# Riot Platforms, Inc. (RIOT) FY 2022 MD&A Verbatim Item 7 Management's Discussion and Analysis from Riot Platforms, Inc.'s 10-K for fiscal year 2022. SEC filing source: https://www.sec.gov/Archives/edgar/data/1167419/000155837023002704/riot-20221231x10k.htm Accession: 0001558370-23-002704 Filing date: 2023-03-02 Report date: 2022-12-31 Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high Company profile: /company/RIOT/ All MD&A years: /company/RIOT/mda/ Previous year: /company/RIOT/mda/fy2021/ (FY 2021) Next year: /company/RIOT/mda/fy2023/ (FY 2023) ITEM 7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Forward Looking Statements: The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to help the reader understand our results of operations and financial condition. The MD&A is provided as a supplement to, and should be read in conjunction with, our consolidated financial statements and notes thereto included in Item 8 - Financial Statements and Supplementary Data. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as anticipate, estimate, plan, project, continuing, ongoing, expect, believe, intend, may, will, should, could, and similar expressions to identify forward-looking statements. See “Forward-Looking Statements.” As discussed in Item 8. Financial Statements and Supplementary Data, in Note 2. Restatement of Previously Issued Financial Statements, we have restated our previously issued audited Consolidated Financial Statements as of December 31, 2021, and for the years ended December 31, 2021 and 2020, and our unaudited quarterly financial information for the quarterly periods ended March 31, June 30 and September 30, 2022 and 2021. Accordingly, Management’s Discussion and Analysis of Financial Condition and Results of Operations have been revised for the effects of the restatement. Business Overview: We are a vertically integrated Bitcoin mining company principally engaged in enhancing our capabilities to mine Bitcoin in support of the Bitcoin blockchain. We also provide comprehensive and critical mining infrastructure for institutional-scale hosted clients to mine Bitcoin at our Rockdale Facility. The Rockdale Facility currently provides 700 megawatts in total developed capacity for our Bitcoin mining and data center hosting services for institutional-scale hosted clients. Our Rockdale Facility is believed to be the largest Bitcoin mining facility in North America, as measured by developed capacity, and we are currently further growing its capacity. Additionally, we are developing the Corsicana Facility, a second large-scale Bitcoin mining data center facility, which, upon completion, is expected to have approximately one gigawatt of capacity available for our own Bitcoin mining and data center hosting services for institutional-scale hosted clients. ​ We operate in an environment which is consistently evolving based on the proliferation of Bitcoin and cryptocurrencies in general. A significant component of our strategy is to effectively and efficiently allocate capital between opportunities that generate the highest return on investment. As discussed further in this Annual Report, we operate in three business segments: Bitcoin Mining, Data Center Hosting, and Engineering. Strategic Acquisitions Corsicana During the year ended December 31, 2022, the Company initiated a large-scale development to expand its Bitcoin mining and data center hosting capabilities with the acquisition of a 265-acre site in Navarro County, Texas, strategically located next to the Navarro switch, where the anticipated one-gigawatt Corsicana Facility will be constructed. The initial phase of the development of the Corsicana Facility involves the construction of 400 megawatts of immersion-cooled Bitcoin mining and data center hosting infrastructure spread across multiple buildings, as well as a high-voltage power substation and transmission facilities to supply power to the facility. Construction of the substation and the data centers is expected to be carried out concurrently, with self-mining and data center hosting operations expected to commence by the fourth quarter of 2023, following the commissioning of the substation, which is also expected to be completed in the fourth quarter of 2023. Industry Trends During 2022, we observed several companies in the Bitcoin ecosystem experience significant challenges and initiate bankruptcy proceedings due to the significant decline in the price of Bitcoin and other national and global macroeconomic factors. We anticipate this trend will likely continue as companies attempt to shift their business models to operate on significantly compressed margins. The dramatic increase in the price of Bitcoin observed in the market during prior years caused many companies to over-leverage themselves, thus operating in an unsustainable way given the recent instability in the price of Bitcoin. Riot chose to refrain from 34 Table of Contents engaging in debt-financing activities during this period and, as a result, has not been subject to the significant debt-service shortfalls some of its competitors are experiencing. Despite such challenges in the ecosystem, Riot continues to focus on building long-term stockholder value by taking strategic action to vertically integrate its business, expanding the Rockdale Facility and developing the Corsicana Facility. Management believes this focus will positively affect each of Riot’s three business segments by providing more capacity for its Bitcoin Mining and Data Center Hosting, and by capitalizing on supply chain efficiencies garnered through its Engineering segment. As we grow our business, we continue to focus on deploying our efficient Bitcoin mining fleet, at scale, while realizing the benefits of being an owner and operator of our Bitcoin Mining and Data Center Hosting facilities. We anticipate that other companies in the industry will continue to experience challenges and that 2023 will continue to be a period of consolidation in the Bitcoin mining industry, and we believe that, given our relative position, liquidity and absence of long-term debt, in the competitive landscape, we are likely positioned to benefit from this consolidation. As a result of any strategic action undertaken by us, our business and financial results may change significantly. We are continuously evaluating strategic opportunities which we may decide to undertake as part of our strategic growth initiatives; however, we can offer no assurances that any strategic opportunities which we decide to undertake will be achieved on the schedule or within the budget we anticipate, if at all, in our competitive and evolving industry. See Part I, Item 1A. “Risk Factors” of this Annual Report for additional discussion regarding potential impacts our competitive and evolving industry may have on our business. ​ Bitcoin Mining The Company’s current focus is on its Bitcoin Mining operations, and during the year ended December 31, 2022, we continued to deploy miners at our Rockdale Facility and continued development activities at the Corsicana Facility, with the objective of increasing the Company’s operational efficiency and performance. ​ As of December 31, 2022, our Bitcoin Mining business segment operated 88,556 ASIC miners, with a hash rate capacity of 9.7 EH/s. In 2022, we mined 5,554 Bitcoin, which represented an increase of 45.7% over the 3,812 Bitcoin we mined in 2021. We anticipate we will have 111,216 miners in operation by the end of 2023. Miner Purchases and Deployments During the year ended December 31, 2022, we purchased, received, and/or deployed the following: ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b"],["Miners deployed as of January 1, 2022","\u200b","30,907"],["Miners received and deployed during the year ended December 31, 2022","","57,649"],["Miners received but not yet deployed","","17,530"],["Miners under contract, but not yet received","","5,130"],["Total miners under contract, expected to be received, or deployed as of December 31, 2022","","111,216"]] [[/GREPCENT_TABLE]] ​ As of December 31, 2022, the Company had outstanding executed purchase agreements for the purchase of miners from Bitmain for a total of 5,130 S19 series miners, which were shipped in January 2023. Pursuant to these agreements, as of December 31, 2022, no amounts remain payable to Bitmain. To take advantage of our low-cost power supply agreement at our Rockdale Facility and eliminate third-party hosting fees, during the year ended December 31, 2022, we elected to not renew our co-location mining services agreement with Coinmint, which therefore terminated automatically per its terms as of July 8, 2022. Upon termination of the agreement, we fully exited our Bitcoin Mining operations at Coinmint. We believe this transition will lower our overall cost of revenues for the Bitcoin Mining business as new miners will be deployed at the Rockdale Facility. For the year ended December 31, 2022, Bitcoin Mining revenue was approximately $156.9 million. ​ Data Center Hosting Upon completion of the Whinstone Acquisition, we commenced an expansion of our Rockdale Facility to 700 MW, from its initial 300 MW of developed capacity. As of December 31, 2022, our 400 MW expansion at the Rockdale Facility had achieved multiple progress milestones while navigating the challenges with the current state of the global supply chain, including the completion of the substation expansion to 700 MW, successful installation of the substation busbar, and 400 MW of high-voltage transformers. We also completed construction of three new buildings in 2022, and a fourth is nearing completion in the first quarter of 2023, which, when completed, will finalize our Rockdale Facility expansion. Two of the four buildings are self-mining buildings dedicated to immersion-cooled Bitcoin mining. 35 Table of Contents The expansion of our Rockdale Facility has provided capacity to enable us to deploy our current fleet of miners (including those expected to be delivered in future shipments pursuant to our purchase orders with Bitmain) in a self-hosted facility, while allowing Whinstone to continue to operate and grow its existing Data Center Hosting business segment. We believe deploying our miners at the expanded Rockdale Facility has many advantages for our mining operations, including allowing us to operate our miners without incurring third-party colocation services fees and to do so at the fixed low energy costs available to the Rockdale Facility under its long-term power supply agreement. The Rockdale Facility currently hosts Bitcoin Mining operations for institutional-scale mining customers. Data Center Hosting revenue includes upfront payments, which we record as deferred revenue and generally recognize as services are provided. We provide energized space and operating and maintenance services to third-party mining companies who locate their mining hardware at our Rockdale Facility under long-term contracts. We account for these agreements as a single performance obligation for services being delivered in a series with delivery being measured by daily successful operation of the mining hardware. As such, we recognize revenue over the life of the contract as its series of performance obligations are met. The contracts are recognized in the amount for which we have the right to invoice because we elected the “right to invoice” practical expedient. For the year ended December 31, 2022, Data Center Hosting revenue was approximately $36.9 million. Engineering Our Engineering business segment designs and manufacturers power distribution equipment and custom engineered electrical products that provide us with the ability to vertically integrate many of the critical electrical components and engineering services necessary for our Rockdale Facility expansion and to reduce our execution and counter-party risk in ongoing and future expansion projects. Our engineers also allow us to continue to explore new methods to optimize and develop a best-in-class Bitcoin mining operation and have been instrumental in the development of our industrial-scale immersion-cooled Bitcoin mining hardware. Our Engineering business segment also provides electricity distribution product design, manufacture, and installation services primarily focused on large-scale commercial and governmental customers and serves a broad scope of clients across a wide range of markets including data center, power generation, utility, water, industrial, and alternative energy. Products are custom built to client and industry specifications Additionally, we utilize an in-house field service and repair department. Engineering revenue is derived from the sale of custom products built to customers’ specifications under fixed-price contracts with one identified performance obligation. Engineering revenues are recognized over time as performance creates or enhances an asset with no alternative use, and for which the Company has an enforceable right to receive compensation as defined under the contract. For the year ended December 31, 2022, Engineering revenue was approximately $65.3 million. COVID-19 The COVID-19 global pandemic has been unprecedented and unpredictable; its impact is likely to continue to result in significant national and global economic disruption, which may adversely affect our business. Based on our current assessment, however, we do not expect any material impact on our long-term development, our operations, or our liquidity due to the worldwide spread of COVID-19, other than the potential impact of COVID-19 on global logistics discussed below. We are actively monitoring this situation and the possible effects on our financial condition, liquidity, operations, suppliers, and industry. In addition, nationally, we have experienced and are experiencing varying degrees of inflation, resulting in part from various supply chain disruptions, increased shipping, and transportation costs, and increased raw material and labor costs, as well as other disruptions resulting from the continuing COVID-19 pandemic and general global economic conditions. This inflationary impact on our cost structure has contributed to adjustments in operations, ability to obtain materials and retain talent, despite a continued focus on reducing our costs where possible. ​ Global Logistics Global supply logistics have caused delays across all channels of distribution. Similarly, we have also experienced delays in certain of our miner delivery schedules and in our infrastructure development schedules due to constraints on the globalized supply chains for miners, electricity distribution equipment and construction materials. Through the date of this Annual Report, we have been able to effectively mitigate any delivery delays to avoid materially impacting our miner deployment schedule, however, there are no assurances we will be able to continue to mitigate any such delivery delays in the future. Additionally, the expansion of the Rockdale 36 Table of Contents Facility and the development of our new Corsicana Facility requires large quantities of construction materials, specialized electricity distribution equipment and other component parts that can be difficult to source. We have procured and hold many of the required materials to help mitigate global supply logistic and pricing concerns. We continue to monitor developments in the global supply chain and assess their potential impact on our expansion plans. ​ Summary of Bitcoin Mining Results The following table presents additional information about our Bitcoin Mining activities, including Bitcoin production and sales of the Bitcoin mined: ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","","Quantity","","Amounts"],["Balance as of January 1, 2020","","514","\u200b","$","3,839"],["Revenue recognized from Bitcoin mined","","1,033","\u200b","","11,984"],["Mining pool operating fees","","\u2014","\u200b","","(146)"],["Proceeds from sale of Bitcoin","","(500)","\u200b","","(8,298)"],["Realized gain on sale/exchange of Bitcoin (as restated)","","26","\u200b","","6,350"],["Impairment of Bitcoin (as restated)","","\u2014","\u200b","","(3,595)"],["Bitcoin received from sale of equipment","","5","\u200b","","52"],["Balance as of December 31, 2020 (as restated)","","1,078","\u200b","","10,186"],["Revenue recognized from Bitcoin mined","","3,812","\u200b","","184,422"],["Exchange of Bitcoin for employee compensation","","(6)","\u200b","","(295)"],["Realized gain on sale/exchange of Bitcoin (as restated)","","\u2014","\u200b","","253"],["Impairment of Bitcoin (as restated)","","\u2014","\u200b","","(43,973)"],["Balance as of December 31, 2021 (as restated)","","4,884","\u200b","","150,593"],["Revenue recognized from Bitcoin mined","","5,554","\u200b","","156,870"],["Proceeds from sale of Bitcoin","","(3,425)","\u200b","","(79,529)"],["Exchange of Bitcoin for employee compensation","\u200b","(39)","\u200b","\u200b","(1,495)"],["Realized gain on sale/exchange of Bitcoin","","\u2014","\u200b","","30,346"],["Impairment of Bitcoin","","\u2014","\u200b","","(147,365)"],["Balance as of December 31, 2022","","6,974","\u200b","$","109,420"]] [[/GREPCENT_TABLE]] ​ ​ Results of Operations Comparative Results for the Years Ended December 31, 2022 and 2021: Revenues: Total revenue for the years ended December 31, 2022 and 2021, was $259.2 million and $213.2 million, respectively, and consisted of our Bitcoin Mining revenue, Data Center Hosting revenue, Engineering revenue, and other revenue. For the years ended December 31, 2022 and 2021, Bitcoin Mining revenue was $156.9 million, and $184.4 million, respectively. The decrease of $27.6 million in Bitcoin Mining revenue was due to lower values of Bitcoin mined in 2022, averaging $28,245 per coin, as compared to $45,744 per coin in 2021, partially offset by a higher number of Bitcoin mined in 2022, which totaled 5,554, as compared to 3,812 in the 2021 period, and an increase in miners deployed. The primary reason for the increase in the number of Bitcoin mined was due to the Company’s effective employment of its proprietary power strategy to significantly reduce overall power costs. During the year ended December 31, 2022, the Company earned $27.3 million in power curtailment credits, to be credited against its power invoices, as a result of temporarily pausing its operations. The power curtailment credits are recorded as an offset against operating expenses and equate to approximately 1,815 Bitcoin, as computed by using the average daily closing BTC prices on a monthly basis. During the year ended December 31, 2021, the Company earned $6.5 million in power credits, or the equivalent of approximately 251 Bitcoin. For the years ended December 31, 2022 and 2021, Data Center Hosting revenue was $36.9 million and $24.5 million, respectively. The increase of $12.3 was primarily attributable to 2021 only including activity subsequent to the acquisition of Whinstone in May 2021. For the years ended December 31, 2022 and 2021, Engineering revenue was $65.3 million and $4.2 million, respectively. The increase of $61.2 was primarily attributable to 2021 only including activity subsequent to the acquisition of ESS Metron in December 2021. 