,053,597	)	 	 	(47,018,781	)
	Gross profit	 	$	(20,282,241	)	 	$	3,487,973	 	 	$	(22,453,209	)
	Gross profit margin	 	 	-50	%	 	 	4	%	 	 	-45	%
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Expenses	 	 	(3,385,163	)	 	 	(6,120,347	)	 	 	(8,791,314	)
	Gain (loss) on use of digital assets	 	 	2,815,342	 	 	 	4,143,311	 	 	 	(4,039,713	)
	Revaluation of digital assets	 	 	13,713,962	 	 	 	4,273,686	 	 	 	(13,822,974	)
	Listing and qualifying transaction	 	 	-	 	 	 	-	 	 	 	(1,151,401	)
	Net operating income (loss)	 	 	(7,138,100	)	 	 	5,784,623	 	 	 	(50,258,611	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Write-down	 	 	-	 	 	 	-	 	 	 	(85,404,592	)
	Net finance expense	 	 	(2,440,866	)	 	 	(4,784,817	)	 	 	(872,103	)
	Foreign exchange gain (loss)	 	 	408,832	 	 	 	1,198,011	 	 	 	(678,495	)
	Other gain (loss)	 	 	13,161,581	 	 	 	(67,247	)	 	 	448,264	 
	Net income before tax	 	$	3,991,447	 	 	$	2,130,570	 	 	$	(136,765,537	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Deferred income tax recovery	 	 	15,048,707	 	 	 	-	 	 	 	-	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Net income (loss)	 	$	19,040,154	 	 	$	2,130,570	 	 	$	(136,765,537	)
	 	 	 	 	 	 	 	 	 	 	 	 	 
	Adjusted EBITDA	 	$	(2,144,836	)	 	$	33,523,508	 	 	$	19,291,271	 
	Adjusted EBITDA margin	 	 	-5	%	 	 	41	%	 	 	39	%
	Net income (loss) per share - basic and diluted	 	$	0.20	 	 	$	0.02	 	 	$	(2.43	)

    6 

     

    

Hut
8 Mining Corp. 

Management’s Discussion and Analysis 

For the year ended December 31, 2020

 

Selected
    Quarterly Financial Information

 

	 	 	Three-month
    ended December 31,	 
	 	 	2020	 	 	2019	 
	Revenue	 	$	12,986,235	 	 	$	14,857,843	 
	Site
    operating costs	 	 	(10,607,444	)	 	 	(11,075,926	)
	Mining
    profit	 	 	2,378,791	 	 	 	3,781,917	 
	Mining
    profit margin	 	 	18	%	 	 	25	%
	 	 	 	 	 	 	 	 	 
	Depreciation	 	 	(3,752,319	)	 	 	(8,518,790	)
	Gross
    profit	 	$	(1,373,528	)	 	$	(4,736,873	)
	Gross
    profit margin	 	 	-11	%	 	 	-32	%
	 	 	 	 	 	 	 	 	 
	Expenses	 	 	(1,171,053	)	 	 	(1,602,629	)
	Gain
    (loss) on use of digital assets	 	 	1,014,358	 	 	 	(1,290,219	)
	Revaluation
    of digital assets	 	 	-	 	 	 	(3,969,403	)
	Net
    operating income (loss)	 	 	(1,530,223	)	 	 	(11,599,124	)
	 	 	 	 	 	 	 	 	 
	Net
    finance expense	 	 	(531,512	)	 	 	(1,272,651	)
	Foreign
    exchange gain	 	 	1,181,546	 	 	 	494,664	 
	Other
    gain (loss)	 	 	13,161,581	 	 	 	(1,018,306	)
	Net
    income (loss) before tax	 	$	12,281,392	 	 	$	(13,395,417	)
	 	 	 	 	 	 	 	 	 
	Deferred
    income tax recovery	 	 	15,048,707	 	 	 	-	 
	Net
    income (loss)	 	$	27,330,099	 	 	$	(13,395,417	)
	 	 	 	 	 	 	 	 	 
	Adjusted
    EBITDA	 	$	1,403,196	 	 	$	2,855,529	 
	Adjusted
    EBITDA margin	 	 	12	%	 	 	19	%
	Net
    income (loss) per share - basic and diluted	 	$	0.28	 	 	$	(0.17	)

 

	Assets	 	 	 	 	 	 	 	 

	 	 	 	 	 	 	 
	 	 	December
    31,	 	 	December
    31,	 
	 	 	2020	 	 	2019	 
	Total
    assets	 	$	145,202,333	 	 	$	71,237,244	 
	 	 	 	 	 	 	 	 	 
	Total
    non-current financial liabilities	 	$	-	 	 	$	19,807,075	 

    7 

     

    

Hut
8 Mining Corp. 

Management’s Discussion and Analysis 

For the year ended December 31, 2020

 DIVIDENDS

 

Hut
8 has never paid dividends. Payment of any future dividends, if any, will be at the discretion of the Hut 8 Board after taking
into account many factors, including operating results, financial condition, and current and anticipated cash needs. All of the
common shares in the capital of Hut 8 will be entitled to an equal share in any dividends declared and paid on a per share basis.

