Vulcan Infrastructure & Power Inc.: Form 10-Q for the period ended Mar 31, 2025

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, 2024 and 2023 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 months ended March 31, 2025 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, 2024 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 are a developer and operator of datacenters focused on cryptocurrency mining and infrastructure development. We currently build, maintain and operate data centers focused on bitcoin mining, along with related power and electric infrastructure. We generate revenue from (1) datacenter hosting, (2) cryptocurrency self-mining, and (3) power and capacity sales. We are focused on utilizing our power generation and datacenter operation expertise to connect datacenter power demand with stranded electrical assets through the identification and development of new datacenter sites.

We own cryptocurrency datacenter operations in Torrey, New York (the "New York Facility") and Columbia, Mississippi (the "Mississippi Facility"), and lease property for purposes of operating a cryptocurrency datacenter in Underwood, North Dakota (the "North Dakota Facility"). 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 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 consist of approximately 30,100 miners with approximately 3.3 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 11,900 miners, or 1.5 EH/s is associated with our cryptocurrency mining.

Recent Developments

Highlights from the quarter ended March 31, 2025 and subsequent events through the date of this filing:

• In March 2025, a subsidiary of the Company agreed to acquire a 37.4-acre property in Columbus, Mississippi for $243,100 in cash, with the transaction expected to close in the second quarter 2025. In April 2025, the subsidiary entered into an agreement with the local utility to initiate preliminary work for a substation to deliver 40 MW of power to the property. As of the filing date, this project is estimated to cost approximately $2.5 million and is anticipated to be completed by July 2026, which does not include the time and expense required to design, engineer and construct a datacenter to utilize such power on the property.
• During the quarter ended March 31, 2025, we did not issue any shares of our Class A common stock under the Common Stock Purchase Agreement with B. Riley Principal Capital II, LLC (See Note 9, "Stockholders' Deficit - Common Stock Purchase Agreement with B. Riley Principal Capital II, LLC"). As of the filing date, we do not plan to sell any shares of our Class A common stock pursuant to the Common Stock Purchase Agreement at a price below $2.73 per share; however, there can be no assurance that we will not sell shares at or below such price.
• On April 16, 2025, we announced the appointment of Christopher Krug and Kenneth Fearn to our Board of Directors and announced the appointment of current board member Timothy Fazio as Chairman, effective April 17, 2025. Mr. Krug is an experienced founder and public markets investor with a dedicated focus on small cap companies across industries. Mr. Fearn is an accomplished senior executive and public board member with over three decades of experience in investments, finance and M&A and a specialization in real estate development

and acquisition. Their expertise in both public and private markets and unique perspectives will be invaluable to the Company as we evaluate various transactions to maximize shareholder value.

• On May 7, 2025, the Company announced that it had exchanged or agreed to exchange approximately 16.6% of the original $72,200,000 aggregate principal amount of its 8.50% Senior Notes due October 2026 (the “Senior Notes"), totaling $12,014,375 in principal amount (or 480,575 Senior Notes, each with a $25 principal value), for either cash or shares of the Company’s Class A common stock, in the aggregate, from October 24, 2024 through May 1, 2025. Refer to Note 5, "Debt," Note 9, "Stockholders' Deficit," and Note 17, "Subsequent Events—Exchange Agreements," in the Notes to our Unaudited Condensed Consolidated Financial Statements for further information.

Results from Operations - Three Months Ended March 31, 2025

The following table (in thousands) sets forth key components of our results from 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 March 31, 2025 versus the three months ended March 31, 2024, unless otherwise specified.

(a) Metrics under 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 March 31, 2025 and 2024.

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

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Revenue

In the first quarter of 2025 Greenidge increased power and capacity MWhs due to favorable power and capacity economics, while reducing MWhs dedicated to cryptocurrency mining and hosting. At March 31, 2025, Greenidge datacenter operations consisted of approximately 30,100 miners with approximately 3.3 EH/s of combined capacity for both datacenter hosting and cryptocurrency mining, of which 18,200 miners, or 1.8 EH/s, were associated with datacenter hosting and 11,900 miners, or 1.5 EH/s, were 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 by us. Our cryptocurrency mining revenue decreased $2.8 million, or 40%, to $4.2 million.

We estimate that approximately 65% 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 44% 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 76% higher and our average hash rate increased 5%, primarily attributable to the addition of more efficient miners to our fleet.

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

As of March 31, 2025, our fleet of miners ranged in age from 0.1 to 3.6 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 March 31, 2025, our fleet of miners ranged in efficiency from approximately 15.0 to 34.2 joules per terahash (“J/TH”) and had an average efficiency of 26.6 J/TH.

