Vulcan Infrastructure & Power Inc.: Form 10-Q for the period ended Sep 30, 2024

The following discussion should be read together with the audited financial statements and the related notes thereto of Greenidge Generation Holdings Inc., together with its consolidated subsidiaries ("Greenidge" or the “Company”) for the years ended December 31, 2023 and 2022 included in our Annual Report on Form 10-K and the unaudited interim financial statements and related notes thereto of the Company for the three and nine months ended September 30, 2024 included elsewhere in this Quarterly Report on Form 10-Q. This discussion contains certain forward-looking statements that reflect plans, estimates and beliefs and involve numerous risks and uncertainties, including but not limited to those described in the “Risk Factors” disclosed in Item 1A to Part I of Greenidge's Annual Report on Form 10-K for the year ended December 31, 2023 and in this Quarterly Report on Form 10-Q, and “Cautionary Statement Regarding Forward-Looking Statements” sections of this Quarterly Report on Form 10-Q. Actual results may differ materially from those contained in any forward-looking statements. For purposes of this section, “Greenidge“, “the Company,” “we,” “us” and “our” refer to Greenidge Generation Holdings Inc. together with its consolidated subsidiaries. You should carefully read “Cautionary Statement Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q.

Overview

We own cryptocurrency datacenter operations in the Town of Torrey, New York (the "New York Facility"), the Town of Columbia, Mississippi (the "Mississippi Facility"), lease property for purposes of operating a cryptocurrency datacenter in the Town of Underwood, North Dakota (the "North Dakota Facility") and previously owned and operated a facility in Spartanburg, South Carolina (the "South Carolina Facility", and, collectively, the "facilities"). The New York Facility is a vertically integrated cryptocurrency datacenter and power generation facility with an approximately 106 megawatt ("MW") nameplate capacity, natural gas power generation facility. We generate revenue from four primary sources: (1) datacenter hosting, which we commenced on January 30, 2023, (2) cryptocurrency mining, (3) power and capacity, and (4) engineering procurement and construction management.

We generate all the power we require for operations in the New York Facility, where we enjoy relatively lower market prices for natural gas due to our access to the Millennium Gas Pipeline price hub. We believe our competitive advantages include efficiently designed mining infrastructure and in-house operational expertise that we believe is capable of maintaining a higher operational uptime of miners. We are mining bitcoin and hosting bitcoin miners, which contributes to the security and transactability of the bitcoin ecosystem while concurrently supplying power to assist in meeting the power needs of homes and businesses in the region served by our New York Facility.

Our datacenter operations consists of approximately 29,200 miners with approximately 3.1 EH/S of combined capacity for both datacenter hosting and cryptocurrency mining, of which 18,200 miners or 1.8 EH/s, is associated with datacenter hosting and 11,000 miners, or 1.3 EH/s is associated with our cryptocurrency mining. In 2023, prior to the South Carolina transaction, our datacenter operations consisted of approximately 42,300 miners with approximately 4.6 EH/s of combined capacity for both datacenter hosting and cryptocurrency mining, of which 32,100 miners, or 3.4 EH/s, were associated with datacenter hosting and 10,200 miners, or 1.2 EH/s, were associated with Greenidge’s cryptocurrency mining.

Recent Developments

In the first nine months of 2024, Greenidge made significant efforts to reduce costs, leading to selling, general and administrative expense reductions of $9.3 million compared to the same period in 2023. Greenidge also reported a reduction in overall operating costs for its Bitcoin mining operations in the third quarter of 2024, when compared to the same period of 2024, while expanding its footprint.

On April 10, 2024, we closed on the purchase of a parcel of land containing approximately 12 acres located in Columbus, Mississippi, including over 73,000 square feet of industrial warehouse space, from a subsidiary of Motus Pivot Inc., a portfolio company of Atlas, our controlling shareholder and a related party. The purchase price was $1.45 million, all of which was paid during the nine months ended September 30, 2024. This property provides us with access to 32.5 MW of additional power capacity. The transaction closed in April 2024, and we deployed 8.5 MW of miners on the property as of September 30, 2024. We have also deployed additional miners in conjunction with a 7.5 MW mining capacity lease in North Dakota, which has a term of five years and provides us with energy to power mining.

Our successful execution of the June 2024 planned maintenance outage of the New York Facility and relocation of owned miners from third-party operated sites to Company-operated facilities in the second quarter of 2024 resulted in our miners being non-operational for a period. We anticipate such actions will positively impact its profitability in the near term by reducing operational costs and maintaining elevated uptime levels. We also continue to explore additional opportunities to further streamline operations and improve efficiency across its business units.

In July 2024, we announced the launch of our Pod X portable cryptocurrency mining infrastructure solution, which is deployed at our facilities across the United States and reflects a culmination of our experience in maintaining optimal temperature control and uptime using portable mining equipment.

On August 1, 2024, we announced our new bitcoin self-mining retention strategy, which enables us to accumulate bitcoin from our owned miners in order to increase our bitcoin holdings.

Discontinued Operations

The contract with Support.com’s largest customer expired on December 31, 2022 and was not renewed. As a result, we have classified the Support.com business as held for sale and discontinued operations in these condensed consolidated financial statements as a result of management and the board of directors making a decision to pursue alternatives for the Support.com business and to strictly focus on its cryptocurrency mining, datacenter hosting and power generation operations. See Note 3, "Discontinued Operations" of our unaudited condensed consolidated financial statements for additional information.

Title V Air Permit

In late June 2022, NYSDEC announced its denial of the Title V Air Permit renewal for our New York Facility. We filed a notice with NYSDEC in July 2022 requesting a hearing on NYSDEC’s decision. In September 2023, the administrative law judge presiding over the hearing issued a ruling with respect to the status of the parties and certain issues to be adjudicated in the hearing. We submitted an interim appeal with NYSDEC thereafter challenging such ruling with a motion to stay the broader appeals process while the interim appeal was being resolved. On May 8, 2024, our interim appeal to NYSDEC and request for an adjudicatory hearing were ultimately denied, and the June 2022 non-renewal of our Title V Air Permit was affirmed by NYSDEC’s Regional Director for Region 7, which rendered NYSDEC’s decision final for purposes of seeking judicial review.

On August 15, 2024, we filed a verified petition and complaint pursuant to Article 78 of the New York Civil Practice Law and Rules against NYSDEC in the New York Supreme Court, Yates County (the "Court"), seeking declaratory and injunctive relief relating to NYSDEC's denial of our renewal application for our New York Facility, including, among other things, to (i) annul NYSDEC's June 2022 denial of our renewal application and the May 8, 2024 affirmation of such denial by NYSDEC's Regional Director for Region 7, (ii) issue certain declaratory judgments with respect to NYSDEC's interpretation of the New York Climate Leadership and Community Protection Act on which the denial of our renewal application was predicated, and (iii) enjoin NYSDEC from taking any action to request that the New York Facility cease operations.