 

Discussion
of Operations for the 2020 Year

 

For
the year ended December 31, 2020, the Company mined 2,798 bitcoin, resulting in revenue generation of $40.7 million combined with
hosting revenue, compared with the prior year of 8,618 bitcoin mined with revenue of $82.0 million. The reason for the significant
decrease was due to a difficult year for bitcoin (particularly in the first three quarters) which included a price collapse in
mid-March, which was largely attributable to the COVID-19 related activities that affected all bitcoin miners, as well as the
Bitcoin Halving Event which occurred on May 11, 2020, effectively cutting down the bitcoin production for every miner in half.
After the Bitcoin Halving Event, there was little to no improvement in bitcoin mining economics until the final quarter of 2020.

 

The
Company also made changes on site as they moved all of the Clarke chips, the latest generation of Bitfury bitcoin mining chips,
from Drumheller to Medicine Hat which caused some down time in mining, but allowed for better mining economics for the Company.
The bitcoin mining economics improved as the Company brought together their most efficient bitcoin mining equipment to Medicine
Hat, where Hut 8 has their lowest electricity price. There were also periods of Fiscal 2020 where Hut 8 was operating at an unprofitable
or breakeven level; however, by the end of the 2020, Hut 8 was operating at fully capacity and was profitable on all generations
of bitcoin mining equipment.

 

The
site operating costs for the year were $39.7 million, a 13% reduction from the prior year operating costs of $45.4 million. The
costs incurred related to the Company’s mining activity in 2020 was 2,798 bitcoin when compared to the prior year bitcoin
mined of 8,618 bitcoin. The average cost of mining each bitcoin for the year was $14,195, compared to the prior year of $5,273,
calculated by dividing site operating costs by the number of bitcoin mined for the given year. As at December 31, 2020, the cost
of mining each bitcoin increased as the network difficulty and the bitcoin price increased from the prior year. The cost per bitcoin
is expected to increase during periods where output is reduced due to periods of lower bitcoin mining economics, as fixed costs
become a larger portion of overall costs. This caused mining profit margin to decrease to 3% from the prior year of 45%.

 

Depreciation
was reduced significantly by 36% to $21.3 million from the prior year amount of $33.0 million. The cause of this decrease was
because many of the first generation chips that the Company purchased came to the end of their two year useful life set for accounting
purposes. Although the chips are through their useful life and the infrastructure is halfway through its useful life, as at December
31, 2020, they were operating on full on a profitable basis. This caused the gross profit margin to reduce to negative 49% in
2020 from 4% for fiscal 2019.

 

During
the tight bitcoin economics of 2020, Hut 8 focused on maintaining a lean operation, and reduced expenses by 45% on a corporate
level from $6.1 million in 2019 to $3.4 million in 2020. A large part of this decrease was due to share based capital gain of
$0.3 million in 2020 due to the recovery of share based compensation from a prior officer and director stepping down, and a share
based capital expense of $2.9 million for 2019.

 

The
Company was able to maintain a $2.8 million gain on the use of digital assets, which consists solely of bitcoin, throughout the
year despite a volatile bitcoin price by strategically timing any sale of such digital asset. This compared to the prior year
gain on the use of digital assets of $4.1 million.

 

The
unrealized gain on digital assets increased by 221% to $13.7 million in 2020 from $4.3 million in 2019 due to the increase in
the bitcoin price, but also did not include a $45.7 million unrealized gain on Hut 8’s bitcoin holdings that wasn’t
recognized on the income statement, but instead was accounted for directly through Other Comprehensive Income on the equity section
of the Company’s balance sheet.

 

The
Company reduced its net finance expense by 49% to $2.4 million in 2020 from $4.8 million in 2019 primarily due to the reduction
of the interest rate and finance expenses related to Hut 8’s bitcoin collateralized loan. This loan was with Galaxy Digital
Lending Services LLC (“Galaxy”) for most of 2019 and was refinanced with Genesis where the Company was able to lower
the overall fees.

    8 

     

    

Hut
8 Mining Corp. 

Management’s Discussion and Analysis 

For the year ended December 31, 2020

 

Hut
8 recognized negative $2.1 million in Adjusted EBITDA which was from the first three quarters of Fiscal 2020, and a positive $1.4
million in Adjusted EBTIDA was recognized in Q4-2020.

 

Below
is a bitcoin price chart and mining difficulty for the year ended December 31, 2020 (reference https://coinmarketcap.com/currencies/bitcoin):

  

 

 

The
Company recorded net income for the year ended December 31, 2020 of $19.0 million (December 31, 2019 – $2.1 million) which
was primarily due to the reversal of impairment charges recognized in prior years with the bitcoin mining economics improved drastically
since Q4-2020, and a deferred income tax recovery related to the unrealized gain on bitcoin revaluation.

