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 includes fixed payments and variable payments, including an annual escalation factor as well as the Company’s proportionate share of the landlord’s cost to own, operate and maintain the premises. The Ground Lease has a term of eight years and a renewal term of five years at the option of the Company, subject to the Company not then being in default, as defined. The Ground Lease, which is classified as an operating lease, was 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 on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at the remeasurement date. Upon expiration of the lease, the buildings and improvements on the premises will revert to the landlord in good order.

For the three and nine months ended September 30, 2024, the Company recorded operating lease expense of $0.3 million and $1.0 million, respectively, including contingent expense of $0.1 million and $0.2 million, respectively, in operating expenses – related party in the condensed consolidated statements of operations and made cash lease payments of $0.1 million and $0.2 million during the three and nine months ended September 30, 2024, respectively. For the three and nine months ended September 30, 2023, the Company recorded operating lease expense of $0.3 million and $1.0 million, respectively, including contingent expense of $37,000 and $0.1 million, respectively, in operating expenses – related party in the condensed consolidated statements of operations and made cash lease payments of $0.2 million and $0.8 million, respectively. The remaining lease term based on the terms of the amended Ground Lease as of September 30, 2024 is 9.7 years.

On October 9, 2024, the Company terminated the Ground Lease and entered into a new ground lease with the same related party counterparty (the “New Ground Lease”) related to the Lake Mariner Facility which expanded the acreage of real property as compared to the Ground Lease for the purposes of cryptocurrency mining and HPC co-location data center hosting operations. The New Ground Lease includes fixed and variable payments, including an annual escalation factor as well as the Company’s proportionate share of the landlord’s cost to own, operate and maintain the premises and has an initial term of 35 years, commencing on October 9, 2024, and will automatically renew for up to nine additional periods of five years each unless the Company provides written notice to terminate the New Ground Lease at least six months prior to the expiration of the initial term lease or the then-current renewal term. Upon expiration of the New Ground Lease, the buildings and improvements on the premises will revert to the landlord in good order. As consideration for the termination of the Ground Lease and entering into the New Ground Lease, the Company issued 20 million shares of the Company’s Common Stock and paid $12 million in cash to the parent company of the counterparty in October 2024.