On August 20, 2024, we submitted a motion to the Court by Order to Show Cause seeking a temporary restraining and preliminary injunction (the “TRO Request”) permitting the Facility to continue operations during the pendency of the Article 78 proceeding. Subsequent to submission of the TRO Request, Greenidge and NYSDEC agreed to a briefing schedule with the respect to the TRO Request, with a hearing before the Court expected to occur in late October 2024. In connection with the agreed-upon briefing schedule, NYSDEC agreed that Greenidge does not need to (i) cease operations of any air contamination sources located at the New York Facility, (ii) render such air contamination sources inoperable, or (iii) relinquish the Title V Air Permit until November 1, 2024, which was subsequently extended through November 14, 2024 (the “November 14 Stay”). We expect that the Court will render a decision on the TRO Request or, alternatively, our Article 78 challenge of the denial of the permit renewal application in total, prior to the expiration of the November 14 Stay.

This challenge has, and will continue, to cause us to incur additional costs and result in the diversion of management attention, which could adversely affect our business, financial condition and results of operations. We expect that the judicial proceedings related to the challenge of NYSDEC’s denial of our Title V Air Permit renewal application may take a number of years to fully resolve, and there can be no assurance that our efforts will be successful. Our inability to secure a temporary restraining order or preliminary injunction to allow the New York Facility to continue operating during the pendency of the litigation or to otherwise succeed in securing a renewal of our Title V Air Permit for the New York Facility could have a material adverse effect on us and our ability to continue operating as a going concern. See Note 2, “Summary of Significant Accounting Policies,” in the Notes to Condensed Consolidated Financial Statements.

Results from Continuing Operations - Three Months Ended September 30, 2024

The following table (in thousands) sets forth key components of our results from continuing operations and should be read in conjunction with our condensed consolidated financial statements and related notes. All comparisons below refer to the three months ended September 30, 2024 versus the three months ended September 30, 2023, unless otherwise specified.

(a) Adjusted Amounts and Other Financial Data are non-GAAP performance measures. A reconciliation of reported amounts to adjusted amounts can be found in the "Non-GAAP Measures and Reconciliations" section of this Management’s Discussion and Analysis ("MD&A").

Key Metrics

The following table provides a summary of key metrics related to the three months ended September 30, 2024 and 2023.

$ in thousands, except $ per MWh and average bitcoin price

33

Revenue

On January 30, 2023, upon entering into the NYDIG Hosting Agreement, we transitioned the majority of the capacity of our owned datacenter facilities to datacenter hosting operations. In November 2023, we sold the South Carolina Facility, which was part of our datacenter hosting operations. We entered into hosting arrangements at third party sites for the majority of our remaining owned miners in the second quarter of 2023. In the second quarter of 2024, the hosting agreements to operate miners at third party sites were terminated. As a result, we deployed miners operated at the host’s sites to our own self-mining sites. At September 30, 2024, Greenidge datacenter operations consisted of approximately 29,200 miners with approximately 3.1 EH/s of combined capacity for both datacenter hosting and cryptocurrency mining, of which 18,200 miners, or 1.8 EH/s, is associated with datacenter hosting and 11,000 miners, or 1.3 EH/s, is associated with Greenidge’s cryptocurrency mining.

Cryptocurrency mining revenue

For our cryptocurrency mining revenue, we generate revenue in the form of bitcoin by earning bitcoin as rewards and transaction fees for supporting the global bitcoin network with application-specific integrated circuit computers ("ASICs" or "miners") owned or leased by the Company. Our cryptocurrency mining revenue decreased $3.3 million, or 51%, to $3.3 million. We estimate that approximately 77% of the decrease was due to increases in the global bitcoin mining difficulty factor and the bitcoin halving that occurred in April 2024, which was partially offset by 26% due to the increase in the average price of bitcoin. Bitcoin mining difficulty was 60% higher compared to the prior year due to increases in the difficulty index associated with the complexity of the algorithmic solution required to create a block and receive a bitcoin award, the average bitcoin price was 117% higher and our average hash rate decreased 26%. The decline in average hashrate is attributable to the Company's focus on maximizing profitability by prioritizing operations of its most efficient miners, curtailing operations of less efficient miners during periods of decreased profitability, and the ongoing efforts to redeploy miners previously hosted at third party locations.

The miners associated with Greenidge’s cryptocurrency mining were comprised as follows:

As of September 30, 2024, our fleet of miners ranged in age from 0.1 to 3.1 years and had an average age of approximately 2.3 years. We do not have scheduled downtime for our miners. When we have unscheduled downtime, we may from time to time replace a miner with a substitute miner in order to minimize overall fleet downtime. As of September 30, 2024, our fleet of miners ranged in efficiency from approximately 15.0 to 34.0 joules per terahash (“J/TH”) and had an average efficiency of 27.1 J/TH.

The table below presents the average cost of mining each bitcoin for the three months ended September 30, 2024:

(1) Computed as cost of revenue of cryptocurrency mining divided by number of bitcoins produced from cryptocurrency mining.

(2) Computed as cryptocurrency mining revenue divided by number of bitcoins produced from cryptocurrency mining.

Datacenter hosting revenue

On January 30, 2023, we entered into the NYDIG Hosting Agreement to provide datacenter hosting services. Under the NYDIG Hosting Agreement, we generate revenue from a reimbursement fee that covers the cost of power and direct costs associated with management of the mining facilities, a hosting fee and a gross profit-sharing arrangement. The arrangement covers substantially all of our current mining capacity at the New York Facility and the South Carolina Facility during the 2023 comparative period, prior to the sale of the facility on November 15, 2023. We generated revenue of $6.5 million for the three months ended September 30, 2024 and $12.1 million for the three months ended September 30, 2023. This decrease of $5.6 million was mainly due to the sale of the South Carolina Facility and partially offset by a 117% increase in price of bitcoin. In addition, we managed approximately 1.7 EH/s of average active hash rate in our hosting services, of which produced approximately 113 bitcoins.

Power and capacity revenue

Power and capacity revenue at our New York Facility is earned when we sell capacity and energy and ancillary services to the wholesale power grid managed by the New York Independent System Operator ("NYISO"). Through these sales, we earn revenue in three streams, including: (1) power revenue received based on the hourly price of power, (2) capacity revenue for committing to sell power to the NYISO when dispatched and (3) other ancillary service revenue received as compensation for the provision of operating reserves. Our power and capacity revenue increased $0.5 million, or 21%, to $2.6 million during the three months ended September 30, 2024. We estimate that higher average power and capacity prices caused revenue increases of approximately 29%, which was partially offset by lower power and capacity sales volume of 8%, as compared to the prior period.