 

Selected
Quarterly Information

 

The
following table summarizes the Company’s financial information for the last eight quarters:

 

All
amounts in 000’s, except for share figures

 

	 	 	Mar 31
 2019
 Q1
	 	 	June 30
 2019
 Q2
	 	 	Sep 30
 2019
 Q3
	 	 	Dec 31
  2019 
 Q4
	 	 	Mar 31
 2020
 Q1
	 	 	June 30
 2020
 Q2
	 	 	Sep 30
 2020
 Q3
	 	 	Dec 31
 2020
  Q4
	 
	Revenue	 	$	12,102	 	 	$	28,280	 	 	$	26,750	 	 	$	14,858	 	 	$	12,740	 	 	$	9,230	 	 	$	5,755	 	 	$	12,986	 
	Net income (loss)	 	 	(9,511	)	 	 	30,226	 	 	 	(5,189	)	 	 	(13,395	)	 	 	(10,230	)	 	 	2,840	 	 	 	(900	)	 	 	27,330	 
	Net income (loss) per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	basic	 	 	(0.13	)	 	 	0.38	 	 	 	(0.06	)	 	 	(0.17	)	 	 	(0.11	)	 	 	0.03	 	 	 	(0.01	)	 	 	0.28	 
	diluted	 	 	n.a.	 	 	 	0.38	 	 	 	n.a.	 	 	 	n.a.	 	 	 	n.a.	 	 	 	0.03	 	 	 	n.a.	 	 	 	0.28	 

    9 

     

    
Hut
8 Mining Corp. 

Management’s Discussion and Analysis

For the year ended December 31, 2020

 

See
below for the calculation of Adjusted EBITDA for the most recent eight quarters:

 

All
amounts in 000’s, except per share figures

 

	 	 	Mar 31
 2019
 Q1
	 	 	Jun 30
 2019
 Q2
	 	 	Sep 30
 2019
 Q3
	 	 	Dec 31
 2019
 Q4
	 	 	Mar 31
 2020
 Q1
	 	 	June 30
 2020
 Q2
	 	 	Sep 30
 2020
 Q3
	 	 	Dec 31
 2020
 Q4
	 
	Net income (loss)	 	$	(9,511	)	 	$	30,226	 	 	$	(5,189	)	 	$	(13,395	)	 	$	(10,230	)	 	$	2,840	 	 	$	(900	)	 	$	27,330	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Add/(deduct): 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 Net finance costs 	 	 	1,184	 	 	 	1,205	 	 	 	1,123	 	 	 	1,273	 	 	 	649	 	 	 	693	 	 	 	568	 	 	 	532	 
	Depreciation and amortization	 	 	8,178	 	 	 	8,178	 	 	 	8,178	 	 	 	8,519	 	 	 	7,009	 	 	 	6,958	 	 	 	3,545	 	 	 	3,752	 
	Stock-based compensation	 	 	1,102	 	 	 	655	 	 	 	670	 	 	 	478	 	 	 	(708	)	 	 	60	 	 	 	168	 	 	 	195	 
	Revaluation of digital assets	 	 	(1,043	)	 	 	(17,255	)	 	 	10,052	 	 	 	3,972	 	 	 	1,282	 	 	 	(9,418	)	 	 	(5,578	)	 	 	-	 
	Gain/loss on use of digital assets	 	 	253	 	 	 	(5,169	)	 	 	(515	)	 	 	1,288	 	 	 	(914	)	 	 	(689	)	 	 	(198	)	 	 	(1,014	)
	Foreign exchange	 	 	(489	)	 	 	(585	)	 	 	370	 	 	 	(494	)	 	 	2,354	 	 	 	(1,073	)	 	 	(509	)	 	 	(1,182	)
	Other one-off items	 	 	-	 	 	 	-	 	 	 	-	 	 	 	197	 	 	 	-	 	 	 	542	 	 	 	-	 	 	 	-	 
	Other gains or losses	 	 	(951	)	 	 	-	 	 	 	-	 	 	 	1,018	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(13,162	)
	Deferred income tax recovery	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	-	 	 	 	(15,049	)
	Adjusted EBITDA(1)	 	$	(1,277	)	 	$	17,256	 	 	$	14,689	 	 	$	2,856	 	 	$	(558	)	 	$	(86	)	 	$	(2,904	)	 	$	1,403	 

 

	(1)	A
    non-IFRS measure defined above

 

The
bitcoin mining industry does not typically have seasonality; however, the Company may have fluctuations at certain times in the
year related to its electricity prices. The Company’s operations are solely out of Alberta, Canada where 42MW of power is
directly from a power purchase agreement with the City of Medicine Hat and the remainder is from the Alberta electricity grid.
Due to the changing weather in Alberta and seasonal electricity needs, time periods of extreme cold or extreme hot weather may
result in higher electricity costs. Hut 8 manages electricity costs to avoid peak prices and is constantly monitoring its operations
to maximize efficiency.

 

During
the year ended December 31, 2020, the Company incurred $18.64 million in electricity cost for its City of Medicine Hat site and
$14.54 million for its Drumheller site. The below chart shows the effect on operations and profitability of the Company if the
average cost of electricity were to increase by 10%, 20%, and 30%.

 

	Sensitivity Analysis	 	2020 Actual	 	 	+10%	 	 	+20%	 	 	+30%	 
	Electricity cost	 	 	33,180,786	 	 	 	36,498,865	 	 	 	39,816,944	 	 	 	43,135,022	 
	Gross loss	 	 	(20,282,241	)	 	 	(23,600,320	)	 	 	(26,918,398	)	 	 	(30,236,477	)
	% change	 	 	 	 	 	 	16	%	 	 	33	%	 	 	49	%
	Net income	 	 	19,040,154	 	 	 	15,722,075	 	 	 	12,403,997	 	 	 	9,085,918	 
	% change	 	 	 	 	 	 	-17	%	 	 	-35	%	 	 	-52	%

    10 

     

    
Hut
8 Mining Corp. 