37 Table of Contents Costs and expenses: Cost of revenues for Bitcoin Mining for the years ended December 31, 2022 and 2021 were $74.3 million and $45.5 million, respectively, representing an increase of approximately $28.8 million. As a percentage of Mining revenue, cost of revenues totaled 47.4% and 24.7% for each of the years ended December 31, 2022 and 2021, respectively. Bitcoin Mining cost of revenues consist primarily of direct production costs of mining operations, including electricity, labor, insurance and, for a portion of 2022, the variable Coinmint hosting fee, but excluding depreciation and amortization, which are separately stated. The increase of $28.8 million is primarily due to the increase in mining capacity at the Rockdale Facility, which requires more headcount and direct costs necessary to maintain and support the mining operations. During the years ended December 31, 2022 and 2021, the Company earned $27.3 million and $6.5 million, respectively, in power credits, to be credited against its power invoices, as a result of temporarily pausing its operations. These credits are recognized in power curtailment credits in the statements of operations, outside of cost of revenues, but significantly reduce the Company’s overall cost to mine Bitcoin. When netting the power curtailment credits with the costs of revenues, the net costs as a percentage of Mining revenue were 39.7% and 24.7% for the years ended December 31, 2022 and 2021, respectively. Cost of revenues for Data Center Hosting for the years ended December 31, 2022 and 2021 was $61.9 million and $33.0 million, respectively. The 2022 costs consisted primarily of direct power costs, with the balance primarily incurred for compensation and rent costs. The increase in costs was primarily attributable to 2021 only including activity subsequent to the acquisition of Whinstone in May 2021. Cost of revenues for Engineering for the years ended December 31, 2022 and 2021 was $57.5 million and $3.6 million, respectively. The 2022 costs consisted primarily of $40.3 million for direct materials and labor, as well as indirect manufacturing costs. The increase in costs was primarily attributable to 2021 only including activity subsequent to the acquisition of ESS Metron in December 2021. Selling, general and administrative expenses during the years ended December 31, 2022 and 2021 totaled $67.5 million and $87.4 million, respectively. The decrease of $20.0 million was primarily attributable to a decrease in stock-compensation expense of  approximately $43.9 million resulting from the adoption of the performance-based stock plan in August 2021, combined with lower grant date values of our common stock, partially offset by increases in compensation expense, which increased by $12.4 million, and other expenses, due to 2022 including a full year’s of activity related to the operations of Whinstone and ESS Metron. Depreciation and amortization expense during the years ended December 31, 2022 and 2021 totaled $108.0 million and $26.3 million, respectively. The increase of $81.6 million was primarily due to higher depreciation expense recognized for the Rockdale Facility, our recently acquired miners, and depreciation of the assets acquired as part of the Whinstone and ESS Metron acquisitions not impacting all of 2021. Changes in fair value of our derivative asset for the years ended December 31, 2022 and 2021 were gains of $71.4 and $12.1 million, respectively. The gains were primarily due to the increase in the forward power market curve compared to the fixed-rate in our power purchase agreement. Power curtailment credits during the years ended December 31, 2022 and 2021, were $27.3 and $6.5 million, respectively, from power sales to ERCOT through its Demand Response Services Programs. Depending on the spot market price of electricity, we opportunistically sell electricity back to ERCOT in exchange for cash payments or credits against future invoices, rather than using the power for the Company’s operations during these peak times. These peak times and spot market prices can vary significantly depending on consumer demand for electricity, the time of day and extreme weather. Realized gain on sale/exchange of Bitcoin for the years ended December 31, 2022 and 2021 were $30.3 million and $0.3 million, respectively. Beginning in March 2022, the Company began selling a portion of its monthly Bitcoin production to fund its operations and expansion cash requirements. The Company sold, or transferred for employee compensation, 3,464 Bitcoin during 2022 compared to only six during 2021. Gain on exchange of equipment for the years ended December 31, 2022 and 2021 were $16.3 million and zero, respectively. The gain was a result of the exchange of miners with a third-party Bitcoin mining company. Casualty-related charges (recoveries), net during the years ended December 31, 2022 and 2021 were $9.7 million and zero, respectively. In December 2022, the Rockdale Facility was damaged during severe winter storms in Texas, impacting approximately 2.5 EH/s of our hash rate capacity. 38 Table of Contents Impairment of Bitcoin for the years ended December 31, 2022 and 2021 was $147.4 million and $44.0 million, respectively, attributable to the decline in Bitcoin values and increase in Bitcoin mined in 2022 as compared to 2021. Impairment of goodwill for the year ended December 31, 2022, was $335.6 million due to adverse changes in our business climate, including decreases in the price of Bitcoin and increased volatility of equity markets, increased weighted-average costs of capital, primarily driven by an increase in interest rates, and market concerns related to inflation, supply chain disruption issues and other macroeconomic factors indicating a triggering event had occurred. Testing performed indicated the fair value of the reporting units did not exceed their carrying amounts, including goodwill, in excess of the carrying value of the goodwill. As a result, the entire carrying amount of the goodwill was recognized as a non-cash impairment charge. Impairment of miners for the year ended December 31, 2022, was $55.5 million and was entirely attributable to our miners. Adverse changes in our business climate, including decreases in the price of Bitcoin and related decreases in market prices of miners indicated a triggering event had occurred. Testing performed indicated the estimated fair value of our miners to be less than their net carrying value as of December 31, 2022, and the carrying value of miners was written down to their estimated fair value. Other Income (Expense): For the years ended December 31, 2022 and 2021, total other income (expense) was ($8.6) million and $14.7 million, respectively. The $8.6 million loss incurred in 2022 primarily consisted of realized losses on marketable equity securities of $9.0 million upon the sale of all of our marketable equity securities. The income of $14.7 million in 2021 primarily consisted of $26.3 million of realized gain on the sale/exchange of long-term investments, partially offset by $13.7 million of unrealized losses on marketable equity securities. Income Taxes: For the years ended December 31, 2022 and 2021 the Company recorded total income tax benefit (expense) of $11.7 million and ($0.3) million, respectively. The increase in tax benefit of $12.0 million was primarily attributable to the change in the contingent consideration liability. Results of Operations Comparative Results for the Years Ended December 31, 2021 and 2020: Revenues: Total revenue for the years ended December 31, 2021 and 2020, was $213.2 million and $12.1 million, respectively, and consisted of our Bitcoin Mining revenue, Data Center Hosting revenue, Engineering revenue, and Other revenue. For the years ended December 31, 2021 and 2020, Bitcoin Mining revenue was $184.4 million, and $12.0 million, respectively. The increase of $172.4 million in mining revenue was due to higher Bitcoin values in the 2021 period, averaging $45,744 per coin as compared to $11,461 per coin in the 2020 period, combined with a higher number of Bitcoin mined in 2021, which totaled 3,812, as compared to 1,033 in the 2020 period. For the period from the acquisition of Whinstone on May 26, 2021 to December 31, 2021, Data Center Hosting revenue was $24.5 million; there was no Data Center Hosting revenue for the year ended December 31, 2020. For the period from the acquisition of ESS Metron on December 1, 2021 to December 31, 2021, Engineering revenue was $4.2 million; there was no Engineering revenue for the year ended December 31, 2020. Costs and expenses: Cost of revenues for Mining for the years ended December 31, 2021 and 2020 was $45.5 million and $6.3 million, respectively, representing an increase of approximately $39.2 million. As a percentage of Mining revenue, cost of revenues totaled 24.7% and 52.2% for each of the years ended December 31, 2021 and 2020, respectively. Cost of revenues consist primarily of direct production costs of mining operations, including electricity, labor, insurance and, in 2020, rent for the Oklahoma City facility and, in 2021, the variable Coinmint hosting fee, but excluding depreciation and amortization which are separately stated. The increase of $39.2 million in cost of revenues is primarily due to the increases in variable mining costs, including the variable hosting fees associated with increases in mining revenues. 39 Table of Contents Cost of revenues for Data Center Hosting for the period from the acquisition of Whinstone on May 26, 2021 to December 31, 2021 was $33.0 million; there were no Data Center Hosting costs for the year ended December 31, 2020. The 2021 costs consisted primarily of direct power costs, with the balance primarily incurred for compensation and rent costs. Cost of revenues for Engineering for the period from the acquisition of ESS Metron on December 1, 2021 to December 31, 2021 was $3.6 million; there were no Engineering costs for the year ended December 31, 2020. The 2021 costs consisted primarily of $3.6 million for direct materials and labor, as well as indirect manufacturing costs. Acquisition-related costs for the year ended December 31, 2021 totaled $21.2 million and consisted of expenses incurred in connection with our acquisitions of Whinstone and ESS Metron. There were no acquisition-related costs for the year ended December 31, 2020. Selling, general and administrative expenses during the years ended December 31, 2021 and 2020 totaled $87.4 million and $10.3 million, respectively. Selling, general and administrative expenses consist of stock-based compensation, legal and professional fees and other personnel and related costs. The increase of $77.2 million is primarily due to an increase in stock-compensation expense of $65.1 million resulting from additional awards (including the performance-based plan announced in August 2021), compensation expense, which increased by $5.7 million due to additional employees to support the Company’s growth, and an increase in consulting fees of $2.6 million resulting primarily from assistance on internal control systems and procedures. Depreciation and amortization expense during the year ended December 31, 2021 totaled $26.3 million, which is an increase of approximately $21.8 million, as compared to $4.5 million for the year ended December 31, 2020. The increase is primarily due to higher depreciation expense recognized for the Rockdale Facility and our recently acquired miners. Change in fair value of our derivative asset for the period from the acquisition of Whinstone to December 31, 2021, was $12.1 million, recorded to adjust the fair value of our Power Supply Agreement, which was classified as a derivative asset and measured at fair value on the date of our acquisition of Whinstone. There were no derivative assets for the year ended December 31, 2020. Power curtailment credits during the year ended December 31, 2021 totaled $6.5 million and were from power sales to ERCOT through its Demand Response Services Programs. Depending on the spot market price of electricity, we opportunistically sell electricity back to ERCOT in exchange for cash payments, rather than using the power for the Company’s operations during these peak times. These peak times and spot market prices can vary significantly depending on consumer demand for electricity, the time of day and extreme weather. There were no power curtailment credits for the year ended December 31, 2020. Impairment of long-term investments of $9.4 million recognized during the year ended December 31, 2020 was recorded in connection with the impairment of our investment in Coinsquare Ltd., a Canadian cryptocurrency exchange (“Coinsquare”). Impairment of Bitcoin for the years ended December 31, 2021 and 2020 was $44.0 million and $3.6 million respectively, arising from the decline in Bitcoin prices during the periods. Other Income: Other income for the years ended December 31, 2021 and 2020 was $14.7 million and $1.4 million, respectively. The increase of $13.3 million is primarily related to a $26.3 million realized gain on the sale/exchange of long-term investment recognized in connection with the exchange of our shares of Coinsquare, partially offset by a $13.7 million unrealized loss on the decline in fair value our marketable equity securities. Income Taxes: For the year ended December 31, 2021 the Company recorded an income tax expense of $0.3 million. There was no income tax expense or benefit recorded for the year ended December 31, 2020. Non-GAAP Measures In addition to financial measures presented under generally accepted accounting principles in the United States of America (“GAAP”), we consistently evaluate our use of and calculation of the non-GAAP financial measures, “Adjusted EBITDA” and Adjusted earnings per share (“Adjusted EPS”). Adjusted EBITDA is a financial measure defined as our EBITDA, adjusted to eliminate the effects of certain non-cash and/or non-recurring items, that do not reflect our ongoing strategic business operations. EBITDA is computed as net income before interest, taxes, depreciation, and amortization. Adjusted EBITDA is EBITDA further 40 Table of Contents adjusted for certain income and expenses, which management believes results in a performance measurement that represents a key indicator of the Company’s core business operations of Bitcoin mining. The adjustments include fair value adjustments such as derivative power contract adjustments, equity securities value changes, and non-cash stock-based compensation expense, in addition to financing and legacy business income and expense items. We exclude impairments and gains or losses on sales or exchanges of Bitcoin from our calculation of Adjusted EBITDA for all periods presented. Adjusted EPS is a financial measure defined as our Adjusted EBITDA divided by our diluted weighted-average shares outstanding. We believe Adjusted EBITDA and Adjusted EPS can be important financial measures because they allow management, investors, and our board of directors to evaluate and compare our operating results, including our return on capital and operating efficiencies, from period-to-period by making such adjustments. Adjusted EBITDA and Adjusted EPS are provided in addition to, and should not be considered to be a substitute for, or superior to, net income, the comparable measure under GAAP for Adjusted EBITDA, and to diluted net income (loss) per share, the comparable measure under GAAP for Adjusted EPS. Further, Adjusted EBITDA and Adjusted EPS should not be considered as an alternative to revenue growth, net income, diluted earnings per share or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of our liquidity. Adjusted EBITDA and Adjusted EPS have limitations as analytical tools, and you should not consider such measures either in isolation or as substitutes for analyzing our results as reported under GAAP. ​ The following table reconciles Adjusted EBITDA to Net income (loss), the most comparable GAAP financial metric: ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Years Ended December 31,"],["\u200b","","2022","","2021","\u200b","2020"],["\u200b","\u200b","\u200b","\u200b","\u200b","(as restated)","\u200b","(as