☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

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 ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant period pursuant to §240.10D-1(b). ☐ 

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

•our ability to achieve profitability, and to maintain profitability in the future;

•high volatility in the volume attributable to our business;

•the rapidly changing regulatory and legal environment in which we operate, may lead to unknown future challenges to operating our business or may subject our business to added costs or uncertainty regarding our ability to operate;

•the availability of financing opportunities due to the volatility in the trading price of our common stock and the price of bitcoin;

•economic dependence on regulated terms of service and power rates;

•dependency on continued growth in blockchain and bitcoin usage;

•our ability to keep pace with technology changes and competitive conditions;

•security and cybersecurity threats and hacks;

•changes in bitcoin mining difficulty;

•our reliance on limited number of key employees;

•changes in network and infrastructure;

•our ability to successfully integrate our newly acquired operations;

•our transition away from our “asset-light” capital strategy;

•our ability to execute on our business and growth strategy, including by successfully managing the execution of our international joint ventures;

•our plans to commence sales under a new at-the-market offering program;

•our ability to remediate the material weakness identified in our internal control over financial reporting;

•our ability to resolve our unresolved comments issued by the staff (the “Staff”) of the Securities and Exchange Commission (the “SEC”); and

•other risks and uncertainties discussed under the caption “Risk Factors” in this Annual Report.

Forward-looking statements represent management’s current expectations and predictions about trends affecting our business and industry and are based on information available at the time such statements are made. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy or completeness. Forward-looking statements involve numerous known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements predicted, assumed, or implied by the forward-looking statements. Some of the risks and uncertainties that may cause our actual results to materially differ from those expressed or implied by these forward-looking statements are described in Part I, Item 1A, “Risk Factors,” and Part II, Item 7, “Management's Discussion and Analysis of Financial Condition and Results of Operations,” within this Annual Report, as well as in our other filings with the SEC. You should read this Annual Report, including the information and documents incorporated by reference herein, in its entirety and with the understanding that our actual future results may be materially different from the results expressed or implied by these forward-looking statements. Moreover, new risks and uncertainties emerge occasionally, and it is not possible for management to predict all risks and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual future results to be materially different from any results expressed or implied by any forward-looking statements. Except as required by applicable law or the listing rules of The Nasdaq Capital Market (“Nasdaq”), we expressly disclaim any intent or obligation to update any forward-looking statements. We qualify all our forward-looking statements with these cautionary statements.

ITEM 1. BUSINESS

In addition to mining and holding bitcoin, from time to time we have explored, and we may in the future explore, opportunities to become more involved in businesses that expand or supplement those directly related to the self-mining of bitcoin as favorable market conditions and opportunities arise. For example, we have considered or engaged in owning and operating bitcoin mining facilities or data centers, selling proprietary software or technology to third parties operating in the Bitcoin ecosystem, offering advisory and consulting services to support bitcoin mining ventures in domestic and international jurisdictions, and generating electricity from renewable energy resources or methane gas capture to power bitcoin mining projects. The Company is committed to carbon neutrality and growing operations through predominately renewable energy sources. Our business is also active in Bitcoin-related projects related to the technological development of immersion, hardware, firmware, mining pools and side chains that use the blockchain cryptography.

Bitcoin halving is a phenomenon that has historically occurred approximately every four years on the Bitcoin network. Halving is a key part of the Bitcoin protocol and serves to control the overall supply and reduce the risk of inflation in digital assets using a Proof-of-Work consensus algorithm. At a predetermined block, the mining reward is cut in half, hence the term “halving.” For example, the reward for adding a single block to the blockchain was initially set at 50 bitcoin currency rewards. The Bitcoin blockchain has undergone halving three times since its inception as follows: (1) on November 28, 2012 at block height 210,000; (2) on July 9, 2016 at block height 420,000; and (3) on May 11, 2020 at block height 630,000, when the reward was reduced to its current level of 6.25 bitcoin per block. The next halving for the Bitcoin blockchain is anticipated to occur around April 2024 at block height 840,000. This process will recur until the total amount of bitcoin currency rewards issued reaches 21.0 million, and the theoretical supply of new bitcoin is exhausted, which is expected to occur around 2140. Many factors influence the price of Bitcoin, and potential increase or decrease in prices in advance of or following the future halving is unknown.