Management’s Discussion and Analysis 

For the year ended December 31, 2020

 

Significant
Agreements

 

On
November 29, 2017, the Company entered into a Master Data Centre Purchase Agreement (the “MPA”) with Bitfury. The
MPA governs the terms and conditions for the purchase from Bitfury of certain equipment (the “Data Centres”) used
for the purpose of running diverse cryptographic hash functions in connection with the mining of cryptocurrency. The MPA is for
a term of five years, with two successive renewal terms of one year each.

 

Concurrent
with the MPA, on November 29, 2017, the Company entered into a Master Service Agreement (the “MSA”) with Bitfury.
In accordance with the MSA, Bitfury shall provide the management, maintenance, support, logistics and operational services (the
 “Services”) required to run the Data Centres. The MSA is for a term of five years, with two successive renewal terms
of one year each.

 

On
February 21, 2020, the Company and Bitfury agreed to amend these key agreements, with the intent of reducing operating costs and
providing more autonomy to Hut 8 in managing its operations. Hut 8 will have improved flexibility to work with outside equipment
vendors and Bitfury will have the ability to work with other miners in North America as well. On August 4, 2020 and September
2, 2020, Hut 8 completed the transfers of its City of Medicine Hat and Drumheller sites, respectively, from Bitfury.

 

The
Company entered into definitive agreements with the City of Medicine Hat (“CMH”) for the supply of electric energy,
and the lease of land upon which Hut 8 is constructed its mining facilities. For electricity, an Electricity Supply Agreement
(“ESA”) was executed, whereby CMH will provide electric energy capacity of approximately 67 MW to the new Hut 8 facilities,
which in conjunction with the Company’s approximate 40 MW in operation in Drumheller, will allow Hut 8 to operate at 107
MW in total. The ESA and the land lease have a concurrent term of 10 years. The minimum payments on the land lease are $1,395
per month up to December 31, 2027.

 

Liquidity
and Capital Resources

 

As
at December 31, 2020, the Company had a working capital surplus of $75.7 million (December 31, 2019 - $21.8 million) and
shareholders’ equity of $115.6 million.

 

Net
cash used in operating activities was $1.3 million, which does not include the bitcoin mined but not yet converted to cash.
Cash used in investing activities amounted to $7.1 million which was used for the purchase of new generation miners for the
City of Medicine Hat facility. Cash provided by financing activities was $8.3 million, mostly from the public offering
completed on June 25, 2020, for gross proceeds of $8,338,161 (the “Offering”) and exercise of warrants (as
defined below) issued from the Offering.

 

As
at December 31, 2020, the Company had cash on hand of $2.8 million (December 31, 2019 - $2.9 million) and digital assets of $102.0
million (December 31, 2019 - $27.3 million).

 

On
February 18, 2020, the Company completed a loan extension with Genesis for $6,615,500 (US$5,000,000). The loan bears interest
at 9.85% per annum, payable monthly, and matures on Feb 18, 2021. 100% of the loan is collateralized with bitcoin that has been
transferred to Genesis. If the collateralized value of the bitcoin drops below 90% of the loan, additional bitcoin will be sent
to Genesis to bring the collateral level back to 100%. Conversely, if the collateralized bitcoin value goes over 110% of the loan,
bitcoin will be returned to the Company as long as the 100% collateral level remains satisfied. These funds were used to repay
the loan with Bitfury.

 

On
June 25, 2020, the Company completed the Offering, and, with the underwriters exercising their over- allotment option,
issued 5,750,456 units (“Unit”) at a price of $1.45 per Unit for gross proceeds of $8,338,161. Each unit
comprises of one common share (each a “Common Share”) and one Common Share purchase warrant of the Company (each
a “Warrant”). Each Warrant entitles the holder thereof to acquire one additional common share of the Company at
an exercise price of $1.80 per share at any time for a period of 18 months. The Warrants are determined at $2,635,544 under
the related fair value approach using the Black-Scholes Option Pricing model based on the following assumptions: expected
life of 1.5 years, interest rate of 0.30%, volatility of 128% and dividend yield of 0%. The Company paid commissions and fees
totaling $843,541 and issued 345,027 broker warrants with a fair value of $127,986. The broker warrants are determined using
the Black-Scholes Option Pricing model based on the following assumptions: expected life of 2 years, interest rate of 0.30%,
volatility of 118% and dividend yield of 0%.

    11 

     

    
Hut
8 Mining Corp. 

Management’s Discussion and Analysis

For the year ended December 31, 2020

 

On
July 13, 2020, the Company successfully renegotiated key terms of the loans with Genesis. The interest rate on the full amount
of the loan, US$20 million, was reduced to 8.00% from 9.85% per annum. The bitcoin collateral required increased from 85% of the
loan value to 95%. Additionally, if the price of bitcoin drops below US$6,500, the bitcoin collateral will automatically drop
to 80% of the loan value, while interest rate adjusts to 10.00% per annum until the bitcoin price once again increases above US$6,500.
The loan will continue indefinitely with Genesis being able to call the loan with five months’ notice, while the Company
will have the option to repay with one month’s notice and no prepayment penalty. This loan was fully repaid on February
12, 2021 and all bitcoin collateral was returned.