restated)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Net income (loss)","\u200b","$","(509,553)","\u200b","$","(15,437)","\u200b","$","(14,107)"],["Interest (income) expense","\u200b","","(454)","\u200b","","296","\u200b","","(85)"],["Income tax expense (benefit)","\u200b","","(11,749)","\u200b","","254","\u200b","","\u2014"],["Depreciation and amortization","\u200b","","107,950","\u200b","","26,324","\u200b","","4,494"],["EBITDA","\u200b","","(413,806)","\u200b","","11,437","\u200b","","(9,698)"],["\u200b","\u200b","","","\u200b","","","\u200b"],["Adjustments:","\u200b","","","\u200b","","","\u200b"],["Non-cash/non-recurring operating expenses:","\u200b","","","\u200b","","","\u200b"],["Stock-based compensation expense","\u200b","","24,555","\u200b","","68,491","\u200b","","3,407"],["Acquisition-related costs","\u200b","","78","\u200b","","21,198","\u200b","","\u2014"],["Change in fair value of derivative asset","\u200b","","(71,418)","\u200b","","(12,112)","\u200b","","\u2014"],["Change in fair value of contingent consideration","\u200b","","(159)","\u200b","","975","\u200b","","\u2014"],["Realized gain on sale/exchange of long-term investment","\u200b","","\u2014","\u200b","","(26,260)","\u200b","","\u2014"],["Realized loss on sale of marketable equity securities","\u200b","\u200b","8,996","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014"],["Unrealized (gain) loss on marketable equity securities","\u200b","","\u2014","\u200b","","13,655","\u200b","","\u2014"],["Reversal of registration rights penalty","\u200b","","\u2014","\u200b","","\u2014","\u200b","","(1,358)"],["Gain on exchange of equipment","\u200b","","(16,281)","\u200b","","\u2014","\u200b","","(29)"],["Casualty-related charges (recoveries), net","\u200b","\u200b","9,688","\u200b","","\u2014","\u200b","","\u2014"],["Impairment of goodwill","\u200b","\u200b","335,648","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014"],["Impairment of miners","\u200b","\u200b","55,544","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014"],["Other (income) expense","\u200b","","59","\u200b","","(2,378)","\u200b","","6"],["Other revenue, (income) expense items:","\u200b","","\u200b","\u200b","","\u200b","\u200b","","\u200b"],["License fees","\u200b","","(97)","\u200b","","(97)","\u200b","","(97)"],["Adjusted EBITDA","\u200b","$","(67,193)","\u200b","$","74,909","\u200b","$","(7,769)"]] [[/GREPCENT_TABLE]] ​ 41 Table of Contents The following table reconciles Adjusted EPS to Diluted net income (loss) per share, the most comparable GAAP financial metric: ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Years Ended December 31,"],["\u200b","","2022","","2021","\u200b","2020"],["\u200b","\u200b","\u200b","\u200b","\u200b","(as restated)","\u200b","(as restated)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Diluted net income (loss) per share","\u200b","$","(3.65)","\u200b","$","(0.17)","\u200b","$","(0.34)"],["Interest (income) expense","\u200b","","-","\u200b","","-","\u200b","","-"],["Income tax expense (benefit)","\u200b","","(0.08)","\u200b","","-","\u200b","","-"],["Depreciation and amortization","\u200b","","0.77","\u200b","","0.28","\u200b","","0.11"],["EBITDA per share","\u200b","","(2.96)","\u200b","","0.11","\u200b","","(0.23)"],["\u200b","\u200b","","","\u200b","","","\u200b"],["Adjustments, per share:","\u200b","","","\u200b","","","\u200b"],["Non-cash/non-recurring operating expenses:","\u200b","","","\u200b","","","\u200b"],["Stock-based compensation expense","\u200b","","0.18","\u200b","","0.73","\u200b","","0.08"],["Acquisition-related costs","\u200b","","-","\u200b","","0.23","\u200b","","-"],["Change in fair value of derivative asset","\u200b","","(0.51)","\u200b","","(0.13)","\u200b","","-"],["Change in fair value of contingent consideration","\u200b","","-","\u200b","","0.01","\u200b","","-"],["Realized gain on sale/exchange of long-term investment","\u200b","","-","\u200b","","(0.28)","\u200b","","-"],["Realized loss on sale of marketable equity securities","\u200b","\u200b","0.06","\u200b","\u200b","-","\u200b","\u200b","-"],["Unrealized (gain) loss on marketable equity securities","\u200b","","-","\u200b","","0.15","\u200b","","-"],["Reversal of registration rights penalty","\u200b","","-","\u200b","","-","\u200b","","(0.03)"],["Gain on exchange of equipment","\u200b","","(0.12)","\u200b","","-","\u200b","","-"],["Casualty-related charges (recoveries), net","\u200b","\u200b","0.07","\u200b","","-","\u200b","","-"],["Impairment of goodwill","\u200b","\u200b","2.41","\u200b","\u200b","-","\u200b","\u200b","-"],["Impairment of miners","\u200b","\u200b","0.40","\u200b","\u200b","-","\u200b","\u200b","-"],["Other (income) expense","\u200b","","-","\u200b","","(0.03)","\u200b","","-"],["Other revenue, (income) expense items:","\u200b","","\u200b","\u200b","","\u200b","\u200b","","\u200b"],["License fees","\u200b","","-","\u200b","","-","\u200b","","-"],["Adjusted EPS","\u200b","$","(0.47)","\u200b","$","0.79","\u200b","$","(0.18)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Diluted weighted average number of shares outstanding","\u200b","\u200b","139,433,901","\u200b","\u200b","93,452,764","\u200b","\u200b","41,976,704"]] [[/GREPCENT_TABLE]] ​ In addition to the non-GAAP financial measures of Adjusted EBITDA and Adjusted EPS described above, we believe “Bitcoin Mining revenue in excess of cost of revenues, net of power curtailment credits”, “Data Center Hosting revenue in excess of cost of revenues, net of power curtailment credits”, “Cost of revenues – Bitcoin Mining, net of power curtailment credits” and “Cost of revenues – Data Center Hosting, net of power curtailment credits” are additional performance measurements that represent a key indicator of the Company’s core business operations of both Bitcoin mining and Data Center Hosting. ​ We believe our ability to offer power back to the grid at market-driven spot prices, thereby reducing our operating costs, is integral to our overall strategy, specifically our power management strategy and our commitment to supporting the ERCOT grid. While participation in various grid demand response programs may impact our Bitcoin production, we view this as an important part of our partnership-driven approach with ERCOT and our commitment to being a good corporate citizen in our communities. We also believe netting the power sales against our costs can be an important financial measure because it allows management, investors, and our board of directors to evaluate and compare our operating results, including our operating efficiencies, from period-to-period by making such adjustments. We have allocated the benefit of the power sales to our Data Center Hosting and Bitcoin Mining segments based on their proportional power consumption during the periods presented. Bitcoin Mining revenue in excess of cost of revenues, net of power curtailment credits, Data Center Hosting revenue in excess of cost of revenues, net of power curtailment credits, Cost of revenues – Bitcoin Mining, net of power curtailment credits and Cost of revenues – Data Center Hosting, net of power curtailment credits are provided in addition to and should not be considered to be a substitute for, or superior to Revenue – Bitcoin Mining, Revenue – Data Center Hosting, Cost of revenues – Bitcoin Mining or Cost of revenues – Data Center Hosting as presented in our consolidated statements of operations.  42 Table of Contents Reconciliations of these measurements to the most comparable GAAP financial metrics for historical periods are presented in the table below: ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Years Ended December 31,"],["\u200b","","2022","","2021","\u200b","2020"],["Bitcoin Mining","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Revenue","\u200b","$","156,870","\u200b","$","184,422","\u200b","$","11,984"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Costs of revenues","\u200b","","74,335","\u200b","","45,513","\u200b","","6,251"],["Power curtailment credits","\u200b","","(11,991)","\u200b","","\u2014","\u200b","","\u2014"],["Cost of revenues, net of power curtailment credits","\u200b","","62,344","\u200b","","45,513","\u200b","","6,251"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Bitcoin Mining revenue in excess of cost of revenues, net of power curtailment credits","\u200b","$","94,526","\u200b","$","138,909","\u200b","$","5,733"],["Bitcoin Mining revenue in excess of cost of revenues, net of power curtailment credits, as a percentage of revenue","\u200b","","60.3%","\u200b","","75.3%","\u200b","","47.8%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Data Center Hosting","\u200b","","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Revenue","\u200b","$","36,862","\u200b","$","24,546","\u200b","$","\u2014"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Costs of revenues","\u200b","\u200b","61,906","\u200b","\u200b","32,998","\u200b","\u200b","\u2014"],["Power curtailment credits","\u200b","","(15,354)","\u200b","","(6,514)","\u200b","","\u2014"],["Cost of revenues, net of power curtailment credits","\u200b","","46,552","\u200b","","26,484","\u200b","","\u2014"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Data Center Hosting revenue in excess of cost of revenues, net of power curtailment credits","\u200b","$","(9,690)","\u200b","$","(1,938)","\u200b","$","\u2014"],["Data Center Hosting revenue in excess of cost of revenues, net of power curtailment credits, as a percentage of revenue","\u200b","","(26.3)%","\u200b","","(7.9)%","\u200b","","\u2014"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Total power curtailment credits","\u200b","","(27,345)","\u200b","","(6,514)","\u200b","","\u2014"]] [[/GREPCENT_TABLE]] ​ RESTATEMENT OF INTERIM FINANCIAL STATEMENTS Results of Operations Comparative Results for the Three Months Ended March 31, 2022 and 2021: Revenue: For the three months ended March 31, 2022 and 2021, mining revenue was $57.9 million, and $23.2 million, respectively. The increase of $34.7 million in mining revenue was due to a higher number of Bitcoin mined of 1,405 in the 2022 period, as compared to 491 in the 2021 period, partially offset by lower Bitcoin values in the 2022 period, averaging $41,241 per coin as compared to $46,729 per coin in the 2021 period. For the three months ended March 31, 2022, hosting revenue was $9.7 million, and there was no hosting revenue for the three months ended March 31, 2021. Hosting revenue includes upfront payments which we record as deferred revenue and generally recognize as services are provided. We provide energized space and operating and maintenance services to third-party mining companies who locate their mining hardware at our Whinstone Facility under long-term contracts. We account for these agreements as a single performance obligation for services being delivered in a series with delivery being measured by daily successful operation of the mining hardware. As such, we recognize revenue over the life of the contract as its series of performance obligations are met. The contracts are recognized in the amount for which we have the right to invoice because we elected the “right to invoice” practical expedient. For the three months ended March 31, 2022, engineering revenue was $12.1 million, and there was no engineering revenue for the three months ended March 31, 2021. Engineering revenue is derived from the sale of custom products built to customers’ specifications under fixed-price contracts with one identified performance obligation. Engineering revenues are recognized over time as performance creates or enhances an asset with no alternative use, and for which the Company has an enforceable right to receive compensation as defined under the contract. Other revenue consisting of license fees was not significant in either period. 43 Table of Contents Costs and expenses: Cost of revenues for mining for the three months ended March 31, 2022 and 2021 was $19.1 million and $7.5 million, respectively, representing an increase of approximately $11.6 million. As a percentage of mining revenue, cost of revenues totaled 33.0% and 32.5% for each of the three months ended March 31, 2022 and 2021, respectively. Cost of revenues consists primarily of direct production costs of mining operations, including electricity, labor, insurance and the variable Coinmint hosting fee, but excluding depreciation and amortization, which are separately stated. The increase of $11.6 million in cost of revenues is primarily due to the increases in variable mining costs, including the variable hosting fees, associated with increases in mining revenues. ​ Cost of revenues for hosting for the three months ended March 31, 2022, was $15.0 million and there were no hosting costs for the three months ended March 31, 2021. The costs consisted primarily of direct power costs, with the balance primarily incurred for rent and compensation costs. Cost of revenues for engineering for the three months ended March 31, 2022 was $11.5 million and there were no engineering costs for the three months ended March 31, 2021. The 2022 costs consisted primarily of direct materials and labor, as well as indirect manufacturing costs. Selling, general and administrative expenses during the three months ended March 31, 2022 and 2021 totaled $10.9 million and $5.5 million, respectively. Selling, general and administrative expenses consist of stock-based compensation, legal and professional fees and other personnel and related costs. The increase of $5.4 million is primarily due to an increase in stock-compensation expense of $2.1 million resulting from additional awards and compensation expense, which increased by $3.5 million due to additional employees to support the Company’s growth. Depreciation and amortization expenses during the three months ended March 31, 2022 totaled $14.2 million, which is an increase of approximately $11.4 million, as compared to $2.8 million for the three months ended March 31, 2021. The increase is primarily due to higher depreciation expense recognized for the Whinstone Facility and our recently acquired miners. Change in fair value of our derivative asset for the three months ended March 31, 2022, was $46.2 million, including $43.7 million recorded to adjust the fair value of our Power Supply Agreement, which was classified as a derivative asset and measured at fair value on the date of our acquisition of Whinstone, and $2.5 million from power sales into the ERCOT marketplace through Whinstone’s participation in ERCOT’s energy demand response programs. Realized gain on sale/exchange of cryptocurrencies for the three months ended March 31, 2022 was $9.2 million. There was no realized gain or loss on sale/exchange of cryptocurrencies for the three months ended March 31, 2021. Impairment of cryptocurrencies for the three months ended March 31, 2022 and 2021 was $25.9 million and $2.4 million, respectively, arising from the decline in Bitcoin prices. Other income and expenses: Other expense for the three months ended March 31, 2022 was $2.0 million and primarily consisted of the unrealized loss on marketable equity securities. Other income for the three months ended March 31, 2021 was $0.2 million. ​ 44 Table of Contents Reconciliations of GAAP to Non-GAAP Measures [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Three Months Ended March 31,"],["\u200b","","2022","","2021"],["\u200b","\u200b","(as restated)","\u200b","(as restated)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Net income (loss)","\u200b","$","36,578","\u200b","$","5,156"],["Interest (income) expense","\u200b","","220","\u200b","","(175)"],["Income tax expense (benefit)","\u200b","","312","\u200b","","\u2014"],["Depreciation and amortization","\u200b","","14,985","\u200b","","2,846"],["EBITDA","\u200b","","52,095","\u200b","","7,827"],["\u200b","\u200b","","","\u200b"],["Adjustments:","\u200b","","","\u200b"],["Non-cash/non-recurring operating expenses:","\u200b","","","\u200b"],["Stock-based compensation expense","\u200b","","3,042","\u200b","","936"],["Acquisition-related costs","\u200b","","78","\u200b","","\u2014"],["Change in fair value of derivative asset","\u200b","","(46,235)","\u200b","","\u2014"],["Change in fair value of contingent consideration","\u200b","","176","\u200b","","\u2014"],["Realized loss on sale of marketable equity securities","\u200b","\u200b","1,611","\u200b","\u200b","\u2014"],["Other (income) expense","\u200b","","137","\u200b","","\u2014"],["Other revenue, (income) expense items:","\u200b","","\u200b","\u200b","","\u200b"],["License fees","\u200b","","(24)","\u200b","","(24)"],["Adjusted EBITDA","\u200b","$","10,880","\u200b","$","8,739"]] [[/GREPCENT_TABLE]] ​ Results of Operations Comparative Results for the Three Months Ended June 30, 2022 and 2021: Revenue: For the three months ended June 30, 2022 and 2021, Mining revenue was $46.2 million, and $31.5 million, respectively. The increase of $14.7 million in Mining revenue was due to a higher number of Bitcoin mined of 1,395 in the 2022 period, as compared to 675 in the 2021 period, partially offset by lower Bitcoin values in the 2022 period, averaging $33,081 per coin as compared to $46,226 per coin in the 2021 period. For the three months ended June 30, 2022 and 2021, Data Center Hosting revenue was $9.8 million, and $2.9 million, respectively. Data Center Hosting revenue includes upfront payments which we record as deferred revenue and generally recognize as services are provided. We provide energized space and operating and maintenance services to third-party mining companies who locate their mining hardware at our Whinstone Facility under long-term contracts. We account for these agreements as a single performance obligation for services