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RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTERS ENDED MARCH 31, 2023 AND MARCH 31, 2022 AND VOLUNTARY CHANGE IN ACCOUNTING PRINCIPLE | 6 Months Ended
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Jun. 30, 2023
Restatement Of Consolidated Financial Statements For Quarters Ended March 31 2023 And March 31 2022 And Voluntary Change In Accounting Principle |
RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTERS ENDED MARCH 31, 2023 AND MARCH 31, 2022 AND VOLUNTARY CHANGE IN ACCOUNTING PRINCIPLE | NOTE 3 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS FOR THE QUARTERS ENDED MARCH 31, 2023 AND MARCH 31, 2022 AND VOLUNTARY CHANGE IN ACCOUNTING PRINCIPLE Restatement Background As disclosed in the Current Report on Form 8-K, dated August 8, 2023, and filed by the Company with the SEC immediately preceding filing of this Quarterly Report, the Company’s previously filed interim unaudited Consolidated Financial Statements for the three months ended March 31, 2023, as set forth in the Company’s Quarterly Report on Form 10-Q for the Three Months Ended March 31, 2023 which was filed with the SEC on May 10, 2023, should no longer be relied upon and a restatement is required for the previously issued Consolidated Financial Statements. The Restatement of the financial information and the prior year period presented was necessary to correct the cash flow presentation for “Proceeds from sale of digital assets” from operating activities to investing activities. Cash Flow Presentation The Company corrected its presentation of “proceeds from sale of digital assets” by reclassifying from operating activities to investing activities as follows: SCHEDULE OF RECLASSIFICATION FROM OPERATING ACTIVITIES TO INVESTING ACTIVITIES
|  | As Reported |  |  | Adjustment |  |  | As Restated |
|  | For the three months ended |
|  | March 31, 2023 |
|  | As Reported |  |  | Adjustment |  |  | As Restated |
|  | (unaudited) |  |  |  |  |  | (unaudited) |
CASH FLOWS FROM OPERATING ACTIVITIES |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | (7,235 | ) |  | $ | — |  |  | $ | (7,235 | )
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 17,733 |  |  |  | — |  |  |  | 17,733 |
Deferred tax expense |  |  | 75 |  |  |  | — |  |  |  | 75 |
Gains on digital assets |  |  | (17,615 | ) |  |  | — |  |  |  | (17,615 | )
Impairment of digital assets |  |  | 6,151 |  |  |  | — |  |  |  | 6,151 |
Stock-based compensation |  |  | 3,945 |  |  |  | — |  |  |  | 3,945 |
Amortization of debt issuance costs |  |  | 971 |  |  |  | — |  |  |  | 971 |
Loss from extinguishment of debt |  |  | 333 |  |  |  | — |  |  |  | 333 |
Other adjustments from operations, net |  |  | 1,290 |  |  |  | — |  |  |  | 1,290 |
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Revenues from digital asset production |  |  | (50,941 | ) |  |  | — |  |  |  | (50,941 | )
Proceeds from sale of digital assets |  |  | 62,646 |  |  |  | (62,646 | ) |  |  | — |
Deposits |  |  | (23,124 | ) |  |  | — |  |  |  | (23,124 | )
Prepaid expenses and other assets |  |  | (20,738 | ) |  |  | — |  |  |  | (20,738 | )
Accounts payable and accrued expenses |  |  | (3,784 | ) |  |  | — |  |  |  | (3,784 | )