Cost of revenue (exclusive of depreciation)

$ in thousands

Total cost of revenue, exclusive of depreciation, decreased $6.1 million, or 39%, to $9.3 million during the three months ended September 30, 2024 as compared to the prior year period. We estimate the decrease is comprised of approximately 22% due to the lower utilization of electricity involved in production as a result of the sale of our South Carolina facility in the fourth quarter of 2023 and 17% due to our transition away from third party hosting service agreements for our own miners, lower natural gas and electricity charges, and lower MWh power consumption by our power plant and operating miner fleet.

Our New York Facility allocates its cost of revenue between datacenter hosting, cryptocurrency mining and power and capacity based on their respective MWh consumption on a pro rata basis.

Selling, general and administrative expenses

Selling, general and administrative expenses decreased $2.9 million, or 44%, to $3.7 million for the three months ended September 30, 2024 as compared to the prior year period. The main drivers of the decrease in selling, general and administrative expenses were:

• Total insurance expense decreased approximately $1.0 million in the third quarter of 2024 compared to the prior year period, as a result of a decline in coverage costs related to umbrella, property, and liability policies due to a lower asset base;
• Total payroll and benefits and other employee costs decreased approximately $0.8 million in the third quarter of 2024 compared to the prior year period, as a result of declines in employee expenses related to the corporate overhead cost reduction efforts that occurred in 2023 as well as a decrease in incentive compensation;
• Decrease of approximately $0.8 million due to reductions in professional fees and consulting expenses caused by reductions in discretionary costs and higher regulatory costs in the prior year period associated with permit renewals and environmental matters at the New York Facility;
• Total administrative overhead costs decreased approximately $0.2 million in the third quarter of 2024 compared to the prior year period, primarily related to reduced spending on information technology and business development; and
• Total stock compensation decreased approximately $0.1 million in the third quarter of 2024 compared to the prior year period, as a result of a decline in amortized expense relating to RSUs with a higher grant date fair value, as well as a decline in amortized expense relating to options granted in prior periods.

Depreciation

There was no change in depreciation expense for the three months ended September 30, 2024 as compared to the prior year period.

Gain on digital assets

We recognized a gain on digital assets of $0.2 million for the three months ended September 30, 2024 as a result of measuring digital assets at fair value due to our adopting ASU 2023-08 on January 1, 2024. There was no gain or loss on digital assets as a result of measuring digital assets at fair value for the three months ended September 30, 2023.

Loss on sale of assets

We recognized a loss on the sale of assets of $0.7 million for the three months ended September 30, 2024 as a result of selling long-lived assets. There was no gain or loss on the sale of assets for the three months ended September 30, 2023.

Operating (loss) income from continuing operations

We reported an operating loss for the three months ended September 30, 2024 of $4.6 million compared with an operating loss of $10.1 million in the three months ended September 30, 2023. The favorable variance of $5.5 million is primarily related to the decrease in impairment expense of $4.0 million, as well as additional cost savings related to selling, general, and administrative expenses.

Adjusted loss from operations was $3.9 million for the three months ended September 30, 2024 as compared to adjusted loss from operations of $3.9 million in the three months ended September 30, 2023. The adjusted loss from operations was driven by the same factors described above impacting loss from operations. A reconciliation of reported amounts to adjusted amounts can be found in the "Non-GAAP Measures and Reconciliations" section of this MD&A.

Total other expense, net

During the three months ended September 30, 2024, Greenidge incurred a decrease of $1.2 million, or 40%, to $1.8 million of other expense due to a reduction in interest expense of $1.2 million. The decrease is a result of the reductions in debt that occurred in the first and fourth quarters of 2023.

Benefit from income taxes

Our effective tax rate for the three months ended September 30, 2024 was a 2% benefit which was lower than the statutory rate of 21% because we have a full valuation allowance on deferred tax assets, as well as an adjustment for the New York State income tax receivable upon completion of the 2023 tax return. We recorded and will continue to carry a full valuation allowance against our gross deferred tax assets that will not reverse against deferred tax liabilities within the scheduled reversal period. The 2%, or $0.1 million benefit for the three months ended September 30, 2024 was the result of an adjustment for the New York State income tax receivable upon completion of our 2023 tax return.

Our effective tax rate for the three months ended September 30, 2023 was 0%, which was lower than the statutory rate of 21% due to a full valuation allowance on deferred tax assets.

Net loss from continuing operations

As a result of the factors described above, Greenidge incurred a net loss of $6.3 million for the three months ended September 30, 2024 as compared to a net loss of $13.2 million for the three months ended September 30, 2023.

On an adjusted basis, excluding the impact of a gain on sale of assets and debt restructure costs, adjusted net loss during the three months ended September 30, 2024 would have been $5.6 million as compared to $6.9 million in the same period in 2023. Adjusted net loss is a non-GAAP performance measure. A reconciliation of reported amounts to adjusted amounts can be found in the "Non-GAAP Measures and Reconciliations" section of this MD&A.

Loss from discontinued operations

We have reported the Support.com business as discontinued operations in the consolidated financial statements. Loss from discontinued operations, net of tax net of tax decreased $1.0 million, or 96%, to $0.0 million for the three months ended September 30, 2024. The decrease is primarily related to the closing of operations.

Non-GAAP Measures and Reconciliations

The following non-GAAP measures are intended to supplement investors’ understanding of our financial information by providing measures which investors, financial analysts and management use to help evaluate our operating performance. Items which we do not believe to be indicative of ongoing business trends are excluded from these calculations so that investors can better evaluate and analyze historical and future business trends on a consistent basis. Definitions of these non-GAAP measures may not be comparable to similar definitions used by other companies. These results should be considered in addition to, not as a substitute for, results reported in accordance with United States Generally Accepted Accounting Principles ("U.S. GAAP").

EBITDA (loss) from continuing operations and Adjusted EBITDA (loss) from continuing operations

"EBITDA from continuing operations" is defined as earnings from continuing operations before taxes, interest, and depreciation and amortization. "Adjusted EBITDA from continuing operations" is defined as EBITDA from continuing operations adjusted for stock-based compensation and other special items determined by management, including, but not limited to business expansion costs, gain on sale of assets and debt restructuring costs as they are not indicative of business operations. Adjusted EBITDA is intended as a supplemental measure of our performance that is neither required by, nor presented in accordance with, U.S. GAAP. Management believes that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors. However, you should be aware that when evaluating EBITDA and Adjusted EBITDA, we may incur future expenses similar to those excluded when calculating these measures. In addition, our presentation of these measures should not be construed as an inference that its future results will be unaffected by unusual or non-recurring items. Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Adjusted EBITDA in the same fashion.