being delivered in a series with delivery being measured by daily successful operation of the mining hardware. As such, we recognize revenue over the life of the contract as its series of performance obligations are met. The contracts are recognized in the amount for which we have the right to invoice because we elected the “right to invoice” practical expedient. For the three months ended June 30, 2022, Engineering revenue was $16.9 million, and there was no Engineering revenue for the three months ended June 30, 2021. Engineering revenue is derived from the sale of custom products built to customers’ specifications under fixed-price contracts with one identified performance obligation. Engineering revenues are recognized over time as performance creates or enhances an asset with no alternative use, and for which the Company has an enforceable right to receive compensation as defined under the contract. Costs and expenses: Cost of revenues for Mining for the three months ended June 30, 2022 and 2021 was $18.0 million and $9.3 million, respectively, representing an increase of approximately $8.7 million. As a percentage of Mining revenue, cost of revenues totaled 39.0% and 29.7% for each of the three months ended June 30, 2022 and 2021, respectively. Cost of revenues consists primarily of direct production costs of mining operations, including electricity, labor, insurance and the variable Coinmint hosting fee, but excluding depreciation and amortization, which are separately stated. The increase of $8.7 million in cost of revenues is primarily due to the increases in variable mining costs, including the variable hosting fees, associated with increases in mining revenues. ​ 45 Table of Contents Cost of revenues for Data Center Hosting for the three months ended June 30, 2022 and 2021 was $15.2 million and $3.7 million, respectively. The costs consisted primarily of direct power costs, with the balance primarily incurred for rent and compensation costs. Cost of revenues for Engineering for the three months ended June 30, 2022 was $15.2 million and there were no engineering costs for the three months ended June 30, 2021. The 2022 costs consisted primarily of direct materials and labor, as well as indirect manufacturing costs. Selling, general and administrative expenses during the three months ended June 30, 2022 and 2021 totaled $10.7 million and $3.5 million, respectively. Selling, general and administrative expenses consist of stock-based compensation, legal and professional fees and other personnel and related costs. The increase of $7.2 million is primarily due to an increase of $2.1 million in compensation-related expense due to additional employees to support the Company’s growth, an increase in audit and consulting fees of $2.2 million resulting primarily from assistance on internal control systems and procedures and information technology projects, an increase in insurance expense of $0.8 million, and other general operating costs, including rent, to support the Company’s growth. Depreciation and amortization expenses during the three months ended June 30, 2022 totaled $20.6 million, which is an increase of approximately $14.9 million, as compared to $5.7 million for the three months ended June 30, 2021. The increase is primarily due to higher depreciation expense recognized for the Whinstone Facility and our recently acquired miners. Change in fair value of our derivative asset for the three months ended June 30, 2022 and 2021, was $60.9 million and $16.4 million, respectively, and was recorded to adjust the fair value of our Power Supply Agreement, which was classified as a derivative asset and measured at fair value on the date of our acquisition of Whinstone. Power curtailment credits for the three months ended June 30, 2022 and 2021, was $5.7 million and $1.1 million, respectively, and represents power sales into the ERCOT marketplace through Whinstone’s participation in ERCOT’s energy demand response programs. Realized gain on sale/exchange of cryptocurrencies for the three months ended June 30, 2022 was $14.4 million. The realized gain or loss on sale/exchange of cryptocurrencies for the three months ended June 30, 2021 was nominal. Gain on exchange of equipment for the three months ended June 30, 2022 was $8.6 million arising from the equipment exchange agreement with a third-party Bitcoin mining company. There was no gain on exchange of equipment during the three months ended June 30, 2021. Impairment of cryptocurrencies for the three months ended June 30, 2022 and 2021 was $101.4 million and $17.8 million, respectively, arising from the decline in Bitcoin prices. Impairment of goodwill for the three months ended June 30, 2022 was $349.1 million arising from recent adverse changes in business climate, including decreases in the price of Bitcoin and increased volatility of equity markets, as evidenced by declines in the market price of the Company’s securities, those of its peers, and major market indices. There was no impairment recognized during the three months ended June 30, 2021. Other income and expenses: Other expense for the three months ended June 30, 2022 was $6.5 million, and primarily consisted of the unrealized loss on marketable equity securities of $4.8 million and the realized loss on sale of marketable equity securities of $1.6 million recognized in connection with the sale of our shares of Mogo. Other income for the three months ended June 30, 2021 was $28.2 million, which primarily related to a $26.3 million realized gain on sale/exchange of long-term investment recognized in connection with the exchange of our shares of Coinsquare Ltd. (“Coinsquare”) for shares of Mogo. ​ Results of Operations Comparative Results for the Six Months Ended June 30, 2022 and 2021: Revenue: For the six months ended June 30, 2022 and 2021, Mining revenue was $104.1 million, and $54.6 million, respectively. The increase of $49.5 million in Mining revenue was due to a higher number of Bitcoin mined of 2,800 in the 2022 period, as compared to 1,166 in the 2021 period, partially offset by lower Bitcoin values in the 2022 period, averaging $37,175 per coin as compared to $37,868 per coin in the 2021 period. 46 Table of Contents For the six months ended June 30, 2022 and 2021, Data Center Hosting revenue was $19.5 million, and $2.9 million, respectively. Data Center Hosting revenue includes upfront payments which we record as deferred revenue and generally recognize as services are provided. We provide energized space and operating and maintenance services to third-party mining companies who locate their mining hardware at our Whinstone Facility under long-term contracts. We account for these agreements as a single performance obligation for services being delivered in a series with delivery being measured by daily successful operation of the mining hardware. As such, we recognize revenue over the life of the contract as its series of performance obligations are met. The contracts are recognized in the amount for which we have the right to invoice because we elected the “right to invoice” practical expedient. For the six months ended June 30, 2022, Engineering revenue was $29.1 million, and there was no Engineering revenue for the six months ended June 30, 2021. Engineering revenue is derived from the sale of custom products built to customers’ specifications under fixed-price contracts with one identified performance obligation. Engineering revenues are recognized over time as performance creates or enhances an asset with no alternative use, and for which the Company has an enforceable right to receive compensation as defined under the contract. Other revenue consisting of license fees was not significant in either period. ​ Costs and expenses: Cost of revenues for Mining for the six months ended June 30, 2022 and 2021 was $37.1 million and $16.9 million, respectively, representing an increase of approximately $20.2 million. As a percentage of Mining revenue, cost of revenues totaled 35.6% and 30.9% for each of the six months ended June 30, 2022 and 2021, respectively. Cost of revenues consists primarily of direct production costs of mining operations, including electricity, labor, insurance and the variable Coinmint hosting fee, but excluding depreciation and amortization, which are separately stated. The increase of $20.2 million in cost of revenues is primarily due to the increases in variable mining costs, including the variable hosting fees, associated with increases in mining revenues. Cost of revenues for Data Center Hosting for the six months ended June 30, 2022 and 2021 was $30.2 million and $3.7 million, respectively. The costs consisted primarily of direct power costs, with the balance primarily incurred for rent and compensation costs. Cost of revenues for Engineering for the six months ended June 30, 2022 was $26.7 million and there were no Engineering costs for the six months ended June 30, 2021. The 2022 costs consisted primarily of direct materials and labor, as well as indirect manufacturing costs. Selling, general and administrative expenses during the six months ended June 30, 2022 and 2021 totaled $21.5 million and $7.7 million, respectively. Selling, general and administrative expenses consist of stock-based compensation, legal and professional fees and other personnel and related costs. The increase of $13.9 million is primarily due to an increase of $5.0 million in compensation expense and an increase of $1.8 million in stock-compensation expense resulting from additional awards due to additional employees, an increase in audit and consulting fees of $2.4 million resulting primarily from assistance on internal control systems and procedures and information technology projects, an increase in insurance expense of $1.6 million, and other general operating costs, including rent, to support the Company’s growth. Depreciation and amortization expenses during the six months ended June 30, 2022 totaled $34.8 million, which is an increase of approximately $26.2 million, as compared to $8.6 million for the six months ended June 30, 2021. The increase is primarily due to higher depreciation expense recognized for the Whinstone Facility and our recently acquired miners. Change in fair value of our derivative asset for the six months ended June 30, 2022 and 2021 was $104.6 million and $16.4 million, respectively, and was recorded to adjust the fair value of our Power Supply Agreement, which was classified as a derivative asset and measured at fair value on the date of our acquisition of Whinstone. Power curtailment credits for the six months ended June 30, 2022 and 2021 was $8.3 million and $1.1 million, respectively, and represents power sales into the ERCOT marketplace through Whinstone’s participation in ERCOT’s energy demand response programs. Realized gain on sale/exchange of cryptocurrencies for the six months ended June 30, 2022 was $23.6 million. The realized gain or loss on sale/exchange of cryptocurrencies for the six months ended June 30, 2021 was nominal. 47 Table of Contents Gain on exchange of equipment for the six months ended June 30, 2022 was $8.6 million arising from the equipment exchange agreement with a third-party Bitcoin mining company. There was no gain on exchange of equipment during the six months ended June 30, 2021.  Impairment of cryptocurrencies for the six months ended June 30, 2022 and 2021 was $127.2 million and $20.2 million, respectively, arising from the decline in Bitcoin prices. Impairment of goodwill for the six months ended June 30, 2022 was $349.1 million arising from recent adverse changes in business climate, including decreases in the price of Bitcoin and increased volatility of equity markets, as evidenced by declines in the market price of the Company’s securities, those of its peers, and major market indices. There was no impairment recognized during the six months ended June 30, 2021. Other income and expenses: Other expense for the six months ended June 30, 2022 was $8.5. million and primarily consisted of the unrealized loss on marketable equity securities of $6.4 million and the realized loss on sale of marketable equity securities of $1.6 million recognized in connection with the sale of our shares of Mogo. Other income for the six months ended June 30, 2021 was $28.4 million, which primarily related to a $26.3 million realized gain on sale/exchange of long-term investment recognized in connection with the exchange of our shares of Coinsquare for shares of Mogo. ​ Reconciliations of GAAP to Non-GAAP Measures Non-GAAP Adjusted EBITDA [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Three Months Ended June 30,","\u200b","Six Months Ended June 30,"],["\u200b","","2022","","2021","\u200b","2022","","2021"],["\u200b","\u200b","(as restated)","\u200b","(as restated)","\u200b","(as restated)","\u200b","(as restated)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Net income (loss)","\u200b","$","(353,559)","\u200b","$","19,009","\u200b","$","(316,981)","\u200b","$","24,165"],["Interest (income) expense","\u200b","","\u2014","\u200b","","(80)","\u200b","","357","\u200b","","(80)"],["Income tax expense (benefit)","\u200b","","(6,199)","\u200b","","3,730","\u200b","","(5,887)","\u200b","","3,730"],["Depreciation and amortization","\u200b","","20,562","\u200b","","5,738","\u200b","","34,807","\u200b","","8,584"],["EBITDA","\u200b","","(339,196)","\u200b","","28,397","\u200b","","(287,704)","\u200b","","36,399"],["\u200b","\u200b","","","\u200b","","","\u200b","","","\u200b"],["Adjustments:","\u200b","","","\u200b","","","\u200b","","","\u200b"],["Non-cash/non-recurring operating expenses:","\u200b","","","\u200b","","","\u200b","","","\u200b"],["Stock-based compensation expense","\u200b","","701","\u200b","","970","\u200b","","3,743","\u200b","","1,905"],["Acquisition-related costs","\u200b","","\u2014","\u200b","","17,032","\u200b","","78","\u200b","","18,342"],["Change in fair value of derivative asset","\u200b","","(60,931)","\u200b","","(16,393)","\u200b","","(104,614)","\u200b","","(16,393)"],["Change in fair value of contingent consideration","\u200b","","\u2014","\u200b","","185","\u200b","","176","\u200b","","185"],["Realized gain on sale/exchange of long-term investment","\u200b","","\u2014","\u200b","","(26,260)","\u200b","","\u2014","\u200b","","(26,260)"],["Realized loss on sale of marketable equity securities","\u200b","\u200b","1,624","\u200b","\u200b","\u2014","\u200b","\u200b","1,624","\u200b","\u200b","\u2014"],["Unrealized (gain) loss on marketable equity securities","\u200b","","4,837","\u200b","","(339)","\u200b","","6,448","\u200b","","(339)"],["Reversal of registration rights penalty","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014"],["Gain on exchange of equipment","\u200b","","(8,614)","\u200b","","\u2014","\u200b","","(8,614)","\u200b","","\u2014"],["Impairment of goodwill","\u200b","\u200b","335,648","\u200b","\u200b","\u2014","\u200b","\u200b","335,648","\u200b","\u200b","\u2014"],["Other (income) expense","\u200b","","59","\u200b","","(1,510)","\u200b","","59","\u200b","","(1,510)"],["Other revenue, (income) expense items:","\u200b","","\u200b","\u200b","","\u200b","\u200b","","\u200b","\u200b","","\u200b"],["License fees","\u200b","","(24)","\u200b","","(24)","\u200b","","(48)","\u200b","","(48)"],["Adjusted EBITDA","\u200b","$","(65,896)","\u200b","$","2,058","\u200b","$","(53,204)","\u200b","$","12,281"]] [[/GREPCENT_TABLE]] ​ 48 Table of Contents Non-GAAP Adjusted EPS [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Three Months Ended June 30,","\u200b","Six Months Ended June 30,"],["\u200b","","2022","","2021","\u200b","2022","","2021"],["\u200b","\u200b","(as restated)","\u200b","(as restated)","\u200b","(as restated)","\u200b","(as restated)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Diluted net income (loss) per share","\u200b","$","(2.71)","\u200b","$","0.21","\u200b","$","(2.56)","\u200b","$","0.28"],["Interest (income) expense","\u200b","","\u2014","\u200b","","(0.00)","\u200b","","0.00","\u200b","","(0.00)"],["Income tax expense (benefit)","\u200b","","(0.05)","\u200b","","0.04","\u200b","","(0.05)","\u200b","","0.04"],["Depreciation and amortization","\u200b","","0.16","\u200b","","0.06","\u200b","","0.28","\u200b","","0.10"],["EBITDA","\u200b","","(2.60)","\u200b","","0.32","\u200b","","(2.32)","\u200b","","0.42"],["\u200b","\u200b","","","\u200b","","","\u200b","","","\u200b"],["Adjustments:","\u200b","","","\u200b","","","\u200b","","","\u200b"],["Non-cash/non-recurring operating expenses:","\u200b","","","\u200b","","","\u200b","","","\u200b"],["Stock-based compensation expense","\u200b","","0.01","\u200b","","0.01","\u200b","","0.03","\u200b","","0.02"],["Acquisition-related costs","\u200b","","\u2014","\u200b","","0.19","\u200b","","\u2014","\u200b","","0.21"],["Change in fair value of derivative asset","\u200b","","(0.47)","\u200b","","(0.18)","\u200b","","(0.85)","\u200b","","(0.19)"],["Change in fair value of contingent consideration","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014"],["Realized gain on sale/exchange of long-term investment","\u200b","","\u2014","\u200b","","(0.29)","\u200b","","\u2014","\u200b","","(0.30)"],["Realized loss on sale of marketable equity securities","\u200b","\u200b","0.01","\u200b","\u200b","\u2014","\u200b","\u200b","0.01","\u200b","\u200b","\u2014"],["Unrealized (gain) loss on marketable equity securities","\u200b","","0.04","\u200b","","(0.00)","\u200b","","0.05","\u200b","","(0.00)"],["Reversal of registration rights penalty","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014"],["Gain on exchange of equipment","\u200b","","(0.07)","\u200b","","\u2014","\u200b","","(0.07)","\u200b","","\u2014"],["Impairment