SEC Filing | Greenidge Generation Holdings Inc.

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________________ to _____________________

Commission File Number: 001-40808

Greenidge Generation Holdings Inc.

(Exact Name of Registrant as Specified in its Charter)


Delaware		86-1746728
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

590 Plant Road, Dresden, NY 14441		14441
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (315) 536-2359

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.0001 par value	GREE	The Nasdaq Global Select Market
8.50% Senior Notes due 2026	GREEL	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Securities registered pursuant to Section 12(g) of the Act: None

As of November 12, 2021, the registrant had 11,605,205 shares of Class A common stock, $0.0001 par value per share, outstanding and 29,040,000 shares of Class B common stock, $0.0001 par value per share, outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets (Unaudited)	5
	Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (Unaudited)	6
	Condensed Consolidated Statements of Shareholders’ Equity (Unaudited)	7
	Condensed Consolidated Statements of Cash Flows (Unaudited)	8
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	45
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	72
Item 3.	Defaults Upon Senior Securities	73
Item 4.	Mine Safety Disclosures	73
Item 5.	Other Information	73
Item 6.	Exhibits	76
Exhibit Index		76
Signatures		78

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Form 10-Q includes certain statements that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are forward-looking statements for purposes of federal and state securities laws. These forward-looking statements involve uncertainties that could significantly affect our financial or operating results. These forward-looking statements may be identified by terms such as “anticipate,” “believe,” “continue,” “foresee,” “expect,” “intend,” “plan,” “may,” “will,” "would," “could” and “should” and the negative of these terms or other similar expressions. Forward-looking statements are based on current beliefs and assumptions that are subject to risks and uncertainties and are not guarantees of future performance. Forward-looking statements in this document include, among other things, statements regarding our business plan, business strategy and operations in the future. In addition, all statements that address operating performance and future performance, events or developments that are expected or anticipated to occur in the future, including statements relating to creating value for stockholders and benefits of the Merger (as defined below) to our customers, vendors, employees, stockholders and other constituents, are forward-looking statements.

Forward-looking statements are subject to a number of risks, uncertainties and assumptions. Matters and factors that could cause actual results to differ materially from those expressed or implied in such forward-looking statements include but are not limited to the matters and factors described in Part II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q, as well as statements about or relating to or otherwise affected by:



the ability to recognize the anticipated objectives and benefits of an expansion into multiple data centers in Texas;



the ability to negotiate or execute definitive documentation with respect to potential expansion sites on terms and conditions that are acceptable to Greenidge, whether on a timely basis or at all;



the ability to recognize the anticipated objectives and any benefits of the merger described in Note 1 of the Notes to Consolidated Financial Statements (Unaudited) herein (the “Merger”), including the anticipated tax treatment of the Merger;



changes in applicable laws, regulations or permits affecting our operations or the industries in which we operate, including regulation regarding power generation, cryptocurrency usage and/or cryptocurrency mining;



any failure by us to obtain acceptable financing with regard to our growth strategies or operations;



fluctuations and volatility in the price of bitcoin and other cryptocurrencies;



loss of public confidence in, or use cases of, bitcoin and other cryptocurrencies;



the potential of cryptocurrency market manipulation;



the economics of mining cryptocurrency, including as to variables or factors affecting the cost, efficiency and profitability of mining;



the availability, delivery schedule and cost of equipment necessary to maintain and grow our business and operations, including mining equipment and equipment meeting the technical or other specifications required to achieve our growth strategy;



the possibility that we may be adversely affected by other economic, business or competitive factors, including factors affecting the industries in which we operate or upon which we rely and are dependent;



the ability to expand successfully to other facilities, mine other cryptocurrencies or otherwise expand our business;



changes in tax regulations applicable to us, our assets or cryptocurrencies, including bitcoin;



any litigation involving us;



costs and expenses relating to cryptocurrency transaction fees and fluctuation in cryptocurrency transaction fees;



the condition of our physical assets, including that our current single operating facility may realize material, if not total, loss and interference as a result of equipment malfunction or break-down, physical disaster, data security breach, computer malfunction or sabotage; and



the actual and potential impact of the COVID-19 pandemic.

Consequently, all of the forward-looking statements made in this Quarterly Report on Form 10-Q are qualified by the information contained herein, including the information contained under this caption and the information in Part II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q. No assurance can be given that these are all of the factors that could cause actual results to vary materially from the forward-looking statements.

You should not put undue reliance on forward-looking statements. No assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do occur, what impact they will have on the results of our operations, financial condition or cash flows. Actual results may differ materially from those discussed in this Quarterly Report on Form 10-Q. All forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and we do not assume any duty to update or revise forward-looking statements, whether as a result of new information, future events, uncertainties or otherwise, as of any future date.

Risk Factor Summary

Our business is subject to numerous risks and uncertainties, which illuminate challenges that we face in connection with the successful implementation of our strategy and the growth of our business. The following considerations, among others, may offset our competitive strengths or have a negative effect on our business strategy, which could cause a decline in the price of our class A common stock and result in a loss of all or a portion of your investment:



Our business and operating plan may be altered due to several external factors including but not limited to market conditions, the ability to procure equipment in a quantity, cost and timeline consistent with the business plan and the ability to identify and acquire additional locations to replicate the operating model in place at our existing facility.



