This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that involve substantial risks and uncertainties. In some cases you can identify these statements by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "seek," "should," "will," and "would," or similar words. Statements that contain these words and other statements that are forward-looking in nature should be read carefully because they discuss future expectations, contain projections of future results of operations or of financial positions or state other "forward-looking" information. Forward-looking statements involve inherent uncertainty and may ultimately prove to be incorrect or false. These statements are based on our management's beliefs and assumptions, which are based on currently available information. These assumptions could prove inaccurate. You are cautioned not to place undue reliance on forward-looking statements. Except as otherwise may be required by law, we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or actual operating results. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including, but not limited to: • labor and other workforce shortages and challenges; • our dependence on principal customers; • the addition or loss of significant customers or material changes to our relationships with these customers; • our ability to timely and successfully build new hosting facilities with the appropriate contractual margins and efficiencies; • our ability to continue to grow sales in our hosting business; •concentration of customers in the crypto mining industry, which customer base may decline due to price volatility and uncertainties around regulation policy of cryptoasset prices; •equipment failures, power or other supply disruptions; and •the lack of final approval of funding initiatives to be made by theCity of Jamestown, North Dakota andStutsman County's Economic Development Fund in favor of the Company, the application of which funding initiatives would decrease the interest rate of the Company's repayment of the Starion Term Loan (as defined below). You should carefully review the risks described in Item 1A of the Company's Annual Report on Form 10-K for the year-endedMay 31, 2022 , which was filed onAugust 29, 2022 , as well as any other cautionary language in this Quarterly Report on Form 10-Q, as the occurrence of any of these events could have an adverse effect, which may be material, on our business, results of operations, financial condition or cash flows. Executive Overview
The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q.
Company overview
We design, build, and operate Next-Gen datacenters which are designed to provide massive computing power and support high-compute applications. Our first facility was constructed inNorth Dakota with 100 Megawatts ("MW") of capacity. We signed an energy services agreement with a utility to power this facility. We provide energized space for customers to host computing equipment. Initially, these datacenters primarily hosted servers securing the Bitcoin network, but these facilities can also host hardware for other applications such as artificial intelligence, protein sequencing, drug discovery, machine learning and additional blockchain networks and applications. We are mid-construction on our second facility inGarden City, Texas , and are in the development stage of the Company's third facility, also located inNorth Dakota . We have a colocation business 12 -------------------------------------------------------------------------------- Table of Contents model where our customers place hardware they own into our facilities and we provide full operational and maintenance services for a fixed fee. We typically enter into long-term fixed rate contracts with our customers. Trends and Other Factors Affecting Our Business Regulatory Environment We have a material concentration of customers in the crypto mining industry. Our customers' businesses are subject to extensive laws, rules, regulations, policies and legal and regulatory guidance, including those governing securities, commodities, cryptoasset custody, exchange and transfer, data governance, data protection, cybersecurity and tax. Many of these legal and regulatory regimes were adopted prior to the advent of the Internet, mobile technologies, cryptoassets and related technologies. As a result, they do not contemplate or address unique issues associated with the crypto economy, are subject to significant uncertainty, and vary widely acrossU.S. federal, state and local and international jurisdictions. These legal and regulatory regimes, including the laws, rules and regulations thereunder, evolve frequently and may be modified, interpreted and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another. Moreover, the complexity and evolving nature of our business and the significant uncertainty surrounding the regulation of the crypto economy requires us to exercise our judgement as to whether certain laws, rules and regulations apply to us or our customers, and it is possible that governmental bodies and regulators may disagree with our or our customers' conclusions. To the extent we or our customers have not complied with such laws, rules and regulations, we could be subject to significant fines and other regulatory consequences, which could adversely affect our business, prospects or operations. As cryptoassets have grown in popularity and in market size, theFederal Reserve Board ,U.S. Congress and certainU.S. agencies (e.g., theCommodity Futures Trading Commission , theSEC , theFinancial Crimes Enforcement Network and theFederal Bureau of Investigation ) have begun to examine the operations of cryptoasset networks, cryptoasset users and cryptoasset exchange markets. Other countries around the world are likewise reviewing and, in some cases, increasing regulation of the cryptoasset industry. For instance, onSeptember 24, 2021 ,China imposed a ban on all crypto transactions and mining. Ongoing and future regulatory actions could effectively prevent our customers' mining operations and our ongoing or planned co-hosting operations, limiting or preventing future revenue generation by us or rendering our operations and crypto mining equipment obsolete. Such actions could severely impact our ability to continue to operate and our ability to continue as a going concern or to pursue our strategy at all, which would have a material adverse effect on our business, prospects or operations. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with accounting principles generally accepted inthe United States of America ("GAAP"). In connection with the preparation of our financial statements, we are required to make assumptions and estimates about future events and apply judgments that affect the reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historical experience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented fairly and in accordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptions and estimates, and such differences could be material. Our significant accounting policies are discussed in Note 3 - Basis of Presentation and Significant Accounting Policies, of the Notes to Consolidated Financial Statements of the Company's Annual Report on Form 10-K for the fiscal year endedMay 31, 2022 filed with theSEC onAugust 29, 2022
Hosting Operation Highlights
Applied Blockchain's first facility is inJamestown, North Dakota with capacity of 100 MW. The entire 100 MW of capacity has been fully contracted on multi-year contracts with our customers, providing revenue visibility for the Company. Additionally, the facility is powered through a five-year energy services agreement 13 -------------------------------------------------------------------------------- Table of Contents with a local utility, providing visibility into the cost structure as a stable pricing mechanism for energy costs has been negotiated. The facility began energizing in lateJanuary 2022 and had over 90 MW online as ofJune 2022 . As previously reported in a Current Report on Form 8-K filed by the Company onJuly 18, 2022 , there was an unexpected equipment failure at the substation powering the facility, resulting in a partial outage of approximately 50%. The power provider completed the required repairs in mid-August, fully restoring power capacity toJamestown ahead of the schedule for early September. TheJamestown facility was not damaged and remains fully operational and capable of hosting the entire 100 MW of capacity. OnJuly 12, 2022 , the Company entered into a five-year hosting contract with Marathon Digital Holdings, Inc. ("Marathon") for 200 MW of mining capacity. As a result of this arrangement, the Company will supply Marathon with 90 MW of hosting capacity at its facility inTexas and at least 110 MW of hosting capacity at its second facility inNorth Dakota . As part of this agreement, the Company has also provided Marathon with the option to increase hosting capacity utilizing up to an additional 70 MW inNorth Dakota , which would increase the total amount of hosting across all of the Company's facilities to 270 megawatts if the option is exercised. Discontinued Operations OnMarch 9, 2022 , the Company ceased all crypto mining operations and completed the sale of all crypto mining equipment in service. The Company has no plans to return to crypto mining operations in the future as we grow our co-hosting operations. The results of the crypto mining operations are accounted for as discontinued operations in our consolidated financial statements. Expansion Opportunities OnNovember 24, 2021 , we entered into a letter of intent to develop a facility inTexas using 200 MW of wind power. OnApril 13, 2022 , the Company entered into a 99-year ground lease inGarden City, TX , with the intent to build our second datacenter facility on this site. OnApril 25, 2022 the Company began construction on this site. This facility is collocated with a wind farm and upon completion is expected to provide 200 MW of power to hosting customers. The facility is expected to begin operating in calendar fourth quarter of 2022 and the 200 MW capacity is fully contracted with our customers. OnAugust 8, 2022 , the Company completed the purchase of 40 acres of land ("the Land") inEllendale, North Dakota , for a total cost of$1 million . The Company took possession of the Land onAugust 15, 2022 , and plans to build a 200 MW datacenter on the Land, with completion scheduled for the first quarter of calendar 2023. As our hosting operations expand, we believe our business structure will become conducive to a REIT structure, comparable to Digital Realty Trust (NYSE: DLR) and Equinix, Inc. (NASDAQ: EQIX), each of which is a traditional datacenter operator and Innovative Industrial Properties, Inc. (NYSE: IIPR), a specialty REIT that similarly services a new growth industry. We have begun to investigate the possibility, costs and benefits of converting to a REIT structure. Changes to Equity The Company's board of directors approved a reverse split of shares of the Company's common stock on a one-for-six basis, which was effected onApril 12, 2022 (the "Reverse Stock Split"). All references to Common Stock, options to purchase common stock, restricted stock units, share data, per share data and related information contained in the condensed consolidated financial statements have been retrospectively adjusted to reflect the effect of the Reverse Stock Split for all periods presented. No fractional shares of the Company's common stock were issued in connection with the Reverse Stock Split. Any fractional share resulting from the Reverse Stock Split was rounded down to the nearest whole share and the affected holder received cash in lieu of such fraction share. Any fractional share resulting from the Reverse Stock Split was rounded down to the nearest whole share. OnJune 6, 2022 , through an agreement between the Company and Sparkpool, Sparkpool agreed to forfeit to the Company shares of Common Stock that had been issued pursuant to the service agreement executed onMarch 19, 2021 . Sparkpool ceased providing the contracted services for the Company, and agreed to forfeit shares to 14
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compensate for future services that will not be rendered. As a result of this agreement, 4,965,432 shares of Common Stock were forfeited and canceled by the Company.