of goodwill","\u200b","\u200b","2.57","\u200b","\u200b","\u2014","\u200b","\u200b","2.71","\u200b","\u200b","\u2014"],["Other (income) expense","\u200b","","\u2014","\u200b","","(0.02)","\u200b","","\u2014","\u200b","","(0.02)"],["Other revenue, (income) expense items:","\u200b","","\u200b","\u200b","","\u200b","\u200b","","\u200b","\u200b","","\u200b"],["License fees","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014"],["Adjusted EBITDA","\u200b","$","(0.51)","\u200b","$","0.02","\u200b","$","(0.43)","\u200b","$","0.14"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Diluted weighted average number of shares outstanding","\u200b","\u200b","130,405,502","\u200b","\u200b","89,241,044","\u200b","\u200b","123,760,839","\u200b","\u200b","86,501,471"]] [[/GREPCENT_TABLE]] ​ Non-GAAP Costs of Revenues, Net [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Three Months Ended June 30,","\u200b","Six Months Ended June 30,"],["\u200b","\u200b","2022","","2021","\u200b","2022","","2021"],["Costs of revenues - Data Center Hosting","\u200b","$","15,184","\u200b","$","3,736","\u200b","$","30,169","\u200b","$","3,736"],["Power curtailment credits","\u200b","","(3,497)","\u200b","","(1,143)","\u200b","","(5,438)","\u200b","","(1,143)"],["Cost of revenues - Data Center Hosting, net of power curtailment credits","\u200b","$","11,687","\u200b","$","2,593","\u200b","$","24,731","\u200b","$","2,593"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Costs of revenues - Mining","\u200b","$","17,995","\u200b","$","9,325","\u200b","$","37,089","\u200b","$","16,859"],["Power curtailment credits","\u200b","","(2,209)","\u200b","","\u2014","\u200b","","(2,820)","\u200b","","\u2014"],["Cost of revenues - Mining, net of power curtailment credits","\u200b","$","15,786","\u200b","$","9,325","\u200b","$","34,269","\u200b","$","16,859"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Total power curtailment credits","\u200b","","(5,706)","\u200b","","(1,143)","\u200b","","(8,258)","\u200b","","(1,143)"]] [[/GREPCENT_TABLE]] ​ Results of Operations Comparative Results for the Three Months Ended September 30, 2022 and 2021: Revenue: For the three months ended September 30, 2022 and 2021, Mining revenue was $22.1 million, and $53.6 million, respectively. The decrease of $31.5 million was due to a lower number of Bitcoin mined of 1,042 in the 2022 period, as compared to 1,292 in the 2021 period, combined with lower Bitcoin values in the 2022 period, averaging $21,184 per coin as compared to $41,837 per coin in the 2021 period. The primary reason for the decrease in the number of Bitcoin mined was due to the Company’s effective employment of its proprietary power strategy to significantly reduce overall power costs. As noted below, during the three months ended September 30, 2022, the Company earned $13.1 million in power credits, to be credited against its power invoices, as a result of temporarily pausing its operations. The power credits equate to approximately 760 Bitcoin, as computed by using the average daily 49 Table of Contents closing BTC prices on a monthly basis. During the three months ended September 30, 2021, the Company earned $2.5 million in power credits, or the equivalent of approximately 66 Bitcoin. ​ For the three months ended September 30, 2022 and 2021, Data Center Hosting revenue was $8.4 million, and $11.2 million, respectively. The decrease of $2.8 million was due primarily to lower revenue share from customers due to the lower Bitcoin values in the 2022 period combined with lower customer billings due to Whinstone’s participation in ERCOT’s energy demand response programs. Data Center Hosting revenue includes upfront payments which we record as deferred revenue and generally recognize as services are provided. We provide energized space and operating and maintenance services to third-party mining companies who locate their mining hardware at our Rockdale Facility under long-term contracts. We account for these agreements as a single performance obligation for services being delivered in a series with delivery being measured by daily successful operation of the mining hardware. As such, we recognize revenue over the life of the contract as its series of performance obligations are met. The contracts are recognized in the amount for which we have the right to invoice because we elected the “right to invoice” practical expedient. For the three months ended September 30, 2022, Engineering revenue was $15.8 million. There was no Engineering revenue for the three months ended September 30, 2021 as such date was prior to the acquisition of the Engineering segment. Engineering revenue is derived from the sale of custom products built to customers’ specifications under fixed-price contracts with one identified performance obligation. Engineering revenues are recognized over time as performance creates or enhances an asset with no alternative use, and for which the Company has an enforceable right to receive compensation as defined under the contract. Costs and expenses: Cost of revenues for Mining for the three months ended September 30, 2022 and 2021 was $14.7 million and $13.0 million, respectively, representing an increase of approximately $1.7 million. As a percentage of Mining revenue, cost of revenues totaled 66.5% and 24.3% for each of the three months ended September 30, 2022 and 2021, respectively. Cost of revenues consists primarily of direct production costs of mining operations, including electricity, labor, insurance and the variable Coinmint hosting fee, but excluding depreciation and amortization, which are separately stated. The increase of $1.6 million in cost of revenues was primarily due to the increase in mining capacity at the Rockdale Facility, which requires more headcount and direct costs necessary to maintain and support the mining operations. As noted below, during the three months ended September 30, 2022 and 2021, the Company earned $13.1 million and $2.5 million, respectively, in power credits to be credited against its power invoices, as a result of temporarily pausing its operations. These credits are recognized in power curtailment credits in the statements of operations, outside of cost of revenues, but significantly reduce the Company’s overall cost to mine Bitcoin. When netting the power curtailment credits with the costs of revenues, the net costs as a percentage of Mining revenue were 38.8% and 24.3% for the three months ended September 30, 2022 and 2021, respectively. Cost of revenues for Data Center Hosting for the three months ended September 30, 2022 and 2021 was $14.2 million and $12.6 million, respectively. The costs consisted primarily of direct power costs, with the balance primarily incurred for rent and compensation costs. Cost of revenues for Engineering for the three months ended September 30, 2022 was $13.8 million. There were no engineering costs for the three months ended September 30, 2021 as such date was prior to the acquisition of the Engineering segment. The 2022 costs consisted primarily of direct materials and labor, as well as indirect manufacturing costs. The increase in cost of revenues was primarily due to the increase in headcount to support the Company’s growth combined with an increase in power costs. Selling, general and administrative expenses during the three months ended September 30, 2022 and 2021 totaled $16.0 million and $40.3 million, respectively. Selling, general and administrative expenses consist of stock-based compensation, legal and professional fees and other personnel and related costs. The decrease of $24.3 million is primarily due to a decrease of $29.7 million in compensation-related expense due to the adoption of the Company’s performance-based stock plan in August 2021, partially offset by additional employees to support the Company’s growth, an increase in audit and consulting fees of $1.9 million resulting primarily from assistance on internal control systems and procedures and information technology projects and an increase in other general operating costs, including rent, to support the Company’s growth. Depreciation and amortization expenses during the three months ended September 30, 2022 totaled $26.6 million, an increase of approximately $14.4 million as compared to $12.2 million for the three months ended September 30, 2021. The increase was primarily due to higher depreciation expense recognized for the Rockdale Facility and our recently acquired miners. Change in fair value of our derivative asset for the three months ended September 30, 2022 and 2021, was ($17.7) million and $7.4 million, respectively, and was recorded to adjust the fair value of our Power Supply Agreement, which was classified as a derivative asset and measured at fair value. 50 Table of Contents ​ Power curtailment credits for the three months ended September 30, 2022 and 2021, was $13.1 million and $2.5 million, respectively, and represents power sales into the ERCOT marketplace through Whinstone’s participation in ERCOT’s energy demand response programs. Realized gain on sale/exchange of Bitcoin for the three months ended September 30, 2022 was $3.1 million. The realized gain or loss on sale/exchange of Bitcoin for the three months ended September 30, 2021 was nominal. Gain on exchange of equipment for the three months ended September 30, 2022 was $7.7 million arising from the equipment exchange agreement with a third-party Bitcoin mining company. There was no gain on exchange of equipment during the three months ended September 30, 2021. Impairment of Bitcoin for the three months ended September 30, 2022 and 2021 was $3.0 million and $6.7 million, respectively, arising from the decline in Bitcoin prices. There was no impairment of Bitcoin recognized during the three months ended September 30, 2021. Other income and expenses: Other income for the three months ended September 30, 2022 was $0.5 million, and primarily consisted of interest and other income of $0.3 million and the unrealized gain on marketable equity securities of $0.1 million. Other expense for the three months ended September 30, 2021 was $11.2 million, which primarily related to the unrealized loss recognized due to the decline in the fair value of our marketable equity securities. Results of Operations Comparative Results for the Nine Months Ended September 30, 2022 and 2021: Revenue: For the nine months ended September 30, 2022 and 2021, Mining revenue was $126.2 million, and $108.2 million, respectively. The increase of $18.0 million was due to a higher number of Bitcoin mined of 3,842 in the 2022 period, as compared to 2,458 in the 2021 period, partially offset by lower Bitcoin values in the 2022 period, averaging $32,839 per coin as compared to $44,591 per coin in the 2021 period. The number of Bitcoin mined during 2022 was significantly impacted by the Company’s effective employment of its proprietary power strategy to significantly reduce overall power costs. As noted below, during the nine months ended September 30, 2022, the Company earned $21.3 million in power credits to be credited against its power invoices, as a result of temporarily pausing its operations. The power credits equate to approximately 1,160 Bitcoin, as computed by using the average daily closing BTC prices on a monthly basis. During the nine months ended September 30, 2021, the Company earned $3.7 million in power credits, or the equivalent of approximately 92 Bitcoin. For the nine months ended September 30, 2022 and 2021, Data Center Hosting revenue was $27.9 million, and $14.1 million, respectively. The $13.8 million increase was primarily due to the 2021 period only containing four months of Data Center Hosting revenue versus nine for the 2022 period. Data Center Hosting revenue includes upfront payments which we record as deferred revenue and generally recognize as services are provided. We provide energized space and operating and maintenance services to third-party mining companies who locate their mining hardware at our Rockdale Facility under long-term contracts. We account for these agreements as a single performance obligation for services being delivered in a series with delivery being measured by daily successful operation of the mining hardware. As such, we recognize revenue over the life of the contract as its series of performance obligations are met. The contracts are recognized in the amount for which we have the right to invoice because we elected the “right to invoice” practical expedient. The Data Center Hosting segment was acquired in May 2021, and therefore its results of operations are only included in the Company’s consolidated results of operations for four months during 2021 compared to nine in 2022. For the nine months ended September 30, 2022, Engineering revenue was $44.9 million. There was no Engineering revenue for the nine months ended September 30, 2021 as such date was prior to the acquisition of the Engineering segment. Engineering revenue is derived from the sale of custom products built to customers’ specifications under fixed-price contracts with one identified performance obligation. Engineering revenues are recognized over time as performance creates or enhances an asset with no alternative use, and for which the Company has an enforceable right to receive compensation as defined under the contract. Other revenue consisting of license fees was not significant in either period. ​ 51 Table of Contents Costs and expenses: Cost of revenues for Mining for the nine months ended September 30, 2022 and 2021 was $51.8 million and $29.9 million, respectively, representing an increase of approximately $21.9 million. As a percentage of Mining revenue, cost of revenues totaled 41.0% and 27.6% for each of the nine months ended September 30, 2022 and 2021, respectively. Cost of revenues consists primarily of direct production costs of mining operations, including electricity, labor, insurance and the variable Coinmint hosting fee, but excluding depreciation and amortization, which are separately stated. The increase of $21.9 million in cost of revenues is primarily due to the increase in mining capacity at the Rockdale Facility, which requires more headcount and direct costs necessary to maintain and support the mining operations. As noted below, during the nine months ended September 30, 2022 and 2021, the Company earned $21.3 million and $3.7 million, respectively, in power credits, to be credited against its power invoices, as a result of temporarily pausing its operations. These credits are recognized in power curtailment credits in the statements of operations, outside of cost of revenues, but significantly reduce the Company’s overall cost to mine Bitcoin. When netting the power curtailment credits with the costs of revenues, the net costs as a percentage of Mining revenue were 34.6% and 27.6% for the nine months ended September 30, 2022 and 2021, respectively. Cost of revenues for Data Center Hosting for the nine months ended September 30, 2022 and 2021 was $44.4 million and $16.3 million, respectively. The costs consisted primarily of direct power costs, with the balance primarily incurred for rent and compensation costs. Whinstone was acquired in May 2021, and therefore its results of operations are only included in the Company’s consolidated results of operations for four months during 2021 compared to nine in 2022. Cost of revenues for Engineering for the nine months ended September 30, 2022 was $40.5 million. There were no Engineering costs for the nine months ended September 30, 2021 as such date was prior to the acquisition of the Engineering segment. The 2022 costs consisted primarily of direct materials and labor, as well as indirect manufacturing costs. Acquisition-costs for the nine months ended September 30, 2022 were nominal. Acquisition-related costs for the nine months ended September 30, 2021, totaled $18.9 million, and consisted of expenses incurred in connection with our acquisition of Whinstone. Selling, general and administrative expenses during the nine months ended September 30, 2022 and 2021 totaled $37.5 million and $48.0 million, respectively. Selling, general and administrative expenses consist of stock-based compensation, legal and professional fees and other personnel and related costs. The decrease of $10.5 million is primarily due to a decrease of $24.8 million in compensation-related expense due to the adoption of the performance-based stock plan in August 2021, partially offset by additional employees to support the Company’s growth, an increase in audit and consulting fees of $3.8 million resulting primarily from assistance on internal control systems and procedures and information technology projects, an increase in insurance expense of $1.2 million, and an increase in other general operating costs, including rent, to support the Company’s growth. Depreciation and amortization expenses during the nine months ended September 30, 2022 totaled $61.4 million, an increase of approximately $40.6 million as compared to $20.8 million for the nine months ended September 30, 2021. The increase was primarily due to higher depreciation expense recognized for the Rockdale Facility and our recently acquired miners. Change in fair value of our derivative asset for the nine months ended September 30, 2022 and 2021 was $86.9 million and $23.8 million, respectively, and was recorded to adjust the fair value of our Power Supply Agreement, which is classified as a derivative asset and measured at fair value. Power curtailment credits for the nine months ended September 30, 2022 and 2021 was $21.3 million and $3.7 million, respectively, and represents power sales into the ERCOT marketplace through Whinstone’s participation in ERCOT’s energy demand response programs. Realized gain on sale/exchange of Bitcoin for the nine months ended September 30, 2022 and 2021 was $28.0 million and $0.1 million, respectively. Gain on exchange of equipment for the nine months ended September 30, 2022 was $16.3 million arising from the equipment exchange agreement with a third-party Bitcoin mining company. There was no gain on exchange of equipment during the nine months ended September 30, 2021.  