Accrued interest |  |  | 1,481 |  |  |  | — |  |  |  | 1,481 |
Net cash used in operating activities |  |  | (28,812 | ) |  |  | (62,646 | ) |  |  | (91,458 | )
CASH FLOWS FROM INVESTING ACTIVITIES |  |  |  |  |  |  |  |  |  |  |  |
Advances to vendors |  |  | (11,565 | ) |  |  | — |  |  |  | (11,565 | )
Purchase of property and equipment |  |  | (17,270 | ) |  |  | — |  |  |  | (17,270 | )
Proceeds from sale of digital assets |  |  | — |  |  |  | 62,646 |  |  |  | 62,646 |
Investments in Joint Venture |  |  | (43,194 | ) |  |  | — |  |  |  | (43,194 | )
Net cash used in investing activities |  |  | (72,029 | ) |  |  | 62,646 |  |  |  | (9,383 | )
CASH FLOWS FROM FINANCING ACTIVITIES |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from issuance of common stock, net of issuance costs |  |  | 163,295 |  |  |  | — |  |  |  | 163,295 |
Repayment of term loan borrowings |  |  | (50,000 | ) |  |  | — |  |  |  | (50,000 | )
Value of shares withheld for taxes |  |  | (77 | ) |  |  | — |  |  |  | (77 | )
Net cash provided by financing activities |  |  | 113,218 |  |  |  | — |  |  |  | 113,218 |
Net increase in cash, cash equivalents and restricted cash |  |  | 12,377 |  |  |  | — |  |  |  | 12,377 |
Cash, cash equivalents and restricted cash — beginning of period |  |  | 112,505 |  |  |  | - |  |  |  | 112,505 |
Cash and cash equivalents — end of period |  | $ | 124,882 |  |  |  | - |  |  | $ | 124,882 |
Change in Accounting Principle During the quarter ended March 31, 2023, we made a voluntary change in accounting principle from LIFO to FIFO effective January 1, 2023, to better reflect the disposition of our digital assets (the “Principle Change”). The Principle Change increased the carrying value of digital assets for the quarter ended March 31, 2022, resulting in the recognition of additional impairment of digital assets. The following tables for the Unaudited Interim Consolidated Condensed Balance Sheet, Consolidated Condensed Statement of Operations, and Consolidated Condensed Statement of Cash Flows present the impact of the Principle Change for the three months ended March 31, 2022. SCHEDULE OF CHANGE IN ACCOUNTING PRINCIPLE FOR CONDENSED CONSOLIDATED BALANCE SHEET
|  | As Reported |  |  | Adjustments |  |  | As Restated |
|  | As of March 31, 2022 |
|  | As Reported |  |  | Adjustments |  |  | As Restated |
|  | (unaudited) |  |  |  |  |  | (unaudited) |
ASSETS |  |  |  |  |  |  |  |  |  |  |  |
Current assets: |  |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 117,942 |  |  | $ | — |  |  | $ | 117,942 |
Restricted cash |  |  | 600 |  |  |  | — |  |  |  | 600 |
Digital assets |  |  | 129,448 |  |  |  | 4,076 |  |  |  | 133,524 |
Digital assets held in Fund |  |  | 218,439 |  |  |  | — |  |  |  | 218,439 |
Other receivable |  |  | 29,870 |  |  |  | — |  |  |  | 29,870 |
Deposits |  |  | 40,792 |  |  |  | — |  |  |  | 40,792 |
Prepaid expenses and other current assets |  |  | 52,765 |  |  |  | — |  |  |  | 52,765 |
Total current assets |  |  | 589,856 |  |  |  | 4,076 |  |  |  | 593,932 |
Other assets: |  |  |  |  |  |  |  |  |  |  |  |
Property and equipment |  |  | 333,317 |  |  |  | — |  |  |  | 333,317 |
Advances to vendors |  |  | 594,240 |  |  |  | — |  |  |  | 594,240 |
Investments |  |  | 13,520 |  |  |  | — |  |  |  | 13,520 |