•In December 2023, we entered into a definitive agreement to acquire two currently operational bitcoin mining sites, totaling 390 megawatts of capacity, in Granbury, Texas and Kearney, Nebraska, to reduce the cost per coin of our current operations at these sites and further transition from the asset-light organization to one that manages a diversified and resilient portfolio of bitcoin mining operations. The transaction closed on January 12, 2024;

•We deployed capital to secure the most efficient Application Specific Integrated Circuit mining rigs (“ASICs”) through contracts that included price protection clauses which benefited the Company as ASICs prices declined throughout the second and third quarters of 2023;

•We continued operations at a wind-powered site in McCamey, Texas and other smaller sites, which have increased our use of renewable sources of energy;

•We secured additional hosting services to further our planned expansion of operations, entering into third-party hosting relationships with Applied Digital Corporation (“APLD”) to host S19XP mining rigs at sites in Texas and North Dakota; and

•We increased our hash rate from 7.0 and 7.0 installed and energized exahashes per second, respectively, as of December 31, 2022 to 25.2 and 24.7 installed and energized exahashes per second, respectively, as of December 31, 2023.

•Our primary mining facility in Hardin, Montana went offline after being damaged by a storm in mid-2022;

•Delays in the energization of the McCamey, Texas site during the second and third quarters of 2022;

•Compute North, our largest hosting partner, entered bankruptcy proceedings in September 2022;

•A significant decline in the price of bitcoin, which resulted in impairments of our bitcoin holdings throughout 2022 and an impairment charge related to the value of our mining rigs and certain contracts during the fourth quarter of 2022; and

•Challenging financial markets and macroeconomic conditions throughout 2022.

(1) Notes the approximate deployed and operational fleet at each site location or the anticipated scope of the fleet to be deployed at those sites not yet operational.

(2) On January 12, 2024, the Company, through its wholly owned subsidiary MARA USA Corporation, acquired two operational bitcoin mining sites.

(3) Includes site locations of Hopedale, Ohio, Murray, Kentucky and Layton, Utah. An additional 4,700 j Pros are anticipated to be energized in 2024.

In digital asset mining, companies and individuals use computing power to solve cryptographic algorithms to record and publish transactions to blockchain ledgers or provide transaction verification services to the Bitcoin network in exchange for digital asset rewards. The current reward for verifying a block on the Bitcoin blockchain is 6.25 bitcoin. Miners can range from individual enthusiasts to professional mining operations with dedicated data centers. Miners may organize themselves in mining pools. We compete or may in the future compete with other companies that focus all or a portion of their activities on owning or operating digital asset exchanges, developing programming for the blockchain, and mining activities. Currently, the information concerning the activities of these enterprises is not readily available as the vast majority of the participants in this sector do not publish information publicly or the information may be unreliable.

•Argo Blockchain plc;

•Bitfarms Ltd.;

•Bit Digital, Inc.;

•Cipher Mining Inc.;

•Cleanspark, Inc.;

•Core Scientific, Inc.;

•Greenidge Generation Holdings Inc.;

•Hive Digital Technologies Ltd.;

•Hut 8 Corp.;

•Iris Energy Limited;

•Riot Platforms, Inc.;

•Stronghold Digital Mining, Inc.; and

•TeraWulf Inc.

We believe our recent acquisition of two currently operational bitcoin mining sites, totaling 390 megawatts of capacity, in Granbury, Texas and Kearney, Nebraska and our ongoing deployment of miners positions us well among the publicly traded companies involved in the digital asset mining industry. The digital asset mining industry is a highly competitive and evolving industry and new competitors and/or emerging technologies could enter the market and affect our competitiveness in the future.

•trade secrets;

•trademarks;

•service marks;

•trade names;

•copyrights; and

•other intellectual property rights.

For additional discussion regarding our belief about the potential risks existing and future regulation pose to our business, see Part I, Item 1A. “Risk Factors” of this Annual Report.

•Bitcoin prices are very volatile and this may affect our ability to effectively manage growth plans and our profitability;

•If we fail to grow our hash rate, we may be unable to compete, and our results of operations could suffer.

•Fluctuations in the price of bitcoin may significantly influence the market price of our bitcoin holdings and therefore the price of our common stock;

•Further significant disruptions in the crypto asset markets, such as those experienced in the second half of 2022, may cause further material impairment of the value and use of our mining rigs;

•Political or economic crises may motivate large-scale sales of digital assets, which could result in a reduction in some or all digital assets’ values and adversely affect an investment in our securities;

•Bitcoin is subject to halving and as such the reward for successfully solving a block will halve several times in the future and its value may not adjust to compensate us for the reduction in the rewards we receive from our mining efforts, which could cause us to cease our mining operations altogether and investors could suffer a complete loss of their investment;

•Security threats to our business could result in a loss of our digital assets, or damage to our reputation and brand, each of which could adversely affect an investment in our securities;

•The limited rights of legal recourse against us, and our lack of insurance protection exposes us and our stockholders to the risk of loss of our digital assets for which no person is liable;

•We rely on third-party hosting, and as such, our operations could be adversely affected by the actions or inactions of such third-parties. Additionally, third-party hosting, among other things, often requires us to give the hosting company a first lien on the mining rigs installed on the site and creates business risk for us.