Impairment of Bitcoin for the nine months ended September 30, 2022 and 2021 was $130.3 million and $26.9 million, respectively, arising from the decline in Bitcoin prices. 52 Table of Contents Impairment of goodwill for the nine months ended September 30, 2022 was $335.6 million arising from recent adverse changes in business climate, including decreases in the price of Bitcoin and increased volatility of equity markets, as evidenced by declines in the market price of the Company’s securities, those of its peers, and major market indices. There was no impairment recognized during the nine months ended September 30, 2021. ​ Other income and expenses: Other expense for the nine months ended September 30, 2022 was $8.0 million and primarily consisted of the unrealized loss on marketable equity securities of $6.3 million and the realized loss on sale of marketable equity securities of $1.6 million recognized in connection with the sale of a portion of our shares of Mogo. Other income for the nine months ended September 30, 2021 was $17.2 million, which primarily related to a $26.3 million realized gain on sale/exchange of long-term investment recognized in connection with the exchange of our shares of Coinsquare Ltd. (“Coinsquare”) for shares of Mogo, partially offset by $10.8 million of unrealized loss recognized on our investment in Mogo. ​ Reconciliations of GAAP to Non-GAAP Measures Non-GAAP Adjusted EBITDA [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Three Months Ended September 30,","\u200b","Nine Months Ended September 30,"],["\u200b","","2022","","2021","\u200b","2022","","2021"],["\u200b","\u200b","(as restated)","\u200b","(as restated)","\u200b","(as restated)","\u200b","(as restated)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Net income (loss)","\u200b","$","(32,435)","\u200b","$","(22,035)","\u200b","$","(349,416)","\u200b","$","2,130"],["Interest (income) expense","\u200b","","(348)","\u200b","","(40)","\u200b","","9","\u200b","","(295)"],["Income tax expense (benefit)","\u200b","","(2,952)","\u200b","","\u2014","\u200b","","(8,839)","\u200b","","3,730"],["Depreciation and amortization","\u200b","","26,559","\u200b","","12,207","\u200b","","61,366","\u200b","","20,791"],["EBITDA","\u200b","","(9,176)","\u200b","","(9,868)","\u200b","","(296,880)","\u200b","","26,356"],["\u200b","\u200b","","","\u200b","","","\u200b","","","\u200b"],["Adjustments:","\u200b","","","\u200b","","","\u200b","","","\u200b"],["Non-cash/non-recurring operating expenses:","\u200b","","","\u200b","","","\u200b","","","\u200b"],["Stock-based compensation expense","\u200b","","3,561","\u200b","","36,023","\u200b","","7,304","\u200b","","37,928"],["Acquisition-related costs","\u200b","","\u2014","\u200b","","552","\u200b","","78","\u200b","","18,894"],["Change in fair value of derivative asset","\u200b","","17,749","\u200b","","(7,413)","\u200b","","(86,865)","\u200b","","(23,806)"],["Change in fair value of contingent consideration","\u200b","","\u2014","\u200b","","259","\u200b","","176","\u200b","","444"],["Realized gain on sale/exchange of long-term investment","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","(26,260)"],["Realized loss on sale of marketable equity securities","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","1,624","\u200b","\u200b","\u2014"],["Unrealized (gain) loss on marketable equity securities","\u200b","","(142)","\u200b","","11,151","\u200b","","6,306","\u200b","","10,812"],["Gain on exchange of equipment","\u200b","","(7,667)","\u200b","","\u2014","\u200b","","(16,281)","\u200b","","\u2014"],["Impairment of goodwill","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","335,648","\u200b","\u200b","\u2014"],["Other (income) expense","\u200b","","\u2014","\u200b","","85","\u200b","","59","\u200b","","(1,425)"],["Other revenue, (income) expense items:","\u200b","","\u200b","\u200b","","\u200b","\u200b","","\u200b","\u200b","","\u200b"],["License fees","\u200b","","(25)","\u200b","","(25)","\u200b","","(73)","\u200b","","(73)"],["Adjusted EBITDA","\u200b","$","4,300","\u200b","$","30,764","\u200b","$","(48,904)","\u200b","$","42,870"]] [[/GREPCENT_TABLE]] ​ 53 Table of Contents Non-GAAP Adjusted EPS [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Three Months Ended September 30,","\u200b","Nine Months Ended September 30,"],["\u200b","","2022","","2021","\u200b","2022","","2021"],["\u200b","\u200b","(as restated)","\u200b","(as restated)","\u200b","(as restated)","\u200b","(as restated)"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Diluted net income (loss) per share","\u200b","$","(0.21)","\u200b","$","(0.23)","\u200b","$","(2.61)","\u200b","$","0.02"],["Interest (income) expense","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014"],["Income tax expense (benefit)","\u200b","","(0.02)","\u200b","","\u2014","\u200b","","(0.07)","\u200b","","0.04"],["Depreciation and amortization","\u200b","","0.17","\u200b","","0.13","\u200b","","0.46","\u200b","","0.23"],["EBITDA","\u200b","","(0.06)","\u200b","","(0.10)","\u200b","","(2.22)","\u200b","","0.29"],["\u200b","\u200b","","","\u200b","","","\u200b","","","\u200b"],["Adjustments:","\u200b","","","\u200b","","","\u200b","","","\u200b"],["Non-cash/non-recurring operating expenses:","\u200b","","","\u200b","","","\u200b","","","\u200b"],["Stock-based compensation expense","\u200b","","0.02","\u200b","","0.37","\u200b","","0.05","\u200b","","0.42"],["Acquisition-related costs","\u200b","","\u2014","\u200b","","0.01","\u200b","","\u2014","\u200b","","0.21"],["Change in fair value of derivative asset","\u200b","","0.12","\u200b","","(0.08)","\u200b","","(0.65)","\u200b","","(0.26)"],["Change in fair value of contingent consideration","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014"],["Realized gain on sale/exchange of long-term investment","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","(0.29)"],["Realized loss on sale of marketable equity securities","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","0.01","\u200b","\u200b","\u2014"],["Unrealized (gain) loss on marketable equity securities","\u200b","","\u2014","\u200b","","0.12","\u200b","","0.05","\u200b","","0.12"],["Gain on exchange of equipment","\u200b","","(0.05)","\u200b","","\u2014","\u200b","","(0.12)","\u200b","","\u2014"],["Impairment of goodwill","\u200b","\u200b","\u2014","\u200b","\u200b","\u2014","\u200b","\u200b","2.51","\u200b","\u200b","\u2014"],["Other (income) expense","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","(0.02)"],["Other revenue, (income) expense items:","\u200b","","\u200b","\u200b","","\u200b","\u200b","","\u200b","\u200b","","\u200b"],["License fees","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014","\u200b","","\u2014"],["Adjusted EBITDA","\u200b","$","0.03","\u200b","$","0.32","\u200b","$","(0.37)","\u200b","$","0.47"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Diluted weighted average number of shares outstanding","\u200b","\u200b","153,895,123","\u200b","\u200b","96,064,036","\u200b","\u200b","133,894,338","\u200b","\u200b","89,896,374"]] [[/GREPCENT_TABLE]] ​ 54 Table of Contents Non-GAAP Costs of Revenues, Net ​ [[GREPCENT_TABLE]] [["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["\u200b","\u200b","Three Months Ended September 30,","\u200b","Nine Months Ended September 30,"],["\u200b","\u200b","2022","","2021","\u200b","2022","","2021"],["Bitcoin Mining","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Revenue","\u200b","$","22,070","\u200b","$","53,590","\u200b","$","126,166","\u200b","$","108,213"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Costs of revenues","\u200b","","14,677","\u200b","","13,034","\u200b","","51,766","\u200b","","29,893"],["Power curtailment credits","\u200b","","(6,104)","\u200b","","\u2014","\u200b","","(8,175)","\u200b","","\u2014"],["Cost of revenues, net of power curtailment credits","\u200b","","8,573","\u200b","","13,034","\u200b","","43,591","\u200b","","29,893"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Bitcoin Mining revenue in excess of cost of revenues, net of power curtailment credits","\u200b","$","13,497","\u200b","$","40,556","\u200b","$","82,575","\u200b","$","78,320"],["Bitcoin Mining revenue in excess of cost of revenues, net of power curtailment credits, as a percentage of revenue","\u200b","","61.2%","\u200b","","75.7%","\u200b","","65.4%","\u200b","","72.4%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Data Center Hosting","\u200b","","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","","\u200b"],["Revenue","\u200b","$","8,371","\u200b","$","11,193","\u200b","$","27,899","\u200b","$","14,067"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Costs of revenues","\u200b","\u200b","14,223","\u200b","\u200b","12,581","\u200b","\u200b","44,392","\u200b","\u200b","16,317"],["Power curtailment credits","\u200b","","(6,996)","\u200b","","(2,507)","\u200b","","(13,153)","\u200b","","(3,650)"],["Cost of revenues, net of power curtailment credits","\u200b","","7,227","\u200b","","10,074","\u200b","","31,239","\u200b","","12,667"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Data Center Hosting revenue in excess of cost of revenues, net of power curtailment credits","\u200b","$","1,144","\u200b","$","1,119","\u200b","$","(3,340)","\u200b","$","1,400"],["Data Center Hosting revenue in excess of cost of revenues, net of power curtailment credits, as a percentage of revenue","\u200b","","13.7%","\u200b","","10.0%","\u200b","","(12.0)%","\u200b","","10.0%"],["\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b","\u200b"],["Total power curtailment credits","\u200b","","(13,100)","\u200b","","(2,507)","\u200b","","(21,328)","\u200b","","(3,650)"]] [[/GREPCENT_TABLE]] ​ LIQUIDITY AND CAPITAL RESOURCES As of December 31, 2022, we had working capital of approximately $321.8 million, which included cash and cash equivalents of $230.3 million. We reported a net loss of $509.6 million during the year ended December 31, 2022. The net loss included $415.0 million in non-cash items, primarily consisting of an impairment of goodwill of $335.6, impairments of Bitcoin of $147.4, depreciation and amortization of $108.0 million, and impairment of miners of $55.5 million, partially offset by $156.9 of net Bitcoin revenue and the change in fair value of our derivative asset of $71.4 million. During the year ended December 31, 2022, the Company sold 3,425 Bitcoin for proceeds of approximately $79.5 million. The Company monitors its balance sheet on an ongoing basis and continuously evaluates the level of Bitcoin retained from monthly production in consideration of the cash requirements and its ongoing operations and expansion. Contractual Commitments As of December 31, 2022, we had no contractual commitments. ​ Coinmint Co-location Mining Services Agreement On April 8, 2020, we entered into an agreement with Coinmint, pursuant to which Coinmint agreed to provide up to approximately 9.5 megawatts of electrical power and to perform all maintenance necessary to operate the Company’s miners deployed at Coinmint. In exchange, Coinmint was reimbursed for direct production expenses and received a performance fee based on the net Bitcoin generated by the Company’s miners deployed at Coinmint. The amount of electrical power supplied to the Company’s miners at Coinmint was subsequently increased to accommodate the Company’s expanding miner fleet. During the year ended December 31, 2022, we elected to not renew its co-location mining services agreement with Coinmint, which was therefore terminated automatically per its terms as of July 8, 2022. ​ 55 Table of Contents Miners During the year ended December 31, 2021, we entered into six purchase agreements with Bitmain to acquire 52,500 Antminer model S19j (90 Terahash per second) (“TH/s”) miners and 30,000 of their latest Antminer model S19XP (140 TH/s) miners for a combined total purchase price of approximately $535.0 million. Pursuant to these agreements, no amounts remained payable to Bitmain at December 31, 2022. All miners subject to these purchase orders were delivered through December 31, 2022, except for 5,130 miners, which were delivered in January 2023. During the year ended December 31, 2020, the Company entered into purchase agreements with Bitmain for the acquisition of a total of 33,646 of their model S19, S19-Pro, and S19j-Pro Antminer series of miners, to be shipped and delivered during 2020 and 2021. During the year ended December 31, 2020, the Company received 3,043 model S19 Antminers of these 33,646 new miners, all of which were deployed at the Coinmint Facility. The remaining 30,603 of these new miners were delivered in monthly shipments through January 2022. Development of the Corsicana Facility Data Center During the year ended December 31, 2022, we announced the initiation of a large-scale development to expand our Bitcoin mining and data center hosting capabilities in Navarro County, Texas with the acquisition of a 265-acre site where the anticipated one-gigawatt Corsicana Facility is being constructed. The Company received approval from ERCOT for the entire one-gigawatt capacity. The initial phase of the development of the Corsicana Facility involves the construction on the 265-acre site of 400 megawatts of immersion-cooled Bitcoin mining and data center hosting infrastructure spread across multiple buildings, as well as a high-voltage power substation and transmission facilities to supply power to the facility. Construction of the substation and the data centers is expected to be carried out concurrently, with self-mining and data center hosting operations expected to commence by the fourth quarter of 2023, following the commissioning of the substation, which is expected to be completed in the fourth quarter of 2023. This first phase of the development of the Corsicana Facility includes land acquisition, site preparation, substation development, and transmission construction, along with construction of ancillary buildings and four buildings utilizing the Company’s immersion-cooling infrastructure and technology. The Company estimates that the total cost of the first phase of the development will be approximately $333 million, which is scheduled to be invested through the first quarter of 2024. Through December 31, 2022, we had incurred costs of approximately $53.4 million related to the development of the Corsicana Facility, which consisted of $10.1 million for land, $38.6 million of initial developments costs and equipment and a $4.7 million deposit for future power usage. We expect to incur costs of approximately $199 million during 2023 and approximately $81 million during the first quarter of 2024. Revenue from Operations Bitcoin Mining Funding our operations on a go-forward basis will rely significantly on our ability to mine Bitcoin at a price above our Bitcoin Mining costs and revenue generated from our Data Center Hosting and Engineering customers. We expect to generate ongoing revenues from Bitcoin rewards from our Bitcoin Mining operations and our ability to liquidate Bitcoin rewards at future values will be regularly evaluated to generate cash for operations. Generating Bitcoin rewards, for example, which exceed our production and overhead costs will determine our ability to report profit margins related to such mining operations, although accounting for our reported profitability is significantly complex. Furthermore, regardless of our ability to generate proceeds from the sale of our Bitcoin produced from our Bitcoin Mining business, we may need to raise additional capital in the form of equity or debt to fund our operations and pursue our business strategy. The ability to raise funds through the sale of equity, debt financings, or the sale of Bitcoin to maintain our operations is subject to many risks and uncertainties and, even if we were successful, future equity issuances or convertible debt offerings could result in dilution to our existing stockholders and any future debt or debt securities may contain covenants that limit our operations or ability to enter into certain transactions. Our ability to realize revenue through Bitcoin production and successfully convert Bitcoin into cash or fund overhead with Bitcoin is subject to a number of risks, including regulatory, financial and business risks, many of which are beyond our control. Additionally, we have observed significant historical volatility in the market price of Bitcoin and, as such, future prices cannot be predicted. See the discussion of risks affecting our business under Part I, Item 1A. “Risk Factors” of this Annual Report. 