Because of these limitations, EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with U.S. GAAP. We compensate for these limitations by relying primarily on our U.S. GAAP results and using EBITDA and Adjusted EBITDA on a supplemental basis. You should review the reconciliation of net loss (income) to EBITDA (loss) and Adjusted EBITDA below and not rely on any single financial measure to evaluate our business. The reported amounts in the table below are from our Unaudited Condensed Consolidated Statements of Operations in our Unaudited Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

Revenue per MWh for datacenter hosting, cryptocurrency mining and power and capacity are used by management to consider the extent to which we may generate electricity to either produce cryptocurrency or sell power to the New York wholesale power market. Cost of revenue (excluding depreciation) per MWh represents a measure of the cost of natural gas, emissions credits, payroll and benefits and other direct production costs associated with the MWhs produced to generate the respective revenue category for each MWh utilized. Depreciation expense is excluded from the cost of revenue (exclusive of depreciation) per MWh metric; therefore, not all cost of revenues for datacenter hosting, cryptocurrency mining and power and capacity are fully reflected. To the extent any other cryptocurrency datacenters are public or may go public, the cost of revenue (exclusive of depreciation) per MWh metric may not be comparable because some competitors may include depreciation in their cost of revenue figures.

Results from Continuing Operations - Nine Months Ended September 30, 2024

The following table (in thousands) sets forth key components of our results from continuing operations and should be read in conjunction with our condensed consolidated financial statements and related notes. All comparisons below refer to the nine months ended September 30, 2024 versus the nine months ended September 30, 2023, unless otherwise specified.

(a) Adjusted Amounts and Other Financial Data are non-GAAP performance measures. A reconciliation of reported amounts to adjusted amounts can be found in the "Non-GAAP Measures and Reconciliations" section of this MD&A.

Key Metrics

The following table provides a summary of key metrics related to the nine months ended September 30, 2024 and 2023.

$ in thousands, except $ per MWh and average bitcoin price

40

Revenue

On January 30, 2023, upon entering into the NYDIG Hosting Agreement, we transitioned the majority of the capacity of our owned datacenter facilities to datacenter hosting operations. In November 2023, we sold the South Carolina Facility, which was part of our datacenter hosting operations. We entered into hosting arrangements at third party sites for the majority of our remaining owned miners in the first and second quarters of 2023. In the second quarter of 2023, the hosting agreements to operate miners at third party sites were terminated. As a result, we deployed miners operated at the host’s site to our own self-mining sites. At September 30, 2024, Greenidge datacenter operations consisted of approximately 29,200 miners with approximately 3.1 EH/s of combined capacity for both datacenter hosting and cryptocurrency mining, of which 18,200 miners, or 1.8 EH/s, is associated with datacenter hosting and 11,000 miners, or 1.3 EH/s, is associated with Greenidge’s cryptocurrency mining.

Cryptocurrency mining revenue

For our cryptocurrency mining revenue, we generate revenue in the form of bitcoin by earning bitcoin as rewards and transaction fees for supporting the global bitcoin network with ASICs owned or leased by us. Our cryptocurrency mining revenue decreased $2.0 million, or 12%, to $15.0 million. We estimate that approximately 66% of the decrease was due to the increase in the global bitcoin mining difficulty factor and the bitcoin halving that occurred in April 2024, which was partially offset by 54% due to the increase in the average price of bitcoin. Bitcoin mining difficulty was 72% higher compared to the prior year due to increases in the difficulty index associated with the complexity of the algorithmic solution required to create a block and receive a bitcoin award, the average bitcoin price was 128% higher and our average hash rate decreased 10%. The decline in average hashrate is attributable to the Company's focus on maximizing profitability by prioritizing operations of its most efficient miners, curtailing operations of less efficient miners during periods of decreased profitability, and the ongoing efforts to redeploy miners previously hosted at third party locations.

The miners associated with Greenidge’s cryptocurrency mining were comprised as follows:

As of September 30, 2024, our fleet of miners ranged in age from 0.1 to 3.1 years and had an average age of approximately 2.3 years. We do not have scheduled downtime for our miners. When we have unscheduled downtime, we may from time to time replace a miner with a substitute miner in order to minimize overall fleet downtime. As of September 30, 2024, our fleet of miners ranged in efficiency from approximately 15.0 to 34.0 J/TH and had an average efficiency of 27.1 J/TH.

The table below presents the average cost of mining each bitcoin for the nine months ended September 30, 2024:

41

Datacenter hosting revenue

On January 30, 2023, we entered into the NYDIG Hosting Agreement to provide datacenter hosting services. Under the NYDIG Hosting Agreement, we generate revenue from a reimbursement fee that covers the cost of power and direct costs associated with management of the mining facilities, a hosting fee and a gross profit-sharing arrangement. The arrangement covers substantially all of our current mining capacity at the New York Facility and the South Carolina Facility during the 2023 comparative period, prior to the sale of the facility on November 15, 2023. We generated revenue of $22.2 million for the first nine months of 2024 and $28.7 million for the first nine months of 2023. Approximately $10.0 million of this decrease is a result of the sale of the South Carolina in November 2023, which was partially offset by an increase in the price of bitcoin during the nine months ended September 30, 2024 as compared to the prior year. In addition, we managed approximately 1.7 EH/s of average active hash rate in our hosting services, of which produced approximately 532 bitcoins.

Power and capacity revenue

Power and capacity revenue at our New York Facility is earned when we sell capacity and energy and ancillary services to the wholesale power grid managed by the NYISO. Through these sales, we earn revenue in three streams, including: (1) power revenue received based on the hourly price of power, (2) capacity revenue for committing to sell power to the NYISO when dispatched and (3) other ancillary service revenue received as compensation for the provision of operating reserves.

Our power and capacity revenue increased $2.1 million, or 43%, to $7.1 million during the nine months ended September 30, 2024. We estimate higher average power and capacity prices and higher power and capacity sales volume caused revenue increases of approximately 25% and 18%, respectively, as compared to the prior period.

Cost of revenue (exclusive of depreciation)

$ in thousands

Total cost of revenue, exclusive of depreciation, decreased $5.3 million, or 15%, to $30.9 million during the nine months ended September 30, 2024 as compared to the prior year period. We estimate the decrease is comprised of approximately 7% due to higher natural gas costs for Datacenter Hosting, as well as revenue share expense. This was partially offset by 18% due to the decrease in electricity utilization within production, mainly as a result of the sale of the facility in South Carolina, along with 4% due to the reduction in monthly hosting fees paid to third parties for hosting Company-owned miners.

The New York Facility allocates its cost of revenue between datacenter hosting, cryptocurrency mining and power and capacity based on their respective MWh consumption on a pro rata basis.