•We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our financial statements or cause us to fail to meet periodic reporting obligations; and

•We have unresolved Staff comments which could result in restated financial statements.

•Regulatory changes or actions may restrict the use of bitcoins or the operation of the Bitcoin network in a manner that adversely affects an investment in our securities;

•Due to the unregulated nature and lack of transparency surrounding the operations of many bitcoin trading venues, they may experience fraud, security failures or operational problems, which may adversely affect the value of our bitcoin;

•If regulatory changes or interpretations require the regulation of bitcoins under the Securities Act and the Investment Company Act of 1940, as amended (the “Investment Act”) by the SEC, we may be required to register and comply with such regulations. To the extent we decide to continue operations, the required registrations and regulatory compliance steps may result in extraordinary, non-recurring expenses to us. We may also decide to cease certain operations. Any disruption of our operations in response to the changed regulatory circumstances may be at a time that is disadvantageous to investors. This would likely have a material adverse effect on us and investors may lose their investment; and

•Changing environmental regulation and public energy policy may expose our business to new risks.

•Our stock price is volatile; and

•Because there has been limited precedent set for financial accounting of bitcoin and other cryptocurrency assets, the determination that we have made for how to account for cryptocurrency assets transactions may be subject to change.

•public familiarity with digital assets;

•ease of buying and accessing bitcoin;

•institutional demand for bitcoin as an investment asset;

•consumer demand for bitcoin as a means of payment; and

•the availability and popularity of alternatives to bitcoin.

•continued worldwide growth in the adoption and use of bitcoins and other digital assets;

•government and quasi-government regulation of bitcoins and other digital assets and their use, or restrictions on or regulation of access to and operation of the digital asset network or similar digital assets systems;

•the maintenance and development of the open-source software protocol of the Bitcoin network;

•changes in consumer demographics and public tastes and preferences;

•the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies;

•general economic conditions and the regulatory environment relating to digital assets;

•the impact of regulators focusing on digital assets and digital securities and the costs associated with such regulatory oversight; and

•a decline in the popularity or acceptance of the digital asset networks of bitcoin, or similar digital asset systems, could adversely affect an investment in our securities.

•the investment of significant capital for the acquisition of such hardware;

•the leasing of operating space (often in data centers or warehousing facilities);

•incurring of electricity costs; and

•the employment of technicians to operate the mining farms.

•efforts to gain unauthorized access to information or systems;

•efforts to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment; and

•the inadvertent transmission of computer viruses.

•patent applications we may file may not result in issued patents or may take longer than we expect to result in issued patents;

•we may be subject to interference proceedings;

•we may be subject to opposition proceedings in the United States or foreign countries;

•any patents that are issued to us may not provide meaningful protection;

•we may not be able to develop additional proprietary technologies that are patentable;

•other companies may challenge patents issued to us;

•other companies may have independently developed and/or patented (or may in the future independently develop and patent) similar or alternative technologies, or duplicate our technologies;

•other companies may design around technologies we have developed; and

•enforcement of our patents would be complex, uncertain and very expensive.

Our future success depends on our ability to expand our organization to match the growth of our activities.

•deteriorating macroeconomic conditions such as the impact of inflation and increased interest rates and the corresponding impact on our ability to borrow funds or refinance existing indebtedness;

•additional challenges arising from catastrophic events (such the FTX collapse and multiple bankruptcies of bitcoin mining companies in 2022 and 2023) that would adversely affect the credibility of, and therefore investor confidence in, companies engaged in the digital assets space;

•additional declines in bitcoin prices and/or production, and increases in electricity costs which could adversely impact both the value of our bitcoin holdings and our ongoing profitability; and

•further instability in the banking system and the possible collapse of more banking institutions which could put the liquidity and cash assets of third parties with which we do business such as miner hosting entities and suppliers and us, if we bank in the future with an institution which subsequently collapses.

The termination of the $200.0 million in loan facilities with Silvergate Bank did not have a material impact on our operations or forecasts with regard to liquidity. The loans were fully collateralized by our holdings of bitcoin and as such, we were only permitted to borrow up to 65% of the value of the bitcoin held as collateral. Specific percentages and conditions are set forth in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption, Bitcoin held as collateral for loans (“Digital assets, restricted”).

In response to the disruptions in the crypto markets and rising interest rates during the fourth quarter of 2022, we decided to move away from leverage and instead chose to rely on increased levels of cash and higher balances of unrestricted bitcoin holdings, which as of January 2023, we are now selling periodically as a means of generating cash for our operations. By selling bitcoin outright, we can realize 100% of the then value of our bitcoin when addressing liquidity needs. Refer to the disclosure under the caption “Liquidity and Capital Resources Outlook” in the section entitled (“Management’s Discussion and Analysis of Financial Condition and Results of Operations”) for further disclosure regarding our liquidity analysis.