Results of operations Comparative results for the three months ended
The following table sets forth key components of the results of operations (in thousands) ofApplied Blockchain during the three months endedAugust 31, 2022 and 2021. Three Months Ended August 31, 2022 August 31, 2021 Revenues: Hosting revenue$ 6,924 $ - Cost of revenues$ 6,093 $ - Gross profit 831 - Costs and expenses: Selling, general and administrative$ 4,131 $ 698 Stock-based compensation 579 12,337 Depreciation and amortization 298 3 Total costs and expenses$ 5,008 $ 13,038 Operating loss $
(4,177)
Other income (expense): Interest Expense $ (356) $ - Gain on extinguishment of accounts payable - 40 Loss on extinguishment of debt (94) (1,342) Total other expense, net (450) (1,302) Net loss from continuing operations before income tax expenses (4,627) (14,340) Income tax expenses (32) - Net loss from continuing operations (4,659) (14,340) Net gain from discontinued operations, net of income taxes - 243 Net loss including noncontrolling interests (4,659) (14,097) Net loss attributable to noncontrolling interest (128) - Net loss attributable to Applied Blockchain $
(4,531)
Adjusted Amounts (a) Adjusted Operating Loss from Continuing Operations$ (2,896) $ 601 as a percentage of revenues (42) % - % Adjusted Net Loss from Continuing Operations$ (3,378) $ (701) as a percentage of revenues (49) % - % Other Financial Data (a) EBITDA$ (3,135) $ (14,337) as a percentage of revenues (45) % - % Adjusted EBITDA$ (1,854) $ (698) as a percentage of revenues (27) % - % Adjusted Gross Profit$ 1,667 $ - as a percentage of revenues 24 % - % 15
-------------------------------------------------------------------------------- Table of Contents (a) Adjusted Amounts and Other Financial Data are non-GAAP performance measures. A reconciliation of reported amounts to adjusted amounts can be found in the section titled "Non-GAAP Measures and Reconciliation".
Revenue
Hosting revenues increased from$0 to$6.9 million , from the three month period endedAugust 31, 2021 to the three month period endingAugust 31, 2022 . The increase in hosting revenues was driven by our completion of our first hosting facility inJamestown, North Dakota , which was brought online in phases during the six months endedMay 31, 2022 . Cost of Revenues Cost of revenues increased from$0 to$6.1 million , from the three month period endedAugust 31, 2021 to the three month period endingAugust 31, 2022 . The increase in cost of revenues was primarily driven by the initiation of our co-hosting business in late fiscal year endedMay 31, 2022 , which represents all of our continuing operations. Cost of revenues for the three month period endingAugust 31, 2022 consists of$836,000 of depreciation and amortization expense attributable to the property, plant and equipment at ourJamestown, ND hosting facility,$4.9 million of energy costs used to generate our hosting revenues, and$360,000 of personnel expenses for employees directly working at the hosting facility. Operating Expenses Selling, general and administrative expenses increased by$3.4 million , or 492%, from$698,000 for the three month period endedAugust 31, 2021 to$4.1 million for the three month period endingAugust 31, 2022 . The two primary drivers of Selling, general and administrative expense are$1.3 million of employee salaries and benefits expense, and$1.4 million of professional service expenses incurred to support the growth of the business. Stock-based compensation for service agreement decreased$11.8 million , or 95%, from$12.3 million for the three month period endedAugust 31, 2021 to$579,000 for the three month period endingAugust 31, 2022 . The expense was related to our service agreements with strategic partners, who provided advisory and consulting services in exchange for shares of common stock we issued to them. These services were fully rendered within the three month period endingAugust 31, 2021 . The Company did recognize expenses related to stock compensation agreements for the three month period endingAugust 31, 2022 , but the number of shares granted under these agreements, and therefore the related expense, was much smaller relative to the number of shares granted under the service agreements as described above.