Long term prepaids |  |  | 5,131 |  |  |  | — |  |  |  | 5,131 |
Right-of-use assets |  |  | 1,326 |  |  |  | — |  |  |  | 1,326 |
Total other assets |  |  | 947,534 |  |  |  | — |  |  |  | 947,534 |
TOTAL ASSETS |  |  | 1,537,390 |  |  |  | 4,076 |  |  |  | 1,541,466 |
LIABILITIES AND STOCKHOLDERS’ EQUITY |  |  |  |  |  |  |  |  |  |  |  |
Current liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Accounts payable |  |  | 7,715 |  |  |  | — |  |  |  | 7,715 |
Accrued expenses |  |  | 4,642 |  |  |  | — |  |  |  | 4,642 |
Operating lease liabilities |  |  | 264 |  |  |  | — |  |  |  | 264 |
Current portion of accrued interest |  |  | 2,710 |  |  |  | — |  |  |  | 2,710 |
Total current liabilities |  |  | 15,331 |  |  |  | — |  |  |  | 15,331 |
Long-term liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Notes payable |  |  | 729,377 |  |  |  | — |  |  |  | 729,377 |
Operating lease liabilities |  |  | 1,071 |  |  |  | — |  |  |  | 1,071 |
Deferred tax liabilities |  |  | 18,312 |  |  |  | 981 |  |  |  | 19,293 |
Total long-term liabilities |  |  | 748,760 |  |  |  | 981 |  |  |  | 749,741 |
Stockholders’ Equity: |  |  |  |  |  |  |  |  |  |  |  |
Preferred stock |  |  | — |  |  |  | — |  |  |  | — |
Common stock |  |  | 11 |  |  |  | — |  |  |  | 11 |
Additional paid-in capital |  |  | 939,742 |  |  |  | — |  |  |  | 939,742 |
Accumulated deficit |  |  | (166,454 | ) |  |  | 3,095 |  |  |  | (163,359 | )
Total stockholders’ equity |  |  | 773,299 |  |  |  | 3,095 |  |  |  | 776,394 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |  | $ | 1,537,390 |  |  | $ | 4,076 |  |  | $ | 1,541,466 |
SCHEDULE OF CHANGE IN ACCOUNTING PRINCIPLE FOR CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
|  | As Reported |  |  | Adjustment |  |  | As Restated |
|  | For the three months ended |
|  | March 31, 2022 |
|  | As Reported |  |  | Adjustment |  |  | As Restated |
|  | (unaudited) |  |  |  |  |  | (unaudited) |
Total revenues |  | $ | 51,723 |  |  | $ | — |  |  | $ | 51,723 |
Costs and expenses |  |  |  |  |  |  |  |  |  |  |  |
Cost of revenues |  |  |  |  |  |  |  |  |  |  |  |
Cost of revenues - energy, hosting and other |  |  | (12,522 | ) |  |  | — |  |  |  | (12,522 | )
Cost of revenues - depreciation and amortization |  |  | (13,877 | ) |  |  | — |  |  |  | (13,877 | )
Total cost of revenues |  |  | (26,399 | ) |  |  | — |  |  |  | (26,399 | )
Operating expenses |  |  |  |  |  |  |  |  |  |  |  |
General and administrative expenses |  |  | (15,515 | ) |  |  | — |  |  |  | (15,515 | )
Impairment of digital assets |  |  | (17,647 | ) |  |  | (5,670 | ) |  |  | (23,317 | )
Impairment of patents |  |  | (919 | ) |  |  | — |  |  |  | (919 | )
Gains on digital assets and losses on digital assets loan receivable |  |  | (461 | ) |  |  | — |  |  |  | (461 | )
Losses on digital assets held within Investment Fund |  |  | (5,328 | ) |  |  | — |  |  |  | (5,328 | )
Total operating expenses |  |  | (39,870 | ) |  |  | (5,670 | ) |  |  | (45,540 | )
Operating loss |  |  | (14,546 | ) |  |  | (5,670 | ) |  |  | (20,216 | )
Other non-operating income |  |  | 247 |  |  |  | — |  |  |  | 247 |
Interest expense |  |  | (2,814 | ) |  |  | — |  |  |  | (2,814 | )