 

On
January 6, 2021, Hut 8 announced a yield account where Hut 8 will provide Genesis with a 1,000 bitcoin unsecured loan with an
interest rate of 4% per annum.

 

On
January 13, 2021, Hut 8 closed a private placement of equity securities for gross proceeds of $77.5 million and consisted of the
sale of 15,500,000 common shares and warrants to purchase up to 7,750,000 common shares at a purchase price of $5.00 per share
and associated warrant. Each warrant will entitle the holder to purchase one common share at an exercise price of $6.25 per common
share at any time prior to the second anniversary of the issuance date.

 

Off-Balance
Sheet Arrangements

 

As
of the date of this MD&A, the Company does not have any off-balance sheet arrangements that have, or are reasonably likely
to have, a current or future effect on the results of operations or financial condition of the Company including, without limitation,
such considerations as liquidity and capital resources that have not previously been discussed.

 

Financial
Instruments and Business Risks

 

The
Company’s risk exposures and the impact on the Company’s financial instruments are summarized below.

 

Credit
risk

 

Financial
instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash and deposits and
prepaid expenses. The Company limits its exposure to credit loss by placing its cash with high credit quality financial institutions.

 

For
the protection of its bitcoin on behalf of shareholders, Hut 8 does not self-custody its bitcoin. Instead, Hut 8 uses the services
of BitGo Trust Company Inc. (“BitGo”). BitGo has US$100 million of insurance backing its digital asset custody and
one of the highest levels of regulatory certifications in the market.

 

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 nominated in foreign currency 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.

    12 

     

    
Hut
8 Mining Corp. 

Management’s Discussion and Analysis 

For the year ended December 31, 2020

 

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 currently settles
its financial obligations out of cash and cash equivalents 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.

 

As
at December 31, 2020 the contractual maturities of financial liabilities, including estimated interest payments are as follows:

 

	 	 	Carrying

 amount	 	 	Contractual

 cash flows	 	 	Within 1

year	 	 	1 to 2 years	 	 	2 to 5 years	 	 	5+ years	 
	Accounts payable and accrued liabilities	 	$	3,890,512	 	 	$	3,890,512	 	 	$	3,890,512	 	 	$	-	 	 	$	-	 	 	$	-	 
	Loans payable and interest	 	 	25,464,000	 	 	 	27,501,120	 	 	 	27,501,120	 	 	 	-	 	 	 	-	 	 	 	-	 
	Lease commitments	 	 	292,942	 	 	 	630,363	 	 	 	17,577	 	 	 	17,577	 	 	 	52,731	 	 	 	542,478	 
	 	 	$	29,647,454	 	 	$	32,021,995	 	 	$	31,409,209	 	 	$	17,577	 	 	$	52,731	 	 	$	542,478	 

 

Foreign
Currency Risk

 

Currency
risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Currency risk
arises from financial instruments (including cash and cash equivalents) that are denominated in a currency other than Canadian
dollars, which represents the functional currency of the Company. The Company’s functional currency is the Canadian dollar
and most purchases are transacted in Canadian dollars. The Company has also transacted in US Dollars to purchase mining equipment
from Bitfury and with loans payable denominated in US Dollars. Management currently does not hedge its foreign exchange risk.

 

Concentration
Risk

 

Concentration
risk arises as a result of the concentration of exposures within the same category, whether it is geographical location, product
type, industry sector or counterparty type. Currently, the Company has its investment highly concentrated in a single asset, bitcoin.
The Company tracks the market price of bitcoin, less the Company’s liabilities and expenses, by investing in the assets
of the company in bitcoin.

 

Price
Volatility Risk

 

The
Company is at risk due to a wide fluctuation in the price of bitcoin, the speculative nature of the underlying asset, and negative
media coverage. Downward pricing of bitcoin may adversely affect investor confidence, and subsequently, the value of the Company’s
bitcoin inventory, its stock price, and profitability.

 

Security
Risk

 

Bitcoins
are controllable only by the possessor of both the unique public key and private key relating to the local or online digital
wallet in which the bitcoins are held. The bitcoin network requires a public key relating to a digital wallet to be published
when used in a spending transaction and, if keys are lost or destroyed, this could prevent trading of the corresponding
bitcoins.

    13 

     

    
Hut
8 Mining Corp. 

Management’s Discussion and Analysis

For
the year ended December 31, 2020

 

Security
breaches, computer malware and computer hacking attacks have been a prevalent concern in the bitcoin exchange market since the
launch of the bitcoin network. Any security breach caused by hacking could cause loss of bitcoin investments.

 

Bitcoin
Network Risk

 

The
open-source structure of the bitcoin network protocol means that the core developers of the bitcoin network and other contributors
are generally not directly compensated for their contributions in maintaining and developing the bitcoin network protocol. A failure
to properly monitor and upgrade the bitcoin network protocol could damage the bitcoin network.