Selling, general and administrative expenses

Selling, general and administrative expenses decreased $9.3 million, or 41%, to $13.4 million for the nine months ended September 30, 2024 as compared to the prior year period. The main drivers of the decrease in selling, general and administrative expenses were:

• Total payroll and benefits and other employee costs decreased approximately $4.0 million in the first nine months of 2024 compared to the prior year period, as a result of declines in employee expenses related to the corporate overhead cost reduction efforts that occurred in 2023 as well as a decrease in incentive compensation;
• Decrease of approximately $2.9 million due to reductions in professional fees and consulting expenses caused by reductions in discretionary costs and higher regulatory costs in the prior year period associated with permit renewals and environmental matters at the New York Facility;
• Total insurance expense decreased approximately $1.7 million in the first nine months of 2024 compared to the prior year period, as a result of declines in coverage costs related to umbrella, property, and liability policies due to a lower asset base; and
• Total restructuring costs decreased approximately $0.7 million in the first nine months of 2024 compared to the prior year period, mainly as a result of non-recurring restructuring costs incurred in the prior year

Depreciation

Depreciation expense decreased $0.5 million, or 4%, to $9.9 million for the nine months ended September 30, 2024 as compared to the prior year period, due to a lower asset base resulting from the sale of the South Carolina Facility in 2023.

Gain on digital assets

We recognized a gain on digital assets of $0.2 million for the nine months ended September 30, 2024 as a result of measuring digital assets at fair value due to us adopting ASU 2023-08 on January 1, 2024. There was no gain or loss on digital assets as a result of measuring digital assets at fair value for the nine months ended September 30, 2023.

Loss (gain) on sale of assets

We recognized a loss on the sale of assets of $0.7 million for the nine months ended September 30, 2024 which was primarily as a result of selling long-lived assets. During the nine months ended September 30, 2023, we recognized a gain on the sale of assets of $1.8 million for the sale of certain credits and coupons, including the $1.2 million of coupons transferred to NYDIG as part of the debt restructuring.

Operating (loss) income from continuing operations

We reported an operating loss for the nine months ended September 30, 2024 of $10.1 million compared with an operating loss of $22.4 million in the nine months ended September 30, 2023. The favorable variance of $12.3 million is primarily related to significant cost savings in selling, general, and administrative expenses, as well as a $3.8 million decrease in impairment of long-lived assets and a $1.6 million decrease in remeasurement on environmental liability.

Adjusted loss from operations was $9.3 million for the nine months ended September 30, 2024 as compared to adjusted loss from operations of $15.7 million in the nine months ended September 30, 2023. The adjusted loss from operations was driven by the same factors described above impacting loss from operations. A reconciliation of reported amounts to adjusted amounts can be found in the "Non-GAAP Measures and Reconciliations" section of this MD&A.

Total other expense, net

During the nine months ended September 30, 2024, we incurred a decrease of $3.5 million, or 37%, to $5.9 million of other expense, mainly due to a reduction in interest expense of $4.3 million and partially offset by a change in fair value of warrant asset of $0.4 million and decrease of $0.4 million in gain on sale of digital assets. The decrease in interest expense is a result of the reductions in debt that occurred in the first and fourth quarters of 2023.

Benefit from income taxes

Our effective tax rate for the nine months ended September 30, 2024 was a 1% benefit which was lower than the statutory rate of 21% because we have a full valuation allowance on deferred tax assets, as well as an adjustment for the New York State income tax receivable upon completion of the 2023 tax return. We recorded and will continue to carry a full valuation allowance against our gross deferred tax assets that will not reverse against deferred tax liabilities within the scheduled reversal period. The 1%, or $0.1 million benefit for the nine months ended September 30, 2024 was the result of an adjustment for the New York State income tax receivable upon completion of our 2023 tax return.

Our effective tax rate for the nine months ended September 30, 2023 was 0%, which was lower than the statutory rate of 21% primarily due to state income taxes and tax benefits associated with stock-based compensation.

Net loss from continuing operations

As a result of the factors described above, Greenidge incurred a net loss of $15.9 million for the nine months ended September 30, 2024 as compared to a net loss of $31.8 million for the nine months ended September 30, 2023.

On an adjusted basis, excluding the impact of a gain on sale of assets and debt restructure costs, adjusted net loss during the nine months ended September 30, 2024 would have been $14.6 million as compared to $25.1 million in the same period in 2023. Adjusted net loss is a non-GAAP performance measure. A reconciliation of reported amounts to adjusted amounts can be found in the "Non-GAAP Measures and Reconciliations" section of this MD&A.

Loss from discontinued operations

We have reported the Support.com business as discontinued operations in the consolidated financial statements. Loss from discontinued operations, net of tax decreased $0.7 million, or 98%, to $0.01 million for the nine months ended September 30, 2024. The decrease is primarily related to the closing of operations.

Non-GAAP Measures and Reconciliations

Revenue per MWh for datacenter hosting, cryptocurrency mining and power and capacity are used by management to consider the extent to which we may generate electricity to either produce cryptocurrency or sell power to the New York wholesale power market. Cost of revenue (excluding depreciation) per MWh represents a measure of the cost of natural gas, emissions credits, payroll and benefits and other direct production costs associated with the MWhs produced to generate the respective revenue category for each MWh utilized. Depreciation expense is excluded from the cost of revenue (exclusive of depreciation) per MWh metric; therefore, not all cost of revenues for datacenter hosting, cryptocurrency mining and power and capacity are fully reflected. To the extent any other cryptocurrency datacenters are public or may go public, the cost of revenue (exclusive of depreciation) per MWh metric may not be comparable because some competitors may include depreciation in their cost of revenue figures.

Liquidity and Capital Resources

On September 30, 2024, we had cash and cash equivalents of $7.6 million. To date, we have primarily relied on debt and equity financing to fund our operations, including meeting ongoing working capital needs. Our management took certain actions during 2023 and during the first nine months of 2024 to improve our liquidity.

As discussed in Item 1, "Business—Corporate History and Structure" of our Annual Report on Form 10-K filed on April 10, 2023, we entered into a debt restructuring agreement with our primary lender, NYDIG. We restructured our debt by transferring ownership of miners, previously secured by the MEFAs, under the Purchase Agreement along with the rights to credits and coupons to NYDIG and reduced our debt and accrued interest balance with NYDIG from $75.8 million to $17.3 million.

We also entered into the NYDIG Hosting Agreement with NYDIG affiliates. The terms of the NYDIG Hosting Agreement require NYDIG affiliates to pay a hosting fee that covers the cost of power and direct costs associated with management of the mining facilities as well as a gross profit-sharing arrangement. This allows us to participate in profit upside, but reduces our downside risk of bitcoin price deterioration and cost increases related to natural gas.

In addition to revenue generated from hosting arrangements, we continue to operate Company-owned miners at our own facilities, including migrating miners from third-party hosting providers to our recent expansion sites in North Dakota and Mississippi. On May 31, 2024, the only order entered into between Greenidge and Core pursuant to the Core Hosting Agreement terminated pursuant to its terms and all Greenidge-owned miners previously hosted by Core were redeployed at Greenidge-owned sites. We expect the migration of miners to Greenidge-owned sites will increase the profitability of Company-owned miners.

We continue to own approximately 153 acres of land in South Carolina, which has been classified as held for sale. We anticipate the sale of the land to generate proceeds that will improve our liquidity within the next twelve months.