The table below presents the average cost of mining each bitcoin for the three months ended March 31, 2025 and 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

Under the hosting services agreement and related orders with affiliates of NYDIG ABL LLC (collectively as in effect from time to time, 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. We generated revenue of $5.8 million for the three months ended March 31, 2025 and $9.1 million for the three months ended March 31, 2024. This decrease of $3.3 million was due to a 44% increase in average difficulty, a 23% decrease in hosting MWhs, as well as a decrease in bitcoin rewards due to the bitcoin halving in April 2024, partially offset by a 76% increase in the average price of bitcoin. In addition, we managed approximately 1.3 EH/s of average active hash rate in our hosting services, of which produced approximately 67 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 $6.2 million, or 203%, to $9.2 million during the three months ended March 31, 2025. We estimate that higher power and capacity sales volume due to increased demand and higher average power and capacity prices caused revenue increases of approximately 65% and 138%, respectively.

Cost of revenue (exclusive of depreciation)

$ in thousands

Total cost of revenue, exclusive of depreciation, increased $2.7 million, or 22%, to $15.0 million during the three months ended March 31, 2025 as compared to the prior year period. We estimate the increase is comprised of approximately 110% due to higher natural gas costs and 27% due to higher emissions expense due to higher RGGI prices. This was partially offset by approximately 113% due to a decrease in cryptocurrency mining hosting fees upon termination of the hosting agreements in 2024.

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 $2.6 million, or 49%, to $2.8 million for the three months ended March 31, 2025 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 $0.8 million in the first quarter of 2025 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 $0.2 million in the first quarter of 2025 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 2024;
• Decrease of approximately $0.7 million due to reductions in professional fees and consulting expenses caused by reductions in discretionary costs;
• Total property tax expense decreased approximately $0.3 million in the first quarter of 2025 compared to the prior year period, primarily related to a reduction in the assessed value of property owned by us; and
• Total stock compensation decreased approximately $0.5 million in the first quarter of 2025 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 due to a modification that occurred in the second quarter of 2024.

Depreciation

Depreciation expense decreased $0.1 million, or 3%, to $3.1 million for the three months ended March 31, 2025 as compared to the prior year period, due to a lower depreciable asset base at the end of the period.

Loss (Gain) on digital assets

We recognized a loss on digital assets of $1.0 million for the three months ended March 31, 2025 as a result of a decline in the closing price of bitcoin during the three months ended March 31, 2025, leading to a $1.2 million unrealized loss on digital assets partially offset by a $0.2 million realized gain on sale of bitcoin during the quarter. There was $0.1 million gain on digital assets as a result of realized gains on sale of bitcoin and change in fair value of digital assets as a result of adopting ASU 2023-08 effective January 1, 2024 during the three months ended March 31, 2024.

Loss on sale of assets

We recognized a loss on the sale of assets of $0.1 million for the three months ended March 31, 2025 as a result of selling long-lived assets. There was no gain or loss on the sale of assets for the three months ended March 31, 2024.

Gain on insurance proceeds

We recognized a gain on insurance proceeds of $0.4 million for the three months ended March 31, 2025 as a result of filing a claim related to miners damaged in a severe weather event. There was no gain on insurance proceeds for the three months ended March 31, 2024.

Operating loss from operations

As a result of the factors described above, we reported an operating loss for the three months ended March 31, 2025 of $2.4 million as compared to an operating loss of $1.7 million in the three months ended March 31, 2024.

Total other expense, net

During the three months ended March 31, 2025, we incurred an increase of $1.0 million, or 43%, to $3.2 million of other expense due to an increase in interest expense of $1.1 million in connection with the extension payment on the letters of credit held by Atlas and a $0.3 million loss on our liquidation of our former foreign subsidiary , which was partially offset by a decrease in the change in fair value of warrant asset due to the warrant being exercised in the fourth quarter of 2024.

Benefit from income taxes

Our effective tax rate for the three months ended March 31, 2025 and 2024 was 0% and 0%, respectively, which was lower than the statutory rate of 21% because we have a full valuation allowance on deferred tax assets. 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.

Net loss from operations

As a result of the factors described above, we incurred a net loss of $5.6 million for the three months ended March 31, 2025 as compared to a net loss of $3.9 million for the three months ended March 31, 2024.

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) and Adjusted EBITDA (loss)

"EBITDA" is defined as earnings from operations before taxes, interest, and depreciation and amortization. "Adjusted EBITDA from operations" is defined as EBITDA from operations adjusted for stock-based compensation and other special items determined by management, including, but not limited to loss on sale of assets, change in fair value of warrant asset and impairment of long-lived assets 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.

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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

As of March 31, 2025, we had cash and cash equivalents of $4.9 million and digital assets of $8.4 million. To date, we have primarily relied on debt and equity financing to fund our operations, including meeting ongoing working capital needs.

