LEASES

3 Months Ended

Mar. 31, 2025

Leases [Abstract]

LEASES

LEASES

Lessee Accounting

In May 2021, the Company entered into a ground lease (as amended from time to time, the “Ground Lease”), related to the Lake Mariner Facility in New York with a counterparty which is a related party due to control by a member of Company management. The Ground Lease had a term of eight years and was classified as an operating lease remeasured as of the date of the second amendment in July 2022 utilizing a discount rate of 12.6%, which was an estimate of the Company’s incremental borrowing rate based.

In October 2024, the Company terminated its existing Ground Lease and entered into a new agreement with the same related party counterparty (the “New Ground Lease”) for the Lake Mariner Facility. The New Ground lease expanded the acreage of real property covered by the prior lease to support both cryptocurrency mining and HPC co-location data center operations.

The New Ground Lease includes both fixed and variable payments, including an annual escalation factor and the Company’s proportionate share of the landlord’s cost to own, operate and maintain the premises. It has an initial term of 35 years, commencing on October 9, 2024, and will automatically renew for up to nine additional five-year periods unless the Company provides written notice of termination at least six months prior to the end of the initial or the then-current renewal term. Upon expiration of the New Ground Lease, all buildings and improvements on the premises will revert to the landlord in good condition.

As consideration for terminating the prior lease and entering into the New Ground Lease, the Company issued 20 million shares of Common Stock with a fair value of $68.8 million and paid $12.0 million in cash (the “Cash Lease Prepayment”) to the parent company of the counterparty in October 2024. The Company determined that this transaction constituted a lease modification under ASC 842.

The New Ground Lease contained two lease components: Land and building. The land component was classified as an operating lease , while the building component was classified as a finance lease, as the 35-year initial term represents a major portion of the building’s remaining economic life. As of October 9, 2024, the Company remeasured the lease liabilities for both components using a discount rate of 6.9%, which reflects the estimated incremental borrowing rate for a collateralized loan with a term comparable to the lease payments.

During the three months ended March 31, 2025 and 2024, the Company recorded operating lease expense of $0.8 million and $0.3 million, respectively, including variable expense of $0.2 million and $36,000, respectively, in operating expenses – related party in the condensed consolidated statements of operations and made cash lease payments pursuant to the New Ground Lease (and prior to termination, the Ground Lease) of $0.4 million and $0.1 million, respectively. During the three months ended March 31, 2025, the Company recorded amortization of the right-of-use asset related to its finance lease of $0.1 million in operating expenses – related party in the condensed consolidated statement of operations and made cash payments pursuant to the New Ground Lease of $6,000. The Company also recorded interest expense on finance lease liabilities of $5,000 in interest expense in the condensed consolidated statement of operations for the three months ended March 31, 2025. The Company was not party to any finance leases during the three months ended March 31, 2024.

The remaining operating and finance lease terms based on the terms of the New Ground Lease were 34.6 years as of March 31, 2025. The following is a maturity analysis of the annual undiscounted cash flows of the estimated operating and finance lease liabilities as of March 31, 2025 (in thousands):

	Operating Lease Liability		Finance Lease Liability
Remainder of 2025	$	194	$	17
2026	259		22
2027	259		22
2028	259		22
2029	259		22
Thereafter	7,723		657
	$	8,953	$	762

A reconciliation of the undiscounted cash flows to the operating lease liabilities recognized in the condensed consolidated balance sheet as of March 31, 2025 follows (in thousands):

	Operating Lease Liability		Finance Lease Liability
Undiscounted cash flows of the operating lease	$	8,953	$	762
Unamortized discount	5,507		469
Total operating lease liability	3,446		293
Current portion of operating lease liability	26		2
Operating lease liability, net of current portion	$	3,420	$	291

Lessor Accounting

In December 2024, the Company entered into long-term HPC Leases with a customer for specified data center infrastructure at the Lake Mariner Facility to support the customer’s HPC operations. The Company determined at contract inception that these arrangements contain a lease, comprising lease components related to the right to use data center space—currently under construction—and non-lease components for power delivery, physical security, and maintenance services.

As of March 31, 2025, none of the HPC Leases had commenced. Each lease is expected to begin at various dates in 2025 and includes an initial 10-year term, two five-year renewal options, and a now-expired provision for near-term capacity expansion. Despite the expiration of this provision, the parties remain in active discussions regarding the customer’s potential expansion at the site.

The HPC Leases provide for certain prepaid rent amounts (“Prepaid Rent”) representing the first 12 months base rent under each lease for a total of $90.0 million and shall be applied towards 50% of each month’s base rent commencing on the respective commencement date of each lease until the Prepaid Rent is exhausted. During the three months ended March 31, 2025, the Company received the $90.0 million of Prepaid Rent from the customer and recorded $32.0 million and $58.0 million in current portion of deferred rent liability and deferred rent liability, net of current portion, respectively, in the condensed consolidated balance sheet as of March 31, 2025.