It may take significant time, expenditure or effort for us to grow our business, including our bitcoin mining operations, through acquisitions, and our efforts may not be successful.



The loss of any of our management team, an inability to execute an effective succession plan, or an inability to attract and retain qualified personnel could adversely affect our results of operations, strategy and financial performance.



We have been, are currently, and may be in the future, the subject of legal proceedings, including governmental investigations, relating to our products or services.



Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.



We have a limited operating history, with operating losses as we have grown. If we are unable to sustain greater revenues than our operating costs of bitcoin mining and power generation, as well as expansion plans, we will resume operating losses, which could negatively impact our results of operations, strategy and financial performance.



While we have multiple sources of revenue from our business and operations, these sources of revenue currently all depend on the single natural gas power generation facility that we operate. Any disruption to our single power plant would have a material adverse effect on our business and operations, as well as our results of operations and financial condition.



As the aggregate amount of computing power, or hash rate, in the bitcoin network increases, the amount of bitcoin earned per unit of hash rate decreases; as a result, in order to maintain our market share, we may have to incur significant capital expenditures in order to expand our fleet of miners.



The properties utilized by us in our bitcoin mining operations may experience damage, including damage not covered by insurance.



Our bitcoin may be subject to loss, theft or restriction on access.



If bitcoin or other cryptocurrencies are determined to be investment securities, and we hold a significant portion of our assets in such cryptocurrency, investment securities or non-controlling equity interests of other entities, we may inadvertently violate the Investment Company Act.



There has been limited precedent set for financial accounting of digital assets and so it is unclear how we will be required to account for digital asset transactions.



Regulatory changes or actions may alter the nature of an investment in us or restrict the use of bitcoin in a manner that adversely affects our business prospects and our results of operations and financial condition.



We are subject to risks related to Internet disruptions, which could have an adverse effect on our ability to mine bitcoin.



Our future success will depend significantly on the price of bitcoin, which is subject to risk and has historically been subject to wide swings and significant volatility.



We may not be able to compete effectively against other companies, some of whom have greater resources and experience.



The impact of geopolitical and economic events on the supply and demand for bitcoin is uncertain.



Bitcoin miners and other necessary hardware are subject to malfunction, technological obsolescence, the global supply chain and difficulty and cost in obtaining new hardware.



We face risks and disruptions related to the COVID-19 pandemic and supply chain issues, including in semiconductors and other necessary mining components, which could significantly impact our operations and financial results.



We may not adequately respond to rapidly changing technology.



A failure to properly monitor and upgrade the bitcoin network protocol could damage the bitcoin network which could, in turn, have an adverse effect on our business.



Over time, incentives for bitcoin miners to continue to contribute processing power to the bitcoin network may transition from a set reward to transaction fees. If the incentives for bitcoin mining are not sufficiently high, we may not have an adequate incentive to continue to mine.



Our operations and financial performance may be impacted by fuel supply disruptions, price fluctuations in the wholesale power and natural gas markets, and fluctuations in other market factors that are beyond our control.



A substantial portion of revenue generated by our Support Services segment is attributable to a limited number of clients. The loss or reduction in business from any of these clients could adversely affect its business and results of operations.



Our Support Services segment's business is based on a relatively new and evolving business model.

The risks described above should be read together with the text of the full risk factors described in Part II, Item 1A. “Risk Factors” and the other information set forth in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and the related notes, as well as in other documents that we file with the SEC. Our business, prospects, financial condition or operating results could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. Certain statements in “Risk Factors” are forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Statements” above.

Table of Contents

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Greenidge Generation Holdings Inc.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(Dollars Amounts in thousands, except share and member unit data)


	September 30, 2021			December 31, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	51,149		$	5,052
Short term investments		496			-
Digital assets		421			254
Accounts receivable		5,501			390
Prepaid expenses		5,042			155
Emissions and carbon offset credits		1,816			1,923
Total current assets		64,425			7,774
LONG-TERM ASSETS:
Property and equipment, net		121,532			56,645
Right-of-use assets		1,369			-
Intangible assets		22,493			-
Goodwill		46,349			-
Other long-term assets		2,143			148
Total assets	$	258,311		$	64,567
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	3,368		$	1,745
Accrued emissions expense		1,674			2,082
Accrued expenses		9,566			946
Accrued interest expense - related party		-			20
Notes payable, current portion		17,994			3,273
Notes payable - related party, current portion		-			3,573
Lease obligations, current portion		852			-
Total current liabilities		33,454			11,639
LONG-TERM LIABILITIES:
Deferred tax liability		3,959			-
Notes payable, net of current portion		7,369			1,364
Lease obligations, net of current portion		111			-
Asset retirement obligations		2,380			2,277
Environmental trust liability		4,994			4,927
Other long-term liabilities		242			-
Total liabilities		52,509			20,207
COMMITMENTS AND CONTINGENCIES (NOTE 13)
STOCKHOLDERS' EQUITY:
Preferred stock, par value $0.0001, 20,000,000 and 0 shares authorized, 0 and 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		-			-
Common stock, par value $0.0001, 3,000,000,000 and 0 shares authorized, 38,667,705 and 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively		4			-
Additional paid-in capital		233,813			-
Members' capital, 0 and 49,978 units outstanding as of September 30, 2021
and December 31, 2020, respectively		-			69,276
Accumulated deficit		(28,015	)		(24,916	)
Total stockholders' equity		205,802			44,360
Total liabilities and stockholders' equity	$	258,311		$	64,567