Digital assets currently face an uncertain regulatory landscape in not only the United States but also in many foreign jurisdictions such as the European Union, China and Russia. While certain governments such as Germany, where the Ministry of Finance has declared bitcoin to be “Rechnungseinheiten” (a form of private money that is recognized as a unit of account, but not recognized in the same manner as fiat currency), have issued guidance as to how to treat bitcoin, most regulatory bodies have not yet issued official statements regarding intention to regulate or determinations on regulation of bitcoin, the Bitcoin network and bitcoin users. The effect of any future regulatory change on us, bitcoins, or other digital assets is impossible to predict, but such change could be substantial and adverse to us and could adversely affect an investment in our securities.

  

•forced divestment of assets;

•expropriation of property;

•cancellation or forced renegotiation of contract rights;

•additional taxes including windfall taxes;

•restrictions on deductions and retroactive tax claims;

•antitrust claims;

•changes to trade compliance regulations;

•price controls;

•local content requirements;

•foreign exchange controls;

•changes to environmental regulations;

•changes to regulatory interpretations and enforcement; and

•changes to disclosure requirements.

•attempting unilaterally to amend or cancel existing agreements or arrangements;

•failing to honor existing contractual commitments; and

•seeking to adjudicate disputes between private litigants.

•extensive laws;

•rules, regulations;

•policies;

•orders;

•determinations;

•directives;

•treaties;

•legal and regulatory interpretations and guidance; and

•counterparty risk in the markets in which we operate.

•regulatory aspects from financial services;

•federal energy and other regulators;

•the SEC;

•the CFTC;

•credit, crypto asset custody;

•exchange, and transfer;

•cross-border and domestic money and crypto asset transmission;

•consumer and commercial lending;

•usury;

•foreign currency exchange;

•privacy;

•data governance;

•data protection;

•cybersecurity;

•fraud detection;

•antitrust and competition;

•bankruptcy;

•tax;

•anti-bribery;

•economic and trade sanctions;

•anti-money laundering, and counter-terrorist financing;

•the same regulatory risks applicable to counterparties which are most notably hosting businesses; and

•the recent economic issues and bankruptcies befalling some in this industry.

•changes in our industry including changes which adversely affect bitcoin and other digital assets;

•changes in bitcoin pricing;

•competitive pricing pressures;

•our ability to obtain working capital financing;

•additions or departures of key personnel;

•sales of our common stock;

•our ability to execute our business plan;

•operating results that fall below expectations;

•loss of any strategic relationship;

•regulatory developments; and

•economic and other external factors.

•Revenue Recognition. The Staff commented on our revenue recognition policy in our capacity as a pool operator and in our capacity as a pool participant, with specific attention to our previous net recognition of revenue as an operator of a pool. We have restated our financial results in response to the comment, and revised our revenue to include gross revenue earned as pool operator with any amounts remitted to third party pool participants as cost of revenue. The Staff further commented on our accounting convention to recognize our noncash (bitcoin) revenue using fair value that is not at contract inception. We evaluated the difference between our current accounting policy and fair value at contract inception and determined that any differences in revenue are not material for all periods stated.

•Impairment of Bitcoin. The Staff objected to our calculation of impairment of bitcoin using a daily closing price. We have, in our restated financial results, revised our calculation to calculate impairment of bitcoin using the intraday low price of bitcoin.

•Accounting for Investment Fund. The Staff commented on whether we should have consolidated the NYDIG Fund, an investment fund in which we were the sole limited partner and, if so, whether our accounting for the income and expenses of the investment fund were appropriately classified within our Statements of Comprehensive Income (Loss). We agreed to consolidate the NYDIG Fund and updated our classification of income and expenses of the investment fund within the Statements of Comprehensive Income (Loss) as part of our restated financial results.

•Statements of Comprehensive Income (Loss) Presentation. The Staff commented on the classification and inclusion of certain items in loss from operation versus in other income (expense). These items include realized gain (loss) on sales of digital assets, interest income, impairment on digital assets and patents, and gain on sale of equipment. We have revised our presentation prospectively and in the restated financial results.

•Embedded Leases in Hosting and Power Arrangements. The Staff requested we disclose a comprehensive analysis assessing whether each of our server hosting arrangements contains embedded leases. We provided such analysis in the Notes to our Consolidated Financial Statements.

•Investments. The Staff requested fulsome analysis of our accounting for various Simple Agreements on Future Equity and our investment in equity of certain investees. We have provided such analysis and have included impacts of any change in accounting for such investments in the restated financial results.