On December 11, 2023, we entered into an Equity Exchange Agreement (the “Equity Exchange Agreement”) with Infinite Reality, Inc. (“Infinite Reality”), pursuant to which, among other things, (i) we issued to Infinite Reality a one-year warrant to purchase 180,000 shares of our Class A common stock at an exercise price of $7.00 per share, the proceeds of which, upon exercise, are required to be used for the development of a proposed new data center contemplated by a Master Services Agreement entered into between us and Infinite Reality on December 11, 2023, and (ii) we issued 180,000 shares of our Class A common stock to Infinite Reality, which shares for purposes of the Equity Exchange Agreement, were valued at $8.33 per share, or an aggregate value of approximately $1.5 million. In addition, Infinite Realty issued to Greenidge a one-year common stock purchase warrant, pursuant to which we have the right to purchase up to 235,754 shares of common stock of Infinite Reality, par value $0.001 per share (“Infinite Reality Common Stock”), at an exercise price of $5.35 per share, and Infinite Reality issued to us 280,374 shares of Infinite Reality Common Stock.

We continued to improve our liquidity position in the first nine months of 2024. On February 12, 2024, we entered into a securities purchase agreement (the “Armistice SPA”) with Armistice Capital Master Fund Ltd. (“Armistice”). Pursuant to the Armistice SPA, Armistice purchased (i) 450,300 shares of Class A common stock (the “SPA Shares”), and (ii) a pre-funded warrant (the “Pre-Funded Warrant”) to purchase 810,205 shares of Class A common stock (the “Pre-Funded Warrant Shares”). The per share purchase price of the SPA Shares and the Pre-Funded Warrant Shares was $4.76, resulting in aggregate gross proceeds of $6.0 million, and after giving effect to the exercise price of $0.0001 per Pre-Funded Warrant Share, we received net proceeds of $6.0 million. In addition, we issued to Armistice a five-year warrant to purchase up to 1,260,505 shares of Class A common stock, exercisable commencing on August 14, 2024 at an exercise price of $5.25 per share.

Despite these improvements to our financial condition, our management expects that we will require additional capital in order to fund our expenses and to support our working capital needs and remaining debt servicing requirements. Management continues to assess different options to improve our liquidity which include, but are not limited to:

• a sale of our remaining real estate in South Carolina and/or sale of the remaining miner infrastructure equipment inventory, which was not used in previous expansions.
• issuances of equity, including but not limited to issuances under the Common Stock Purchase Agreement and/or the ATM Agreement.
• retirement or purchase of our outstanding debt through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material and to the extent equity is issued, dilutive.

The Company believes it will be successful in certain efforts to improve liquidity that will allow it to extend cash resources for at least the next twelve months, contingent on factors outlined below which continue to present significant uncertainty regarding the Company's financial condition.

Our operating cash flows generated by mining, hosting, and power are affected by several factors including the price of bitcoin, bitcoin mining difficulty, and the costs of electricity, natural gas, and emissions credits. Increases in the price of bitcoin benefit us by increasing the amount of revenue earned for each bitcoin mined. Increases in the difficulty to mine a bitcoin adversely affect us by decreasing the number of bitcoin we can mine. Increases in the costs of electricity, natural gas, and emissions credits adversely affect us by increasing the cost to mine bitcoin. In April 2024, a bitcoin halving occurred, which decreased the reward for successfully placing a block from 6.25 bitcoin to 3.125 bitcoin. There are no assurances that favorable changes in the price of bitcoin will occur as a result of the bitcoin halving to offset the decrease in mining revenues as a result therefrom. Therefore, the most recent bitcoin halving has had and may continue to have a material adverse effect on the profitability of our future self-mining and hosting operations. While we continue to work to implement options to improve liquidity, we can provide no assurance that these efforts will be successful and our liquidity could be negatively impacted by factors outside of our control, in particular, significant decreases in the price of bitcoin or increases in the difficulty of mining bitcoin, our inability to procure and comply with the permits and licenses required to operate our facilities, including the Title V Air Permit for the New York Facility and the possibility of a temporary or permanent loss of such permit following the expiration of the November 14 Stay, or the cost to us of such procurement or compliance, regulatory changes concerning cryptocurrency, increases in energy costs or other macroeconomic conditions and other matters identified in Item 1A, "Risk Factors" in our Annual Report for the year ended December 31, 2023 and in this Quarterly Report on Form 10-Q.

Given this uncertainty regarding our financial condition over the next 12 months from the date these financial statements were issued, we have concluded that there is substantial doubt about our ability to continue as a going concern for a reasonable period of time. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations and other commitments at September 30, 2024, and the years in which these obligations are due:

$ in thousands

The debt payments included in the table above include the principal and interest amounts due. The lease payments include fixed monthly rental payments and exclude any variable payments. Environmental obligations are based on estimates subject to various assumptions including, but not limited to, closure and post-closure cost estimates, timing of expenditures, escalation factors, and requirements of granted permits. Additional adjustments to the environment liability may occur periodically due to potential changes in remediation requirements regarding coal combustion residuals which may lead to material changes in estimates and assumptions.

Summary of Cash Flow

The following table provides information about our net cash flow for the nine months ended September 30, 2024 and 2023.

$ in thousands

Operating Activities

Net cash used for operating activities was $8.2 million for the nine months ended September 30, 2024, as compared to net cash used of $0.9 million for the nine months ended September 30, 2023. The variance in the operating cash flow during the first nine months of 2024 as compared to 2023 was driven primarily by the purchase of additional Regional Greenhouse Gas Initiative ("RGGI") credits in Q1 2024, which was required to settle the accrued emissions liability for the three-year control period ended December 31, 2023, as well as the advantageous change in net loss.

Investing Activities

Net cash used in investing activities was $4.4 million for the nine months ended September 30, 2024, as compared to $10.4 million for the nine months ended September 30, 2023. The decrease is primarily related to $4.0 million of lower purchases of and deposits for property and equipment as compared to the prior year due to the lower miner purchases and increase in proceeds from the sale of long-lived assets of $1.3 million.

Financing Activities

Net cash provided by financing activities was $7.0 million for the nine months ended September 30, 2024, as compared to $4.7 million for the nine months ended September 30, 2023. The increase is primarily related to the increase of $6.0 million of proceeds from the issuance of common stock and pre-funded warrant, along with the $6.8 million elimination of principal payments on debt due to its restructuring. These increases were partially offset by a $10.4 million reduction in sales of Class A common stock under the Company’s ATM Agreement.

Financing Arrangements

See Note 5, "Debt," and Note 9, "Stockholder’s Deficit" in the Notes to our Unaudited Condensed Consolidated Financial Statements for details regarding our financing arrangements for further details regarding our financing arrangements.