Depreciation and amortization not attributable to cost of sales increased
Other Expense Interest expense increased from$0 to$356,000 , from the three month period endedAugust 31, 2021 to the three month period endingAugust 31, 2022 . This increase was driven by the increase in finance leases and change in the company's debt obligations between periods, as the Company has entered into the Starion Loan agreement in the three month period endingAugust 31, 2022 , and previously entered into a term loan agreement withVantage Bank , which was subsequently extinguished. The Starion Loan Agreement provides for an interest rate of 6.50% per annum. TheCity of Jamestown, North Dakota andStutsman County's Economic Development Fund provides a multimillion-dollar economic development program, available to assist with expanding or relocating businesses. As part of financial packages, theJamestown Stutsman Development Corporation (JSDC) makes direct loans, equity investments, and interest buy-downs to businesses. Contingent 16 -------------------------------------------------------------------------------- Table of Contents upon such incentives, the Company expects the effective interest rate of the Starion Term Loan to be less than 6.50% per annum after different state funds are applied to the Loan, pending final approval. The Loan is secured by a mortgage on the Property, and a security interest in substantially all of the assets of the Company as set forth in the Security Agreement dated as ofJuly 25, 2022 by and between Hosting and theStarion Lender and a security interest in the form of a collateral assignment of the Company's rights and interests in a master hosting agreement related to the Property and records and data relating thereto as set forth in the Security Agreement dated as ofJuly 25, 2022 by and among Hosting, the Company as Grantor and the Starion Lender. In addition, the Company unconditionally guaranteed the Company's obligations to the Starion Lender, including under the Starion Term Loan, pursuant to an Unlimited Commercial Corporate Guaranty of the Company dated as ofJuly 25, 2022 . Loss on extinguishment of debt decreased$1.25 million , or (93)% from the three month period endedAugust 31, 2021 to the three month period endedAugust 31, 2022 . This decrease was driven by the extinguishment of our related party notes payable by conversion to common stock during the three month period endedAugust 31, 2021 , compared to a smaller extinguishment of debt that was recognized in the three month period endedAugust 31, 2022 . Income tax expense Income tax expense increased from$0 to$32,000 from the three month period endedAugust 31, 2021 to the three month period endingAugust 31, 2022 . This increase was driven by a change in valuation allowance for three month period endingAugust 31, 2022 . Gain from Discontinued Operations Beginning in the quarter endedAugust 31, 2021 (the first quarter of fiscal year endedMay 31, 2022 ), we began cryptoasset mining operations, using Nvidia GPU miners which we hosted at a facility operated byCoinmint . In fiscal year endedMay 31, 2022 , we made the strategic decision to discontinue our mining operations and focus on hosting operations in the future. As a result of this strategic shift, our mining operations were reclassified as discontinued operations.