•Risk Factors. The Staff has requested further disclosure on material risks due to regulations, ability to obtain financing, reputational harm, and depreciation of digital assets prices. We considered such risks and updated our disclosures accordingly.

•Bitcoin as Collateral. The Staff has raised several comments regarding our accounting for bitcoin used as collateral within our lending arrangements. We continue to cooperate with and respond to the Staff’s comments based on our application of U.S. GAAP, and we have not changed our classification of such bitcoin used as collateral as digital assets, restricted.

•Identifying cybersecurity risks that could impact our facilities, third-party vendors/partners, operations, critical systems, information, and broader enterprise IT environment. Risks are informed by threat intelligence, current and historical adversarial activity, and industry specify threats;

•Performing a cybersecurity risk assessment to evaluate our readiness if the risks were to materialize; and

•Ensuring risk is addressed and tracking any necessary remediation through an action plan.

As of December 31, 2023, there were 49 holders of record of 242,829,391 shares of our common stock.

•On January 12, 2024, the Company, through its wholly owned subsidiary MARA USA Corporation, completed the acquisition of 100% of the issued and outstanding equity interests (the “Transaction”) of GC Data Center Equity Holdings, LLC, pursuant to which, the Company acquired two operational bitcoin mining sites, for an aggregate 390 megawatts of operational capacity for $179.0 million cash consideration plus customary working capital adjustments. The Company hopes to realize synergies from this transaction through the integration of its technology stack, which the Company expects will improve efficiencies and scale its operating capacity.

•In November 2023, Marathon launched a joint venture in Paraguay with 1,170 miners energized. The operations at this facility are powered entirely by hydroelectricity. The Company expects 1.1 exahashes at this facility to be online during the quarter ending June 30, 2024.

•The Company completed the installation and energization of approximately 28,000 S19 XPs to commence operations at a Garden City, Texas site during the quarter ended December 31, 2023.

•On October 24, 2023, the Company commenced the 2023 ATM with Wainwright, acting as sales agent, under which it may offer and sell shares of its common stock from time to time through the sales agent having an aggregate offering price of up to $750.0 million. As of December 31, 2023, the Company had sold 19,591,561 shares under this program for an aggregate purchase price of $248.1 million, net of commissions and expenses. Subsequent to December 31, 2023, we sold additional shares of common stock under the 2023 ATM such that the aggregate offering price of shares sold under the 2023 ATM is approximately $750.0 million. In February 2024, Marathon intends to commence a new at-the-market offering program with Wainwright acting as sales agent pursuant to the ATM Agreement, under which the Company may offer and sell shares of its common stock from time to time through Wainwright having an aggregate offering price of up to $1.5 billion.

•Bitcoin prices rebounded significantly during the year ended December 31, 2023, following the volatility and decrease in value in 2022. The price of a bitcoin increased from $16,458 per bitcoin as of December 31, 2022 to $42,288 per bitcoin as of December 31, 2023, and increase of 157.0% benefiting the value of the Company’s bitcoin holdings as of December 31, 2023, compared to the prior year period. From time to time, the Company sells bitcoin to offset its monthly cash operating costs. During the year ended December 31, 2023, the Company sold 9,482 bitcoin for total proceeds of $264.9 million. There were no comparable sales in the prior year period.

Our revenues are generally comprised of block rewards earned in bitcoin as a result of successfully solving blocks, and transaction fees earned for verifying transactions in support of the blockchain. Currently the reward for each solved block is equal to 6.25 bitcoin plus transaction fees. However, Marathon expects the block rewards to halve again to 3.125 bitcoin around April 2024, which could have a negative impact on the Company’s revenues as the reward for each block solved is reduced. Further, the impacts of halving on the Company’s results of operations and financial condition may be exacerbated by changes in the market value of bitcoin, which has historically been subject to significant volatility. For example, as of December 31, 2023, the price of a bitcoin was $42,288, compared to $16,458 as of December 31, 2022. The Company held approximately 15,126 bitcoin on its Consolidated Balance Sheets with a carrying value of $639.7 million as of December 31, 2023, which value may be materially impacted as the market value of bitcoin fluctuates. In addition, as a result of the relatively lower market value of bitcoin in 2022, several companies operating within the Bitcoin ecosystem initiated bankruptcy proceedings, while others sought to consolidate their operations or seek debt financing to provide adequate capital to continue as a going concern. The various Bitcoin company-related bankruptcies and restructurings, coupled with general market sentiment caused in large part by the FTX collapse, led to a material decline in the fair value of the Company’s mining rigs and deposits for future mining rig purchases. As the market has settled the Company has invested in and deployed its efficient bitcoin mining fleet domestically and internationally through strategic ventures. Management believes, given the Company’s recent investments, coupled with its relative position and liquidity, the Company is well-positioned to continue capturing market share and executing its long-term growth strategy.