 

Digital
Assets and Risk Management

 

Digital
assets are measured using level two fair values, determined by taking the rate from Coinmarketcap.com.

 

Digital
asset 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 bitcoin; in addition, the Company may not be able liquidate its inventory of digital assets at its desired price
if required. A decline in the market price for bitcoin could negatively impact the Company’s future operations. The Company
has not hedged the conversion of any of its sales of bitcoin.

 

Bitcoin
has a limited history and the fair value historically has been volatile. Historical performance of bitcoin is not indicative of
its future price performance. The Company’s digital assets currently solely consist of bitcoin.

 

Related
Party Transactions

 

See
the consolidated financial statements for the year ended December 31, 2020, for related party transactions with respect to share
issuances.

 

During
the year ended December 31, 2020, the Company was charged $2,350,392 (2019 - $19,913,152) in site operating costs by Bitfury.
The reduction in cost is the result of the Company taking over the site management from Bitfury. As at December 31, 2020, $754,737
(2019 - $394,732) was owed to Bitfury, which has been included in accounts payable.

 

The
Company also made payment to Andrew Kiguel, the previous CEO, through his numbered corporation 1138029 B.C. Ltd, a one-time $500,000
consulting fee to assist with the transition to the Interim CEO.

 

These
transactions were made on terms equivalent to those that prevail in arm’s length transactions. 

    14 

     

    
Hut
8 Mining Corp. 

Management’s Discussion and Analysis

For
the year ended December 31, 2020

 

Critical
Accounting Estimates and Accounting Policies

 

The
following are the estimates and assumptions that have been made in applying the Company’s accounting policies that have
the most significant effect on the amounts in the unaudited condensed consolidated interim financial statements:

 

	i.	Fair
    value measurement of stock options and broker warrants

 

The
Company measures the cost of equity-settled transaction by reference to the fair value of the equity instruments at the date on
which they are granted. Estimating fair value requires determining the most appropriate valuation model, which is dependent on
the terms and conditions of the grant. This estimate also requires the determination of the most appropriate inputs to the valuation
model including the expected life of the broker warrants, volatility and dividend yield and making assumptions about them.

 

	ii.	Revenue
    recognition

 

The
Company recognizes revenue from the provision of transaction verification services within the bitcoin blockchain, and as consideration
for these services, the Company receives bitcoin. Revenue is measured based on the fair value of the bitcoin received. The fair
value is determined using the closing bitcoin price each day per Coinmarketcap. The Company is relying on the data available at
Coinmarketcap to be an accurate representation of the closing price for the digital assets.

 

	iii.	Fair
    value of digital assets

 

Digital
assets, consisting solely of bitcoin, are measured at fair value using the quoted price on Coinmarketcap. Management considers
this fair value to be a level two input under IFRS 13 Fair Value Measurement fair value hierarchy as the price on this source
represents an average of quoted prices on multiple digital currency exchanges. The bitcoin is valued based on the closing price
obtained from Coinmarketcap at the reporting period corresponding to the digital assets mined by the Company.

 

The
Company’s determination to classify its holding of bitcoin as current assets is based on management’s assessment that
its bitcoin held can be considered a commodity and the availability of liquid markets to which the Company may sell a portion
or all of its holdings.

 

	iv.	Non-monetary
    transactions

 

Non-monetary
transactions for the exchange of bitcoin for various goods and services are measured at the fair value determined from the exchange
amount. Fair value of the bitcoin is determined at the time of transaction.

 

	v.	Share
    based transactions

 

Equity-settled
share-based payment transactions with parties other than employees are measured at the fair value of the goods or services received,
except where that fair value cannot be estimated reliably, in which case they are measured at the fair value of the equity instruments
granted, measured at the date the entity obtains the goods or the counterparty renders the service.

 

The
Company issued broker warrants as part of brokered private placement offering for common shares. Broker warrants are measured
at fair value at the date of the offering and accounted for as a separate component of shareholders’ equity. When the broker
warrants are exercised, the proceeds received together with the related amount allocated as a separate component of shareholders’
equity are allocated to capital stock. If the broker warrants expire unexercised, the related amount separately allocated to shareholders’
equity is allocated to contributed surplus.

    15 

     

    
Hut
8 Mining Corp. 

Management’s Discussion and Analysis 

For the year ended December 31, 2020

 

	vi.	Useful
    life of mining equipment

 

Management
is depreciating mining equipment using a straight-line basis, with a useful life of:

 

	Seacan containers and supporting infrastructure	 4 years

	Mining
    servers	 2 years

 

The
mining equipment is used to generate bitcoin. The rate at which the Company generates digital assets and, therefore, consumes
the economic benefits of its mining equipment are influenced by several factors including, but not limited to, the following:

 

		•	The
complexity of the mining process which is driven by the algorithms contained within the digital assets open source software; and

 

		•	Technological
obsolescence reflecting rapid development in the mining machines such that more recently developed hardware is more economically
efficient to run in terms of digital assets mined as a function of operating costs, primarily power costs (ie., the speed of mining
machines evolution in the industry) is such that later mining machine models generally have faster processing capacity combined
with lower operating costs and a lower cost of purchase.