Critical Accounting Policies and Estimates

The most significant accounting estimates involve a high degree of judgment or complexity. Management believes the estimates and judgments most critical to the preparation of our condensed consolidated financial statements and to the understanding of our reported financial results include those made in connection with environmental obligations. Management evaluates its policies and assumptions on an ongoing basis.

Our significant accounting policies related to these accounts in the preparation of our condensed consolidated financial statements are described under the heading “Management Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2023. See Note 2. Summary of Significant Accounting Policies in Part I, Item 1 herein, which describes changes to the critical accounting policies and methods used in the preparation of our condensed consolidated financial statements.

Off-Balance Sheet Arrangements

None.

Emerging Growth Company Status

We qualify as an “emerging growth company” under the Jumpstart our Business Startups Act ("JOBS Act"). As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

• have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
• comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
• submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay,” “say-on-frequency” and pay ratio; and
• disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards.

In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Its financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.

We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1.235 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our Class A common stock that are held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

Our management, including our Chief Executive Officer and Chief Financial Officer, have conducted an evaluation of the effectiveness of disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded as of September 30, 2024, that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this Quarterly Report on Form 10-Q has been recorded, processed, summarized and reported when required and the information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There have not been any changes in our internal control over financial reporting that occurred during the third quarter of 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In evaluating our company and our business, you should carefully consider the risks and uncertainties described in Part I, Item 1A, “Risk Factors” in our most recent Annual Report on Form 10-K together with updates to those risk factors or new risk factors contained in this Quarterly Report on Form 10-Q below and any other information in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes and in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. The occurrence of one or more of the events or circumstances described in these risk factors, alone or in combination with other events or circumstances, may have a material adverse effect on our business, reputation, revenue, financial condition, results of operations and future prospects, in which case the market price of our common stock could decline. Unless otherwise indicated, reference in this section and elsewhere in this Quarterly Report on Form 10-Q to our business being adversely affected, negatively impacted or harmed will include an adverse effect on, or a negative impact or harm to, our business, reputation, financial condition, results of operations, revenue and our future prospects. The material and other risks and uncertainties included in our Annual Report on Form 10-K, summarized above in this Quarterly Report on Form 10-Q and described below are not intended to be exhaustive and are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. This Quarterly Report on Form 10-Q also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of a number of factors, including the risks described below. Certain statements in the Risk Factors below are forward-looking statements. See the section titled “Cautionary Statement Regarding Forward-Looking Statements”.

Our business is subject to numerous risks and uncertainties, which illuminate challenges that we face in connection with the successful implementation of our strategy and the growth of our business. Our business, prospects, financial condition or operating results could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. There have been no material changes to the risk factors identified in our most recent Annual Report on Form 10-K, other than as set forth below.

The bitcoin reward for successfully uncovering a block most recently halved in April 2024 and will halve again several times in the future, and bitcoin value may not adjust to compensate us for the reduction in the rewards we receive from our bitcoin mining efforts.

Halving is a process designed to control the overall supply and reduce the risk of inflation in cryptocurrencies using a proof of work consensus algorithm. At a predetermined block, the bitcoin mining reward is cut in half, hence the term "halving." For bitcoin, the reward was initially set at 50 bitcoin currency rewards per block, which was cut in half to 25 on November 28, 2012 at block 210,000, then to 12.5 on July 9, 2016 at block 420,000, and then again to 6.25 on May 11, 2020 at block 630,000. The most recent halving for bitcoin occurred on April 19, 2024 at block 840,000 and the reward was reduced to 3.125. The next halving is expected to occur in spring 2028. This process will reoccur until the total amount of bitcoin currency rewards issued reaches 21 million, which is expected to occur around the year 2140.

Bitcoin has had a history of price fluctuations around the halving of its rewards, and we can provide no assurance that any price change will be favorable or would compensate for the reduction in bitcoin mining reward in connection with a halving. If the award of bitcoin or a proportionate decrease in bitcoin mining difficulty does not follow these anticipated halving events, the revenue we earn from our cryptocurrency datacenter operations would see a corresponding decrease, and we may not have an adequate incentive to continue bitcoin mining.

We have material environmental liabilities, and costs of compliance with existing and new environmental laws could have a material adverse effect on us.

We and our affiliates are subject to extensive environmental regulation by governmental authorities, including the United States Environmental Protection Agency (the "EPA"), and state environmental agencies such as the NYSDEC and/or attorneys general, and have material environmental liabilities, including a coal combustion ("CCR") residual liability of $17.3 million as of December 31, 2023 associated with the closure of a coal ash point located on the New York Facility property and an environmental liability of $12.9 million as of December 31, 2023 associated with the Lockwood Hills Landfill. See "Business—Governmental Regulation—Environmental Liability" and Note 10, "Commitments and Contingencies—Environmental Liabilities", in the Notes to Consolidated Financial Statements. We may incur significant additional costs beyond those currently contemplated to comply with these regulatory requirements. If we fail to comply with these and future regulatory requirements, we could be forced to reduce or discontinue operations or become subject to administrative, civil, or criminal liabilities and fines.

In 2015, EPA finalized federal regulations (the “CCR Rule”) that establish technical requirements for the disposal of CCR. The EPA recently published revisions to the CCR Rule, effective November 8, 2024 (the “revised CCR regulations”). The revised CCR regulations impose certain compliance and other obligations on certain previously unregulated CCR sites. The revised CCR regulations require, among other things, electric utilities and independent power producers to investigate and identify previously unregulated CCR sites and demonstrate that the sites were closed in accordance with the closure performance standards in the CCR Rule. The required investigation is conducted in phases, with the Phase 1 report due on February 9, 2026. Any required closure obligation would commence on May 8, 2029, unless exceptions apply that would defer the closure obligation to a permitting process. In accordance with the revised CCR regulations, phased evaluations of the Lockwood Hills and Greenidge Generation facilities will be conducted to determine if any previously unregulated CCR sites must be addressed under the new regulation. We make no assurances as to the status of any CCR sites at either facility that could be subject to regulation under the revised CCR regulations.

Additionally, the EPA has recently finalized or proposed several regulatory actions establishing new requirements for control of certain air emissions from certain sources, including electricity generation facilities. In the future, the EPA may also propose and finalize additional regulatory actions that may adversely affect our existing generation facilities or our ability to cost-effectively develop new generation facilities. We can provide no assurance that the currently installed emissions control equipment at the natural gas-fueled generation facilities owned and operated by us will satisfy the requirements under any future EPA or state environmental regulations. Future federal and/or state regulatory actions could require us to install significant additional emissions control equipment, resulting in potentially material costs of compliance for our generation units, including capital expenditures, higher operating and fuel costs, and potential production curtailments. These costs could have a material adverse effect on our results of operations and financial condition.