We believe our existing cash and cash equivalents, together with digital assets, cash generated from operations and the proceeds from the sale of the South Carolina Facility, will be sufficient to fund our operations and satisfy our current obligations through the next 12 months. However, our projected operating cash flows are not sufficient in the long term to meet our existing long-term debt obligations and will only be sufficient to fund operations and current operations if bitcoin mining economics remain at or above current levels.

We are considering various items to address the long-term debt obligations, including the retirement or purchase of our outstanding debt through cash purchases and/or exchanges for equity or other debt, which may be conducted in open-market purchases, privately negotiated transactions or other transactions. 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 used, dilutive. During the year ended December 31, 2024, we entered into privately negotiated exchange agreements, pursuant to which we issued an aggregate of 692,433 shares of our Class A common stock, in exchange for $3.7 million aggregate principal amount of our Senior Notes. During the first quarter of 2025, we entered into privately negotiated exchange agreements, pursuant to which we issued an aggregate of 643,456 shares of our Class A common stock, in exchange for $1.8 million aggregate principal amount of our Senior Notes. From April 1, 2025 through the date of this filing, we entered into privately negotiated exchange agreements, pursuant to which we issued an aggregate of 599,000 shares of our Class A common stock and paid $1.9 million in cash, in exchange for $6.5 million aggregate principal amount of our Senior Notes.

Our operating cash flows are highly dependent on bitcoin mining economics commonly measured by hashprice. Increases in the price of bitcoin benefit us by increasing the amount of revenue earned for each bitcoin earned. Increases in the difficulty to mine a bitcoin adversely affect us by decreasing the number of bitcoin earned. Increases in the costs of electricity, natural gas, and emissions credits adversely affect us by increasing operating costs. Depending on our assumptions regarding the bitcoin hashprice and energy price inputs, the estimates of the amounts of required liquidity vary significantly. There can be no assurances that these assumptions used to estimate liquidity requirements and future cash burn rates will be correct, and the ability to be predictive is uncertain due to the limited ability to predict future bitcoin and energy prices. The Company’s forecast also anticipates proceeds from the South Carolina Land classified as held for sale and any inability to close on a sale of the South Carolina Land will further adversely impact the Company’s liquidity projections. Additionally, the 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, which is subject to ongoing litigation (see Note 10, "Commitments and Contingencies"), may have an adverse impact on our ability to meet cash flow forecasts.

While the Company believes it will be successful in its efforts to improve liquidity, which will allow it to meet its financial commitments for at least the next 12 months, there can be no assurance that these efforts will be successful.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations and other commitments at March 31, 2025, 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. Self-mining capacity obligation is based on minimum power usage required at its North Dakota Facility. 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 three months ended March 31, 2025 and 2024.

$ in thousands

Operating Activities

Net cash used for operating activities was $5.7 million for the three months ended March 31, 2025, as compared to net cash used of $5.1 million for the three months ended March 31, 2024. The variance in the operating cash flow during the first three months of 2025 as compared to 2024 was driven primarily by funding a trust for environmental obligations and 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. We also surrendered the required RGGI credits in the first quarter of 2025 for the first year of the three-year control period ending December 31, 2026, as compared to surrendering the required RGGI credits in the second quarter of 2024. Non-cash adjustments included decreases in change in fair value of warrant asset, impairment of long-lived assets and stock-based compensation, an increase in loss on digital assets due to fluctuations in the price of bitcoin, a gain on insurance proceeds. This was partially offset by a less favorable net loss and us retaining bitcoin in connection with our bitcoin self-mining retention strategy.

Investing Activities

Net cash provided by investing activities was $2.0 million for the three months ended March 31, 2025, as compared to net cash used for investing activities of $1.0 million for the three months ended March 31, 2024. The variance is primarily related to sales of bitcoin coin resulting in proceeds of $1.8 million, an increase in proceeds from the sale of long-lived assets of $0.3 million, insurance proceeds received of $0.4 million on miners damaged as a result of a severe weather event and a decrease in purchase of and deposits for property and equipment of $0.4 million.

Financing Activities

There was no net cash provided by financing activities for the three months ended March 31, 2025, as compared to $7.0 million for the three months ended March 31, 2024. The variance was a result of us not engaging in any financing activities that resulted in cash inflows or outflows during the three months ended March 31, 2025.

Financing Arrangements

See Note 5, "Debt," and Note 9, "Stockholders' 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 our environmental obligations. There were no adjustments to the environmental liabilities for the three months ended March 31, 2025. 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 Note 2, "Summary of Significant Accounting Policies" in our Annual Report on Form 10-K for the year ended December 31, 2024. As described in Note 2, "Summary of Significant Accounting Policies" in Part I, Item 1 herein, there have been no material changes to our significant accounting policies for the three months ended March 31, 2025.

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 (which will expire in 2026), 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 March 31, 2025, 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 first quarter of 2025 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.