56 Table of Contents Data Center Hosting In general, we provide power for our data center customers on a variable (sub-metered) basis. A customer pays us variable monthly fees for the specific amount of power utilized at rates specified in each contract, subject to certain minimums. We recognize variable power revenue each month as the uncertainty related to the consideration is resolved, power is provided to our customers, and our customers utilize the power (the customer simultaneously receives and consumes the benefits of our performance). We generate engineering and construction services revenue from the fabrication and deployment of immersion cooling technology for Bitcoin mining customers, for which we bill the customer at a fixed monthly fee or at an hourly rate. For the construction of customer-owned equipment, revenue is recognized upon completion of each phase of the construction project, as defined in each contract. For the construction of assets owned by us but paid for and used by the customer during the term of their data center hosting contract, revenue is recognized on a straight-line basis over the remaining life of the contract. Maintenance services include cleaning, cabling, and other services to maintain the customers’ equipment. We bill the customer at a fixed monthly fee or at an hourly rate. Revenue is recognized as these services are provided. Engineering Substantially all engineering revenue is derived from the sale of custom products built to customers’ specifications under fixed-price contracts. Revenues are recognized over time as performance creates or enhances an asset with no alternative use, and for which we have an enforceable right to receive compensation as defined under the contract. The length of time required to complete a custom product varies but is typically between four to 12 weeks. Customers are typically required to make periodic progress payments based on contractually agreed-upon milestones. If we are unable to generate sufficient revenue from our Bitcoin Mining, Data Center Hosting, or Engineering operations when needed or secure additional sources of funding, it may be necessary to significantly reduce our current rate of spending or explore other strategic alternatives. At-the-Market Equity Offerings 2022 ATM Offering In March 2022, we entered into an ATM sales agreement under which we could offer and sell up to $500.0 million in shares of the Company’s common stock. During the year ended December 31, 2022, we received gross proceeds of approximately $304.8 million ($298.2 million, net of $6.6 million in commissions and expenses), from the sale of 37,052,612 shares of common stock at an average fair value of $8.23 per share. 2021 ATM Offering In August 2021, we entered into an ATM sales agreement under which we could offer and sell up to $600.0 million in shares of the Company’s common stock. During the year ended December 31, 2021, we received gross proceeds of approximately $600.0 million ($587.2 million, net of $12.8 million in commissions and expenses), from the sale of 19,910,589 shares of common stock at an average fair value of $29.53 per share. With the sale and issuance of these shares, all $600.0 million in shares of our common stock available for sale under 2021 ATM Offering had been issued. 2020 ATM Offering In January 2021, we received gross proceeds of approximately $84.8 million ($82.7 million net, after $2.1 million in expenses) from the sale of 4,433,468 shares of common stock at an average fair value of $19.13 per share under an ATM agreement we entered into in December 2020. With the sale and issuance of these shares, and of the shares previously sold and issued during the year ended December 31, 2020, all $200 million in shares of our common stock available for sale under the December 2020 ATM Offering had been issued. In October 2020, we entered into an ATM sales agreement under which we received proceeds of approximately $100.0 million from the sale of common shares. We incurred fees of up to 3.0% of the gross proceeds received. 57 Table of Contents Legal Proceedings The Company has been named a defendant in several class action and other investor related lawsuits as more fully described in Part I, Item 3., “Legal Proceedings”, of this Annual Report. While the Company maintains policies of insurance, such policies may not cover all of the costs or expenses associated with responding to such matters or any liability or settlement associated with any lawsuits and are subject to significant deductible or retention amounts. Operating Activities For the year ended December 31, 2022, Net cash provided by operating activities was $0.5 million, which primarily consisted of: [[GREPCENT_TABLE]] [["","\u25cf","the net loss of $509.6 million;"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","an increase in assets and liabilities of $95.1 million, which consisted primarily of:"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","proceeds from the sale of Bitcoin of $79.5 million and $59.0 million from the receipt of future power credits, partially offset by an increase in prepaids and other assets of $25.5 million and a decrease in accounts receivable of $11.5 million; and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","non-cash reconciling items of $415.0 million, consisting primarily of:"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","impairment of goodwill of $335.6 million,"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","impairment of Bitcoin of $147.4 million,"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","depreciation and amortization of $108.0 million,"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","impairment of miners of $55.5 million,"]] [[/GREPCENT_TABLE]] partially offset by: [[GREPCENT_TABLE]] [["","\u25cf","the change in fair value of our derivative asset of $71.4 million, and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","net Bitcoin revenue of $156.9 million."]] [[/GREPCENT_TABLE]] ​ For the year ended December 31, 2021, Net cash used in operating activities was $86.1 million, which primarily consisted of: [[GREPCENT_TABLE]] [["","\u25cf","the net loss of $15.4 million; and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","a decreases in assets and liabilities of $2.6 million, which consisted primarily of:"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","an increase in accrued expenses of $16.1 million, partially offset by a decrease in deferred revenue of $12.9 million; and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","non-cash reconciling items of $69.7 million, consisting primarily of:"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","net Bitcoin revenue of $184.4 million,"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","stock-based compensation expense of $68.5 million,"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","impairment of Bitcoin of $44.0 million,"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","depreciation and amortization of $26.3 million, and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","an unrealized loss on marketable equity securities of $13.7 million,"]] [[/GREPCENT_TABLE]] partially offset by: [[GREPCENT_TABLE]] [["","\u25cf","a realized gain on the sale/exchange of long-term investment of $26.3 million; and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","and the change in fair value of our derivative asset of $12.1 million."]] [[/GREPCENT_TABLE]] ​ For the year ended December 31, 2020, Net cash used in operating activities was $2.8 million, which primarily consisted of: [[GREPCENT_TABLE]] [["","\u25cf","the net loss of $14.1 million; and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","an increase in assets and liabilities of $9.7 million, which consisted primarily of:"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","proceeds from the sale of Bitcoin of $8.3 million; and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","non-cash reconciling items of $1.6 million, consisting primarily of:"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","net Bitcoin revenue of $11.8 million"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","the impairment of our investment in Coinsquare of $9.4 million,"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","depreciation and amortization of $4.5 million,"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","impairment of Bitcoin of $3.6 million, and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","stock-based compensation expense of $3.4 million,"]] [[/GREPCENT_TABLE]] partially offset by: [[GREPCENT_TABLE]] [["","\u25cf","a $6.4 million realized gain on the sale/exchange of Bitcoin, and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","$1.4 million for the reversal of our accrual for the registration rights penalty."]] [[/GREPCENT_TABLE]] ​ Investing Activities For the year ended December 31, 2022, Net cash used in investing activities was $354.9 million, which primarily consisted of: 58 Table of Contents [[GREPCENT_TABLE]] [["","\u25cf","Deposits paid on equipment of $194.9 million, and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Purchases of property and equipment of $148.4 million."]] [[/GREPCENT_TABLE]] For the year ended December 31, 2021, Net cash used in investing activities was $490.6 million, which primarily consisted of: [[GREPCENT_TABLE]] [["","\u25cf","deposits paid on equipment of $274.8 million,"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","purchases of property and equipment of $147.1 million,"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","net cash paid for our acquisition of Whinstone of $40.9 million, and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","net cash paid for our acquisition of ESS Metron of $29.6 million."]] [[/GREPCENT_TABLE]] For the year ended December 31, 2020, Net cash used in investing activities was $41.1 million, which primarily consisted of: [[GREPCENT_TABLE]] [["","\u25cf","deposits paid on equipment of $33.1 million, and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","purchases of property and equipment of $8.1 million."]] [[/GREPCENT_TABLE]] ​ Financing Activities For the year ended December 31, 2022, Net cash provided by financing activities was $272.3 million, which primarily consisted of: [[GREPCENT_TABLE]] [["","\u25cf","net proceeds from the issuance of our common stock in connection with our ATM Offerings of $298.2 million,"]] [[/GREPCENT_TABLE]] partially offset by: [[GREPCENT_TABLE]] [["","\u25cf","payments on our contingent consideration liability of $15.7 million, and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","the repurchase of shares of common stock withheld to satisfy employee withholding taxes of $10.1 million in connection with the settlement of vested equity awards granted under our 2019 Equity Incentive Plan."]] [[/GREPCENT_TABLE]] For the year ended December 31, 2021, Net cash provided by financing activities was $665.6 million, which primarily consisted of: [[GREPCENT_TABLE]] [["","\u25cf","net proceeds from the issuance of our common stock in connection with our ATM Offerings of $669.9 million, and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","proceeds received from the exercise of common stock warrants of $0.8 million,"]] [[/GREPCENT_TABLE]] partially offset by: [[GREPCENT_TABLE]] [["","\u25cf","the shares of common stock withheld to satisfy employee withholding taxes of $5.1 million in connection with the settlement of vested equity awards granted under our 2019 Equity Incentive Plan."]] [[/GREPCENT_TABLE]] For the year ended December 31, 2020, Net cash provided by financing activities was $259.9 million, which primarily consisted of: [[GREPCENT_TABLE]] [["","\u25cf","net proceeds from the issuance of our common stock in connection with our 2019 ATM Offering of $48.0 million and $209.5 million in connection with our 2020 ATM Offering, and"]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","proceeds received from the exercise of common stock warrants of $2.9 million,"]] [[/GREPCENT_TABLE]] partially offset by: [[GREPCENT_TABLE]] [["","\u25cf","the repurchase of common stock to pay director and employee withholding taxes of $0.4 million."]] [[/GREPCENT_TABLE]] Critical Accounting Policies The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Future events and their effects cannot be determined with absolute certainty. Therefore, the determination of estimates requires the exercise of judgment. Actual results inevitably will differ from those estimates, and such differences may be material to the financial statements. The most significant accounting estimates inherent in the preparation of our financial statements include estimates associated with valuing contingent consideration for a business combination and periodic reassessment of its fair value, allocating the fair value of purchase consideration to assets acquired and liabilities assumed in business acquisitions, revenue recognition, valuing the derivative asset classified under Level 3 fair value hierarchy, determining the useful lives and recoverability of long-lived assets, impairment analysis of goodwill, fixed assets, and finite-lived intangibles, stock-based compensation, and the valuation allowance associated with our deferred tax assets. The Company’s financial position, results of operations and cash flows are impacted by the accounting policies the Company has adopted. In order to get a full understanding of the Company’s financial statements, one must have a clear understanding of the accounting policies employed. A summary of the Company’s critical accounting policies follows: Bitcoin Bitcoin purchased are recorded at cost and Bitcoin awarded to the Company through its mining activities are accounted for in connection with the Company’s revenue recognition policy. 59 Table of Contents Bitcoin held are accounted for as intangible assets with indefinite useful lives. Bitcoin is measured on a first-in-first-out (“FIFO”) basis and measured for impairment whenever indicators of impairment are identified based on the intraday low quoted price of Bitcoin. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the Bitcoin. Subsequent reversal of impairment losses is not permitted. Bitcoin is classified on our balance sheet as a current asset due to the Company’s ability to sell it in a highly liquid marketplace and its intent to liquidate its Bitcoin to support operations when needed. Purchases and sales of Bitcoin by the Company and Bitcoin awarded to the Company are included within Cash flows from operating activities on the Consolidated Statements of Cash Flows. Any realized gains or losses from sales of Bitcoin are included in Operating income (expense) on the Consolidated Statements of Operations. The Company accounts for its gains or losses on a FIFO basis. Impairment of long-lived assets Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Leases The Company determines whether an arrangement contains a lease at the inception of the arrangement. If a lease is determined to exist, the term of such lease is assessed based on the date on which the underlying asset is made available for the Company’s use by the lessor. The Company’s assessment of the lease term reflects the non-cancelable term of the lease, inclusive of any rent-free periods and/or periods covered by early-termination options which the Company is reasonably certain of not exercising, as well as periods covered by renewal options which the Company is reasonably certain of exercising. The Company also determines lease classification as either operating or finance at lease commencement, which governs the pattern of expense recognition and the presentation reflected in the consolidated statements of operations over the lease term. For leases with a term exceeding 12 months, an operating lease liability is recorded on the Company’s consolidated balance sheet at lease commencement reflecting the present value of its fixed minimum payment obligations over the lease term. A corresponding operating lease right-of-use asset equal to the initial lease liability is also recorded, adjusted for any prepaid rent and/or initial direct costs incurred in connection with execution of the lease and reduced by any lease incentives received. For purposes of measuring the present value of its fixed payment obligations for a given lease, the Company uses its incremental borrowing rate, determined based on information available at lease commencement, as rates implicit in its leasing arrangements are typically not readily determinable. The Company’s incremental borrowing rate reflects the rate it would pay to borrow on a secured basis and incorporates the term and economic environment of the associated lease. For the Company’s operating leases, fixed lease payments are recognized as lease expense on a straight-line basis over the lease term. For leases with a term of 12 months or less, any fixed lease payments are recognized on a straight-line basis over the lease term and are not recognized on the Company’s consolidated balance sheet as an accounting policy election. Leases qualifying for the short-term lease exception were insignificant. Variable lease costs are recognized as incurred and primarily consist of common area maintenance and utility charges not included in the measurement of right of use assets and operating lease liabilities. Revenue recognition Bitcoin Mining The Company has entered into digital asset mining pools by executing contracts with mining pool operators to provide computing power to the mining pool. The Company’s enforceable right to compensation begins only when, and lasts as long as, the Company provides computing power to the mining pool operator and is created as power is provided over time. The only consideration due to the Company relates to the provision of computing power. The contracts are terminable at any time by and at no cost to the Company, and by the pool operator under certain conditions specified in the contract. Providing computing power in digital asset transaction verification services is an output of the Company’s ordinary activities. Providing such computing power is the only performance obligation in the Company’s contracts with mining pool operators. The transaction consideration the Company receives, if any, is noncash consideration in the form of Bitcoin. Changes in the fair value of the noncash consideration due to form of the consideration (changes in the market price of Bitcoin) are not included in the transaction price and therefore, are not included in revenue. Certain mining pool operators charge fees to cover the costs of 60 Table of Contents maintaining the pool and are deducted from amounts we may otherwise earn and are treated as a reduction to the consideration received. Fees fluctuate and historically have been no more than approximately 2% per reward earned, on average. The terms of the agreements provide that neither party can dispute settlement terms after approximately thirty-five days following settlement. In exchange for providing computing power, the Company is entitled to either: [[GREPCENT_TABLE]] [["","\u25cf","a Full-Pay-Per-Share payout of Bitcoin based on a contractual formula, which primarily calculates the hash rate provided by the Company to the mining pool as a percentage of total network hash rate, and other inputs. The Company is entitled to consideration even if a block is not successfully placed by the mining pool operator. The contract is in effect until terminated by either party."