Quarterly report pursuant to Section 13 or 15(d)

Segment Information

v3.22.2.2
Segment Information
 9 Months Ended
Sep. 30, 2022
Segment Reporting [Abstract]  
Segment Information

Note 17. Segment Information

The Company applies ASC 280, Segment Reporting, in determining its reportable segments. The Company has three reportable segments: Mining, Data Center Hosting, and Engineering. The guidance requires that segment disclosures present the measure(s) used by the CODM to decide how to allocate resources and for purposes of assessing such segments’ 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.

No operating segments have been aggregated to form the reportable segments. The Company does not allocate all assets to the reporting segments as these are managed on an entity-wide basis. Therefore, the Company does not separately disclose the total assets of its reportable operating segments.

The Mining segment generates revenue from the Bitcoin the Company earns through its mining activities. The Data Center Hosting segment generates revenue from long-term customer contracts for the provision/consumption of electricity, construction of infrastructure, operation of data centers and maintenance/management of computing capacity from the Company’s data center facility in Rockdale, Texas. The Engineering segment generates revenue through customer contracts for custom engineered electrical products.

The Data Center Hosting segment purchases custom engineered electrical products from the Engineering segment in the ordinary course of business. Effective January 1, 2022, the Mining segment entered into a colocation services agreement with the Data Center Hosting segment whereby the Mining segment is charged a base colocation fee per miner deployed at Whinstone plus a performance fee calculated as a percentage of gross mining profit. The revenue and cost of revenues from intersegment transactions have been eliminated in the consolidated statements of operations in accordance with U.S. GAAP. For purposes of segment reporting, the revenues and cost of revenues for each segment are presented in the table below on a stand-alone basis, with the intersegment eliminations presented separately, such that total revenue and total cost of revenues total to the consolidated statements of operations. All other revenues are from external customers. No single third-party customer or related group of third-party customers contributed 10% or more of the Company’s total consolidated revenue during the three and nine months ended September 30, 2022 and 2021. However, three customers accounted for nearly all of the Company’s third-party Data Center Hosting revenue.

For the three months ended September 30, 2022, approximately 98% of the Company’s mining revenue was generated from our Rockdale Facility in Rockdale, Texas, and the remaining 2% was generated from the Coinmint Facility. For the nine months ended September 30, 2022, approximately 71% of the Company’s mining revenue was generated from our Rockdale Facility in Rockdale, Texas, and the remaining 29% was generated from the Coinmint Facility in New York. During the nine months ended September 30, 2022, the Company terminated its agreement with Coinmint effective July 8, 2022.

 

The following table details revenue and cost of revenues for the Company’s reportable segments for the three and nine months ended September 30, 2022 and 2021, and reconciles to net income (loss) on the unaudited condensed consolidated statements of operations:

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2022     2021     2022     2021  
Reportable segment revenue, net:                                
Mining   $ 22,070     $ 53,590     $ 126,166     $ 108,213  
Data Center Hosting     23,624       11,193       68,240       14,067  
Engineering     20,300      
—  
       55,050      
—  
  
Other revenue     25       25       73       73  
Eliminations     (19,729 )    
—  
       (50,505 )    
—  
  
Total segment and consolidated revenue     46,290       64,808       199,024       122,353  
Reportable segment cost of revenues (exclusive of depreciation and amortization shown below):                                
Mining     15,949       13,034       60,793       29,893  
Data Center Hosting     28,201       12,581       75,705       16,317  
Engineering     16,767      
—  
       47,302      
—  
  
Eliminations     (18,237 )    
—  
       (47,138 )    
—  
  
Total segment and consolidated cost of revenues (exclusive of depreciation and amortization shown below)     42,680       25,615       136,662       46,210  
Reconciling Items:                                
Acquisition-related costs    
—  
       (552 )     (78 )     (18,894 )
Selling, general and administrative     (16,004 )     (40,307 )     (37,549 )     (47,971 )
Depreciation and amortization     (26,559 )     (12,207 )     (61,366 )     (20,791 )
Change in fair value of derivative asset     (17,749 )     7,413       86,865       23,806  
Power curtailment credits     13,070       2,507       21,328       3,650  
Change in fair value of contingent consideration    
—  
       (259 )     (176 )     (444 )
Realized gain on sale/exchange of Bitcoin     1,854       65       25,443       94  
Gain on exchange of equipment     7,667      
—  
       16,281      
—  
  
Impairment of Bitcoin     (5,900 )    
—  
       (132,077 )     (17,507 )
Impairment of goodwill    
—  
      
—  
       (335,648 )    
—  
  
Interest income (expense)     348       40       (9 )     295  
Realized loss on sale of marketable equity securities    
—  
      
—  
       (1,624 )    
—  
  
Realized gain on sale/exchange of long-term investment    
—  
      
—  
      
—  
       26,260  
Unrealized gain (loss) on marketable equity securities     142       (11,151 )     (6,306 )     (10,812 )
Other income (expense)    
—  
       (85 )     (59 )     1,425  
Current income tax benefit (expense)     (89 )    
—  
       (828 )    
—  
  
Deferred income tax benefit (expense)     3,041      
—  
       9,667       (3,730 )
Net income (loss)   $ (36,569 )   $ (15,343 )   $ (353,774 )   $ 11,524