Our Class A common stock has recently been subject to Nasdaq delisting proceedings. While we have previously regained compliance with Nasdaq’s listing requirements, there can be no assurance that we will regain compliance with Nasdaq's continued listing requirements or that our Class A common stock will not be subject to delisting proceedings in the future. The delisting of our shares could negatively affect us and the price and liquidity of our Class A common stock.

Compliance with certain Nasdaq listing requirements depends upon the price of our Class A common stock, which may be impacted by market factors not within our control. We have previously received and resolved noncompliance notices from the Nasdaq listing qualifications department but can provide no assurance that we will be able to continue to maintain compliance with Nasdaq’s listing requirements in the future.

On March 26, 2025, we received a letter from the Nasdaq listing qualifications department notifying us that for the prior 30 consecutive business days, our Market Value of Publicly Held Shares ("MVPHS") had been below the listing requirement of $15 million. The Nasdaq rules provide us with an initial compliance period of 180 calendar days to regain compliance with the minimum MVPHS requirement. We can provide no assurance of our ability to take the appropriate actions within the 180 day cure period to regain compliance with Nasdaq listing requirements.

On April 9, 2025, we received a letter from the Nasdaq listing qualifications department notifying us that for the prior 30 consecutive business days, the bid price for the Company’s Class A common stock had closed below the listing requirement of $1.00 per share. The Nasdaq rules provide us with an initial compliance period of 180 calendar days to regain compliance with the minimum bid requirement. We can provide no assurance of our ability to take the appropriate actions within the 180 day cure period to regain compliance with Nasdaq listing requirements.

If Nasdaq delists our Class A common stock from trading on its exchange and we are not able to list our Class A common stock on another national securities exchange, we expect our securities could be quoted on an over-the-counter market. If this were to occur, we could face significant material adverse consequences, including, among other things: decreasing availability of market quotations for our Class A common stock; resulting in a determination that our Class A common stock is a “penny stock” which will require brokers trading in our Class A common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities; reducing the liquidity and market price of our Class A common stock; reducing the number of investors willing to hold or acquire our Class A common stock, which could negatively impact our ability to raise equity financing; limiting our ability to issue additional securities or obtain additional financing in the future; decreasing the amount of news and analyst coverage of us; and causing us reputational harm with investors, our employees, and parties conducting business with us.

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 1,595,855 shares under the Common Stock Purchase Agreement through the date of filing.

In 2022, we entered into the ATM Agreement with B. Riley, 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 one-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 are seeking approval by the Company's stockholders to increase the number of shares of Class A common stock authorized for issuance thereunder by one million at our 2025 annual meeting of stockholders to be held on June 17, 2025, and have issued certain inducement grants, and shares of Class A common stock in connection with the Equity Interest Payment Agreement, as described under Note 9, "Stockholders' Deficit—Equity Interest Payment Agreement," Note 12 "Related Party Transactions—Equity Interest Payment Agreement" and Note 17, "Subsequent Events—Equity Interest Payment," and in exchange for our debt pursuant to certain privately negotiated exchange agreements, as described under Note 5, "Debt," Note 9, "Stockholders' Deficit," and Note 17, “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 commencing on September 24, 2024, 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, and are seeking approval by our stockholders at our 2025 annual meeting of stockholders to be held on June 17, 2025 an amendment and restatement to our 2021 Equity Plan to increase the aggregate number of shares of Class A common stock that may be issued thereunder by one million, from 1,583,111 to 2,583,111.

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 one-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 in June 2024, as well as shares of Class A common stock in exchange for our Senior Notes pursuant to certain privately negotiated exchange agreements, as described under Note 5, "Debt," Note 9, "Stockholders' Deficit," and Note 17, "Subsequent Events—Exchange Agreements".

We may not have sufficient resources to repay our Senior Notes upon their maturity in October 2026, and we will face additional risks if we incur additional indebtedness.

As of March 31, 2025, we had $66.7 million of the Senior Notes outstanding. Given our current financial condition and liquidity position, we may not have sufficient resources to repay the Senior Notes, in whole or in part, upon their maturity on October 31, 2026, and our ability to earlier redeem or repurchase the Senior Notes, is uncertain. The indenture for the Senior Notes does not limit the amount of indebtedness that we or our subsidiaries may issue. As a result, we and our subsidiaries may be able to incur significant additional indebtedness. If we and our subsidiaries incur new indebtedness, the related risks that we face would be increased, and we may not be able to meet all our debt obligations, including repayment of the Senior Notes in 2026. If we incur any additional debt that is secured, the holders of that debt will be entitled to share in the proceeds distributed in connection with any enforcement against the collateral or an insolvency, liquidation, reorganization, dissolution, or other winding-up of the applicable obligor prior to applying any such proceeds to the Senior Notes. As of March 31, 2025, we had $66.7 million of indebtedness, all of which was unsecured.