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","The consideration is all variable. Because it is probable that a significant reversal of cumulative revenue will not occur and the Company is able to calculate the payout based on the contractual formula, noncash revenue is estimated and recognized based on the spot price of Bitcoin determined using the Company\u2019s primary trading platform for Bitcoin at the inception of each contract, which is determined to be daily. Noncash consideration is measured at fair value at contract inception. Fair value of the crypto asset consideration is determined using the quoted price on the Company\u2019s primary trading platform for Bitcoin at the beginning of the contract period at the single bitcoin level (one bitcoin). This amount is estimated and recognized in revenue upon inception, which is when hash rate is provided."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","The Company transitioned completely to this mining pool in December 2022."]] [[/GREPCENT_TABLE]] Or: [[GREPCENT_TABLE]] [["","\u25cf","a fractional share of the fixed Bitcoin award the mining pool operator receives (less digital asset transaction fees to the mining pool operator which are immaterial and are recorded as a deduction from revenue) for successfully adding a block to the blockchain based on a proportion of the Company\u2019s \u201cscoring hash rate\u201d to the pool\u2019s \u201cscoring hash rate\u201d where the scoring hash rate as defined by the pool is the exponential moving average of the hash power contributed by the Company or by all pool members combined. The Company\u2019s fractional share of the Bitcoin reward is based on the proportion of computing power the Company contributed to the mining pool operator to the total computing power contributed by all mining pool participants in solving the current algorithm."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Because the consideration to which the Company expects to be entitled for providing computing power is entirely variable, as well as being noncash consideration, the Company assesses the estimated amount of the variable noncash consideration to which it expects to be entitled for providing computing power at contract inception and subsequently, to determine when and to what extent it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur once the uncertainty associated with the variable consideration is subsequently resolved (the \u201cconstraint\u201d). Only when significant revenue reversal is concluded probable of not occurring can estimated variable consideration be included in revenue. Based on evaluation of likelihood and magnitude of a reversal in applying the constraint, the estimated variable noncash consideration is constrained from inclusion in revenue until the end of the contract term, when the underlying uncertainties have been resolved and number of Bitcoin to which the Company is entitled becomes known."]] [[/GREPCENT_TABLE]] [[GREPCENT_TABLE]] [["","\u25cf","Because it is not probable that a significant reversal of cumulative revenue will not occur, the consideration is constrained until the mining pool operator successfully places a block (by being the first to solve an algorithm) and the Company receives confirmation of the consideration it will receive, at which time revenue is recognized based on the spot rate of Bitcoin determined using the Company\u2019s primary trading platform for Bitcoin at the time of receipt."]] [[/GREPCENT_TABLE]] There is no significant financing component in these transactions. Data Center Hosting In general, we provide power for our data center customers on a variable (sub-metered) basis. A customer pays us variable monthly fees for the specific amount of power utilized at rates specified in each contract, subject to certain minimums. We recognize variable power revenue each month as the uncertainty related to the consideration is resolved, power is provided to our customers, and our customers utilize the power (the customer simultaneously receives and consumes the benefits of the Company’s performance). 61 Table of Contents We have determined that our contracts contain a series of performance obligations which qualify to be recognized under a practical expedient available known as the “right to invoice.” This determination allows variable consideration in such contracts to be allocated to and recognized in the period to which the consideration relates, which is typically the period in which it is billed, rather than requiring estimation of variable consideration at the inception of the contract. We have also determined that the contracts contain a significant financing component because the timing of revenue recognition differs from the timing of invoicing by a period, exceeding one year. We generate engineering and construction services revenue from the fabrication and deployment of immersion cooling technology for Bitcoin mining customers, for which we bill the customer at a fixed monthly fee or at an hourly rate. For the construction of customer-owned equipment, revenue is recognized upon completion of each phase of the construction project, as defined in each contract. For the construction of assets owned by us but paid for and used by the customer during the term of their data center hosting contract, revenue is recognized on a straight-line basis over the remaining life of the contract. Maintenance services include cleaning, cabling, and other services to maintain the customers’ equipment. We bill the customer at a fixed monthly fee or at an hourly rate. Revenue is recognized as these services are provided. Deferred revenue is primarily from advance payments received and is recognized on a straight-line basis over the remaining life of the contract or upon completion of the installation of the customers’ equipment, as applicable. Our primary data center hosting contracts contain Service Level Agreement clauses, which guarantee a certain percentage of time the power will be available to our customer. In the rare case that we may incur penalties under these clauses, we recognize the payment as variable consideration and a reduction of the transaction price and, therefore, of revenue, when not in exchange for a good or service from the customer. Engineering Substantially all revenue is derived from the sale of custom products built to customers’ specifications under fixed-price contracts with one identified performance obligation. Revenues are recognized over time as performance creates or enhances an asset with no alternative use, and for which the Company has an enforceable right to receive compensation as defined under the contract. To determine the amount of revenue to recognize over time, the Company utilizes the cost-to-cost method as management believes cost incurred best represents the amount of work completed and remaining on projects. As the cost-to-cost method is driven by incurred cost, the Company calculates the percentage of completion by dividing costs incurred to date by the total estimated cost. The percentage of completion is then multiplied by estimated revenues to determine inception-to-date revenue. Approved changes to design plans are generally recognized as a cumulative adjustment to the percentage of completion calculation. Revenue recognized for the period is the current inception-to-date recognized revenue less the prior period inception-to-date recognized revenue. If a contract is projected to result in a loss, the entire contract loss is recognized in the period when the loss was first determined, and any additional losses incurred subsequently are recognized in the subsequent reporting periods as they are identified. Additionally, contract costs incurred to date and expected total contract costs are continuously monitored during the term of the contract. Changes in the job performance, job conditions and final contract settlements are factors that influence management’s assessment of total contract value and the total estimated costs to complete those contracts, and therefore, profit and revenue recognition. Any costs to obtain a contract are not material to the Company’s financial statements and would be expensed as incurred. Because of the inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change within the near term. The length of time for the Company to complete a custom product varies but is typically between four to 12 weeks. Customers are typically required to make periodic progress payments to the Company based on contractually agreed-upon milestones. Invoices are due net, 30 days, and retainage, if any, is generally due 30 days after delivery. Taxes collected from customers and remitted to governmental authorities are excluded from revenue. Shipping and handling costs are treated as fulfillment costs and are included in cost of sales. Other Revenue Other revenue is recognized from an upfront license fee generated from our legacy animal health business. The upfront fee was recorded as deferred revenue and is being amortized into revenue over the term of the agreement. 62 Table of Contents Business combinations The Company uses the acquisition method of accounting by recognizing the identifiable tangible and intangible assets acquired and liabilities assumed, and any non-controlling interest in the acquired business, measured at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the aforementioned amounts. Contingent consideration is included within the purchase price and is recognized at its fair value on the acquisition date. A liability resulting from contingent consideration is remeasured to fair value as of each reporting date until the contingency is resolved, and subsequent changes in fair value are recognized in earnings. Contingent consideration is recorded in long-term liabilities in our consolidated balance sheets. While we use our best estimates and assumptions to accurately apply preliminary values to assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of the assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the consolidated statements of operations. Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date, including estimates for intangible assets, contractual obligations assumed, pre-acquisition contingencies, and contingent consideration, where applicable. Although we believe the assumptions and estimates we have made have been reasonable and appropriate, they are based in part on historical experience and information obtained from management of the acquired companies and are inherently uncertain. Critical estimates in valuing certain of the intangible assets we have acquired include; future expected cash flows from customer contracts, discount rates, and estimated market changes in the value of the Power Supply Agreement, which is accounted for as a nonhedged derivative contract. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates, or actual results. Acquisition-related expenses are recognized separately from the business combination and are expensed as incurred. Fair value of financial instruments The Company recognizes financial instruments under the following fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows: Level 1 — quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 — observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and Level 3 — assets and liabilities whose significant value drivers are unobservable. Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment. The carrying amounts of the Company’s financial assets and liabilities, such as cash and cash equivalents, and accounts payable, approximate fair value due to the short-term nature of these instruments. Goodwill Goodwill represents the cost of a business acquisition in excess of the fair value of the net assets acquired. Goodwill is not amortized and is reviewed for impairment annually as of December 31, or more frequently if facts and circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. We use both qualitative and quantitative analyses in making this determination. The Company determined that it has three reporting units for goodwill impairment testing purposes, Bitcoin Mining, Data Center Hosting, and Engineering, which is consistent with internal management reporting and management’s oversight of operations. Our analyses require significant assumptions and judgments, including assumptions about future economic conditions, revenue growth, and operating margins, among other factors. Example events or changes in circumstances considered in the qualitative analysis, many of which are subjective in nature, include: a significant 63 Table of Contents negative trend in our industry or overall economic trends, a significant change in how we use the acquired assets, a significant change in or our business strategy, a significant decrease in the market value of the asset, a significant change in regulations or in the industry that could affect the value of the asset, and a change in segments. If it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company performs a quantitative test to identify and measure the amount of goodwill impairment loss. The Company compares the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds the fair value, goodwill of the reporting unit is considered impaired and that excess is recognized as a goodwill impairment loss. Finite-lived intangible assets Intangible assets with finite lives are comprised of customer contracts, trademarks, UL Listings and patents that are amortized on a straight-line basis over their expected useful lives, which is their contractual term or estimated useful life. Patents costs consisting of filing and legal fees incurred are initially recorded at cost. Certain patents are in the legal application process and therefore are not currently being amortized. The Company performs assessments to determine whether finite-lived classification is still appropriate at least annually. The carrying value of finite-lived assets and their remaining useful lives are also reviewed at least annually to determine if circumstances exist which may indicate a potential impairment or revision to the amortization period. A finite-lived intangible asset is considered to be impaired if its carrying value exceeds the estimated future undiscounted cash flows to be derived from it. We exercise judgment in selecting the assumptions used in the estimated future undiscounted cash flows analysis. Impairment is measured by the amount that the carrying value exceeds fair value. The use of different estimates or assumptions could result in significantly different fair values for our reporting units and intangible assets. Operating segments Operating segments are defined as components of an entity for which discrete financial information is available that is regularly reviewed by the Chief Operating Decision Maker (“CODM”) in deciding how to allocate resources to an individual segment and in assessing performance. The Company’s CODM is comprised of several members of its executive management team who use revenue and cost of revenues of our three reporting segments to assess the performance of the business of our reportable operating segments. Stock-based compensation The Company accounts for share-based payment awards exchanged for services at the estimated grant date fair value of the award, which is based on the fair market value of the Company’s common stock at the time of the grant. For performance-based share-based payment awards, the Company begins to recognize compensation cost over the performance period when achievement of the milestones and targets is probable. The Company has elected to account for forfeitures of awards as they occur. Recently issued and adopted accounting pronouncements The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a review to determine the consequences of the change to its financial statements and believes that there are proper controls in place to ascertain that the Company’s financial statements properly reflect the change. We have considered the recently issued accounting pronouncements and do not believe the adoption of such pronouncements will have a material impact on our consolidated financial statements. See Note 4. Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements, to our Consolidated Financial Statements for a description of applicable recent accounting pronouncements. Off-Balance Sheet Arrangements The Company does not have any off-balance sheet arrangements. ​ 64 Table of Contents