Gain from discontinued operations decreased
Non-GAAP Measures and Reconciliation
The reconciliations of (1) adjusted operating loss from continuing operations to
operating loss from continuing operations, (2) adjusted net loss from continuing
operations to net loss from continuing operations, (3) EBITDA and Adjusted
EBITDA to net loss from continuing operations, and (4) adjusted gross profit to
gross profit, is as follows:
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Three Months Ended
$ in thousands August 31, 2022 August 31, 2021
Adjusted operating loss
Operating Loss from Continuing Operations (GAAP) $ (4,177) $ (13,038)
Add: Stock-based compensation for service agreement 579 12,337
Add: Gain on Extinguishment of Accounts Payable - (40)
Add: Loss on Extinguishment of Debt 94 1,342
Add: Non-recurring professional service costs 408
Add: Other non-recurring expenses 200 -
Adjusted operating loss from continuing operations (non-GAAP)
$ (2,896) $ 601 Adjusted operating margin from Continuing Operations (41.8) % - % Adjusted net loss Net Loss from Continuing Operations (GAAP) (4,659) (14,340) Add: Stock-based compensation for service agreement 579 12,337 Add: Gain on Extinguishment of Accounts Payable - (40) Add: Loss on Extinguishment of Debt 94 1,342 Add: Non-recurring professional service costs 408 Add: Other non-recurring expenses 200 -
Adjusted net loss from continuing operations (non-GAAP)
EBITDA and Adjusted EBITDA Net Loss from Continuing Operations (GAAP)$ (4,659) $ (14,340) Add: Interest Expense 356 - Add: Income Tax Expense 32 - Add: Depreciation 1,136 3 EBITDA (Non-GAAP)$ (3,135) $ (14,337) Add: Stock-based compensation for service agreement 579 12,337 Add: Gain on Extinguishment of Accounts Payable - (40) Add: Loss on Extinguishment of Debt 94 1,342 Add: Non-recurring professional service costs 408 Add: Other non-recurring expenses 200 - Adjusted EBITDA (Non-GAAP)$ (1,854) $ (698) Adjusted Gross Profit Gross profit (GAAP) $ 831 $ - Add: Depreciation in cost of revenues 836 - Adjusted Profit (Non-GAAP)$ 1,667 $ - 18
-------------------------------------------------------------------------------- Table of Contents Adjusted Operating Loss and Adjusted Net Loss "Adjusted Operating Loss" and "Adjusted Net Loss" are non-GAAP measures that represents operating loss and net loss, respectively, from continuing operations excluding stock-based compensation and nonrecurring expenses. We believe these are useful metrics as they provide additional information regarding factors and trends affecting our business and provide perspective on results absent one-time or significant non-cash items. However,Applied Blockchain's presentation of these measures should not be construed as an inference that its future results will be unaffected by unusual or non-recurring items.Applied Blockchain's computation of Adjusted Operating Loss and Adjusted Net Loss may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Adjusted Operating Loss and Adjusted Net Loss in the same fashion. Because of these limitations, Adjusted Operating Loss and Adjusted Net Loss should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.Applied Blockchain compensates for these limitations by relying primarily on its GAAP results and using Adjusted Operating Loss and Adjusted Net Loss on a supplemental basis. You should review the reconciliation of operating loss to Adjusted Operating Loss and net loss to Adjusted Net Loss above and not rely on any single financial measure to evaluateApplied Blockchain's business.
EBITDA and Adjusted EBITDA
"EBITDA" is defined as earnings before interest, taxes, and depreciation and amortization. "Adjusted EBITDA" is defined as EBITDA adjusted for stock-based compensation, gain on extinguishment of accounts payable, loss on extinguishment of debt, and one-time professional service costs not directly related to the company's offering and therefore not deferred under the guidance in ASC 340 and SAB Topic 5A. These costs have been adjusted as they are not indicative of business operations. Adjusted EBITDA is intended as a supplemental measure ofApplied Blockchain's performance that is neither required by, nor presented in accordance with, GAAP.Applied Blockchain believes that the use of EBITDA and Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing its financial measures with those of comparable companies, which may present similar non-GAAP financial measures to investors. We also believe EBITDA and Adjusted EBITDA are useful metrics to investors because they provide additional information regarding factors and trends affecting our business, which are used in the business planning process to understand expected operating performance, to evaluate results against those expectations, and because of their importance as measures of underlying operating performance, as the primary compensation performance measure under certain programs and plans. However, you should be aware that when evaluating EBITDA and Adjusted EBITDA,Applied Blockchain may incur future expenses similar to those excluded when calculating these measures. In addition,Applied Blockchain's presentation of these measures should not be construed as an inference that its future results will be unaffected by unusual or non-recurring items.Applied Blockchain's computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies may not calculate Adjusted EBITDA in the same fashion. Because of these limitations, EBITDA and Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.Applied Blockchain compensates for these limitations by relying primarily on its GAAP results and using EBITDA and Adjusted EBITDA on a supplemental basis. You should review the reconciliation of net loss to EBITDA and Adjusted EBITDA above and not rely on any single financial measure to evaluateApplied Blockchain's business.