The number of mining rigs Marathon deploys and the efficiency of such rigs directly impacts the number of bitcoin the Company is able to mine. Generally, the greater the share a single mining rig can capture of the blockchain’s total network hash rate, or the aggregate hash rate deployed to solving a block on the Bitcoin blockchain, the greater the rig’s chances of solving a block and therefore earning the reward. In response to an increased demand for

(1) Includes 112 bitcoin representing the Company’s share of the equity method investee for the year ended December 31, 2023.

(2) The Company defines Energized Hash Rate as the total hash rate that could be generated if all installed and energized machines were running at 100% of manufacturers specifications. The Company uses this metric only as an indicator of progress in bringing mining rigs online. The Company defines Installed Hash Rate as the total hash rate that could be generated if all installed machines were running at 100% of manufacturers specifications. The Company uses this metric only as an indicator of progress in deploying mining rigs at its production sites. The Company believes that these metrics are useful as an indicator of potential bitcoin production. However, these metrics cannot be tied directly to any production level expected to be actually achieved as (a) there may be delays in the energization of Installed Hash Rate (b) the Company cannot predict when installed and energized mining rigs may be offline for any reason, including curtailment or machine failure and (c) the Company cannot predict Global Hash Rate (and therefore the Company's share of the Global Hash Rate), which has a significant impact on the Company's ability to generate bitcoin in any given period.

(3) Defined as the daily Average Operational Hash Rate online during the period. Data not available for prior periods.

(4) Includes approximately $2.1 million of depreciation and amortization as the Company’s share in the results of its equity method investee reported in Equity in net earnings of unconsolidated affiliate for the year ended December 31, 2023.

Revenues: The Company generated revenues of $387.5 million for the year ended December 31, 2023, compared to $117.8 million in the prior year period. The $269.8 million, or approximately 229.1% increase in revenues was primarily driven by an increase in bitcoin production year-over-year of $244.3 million and a $25.5 million increase from primarily higher bitcoin prices in the current year period, as the average price of bitcoin mined was 6.1% higher than the average price of bitcoin mined in the prior year period. Average daily bitcoin production was 35.2 bitcoin in the current year period compared with 11.4 in the prior year period, reflecting the increased scale of the Company’s operations.

Cost of revenues – energy, hosting and other during the year ended December 31, 2023, totaled $223.3 million compared to $72.7 million in the prior year period. The $150.6 million, or approximately 207.1% increase was primarily driven by the growth in the Company’s hash rate as a result of the deployment and energization of mining rigs in existing and new hosting facilities, which increased hosting and energy costs, as well as improvements in uptime of our mining rigs compared to the significant delays in the energization of our mining rigs the Company experienced in the prior year period. Offsetting the increase in cost of revenue - energy, hosting and other in the current year was the absence of accelerated costs associated with the closure of the Hardin, Montana facility in the prior year period of $18.2 million.

Cost of revenues – depreciation and amortization during the year ended December 31, 2023 totaled $179.5 million compared to $78.7 million in the prior year period. The $100.8 million or approximately 128.1% increase was primarily due to the deployment of mining rigs in the current year period as a result of the increased scale of the business, partially offset by the absence of accelerated depreciation of $36.0 million recorded in the prior year period related to the closure of the Hardin, Montana facility.

Total Margin was a loss of $15.3 million in the current year period compared to a loss of $33.7 million in the prior year period, an improvement of $18.3 million or approximately 54.4%. The following table summarizes the factors that impacted the increase in total margin for the year ended December 31, 2023 as compared to the prior year period:

General and administrative expenses: General and administrative expenses were $95.2 million for the year ended December 31, 2023, compared to expenses of $56.7 million in the prior year period, an increase of $38.5 million or approximately 67.8%. The Company’s general and administrative expenses included stock-based (non-cash) compensation expense of $32.6 million in the current year period and $24.6 million in the prior year period. The increase in stock-based compensation expense was primarily due to additional restricted stock unit awards granted as a result of an increase in the Company’s headcount, which grew from 30 employees as of December 31, 2022 to approximately 60 employees as of December 31, 2023. General and administrative expenses excluding stock-based compensation was $62.6 million in the current year period compared with $32.1 million in the prior year period primarily due to the increasing scale of our operations. This $30.4 million or approximately 94.7% increase in expenses was primarily due to the increased scale of the business and headcount, including payroll and benefits, professional fees, and other third-party costs associated with growth.