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Greenidge Generation Holdings Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(in thousands, except per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
REVENUE:
Cryptocurrency mining	$	31,156		$	3,043		$	54,217		$	8,673
Power and capacity		3,077			3,080			7,255			5,264
Services and other		1,521			-			1,521			-
Total revenue		35,754			6,123			62,993			13,937
OPERATING COSTS AND EXPENSES
Cost of revenue - cryptocurrency mining (exclusive of depreciation and amortization shown below)		5,974			1,027			11,504			2,966
Cost of revenue - power and capacity (exclusive of depreciation and amortization shown below)		2,831			3,045			6,688			5,715
Cost of revenue - services and other (exclusive of depreciation and amortization shown below)		854			-			854			-
Selling, general and administrative		5,446			1,493			12,017			4,131
Merger and other costs (Note 4)		29,847			-			31,095			-
Depreciation and amortization		2,667			1,064			5,531			3,227
Total operating costs and expenses		47,619			6,629			67,689			16,039
Loss from operations		(11,865	)		(506	)		(4,696	)		(2,102	)
OTHER INCOME (EXPENSE), NET:
Interest expense, net		(1,009	)		-			(1,377	)		-
Interest expense - related party		-			-			(22	)		(540	)
Gain on sale of digital assets		18			36			159			11
Other (expense) income, net		(29	)		181			(23	)		165
Total other (expense) income, net		(1,020	)		217			(1,263	)		(364	)
LOSS BEFORE INCOME TAXES		(12,885	)		(289	)		(5,959	)		(2,466	)
Benefit for income taxes		(4,989	)		-			(2,860	)		-
NET LOSS AND TOTAL COMPREHENSIVE LOSS	$	(7,896	)	$	(289	)	$	(3,099	)	$	(2,466	)
Loss per share:
Basic	$	(0.28	)				$	(0.13	)
Diluted	$	(0.28	)				$	(0.13	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

Greenidge Generation Holdings Inc.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

(in thousands, except share and member unit data)


											Additional		Common Units					Preferred Units						Senior Priority Units						Total
	Preferred Stock						Common Stock				Paid - In		Number			Members'		Number			Members'			Number			Members'			Members'			Accumulated
	Shares			Amount			Shares		Amount		Capital		of Units			Capital		of Units			Capital			of Units			Capital			Capital			Deficit			Total
Balance at January 1, 2021		-		$	-			-	$	-	$	-		750		$	-		39,228		$	39,074			10,000		$	30,202		$	69,276		$	(24,916	)	$	44,360
Contribution of Preferred Units, Senior Priority Units, and notes payable to related party for Greenidge class B common stock (Note 9)		-			-			26,800,300		3		72,888		-			-		(39,228	)		(39,074	)		(10,000	)		(30,202	)		(69,276	)		-			3,615
Contribution of GGH Common Units for Greenidge class B common stock (Note 9)		-			-			1,199,700		-		-		(750	)		-		-			-			-			-			-			-			-
Proceeds from issuance of preferred stock, net of stock issuance costs of $3,387 (Note 9)		1,620,000			1			-		-		37,112		-			-		-			-			-			-			-			-			37,113
Stock-based compensation expense		-			-			-		-		1,063		-			-		-			-			-			-			-			-			1,063
Proceeds from stock options exercised		-			-			160,000		-		1,000		-			-		-			-			-			-			-			-			1,000
Stock issued to purchase miners		-			-			160,000		-		991		-			-		-			-			-			-			-			-			991
Net income		-			-			-		-		-		-			-		-			-			-			-			-			4,797			4,797
Balance at June 30, 2021		1,620,000		$	1			28,320,000	$	3	$	113,054		-		$	-		-		$	-			-		$	-		$	-		$	(20,119	)	$	92,939
Shares issued to Support.com shareholders upon Merger, net of issuance costs of $2,296 (Note 9)		-			-			2,960,731		-		91,588		-			-		-			-			-			-			-			-			91,588
Issuance of shares for investor fee associated with successful completion of Merger (Note 9)		-			-			562,174		-		17,826		-			-		-			-			-			-			-			-			17,826
Issuance of warrants to advisor in connection with completion of Merger (Note 9)		-			-			-		-		8,779		-			-		-			-			-			-			-			-			8,779
Conversion of preferred stock (Note 9)		(1,620,000	)		(1	)		6,480,000		1		-		-			-		-			-			-			-			-			-			-
Shares issued upon exercise of warrants		-			-			344,800		-		2,155		-			-		-			-			-			-			-			-			2,155
Stock-based compensation expense		-