LEASES

LEASES

Lessee Accounting

In May 2021, the Company entered into a ground lease (as amended from time to time, the “Ground Lease”), related to the Lake Mariner Facility in New York with a counterparty which is a related party due to control by a member of Company management. The Ground Lease had a term of eight years and was classified as an operating lease remeasured as of the date of the second amendment in July 2022 utilizing a discount rate of 12.6%, which was an estimate of the Company’s incremental borrowing rate based.

In October 2024, the Company terminated its existing Ground Lease and entered into a new agreement with the same related party counterparty (the “New Ground Lease”) for the Lake Mariner Facility. The New Ground lease expanded the acreage of real property covered by the prior lease to support both cryptocurrency mining and HPC co-location data center operations.

The New Ground Lease includes both fixed and variable payments, including an annual escalation factor and the Company’s proportionate share of the landlord’s cost to own, operate and maintain the premises. It has an initial term of 35 years, commencing on October 9, 2024, and will automatically renew for up to nine additional five-year periods unless the Company provides written notice of termination at least six months prior to the end of the initial or the then-current renewal term. Upon expiration of the New Ground Lease, all buildings and improvements on the premises will revert to the landlord in good condition.

As consideration for terminating the prior lease and entering into the New Ground Lease, the Company issued 20 million shares of Common Stock with a fair value of $68.8 million and paid $12.0 million in cash (the “Cash Lease Prepayment”) to the parent company of the counterparty in October 2024. The Company determined that this transaction constituted a lease modification under ASC 842.

The New Ground Lease contained two lease components: Land and building. The land component was classified as an operating lease , while the building component was classified as a finance lease, as the 35-year initial term represents a major portion of the building’s remaining economic life. As of October 9, 2024, the Company remeasured the lease liabilities for both components using a discount rate of 6.9%, which reflects the estimated incremental borrowing rate for a collateralized loan with a term comparable to the lease payments.

During the three months ended March 31, 2025 and 2024, the Company recorded operating lease expense of $0.8 million and $0.3 million, respectively, including variable expense of $0.2 million and $36,000, respectively, in operating expenses – related party in the condensed consolidated statements of operations and made cash lease payments pursuant to the New Ground Lease (and prior to termination, the Ground Lease) of $0.4 million and $0.1 million, respectively. During the three months ended March 31, 2025, the Company recorded amortization of the right-of-use asset related to its finance lease of $0.1 million in operating expenses – related party in the condensed consolidated statement of operations and made cash payments pursuant to the New Ground Lease of $6,000. The Company also recorded interest expense on finance lease liabilities of $5,000 in interest expense in the condensed consolidated statement of operations for the three months ended March 31, 2025. The Company was not party to any finance leases during the three months ended March 31, 2024.

The remaining operating and finance lease terms based on the terms of the New Ground Lease were 34.6 years as of March 31, 2025. The following is a maturity analysis of the annual undiscounted cash flows of the estimated operating and finance lease liabilities as of March 31, 2025 (in thousands):

	Operating Lease Liability		Finance Lease Liability
Remainder of 2025	$	194	$	17
2026	259		22
2027	259		22
2028	259		22
2029	259		22
Thereafter	7,723		657
	$	8,953	$	762

A reconciliation of the undiscounted cash flows to the operating lease liabilities recognized in the condensed consolidated balance sheet as of March 31, 2025 follows (in thousands):

	Operating Lease Liability		Finance Lease Liability
Undiscounted cash flows of the operating lease	$	8,953	$	762
Unamortized discount	5,507		469
Total operating lease liability	3,446		293
Current portion of operating lease liability	26		2
Operating lease liability, net of current portion	$	3,420	$	291

Lessor Accounting

In December 2024, the Company entered into long-term HPC Leases with a customer for specified data center infrastructure at the Lake Mariner Facility to support the customer’s HPC operations. The Company determined at contract inception that these arrangements contain a lease, comprising lease components related to the right to use data center space—currently under construction—and non-lease components for power delivery, physical security, and maintenance services.

As of March 31, 2025, none of the HPC Leases had commenced. Each lease is expected to begin at various dates in 2025 and includes an initial 10-year term, two five-year renewal options, and a now-expired provision for near-term capacity expansion. Despite the expiration of this provision, the parties remain in active discussions regarding the customer’s potential expansion at the site.

The HPC Leases provide for certain prepaid rent amounts (“Prepaid Rent”) representing the first 12 months base rent under each lease for a total of $90.0 million and shall be applied towards 50% of each month’s base rent commencing on the respective commencement date of each lease until the Prepaid Rent is exhausted. During the three months ended March 31, 2025, the Company received the $90.0 million of Prepaid Rent from the customer and recorded $32.0 million and $58.0 million in current portion of deferred rent liability and deferred rent liability, net of current portion, respectively, in the condensed consolidated balance sheet as of March 31, 2025.