•Gains (losses) on digital assets and digital assets loan receivable: The Company recognized a gain on digital assets of $331.5 million in the current period primarily related to the new fair value model of ASU 2023-08. The Company recognized a loss of $14.5 million during the prior year period primarily due to the decrease in fair value of a digital asset loan receivable that was repaid in September 2022.

•Impairment of digital assets: The Company incurred impairments of digital assets during the year ended December 31, 2022 of $182.9 million. Under the new fair value model of ASU 2023-08, the Company measures crypto assets at fair value with changes recognized within “Gains (losses) on digital assets and digital assets loan receivable.” Therefore, there were no such impairments of digital assets during the year ended December 31, 2023.

•Gains (losses) on digital assets held within investment fund: The Company exited the investment fund with NYDIG in June 2022 and as such, there were no such gains or losses in the current year period. The changes in the fair value of the Company’s investment fund during the year ended December 31, 2022 resulted in a realized loss of $85.0 million. Refer to Note 4 – Digital Assets, for further information.

Legal reserves: During 2022, the Company recorded a reserve of $26.1 million in connection with a dispute concerning the settlement of certain restricted stock unit awards granted to the Company’s former Chief Executive Officer and Chairman and seven other recipients. There were no such costs incurred during the year ended December 31, 2023.

Total impairments due to vendor bankruptcy filing: The Company recorded impairment charges of $55.7 million in the prior year period related to the Compute North bankruptcy filing.

Impairment of patents: The Company recorded an impairment of $0.9 million in the prior year period related to certain patents no longer utilized in its business operations.

Impairment of fixed assets and advances to vendors: In accordance with ASC 360-10 – Impairment and Disposal of Long-Lived Assets, any long-lived asset group that is held and used must be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset group might not be recoverable. Due to the significant decrease in fair values of bitcoin mining rigs during the fourth quarter ended December 31, 2022, the Company assessed the need for an impairment write-down of both bitcoin mining rigs (held as fixed assets) and advances to vendors (a long-term asset) representing deposits associated with the future delivery of mining rigs. In accordance with ASC 360-10, the Company determined that both of these asset categories had

Gain on sales of equipment, net: In late 2021, the Company entered into an agreement with DCRBN Ventures Development and Acquisition LLC (“DCRBN”) to sell certain mining rigs to DCRBN in conjunction with the development of commercial activities at the McCamey, Texas facility. In conjunction with the closure of the Hardin, Montana facility in 2022, the Company sold bitcoin mining rigs to various third parties. Gains resulting from the asset sales totaled $83.9 million for the year ended December 31, 2022. There were no such sales in 2023.

Net gain from extinguishment of debt: During the year ended December 31, 2023, the Company recorded a $82.3 million net gain on extinguishment of debt primarily due to an exchange transaction of Convertible Senior Notes due 2026 (the “Notes”).

In March, 2023, the Company prepaid the outstanding balance on its term loan facility with Silvergate Bank and terminated the term loan facility. The Company and Silvergate agreed to also terminate the RLOC facility. In connection with the termination of the credit facility, the Company recorded a loss in the amount of $0.3 million to “Net gain from extinguishment of debt” on the Consolidated Statements of Comprehensive Income (Loss).

Loss on hedge instruments: During the year ended December 31, 2023, the Company recorded a $17.4 million realized loss related to bitcoin hedging activities. The Company has significant bitcoin holdings on its balance sheet and from time to time will evaluate as part of its risk management and treasury management process, short-term hedging or yield enhancing opportunities. The Company has an Investment Committee composed of members of its senior executive team, that evaluates market conditions to set hedging, investments, and monetization of bitcoin strategies. During the year, the Company purchased cost-less collars to protect against the downside price risk of bitcoin while keeping the upside potential. The Company believed this hedging strategy provided short-term protection from the downside price risk of bitcoin. However, bitcoin price increased during the hedge period but overall the increase in the price of bitcoin enhanced the overall fair value of its bitcoin holdings. The Company may, from time to time, evaluate and deploy low-cost hedging strategies to a portion of its bitcoin holdings. There were no outstanding hedging transactions as of the year ended December 31, 2023 and there were no such activities in the prior year period.

Equity in net earnings of unconsolidated affiliate: During the year ended December 31, 2023, the Company recorded its share of net losses for its 20% interest in the ADGM Entity in the amount of $0.6 million, which began mining operations during the third quarter of 2023. The Company’s share of the ADGM Entity’s operating results included earnings from the production of 112 bitcoin and approximately $2.1 million of depreciation and amortization during the year ended December 31, 2023.