 

Based
on the Company and the industry’s limited history to date, management is limited by the market data available. Furthermore,
the data available also includes data derived from the use of economic modelling to forecast future digital assets and the assumptions
included in such forecasts, including digital asset’s price and network difficulty, and derived from management’s
assumptions. Based on current data available, management has determined that the straight-line method of amortization best reflects
the current expected useful life of mining equipment. Management will review their estimates at each reporting date and will revise
such estimates as and when data become available. Management will review the appropriateness of its assumption related to residual
value at each reporting date.

 

	vii.	Taxes

 

Uncertainties
exist with respect to the interpretation of complex tax regulations, changes in tax laws, and the amount and timing of future
taxable income. The Company has not recognized the value of any deferred tax assets in its statements of financial position.

 

The
Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will
be sustained based on its technical merits. The Company measures and records the tax benefits from such a position based on the
largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company’s estimated
liabilities related to these matters are adjusted in the period in which the uncertain tax position is effectively settled, the
statute of limitations for examination expires or when additional information becomes available. The Company’s liability
for unrecognized tax benefits requires the use of assumptions and significant judgment to estimate the exposures associated with
our various filing positions. Although the Company believes that the judgments and estimates made are reasonable, actual results
could differ and resulting adjustments could materially affect our effective income tax rate and income tax provision.

 

The
Company has earned bitcoin from the commercial activity of bitcoin mining. The Company has followed the published Canada Revenue
Agency (“CRA”) view that bitcoin is a commodity and inventory of the business, the value of which is included in the
calculation of taxable income from the business. Bitcoin is valued in accordance with Section 10 of the Income Tax Act. Revenue
from bitcoin mining is included in taxable income when the bitcoin earned is sold or exchanged for cash or another asset. There
is uncertainty regarding the taxation of cryptocurrency and the CRA may assess the Company differently from the position adopted.
This could result in additional current taxes payable with equal offset to deferred tax expense.

    16 

     

    
Hut
8 Mining Corp. 

Management’s Discussion and Analysis

For the year ended December 31, 2020

 

Capital
Management

 

The
Company’s capital currently consists of Common Shares. The Company’s capital management objectives are to safeguard
its ability to continue as a going concern and to have sufficient capital to be able to identify, evaluate and then acquire an
interest in a business or assets. The Company does not have any externally imposed capital requirements to which it is subject.
The Company manages the capital structure and makes adjustments to it in light of changes in economic conditions and the risk
characteristics of the underlying assets. To maintain or adjust the capital structure, the Company may attempt to issue new shares.

 

Management’s
Report on Disclosure Controls and Procedures and Internal Control over Financial Reporting

 

Management
is committed to delivering timely and accurate disclosure of all material information.

 

Disclosure
controls and procedures ensure that reporting requirements are satisfied, and that material information is disclosed in a timely
manner. Due to the limitation on the ability of the officers to design and implement cost-effective policies for disclosure controls
and procedures and internal control over financial reporting, the officers are not making representations that such controls and
procedures would identify and allow for reporting material information on a timely basis, nor are they representing that such
procedures are in place that provide reasonable assurance regarding the reliability of financial reporting.

 

However,
as permitted for TSX issuers, the CEO and CFO individually have certified that after reviewing the consolidated financial statements
for the years ended December 31, 2020 and 2019 and this MD&A of the Company, there are no material misstatements or omissions,
and the filing materially presents the consolidated financial position and consolidated results of operations and cash flows for
the year ended December 31, 2020 and all material subsequent activity up to March 24, 2021.

 

The
CEO and CFO are responsible for establishing and maintaining disclosure controls and procedures (“DC&P”) and internal
controls over financial reporting (“ICFR”), as those terms are defined in National Instrument 52-109 Certification
of Disclosure in Issuers’ Annual and Interim Filings, for the Company.

 

The
Company’s CEO and CFO certify that: (i) the control framework the Company’s CEO and CFO used to design the Company’s
ICFR is The Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) framework issued on May 14,
2013; (ii) there is no material weakness relating to the design of ICFR or limitation on the scope of the design of the DC&P
and ICFR; and (iii) there has been no material change in the Company’s design of the ICFR that occurred during the year
ended December 31, 2020 which has materially affected, or is reasonably likely to materially affect the Company’s ICFR.

 

Share
Capital

 

As
of the date of this MD&A, the Company has issued, and outstanding share capital comprised of 118,480,078 Common Shares, 646,667
stock options, 11,490,727 warrants, and 3,313,334 restricted share units.

 

Additional
information and other publicly filed documents relating to the Company are available through the internet on the Canadian Securities
Administrators’ System for Electronic Document Analysis and Retrieval (“SEDAR”), which can be accessed at www.sedar.com.

    17Exhibit 4.1

 

SPECIMEN UNIT CERTIFICATE

NUMBER UNITS

U-

 

SEE REVERSE FOR CERTAIN

DEFINITIONS

 

CUSIP [ ]

 

TRADEUP
GLOBAL CORPORATION

 

UNITS CONSISTING OF ONE CLASS A ORDINARY SHARE
AND ONE-HALF OF ONE REDEEMABLE WARRANT TO PURCHASE ONE CLASS A ORDINARY SHARE

 

THIS CERTIFIES
THAT                 is the owner of                
Units.