LEASES

LEASES

Lessee Accounting

In May 2021, the Company entered into a ground lease (as amended from time to time, the “Ground Lease”), related to the Lake Mariner Facility in New York with a counterparty which is a related party due to control by a member of Company management. The Ground Lease had a term of eight years and was classified as an operating lease remeasured as of the date of the second amendment in July 2022 utilizing a discount rate of 12.6%, which was an estimate of the Company’s incremental borrowing rate based.

In October 2024, the Company terminated its existing Ground Lease and entered into a new agreement with the same related party counterparty (the “New Ground Lease”) for the Lake Mariner Facility. The New Ground lease expanded the acreage of real property covered by the prior lease to support both cryptocurrency mining and HPC co-location data center operations.

The New Ground Lease includes both fixed and variable payments, including an annual escalation factor and the Company’s proportionate share of the landlord’s cost to own, operate and maintain the premises. It has an initial term of 35 years, commencing on October 9, 2024, and will automatically renew for up to nine additional five-year periods unless the Company provides written notice of termination at least six months prior to the end of the initial or the then-current renewal term. Upon expiration of the New Ground Lease, all buildings and improvements on the premises will revert to the landlord in good condition.

As consideration for terminating the prior lease and entering into the New Ground Lease, the Company issued 20 million shares of Common Stock with a fair value of $68.8 million and paid $12.0 million in cash (the “Cash Lease Prepayment”) to the parent company of the counterparty in October 2024. The Company determined that this transaction constituted a lease modification under ASC 842.

The New Ground Lease contained two lease components: Land and building. The land component was classified as an operating lease , while the building component was classified as a finance lease, as the 35-year initial term represents a major portion of the building’s remaining economic life. As of October 9, 2024, the Company remeasured the lease liabilities for both components using a discount rate of 6.9%, which reflects the estimated incremental borrowing rate for a collateralized loan with a term comparable to the lease payments.

During the three months ended March 31, 2025 and 2024, the Company recorded operating lease expense of $0.8 million and $0.3 million, respectively, including variable expense of $0.2 million and $36,000, respectively, in operating expenses – related party in the condensed consolidated statements of operations and made cash lease payments pursuant to the New Ground Lease (and prior to termination, the Ground Lease) of $0.4 million and $0.1 million, respectively. During the three months ended March 31, 2025, the Company recorded amortization of the right-of-use asset related to its finance lease of $0.1 million in operating expenses – related party in the condensed consolidated statement of operations and made cash payments pursuant to the New Ground Lease of $6,000. The Company also recorded interest expense on finance lease liabilities of $5,000 in interest expense in the condensed consolidated statement of operations for the three months ended March 31, 2025. The Company was not party to any finance leases during the three months ended March 31, 2024.

The remaining operating and finance lease terms based on the terms of the New Ground Lease were 34.6 years as of March 31, 2025. The following is a maturity analysis of the annual undiscounted cash flows of the estimated operating and finance lease liabilities as of March 31, 2025 (in thousands):

	Operating Lease Liability		Finance Lease Liability
Remainder of 2025	$	194	$	17
2026	259		22
2027	259		22
2028	259		22
2029	259		22
Thereafter	7,723		657
	$	8,953	$	762

A reconciliation of the undiscounted cash flows to the operating lease liabilities recognized in the condensed consolidated balance sheet as of March 31, 2025 follows (in thousands):

	Operating Lease Liability		Finance Lease Liability
Undiscounted cash flows of the operating lease	$	8,953	$	762
Unamortized discount	5,507		469
Total operating lease liability	3,446		293
Current portion of operating lease liability	26		2
Operating lease liability, net of current portion	$	3,420	$	291

Lessor Accounting

In December 2024, the Company entered into long-term HPC Leases with a customer for specified data center infrastructure at the Lake Mariner Facility to support the customer’s HPC operations. The Company determined at contract inception that these arrangements contain a lease, comprising lease components related to the right to use data center space—currently under construction—and non-lease components for power delivery, physical security, and maintenance services.

As of March 31, 2025, none of the HPC Leases had commenced. Each lease is expected to begin at various dates in 2025 and includes an initial 10-year term, two five-year renewal options, and a now-expired provision for near-term capacity expansion. Despite the expiration of this provision, the parties remain in active discussions regarding the customer’s potential expansion at the site.

The HPC Leases provide for certain prepaid rent amounts (“Prepaid Rent”) representing the first 12 months base rent under each lease for a total of $90.0 million and shall be applied towards 50% of each month’s base rent commencing on the respective commencement date of each lease until the Prepaid Rent is exhausted. During the three months ended March 31, 2025, the Company received the $90.0 million of Prepaid Rent from the customer and recorded $32.0 million and $58.0 million in current portion of deferred rent liability and deferred rent liability, net of current portion, respectively, in the condensed consolidated balance sheet as of March 31, 2025.