LEASES

3 Months Ended

Mar. 31, 2024

The Company leases office space in the United States under operating lease agreements. The Company also entered into an arrangement with Applied Blockchain for the use of energized cryptocurrency mining facilities under which the Company pays for electricity per megawatt based on usage. The Company has determined that it has embedded operating leases at two of the facilities governed by this arrangement that commenced in January and March 2023, and has elected not to separate lease and non-lease components. Payments made for these two operating leases are entirely variable and are based on usage of electricity, and the Company therefore does not record a right-of-use (“ROU”) asset or lease liability associated with the leases. Variable lease cost during the three months ended March 31, 2024 and March 31, 2023 are disclosed in the table below. Office space and mining facilities comprise the Company’s material underlying asset class under operating lease agreements. The Company has no material finance leases.

Additionally, the Company assumed an operating lease in the GC Data Center Equity Holdings, LLC acquisition related to the data center land lease in Granbury, Texas on January 12, 2024. The ROU asset and total lease liabilities recorded for the assumption of the leases were $8.9 million and $8.9 million, respectively. ROU assets related to the GC Data Center Equity Holdings, LLC acquisition reflect an unfavorable lease liability adjustment of $5.1 million. Lease liabilities for the leases assumed were measured based on the net present value of remaining future lease payments on the date of the acquisition, with consideration given for options to extend or renew the lease.

As of March 31, 2024, the Company’s ROU assets and total lease liabilities were $9.0 million and $9.4 million, respectively. As of December 31, 2023, the Company’s ROU assets and total lease liabilities were $0.4 million and $0.5 million, respectively. The Company has amortized the right-of-use assets totaling $0.3 million and $0.1 million for the three months ended March 31, 2024 and 2023, respectively.

Operating lease costs are recorded on a straight-line basis within operating expenses. The Company’s total lease expense is comprised of the following:


	For the Three Months Ended March 31,
(in thousands)		2024		2023
Operating leases:
Operating lease cost		$	204	$	112
Operating lease expense		204		112
Short-term lease rent expense		16		9
Variable lease cost		23,186		2,773
Total rent expense		$	23,406	$	2,894

Additional information regarding the Company’s leasing activities is as follows:


	For the Three Months Ended March 31,
	2024			2023
Operating cash flows from operating leases	$	438		$	(2)
Weighted-average remaining lease term – operating leases	7.3			3.5
Weighted-average discount rate – operating leases	7		%	5		%

The following table presents the Company’s future minimum operating lease payments as of March 31, 2024:


Year	Amount (in thousands)
2024 (remaining)	$	168
2025	203
2026	817
2027	2,563
2028	2,500
Thereafter	6,876
Total	13,127
Less: Imputed interest	(3,694)
Present value of lease liability	$	9,433