Loss before income taxes |  |  | (17,113 | ) |  |  | (5,670 | ) |  |  | (22,783 | )
Income tax benefit |  |  | 4,262 |  |  |  | 1,412 |  |  |  | 5,674 |
Net loss |  | $ | (12,851 | ) |  | $ | (4,258 | ) |  | $ | (17,109 | )
Net loss per share, basic and diluted: |  | $ | (0.12 | ) |  |  | - |  |  | $ | (0.17 | )
Weighted average shares outstanding, basic and diluted: |  |  | 103,102,596 |  |  |  | - |  |  |  | 103,102,596 |
SCHEDULE OF CHANGE IN ACCOUNTING PRINCIPLE FOR CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
|  | As Reported |  |  | Adjustment |  |  | As Restated |
|  | For the three months ended |
|  | March 31, 2022 |
|  | As Reported |  |  | Adjustment |  |  | As Restated |
|  | (unaudited) |  |  |  |  |  | (unaudited) |
CASH FLOWS FROM OPERATING ACTIVITIES |  |  |  |  |  |  |  |  |  |  |  |
Net loss |  | $ | (12,851 | ) |  | $ | (4,258 | ) |  | $ | (17,109 | )
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 13,877 |  |  |  | — |  |  |  | 13,877 |
Amortization of prepaid service contract |  |  | 4,662 |  |  |  | — |  |  |  | 4,662 |
Deferred tax benefit |  |  | (4,262 | ) |  |  | (1,412 | ) |  |  | (5,674 | )
Losses on digital assets held within Investment Fund |  |  | 5,328 |  |  |  | — |  |  |  | 5,328 |
Losses on digital assets loan receivable |  |  | 461 |  |  |  | — |  |  |  | 461 |
Impairment of digital assets |  |  | 17,647 |  |  |  | 5,670 |  |  |  | 23,317 |
Stock-based compensation |  |  | 9,275 |  |  |  | — |  |  |  | 9,275 |
Amortization of debt issuance costs |  |  | 971 |  |  |  | — |  |  |  | 971 |
Impairment of patents |  |  | 919 |  |  |  | — |  |  |  | 919 |
Other adjustments from operations, net |  |  | (215 | ) |  |  | — |  |  |  | (215 | )
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Revenues from digital asset production |  |  | (51,874 | ) |  |  | — |  |  |  | (51,874 | )
Deposits |  |  | (6,287 | ) |  |  | — |  |  |  | (6,287 | )
Prepaid expenses and other assets |  |  | (4,889 | ) |  |  | — |  |  |  | (4,889 | )
Accounts payable and accrued expenses |  |  | (667 | ) |  |  | — |  |  |  | (667 | )
Accrued interest |  |  | 1,843 |  |  |  | — |  |  |  | 1,843 |
Net cash used in operating activities |  |  | (26,062 | ) |  |  | — |  |  |  | (26,062 | )
CASH FLOWS FROM INVESTING ACTIVITIES |  |  |  |  |  |  |  |  |  |  |  |
Advances to vendors |  |  | (192,391 | ) |  |  | — |  |  |  | (192,391 | )
Purchase of property and equipment |  |  | (6,534 | ) |  |  | — |  |  |  | (6,534 | )
Purchase of equity investments |  |  | (10,500 | ) |  |  | — |  |  |  | (10,500 | )
Net cash used in investing activities |  |  | (209,425 | ) |  |  | — |  |  |  | (209,425 | )
CASH FLOWS FROM FINANCING ACTIVITIES |  |  |  |  |  |  |  |  |  |  |  |
Proceeds from issuance of common stock, net of issuance costs |  |  | 85,473 |  |  |  | — |  |  |  | 85,473 |
Net cash provided by financing activities |  |  | 85,473 |  |  |  | — |  |  |  | 85,473 |
Net decrease in cash, cash equivalents and restricted cash |  |  | (150,014 | ) |  |  | — |  |  |  | (150,014 | )
Cash and cash equivalents — beginning of period |  |  | 268,556 |  |  |  | - |  |  |  | 268,556 |
Cash, cash equivalents and restricted cash — end of period |  | $ | 118,542 |  |  |  | - |  |  | $ | 118,542 |

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