 

Each Unit (“Unit”) consists of one
(1) Class A ordinary share, par value $0.0001 per share (“Ordinary Shares”), of TradeUP Global Corporation, a Cayman Islands
exempted company (the “Company”), and one-half (1/2) of one redeemable warrant (each whole warrant, a “Warrant”).
Each Warrant entitles the holder to purchase one (1) Ordinary Share for $11.50 per share (subject to adjustment). Each Warrant will become
exercisable on the later of (i) thirty (30) days after the Company’s completion of a merger, share exchange, asset acquisition,
share purchase, reorganization or other similar business combination with one or more businesses (each, a “Business Combination”),
and (ii) twelve (12) months from the closing of the Company’s initial public offering, and will expire unless exercised before 5:00
p.m., New York City Time, on the date that is five (5) years after the date on which the Company completes its initial Business Combination,
or earlier upon redemption or liquidation (the “Expiration Date”). The Ordinary Shares and Warrants comprising the Units represented
by this certificate are not transferable separately prior to           , 2021, unless
US Tiger Securities, Inc. elects to allow earlier separate trading, subject to the Company’s filing with the Securities and Exchange
Commission of a Current Report on Form 8-K containing an audited balance sheet reflecting the Company’s receipt of the gross proceeds
of the initial public offering and issuing a press release announcing when separate trading will begin. No fractional warrants will be
issued upon separation of the Units and only whole warrants are exercisable. The terms of the Warrants are governed by a Warrant Agreement,
dated as of           , 2021, between the Company and vStock Transfer LLC, as Warrant
Agent, and are subject to the terms and provisions contained therein, all of which terms and provisions the holder of this certificate
consents to by acceptance hereof. Copies of the Warrant Agreement are on file at the office of the Warrant Agent at 18 Lafayette Place,
Woodmere, New York 11598, and are available to any Warrant holder on written request and without cost.

 

Upon the consummation of the Business Combination,
the Units represented by this certificate will automatically separate into the Class A Ordinary Shares and Warrants comprising such Units.

 

This certificate is not valid unless countersigned
by the Transfer Agent and Registrar of the Company.

 

This certificate shall be governed by and construed
in accordance with the internal laws of the State of New York.

 

Witness the facsimile signatures of its duly authorized
officers.

 

	By:	 	 	 

	 	Chief Executive Officer	 	Chief Financial Officer

 

     

     

    

 

TRADEUP
GLOBAL CORPORATION

 

The Company will furnish without charge to each
unitholder who so requests, a statement of the powers, designations, preferences and relative, participating, optional or other special
rights of each class of shares or series thereof of the Company and the qualifications, limitations or restrictions of such preferences
and/or rights.

 

The following abbreviations, when used in the
inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or
regulations:

 

	TEN COM	—	as tenants in common	 	UNIF GIFT MIN ACT	—	 	Custodian	 
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	(Cust)	 	(Minor)
	TEN ENT	—	as tenants by the entireties	 	 	 	under Uniform Gifts to Minors Act
	 	 	 	 	 	 	(State)
	JT TEN	—	
    as joint tenants with right of

    survivorship and not as tenants in

    common
	 	 	 	 

Additional abbreviations may also be used though
not in the above list.

 

For value received, ___________________________ hereby sells, assigns
and transfers unto 

 

PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE

 

(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING
ZIP CODE, OF ASSIGNEE)

 

____________________ Units represented by the
within Certificate, and hereby irrevocably constitutes and appoints Attorney to transfer said Units on the books of the within named Company
with full power of substitution in the premises.

 

	Dated	 	 	 
	 	 	 	
    Shareholder

    Notice:
      The signature to this assignment must correspond with the name as written upon the face of the certificate in every particular, without
    alteration or enlargement or any change whatever.

 

	Signature(s) Guaranteed:	 
	
    THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM,
PURSUANT TO S.E.C. RULE 17Ad-15 OR ANY SUCCESSOR

    RULES).
	 

 

In each case, as more fully described in the Company’s
final prospectus dated           , 2021, the holder(s) of this certificate shall be
entitled to receive a pro-rata portion of certain funds held in the trust account established in connection with the Company’s initial
public offering only in the event that (i) the Company redeems the Ordinary Shares sold in its initial public offering and liquidates
because it does not consummate an initial business combination within the period of time set forth in the Company’s amended and
restated memorandum and articles of association, as the same may be amended from time to time, (ii) the Company redeems the Ordinary Shares
sold in its initial public offering in connection with a shareholder vote to amend the Company’s amended and restated memorandum
and articles of association that would affect the substance or timing of the Company’s obligation to provide for the redemption
of Class A ordinary shares in connection with an initial business combination or to redeem 100% of the Ordinary Shares if it does not
consummate an initial business combination within the time period set forth therein, or (iii) if the holder(s) seek(s) to redeem for cash
his, her or its respective Ordinary Shares in connection with a tender offer (or proxy solicitation, solely in the event the Company seeks
shareholder approval of the proposed initial business combination) setting forth the details of a proposed initial business combination.
In no other circumstances shall the holder(s) have any right or interest of any kind in or to the trust account.

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