Adjusted gross profit
"Adjusted Gross Profit" is a non-GAAP measure that represents gross profit adjusted for depreciation expense within cost of revenues. We believe this is a useful metric as it provides additional information regarding gross profit aside from significant non-cash expense in depreciation. However,Applied Blockchain's presentation of this measure should not be construed as an inference that its future results will be unaffected by other factors 19
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within the cost of revenue.
Because of these limitations, Adjusted Gross Profit should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP.Applied Blockchain compensates for these limitations by relying primarily on its GAAP results and using Adjusted Gross Profit on a supplemental basis. You should review the reconciliation of gross profit to Adjusted Gross Profit above and not rely on any single financial measure to evaluateApplied Blockchain's business. The Sources of Liquidity We have primarily generated cash in the last 12 months from the proceeds of our term loan, proceeds from our initial public offering, and the receipt of contractual deposits and revenue prepayments from hosting customers. OnApril 18, 2022 , we received$36 million in net proceeds from the issuance of 8 million shares of the Company's Common Stock in conjunction with the closing of our initial public offering. OnJuly 25, 2022 , the Company entered into a Loan Agreement withStarion Bank ("Starion Lender") and the Company as Guarantor (the "Starion Loan Agreement"). The Starion Loan Agreement provides for a term loan (the "Starion Term Loan") in the principal amount of$15 million with a maturity date ofJuly 25, 2027 . The Starion Loan Agreement contains customary covenants, representations and warranties and events of default. The Starion Loan Agreement provides for an interest rate of 6.50% per annum. A portion of the proceeds were used to pay down the Vantage term loan that was entered into onMarch 11, 2022 . The remaining proceeds of the term loan will be used for working capital needs for the operation of Phase I of the hosting facility inJamestown, North Dakota . See Note 7 to the consolidated financial statements included in this Quarterly Report on Form 10-Q for more information on the Starion Term Loan. During the three month period endedAugust 31, 2022 , we received$22.2 million in payments for future hosting services. During fiscal year endedMay 31, 2022 , we generated revenue from crypto mining and co-hosting, but we have incurred net losses from operations. As ofAugust 31, 2022 andMay 31, 2022 , we had cash of$40.8 million and$46.3 million respectively, and an accumulated deficit of$60.6 million and$56.1 million , respectively. Funding Requirements We have experienced net losses through our fiscal year endedMay 31, 2022 . Our transition to profitability is dependent on the successful operation of our co-hosting facilities. We believe that amounts we received from our proceeds from our term loan, proceeds from our initial public offering, and revenue payments we have begun to achieve in our co-hosting operations since our first co-hosting facility was brought online inFebruary 2022 , after planned expenditures with respect to the items described in the section titled "Expansion Opportunities" above, will be sufficient to meet our working capital needs for at least the next 12 months and all of the Company's known requirements and plans for cash. We expect that our general and administrative expenses and our operating expenditures will continue to increase as we continue to expand our operations and as we bear the costs of being a public company. We expect significant increases in our investment in property and equipment as we expand our co-hosting capacity. We also expect that our revenues will increase as we continue to bring online additional capacity at ourJamestown, ND ,Garden City, TX , andEllendale, ND locations. We expect to need additional capital to fund continued growth, which we may obtain through one or more equity offerings, debt financings or other third-party funding. Because of the numerous risks and uncertainties associated with the Company's concentration of customers in the crypto mining industry, we are unable to estimate the amount of increased capital we may need to raise to continue to build additional co-hosting facilities and we may use our available capital sooner that we currently expect. 20
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Table of Contents We believe that our existing cash, together with the anticipated revenues from current operations and debt funding opportunities, will enable us to fund our operating expense requirements through at least 12 months as well as all of the Company's known requirements and plans for cash. We have based our estimates as to how long we expect we will be able to fund our operations on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect, in which case, we would be required to obtain additional financing sooner than currently projected, which may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.
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