Existing environmental regulations could be revised or reinterpreted, new laws and regulations could be adopted or become applicable to us or our facilities, and future changes in environmental laws and regulations could occur, including potential regulatory and enforcement developments related to air emissions, all of which could result in significant additional costs beyond those currently contemplated to comply with existing requirements. Any of the foregoing could have a material adverse effect on our results of operations and financial condition.

We may not be able to obtain or maintain all required environmental regulatory approvals. For example, in June 2022, NYSDEC denied our application to renew a Title V Air Permit for the continued operation of our natural gas power generation facility in the Town of Torrey, New York. In July 2022, we appealed the denial and requested an administrative adjudicatory hearing with NYSDEC, however, in May 2024, our appeal to NYSDEC and request for an adjudicatory hearing were ultimately denied and the June 2022 non-renewal of our Title V Air Permit was affirmed by NYSDEC’s Regional Director for Region 7.

A hearing was held on October 29, 2024, in the New York State Supreme Court, Yates County, on our previously disclosed TRO Request allowing our New York Facility to continue operations pending a final, non-appealable outcome regarding our Article 78 challenge of NYSDEC’s denial of our Title V Air Permit renewal application filed on August 15, 2024. In connection with such hearing, we and NYSDEC entered into a stipulation on the record to extend a stay of NYSDEC's shut down order from November 1, 2024 to November 14, 2024, at such time we expect the Court to render a decision on our TRO Request, or, alternatively, our Article 78 challenge of the denial of the permit renewal application in total. There can be no assurance that our efforts will be successful. If there is a delay in obtaining any required environmental regulatory approvals, if we fail to obtain, maintain, or comply with any such approval, or if an approval is retroactively disallowed or adversely modified, the operation of our generation facilities could be stopped, disrupted, curtailed, or modified or become subject to additional costs. Any such stoppage, disruption, curtailment, modification, or additional costs could have a material adverse effect on our results of operations and financial condition.

In addition, we may be responsible for any on-site liabilities associated with the environmental condition of facilities that we have acquired, leased, developed, or sold, regardless of when the liabilities arose and whether they are now known or unknown. In connection with certain acquisitions and sales of assets, we may obtain, or be required to provide, indemnification against certain environmental liabilities. Another party could, depending on the circumstances, assert an environmental claim against us or fail to meet its indemnification obligation to us. Such event could have an adverse effect on our results of operations and financial condition.

The properties utilized by us in our cryptocurrency datacenter and hosting may experience damage, including damage not covered by insurance.

Our current cryptocurrency datacenter operations in the Town of Torrey, New York are, and any future cryptocurrency datacenter operations that we establish or host will be, subject to a variety of risks relating to physical condition and operation, including:

• the presence of construction or repair defects or other structural or building damage;
• any noncompliance with or liabilities under applicable environmental, health or safety regulations or requirements or building permit requirements;
• any damage resulting from natural disasters, such as hurricanes, earthquakes, fires, floods and windstorms;
• damage caused by criminal actors, such as cyberattacks, vandalism, sabotage or terrorist attacks; and
• claims by employees and others for injuries sustained at our properties.

Any of these could render our cryptocurrency datacenter, hosting and/or power generation operations inoperable, temporarily, or permanently, and the potential impact on our business is currently magnified because we operate the majority of our cryptocurrency datacenter operations from a single location. The security and other measures we take to protect against these risks may be insufficient or unavailable. Apart from $15 million in coverage of our bitcoin mining equipment, which is subject to certain deductibles, our power plant property is not insured by any third party insurance provider and our ability to self-insure may not be adequate to cover the losses we suffer as a result of the aforementioned risks, which could materially adversely impact our results of operations and financial condition.

Our issuance of a significant number of additional shares of Class A common stock in connection with any future financings, acquisitions, investments, commercial arrangements, under our stock incentive plans, or otherwise will dilute all other shareholders and our stock price could decline as a result.

In July 2024, we entered into the Common Stock Purchase Agreement with B. Riley Principal II pursuant to which we issued an aggregate of 7,300,000 shares of Class A common stock for a 36-month period beginning on the Effective Date. We issued 424,156 shares under the Common Stock Purchase Agreement through the date of filing.

In 2022, we entered into an At Market Issuance Sales Agreement with B. Riley Securities, pursuant to which we issued an aggregate of 4,167,463 shares of Class A common stock through the date of filing.

In December 2023, we entered into the Equity Exchange Agreement with Infinite Reality under which we issued 180,000 shares of Class A common stock, and a 1-year warrant to purchase 180,000 shares of Class A common stock.

In February 2024, we entered into the Armistice SPA, pursuant to which we issued 450,300 shares of Class A common stock as SPA Shares, the Pre-Funded Warrant to purchase 810,205 shares of Class A common stock, which has been exercised in full, and the Armistice Warrant to purchase up to 1,260,505 shares of Class A common stock. We may continue to raise capital by selling shares of Class A common stock, or instruments convertible or exercisable for Class A common stock, through future equity offerings.

In addition, we have issued equity compensation pursuant to our 2021 Equity Plan, as amended and restated, and certain inducement grants, and shares of Class A common stock in exchange for our debt pursuant to certain privately negotiated exchange agreements, as described under Note 16, “Subsequent Events—Exchange Agreements".

We cannot predict what effect, if any, actual or potential future sales of our Class A common stock will have on the market price of our Class A common stock. Sales of substantial amounts of our Class A common stock in the public market, or the perception that such sales could occur, could materially adversely affect the market price of our Class A common stock.

A significant portion of our total outstanding shares of Class A common stock are or will be registered for resale or will become eligible for resale under Rule 144, and may be sold into the market in the future. This could cause the market price of our Class A common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of our Class A common stock could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our Class A common stock.

As of the date of this filing, we have registered in a registration statement on Form S-1 up to 7,300,000 shares of Class A common stock issuable pursuant to the Common Stock Purchase Agreement that may be resold from time to time, over a 36-month period beginning on the Effective Date, by B. Riley Principal II, in a registration statement on Form S-8 up to 307,684 shares of Class A common stock issuable upon the vesting and exercise of non-qualified stock option inducement grants, in two registration statements on Form S-8 an aggregate of up to 1,324,532 shares of Class A common stock that may be delivered from time to time pursuant to past and future awards under our 2021 Equity Plan, as amended and restated, and in a registration statement on Form S-3 up to 2,521,010 shares of Class A common stock issuable pursuant to the SPA that may be resold from time to time by Armistice.

As the shares of Class A common stock registered or to be registered pursuant to these registration statements can be freely sold in the public market, the market price of our Class A common stock could decline if the stockholders sell their shares or are perceived by the market as intending to sell them.

In addition, we have issued 180,000 shares of Class A common stock and a 1-year warrant to purchase 180,000 shares of Class A common stock to Infinite Reality as restricted securities in private placements under Section 4(a)(2) of the Securities Act, which shares became eligible for resale under Rule 144 under the Securities Act after a six-month holding period.