Interest expense: Interest expense was $10.4 million for the year ended December 31, 2023 compared to $15.0 million in the prior year. The $4.6 million, or approximately 30.9% decrease was primarily a result of lower interest costs following the exchange of $416.8 million aggregate principal amount of Notes for shares of the Company’s common stock during the year ended December 31, 2023 compared to the prior year period. Additionally, the Company prepaid and terminated its revolving line of credit and term loan facilities during March 2023.

Other non-operating income (loss): Other non-operating income was $2.8 million during the year ended December 31, 2023 compared to income of $1.3 million in the prior year period. The $1.5 million, or approximately 118.9% increase was primarily due to the higher balance of cash and cash equivalents and an increase in interest rates in the current year period.

Income tax benefit (expense): The Company recorded income tax expense of $16.4 million for the year ended December 31, 2023 compared to an income tax benefit of $24.2 million in the prior year period. The $40.7 million, or approximately 167.8% unfavorable tax variance was primarily due to federal limitations on net operating loss carryforwards, which due to the limitation, could not fully offset the amount of the Company’s future tax liabilities.

Net income (loss): The Company recorded net income of $261.2 million for the year ended December 31, 2023 compared to a net loss of $694.0 million in the prior year period. The $955.2 million, or approximately 137.6%, increase in earnings was primarily driven by the favorable mark-to-market adjustment of digital assets related to the early adoption of the new fair value accounting guidance, gain on extinguishment of debt, and favorable variances related to an absence of impairment of digital assets, mining equipment and advances to vendors, losses on digital assets held within the investment fund, partially offset by a net gain on sale of equipment in the prior year period.

Adjusted EBITDA: Adjusted EBITDA was $419.9 million for the year ended December 31, 2023 compared to an adjusted EBITDA loss of $543.4 million in the prior year period. The $963.3 million increase was primarily driven by a favorable adjustment to digital assets under the new cryptocurrency fair value model of $331.5 million, higher production of bitcoin, gain from extinguishment of debt of $82.3 million, and higher average price of bitcoin mined. Adjusted EBITDA also benefited from the absence of several expenses recorded in the prior year period: the impairment of digital assets of $182.9 million; impairment of mining equipment and advances to vendors of $332.9 million; losses on digital assets held within investment fund of $85.0 million; legal reserves of $26.1 million; and losses on digital assets loan receivable of $14.5 million, partially offset by the net gain on sale of equipment of $83.9 million.

Revenues: The Company generated revenues of $117.8 million for the year ended December 31, 2022, compared to $159.2 million in 2021. The $41.4 million, or approximately 26.0%, decrease in revenue was primarily driven by a $77.3 million decrease in revenue resulting from lower bitcoin prices in 2022, partially offset by increased revenues of $44.6 million related to a 30% increase in production year-over-year. Revenues also declined by $8.7 million in 2022 as the Company ceased operation of a mining pool that included third-parties. Despite the overall increase in production for the year, the Company experienced significant production downtime in the second and third quarters of 2022 as a result of the closure of the Hardin, Montana facility and delays in energization at the McCamey, Texas facility. Production during the third quarter of 2022 was down 50% from the prior year period. The Company's best production quarters of 2022 were the first quarter and the fourth quarter. 

Cost of revenues – energy, hosting and other during the year ended December 31, 2022, totaled $72.7 million compared to $27.5 million in the prior year period. The $45.2 million, or approximately 164.5%, increase was driven by an increase in hash rate from the deployment of mining rigs that increased hosting and energy costs. Cost of revenues – energy, hosting and other also increased in 2022 due to accelerated costs associated with the closure of the Hardin, Montana facility of $18.2 million. Partially offsetting these increased costs was an $8.7 million decline in cost of revenues related to the discontinuation of the third party mining pool in 2022.

Cost of revenues – depreciation and amortization was $78.7 million in the current year period compared to $14.9 million in the prior year period. The $63.8 million, or approximately 428.1%, increase was primarily due to the acceleration of depreciation of $36.0 million related to the closure of the Hardin, Montana facility and increased depreciation costs of $27.8 million associated with a higher number of mining rigs in operation.

Total Margin: Total margin was a loss of $33.7 million in the current year period compared with income of $116.8 million in the prior year period, a decline of $150.4 million. This decline was driven by the factors discussed above, which are summarized in the table below:

General and administrative expenses: General and administrative expenses were $56.7 million for the year ended December 31, 2022, compared to $174.4 million in the prior year period, a decrease of $117.6 million, or approximately 67.5%. The Company's general and administrative expenses included stock-based (non-cash) compensation expense of $24.6 million in the current year period and $160.8 million in the prior year period. The significant decrease from 2021 to 2022 was primarily related to stock-based incentive compensation payments made to the former Chairman and CEO in 2021, as further described under “Legal reserves.” General and administrative expenses excluding stock-based compensation was $32.1 million in the current year period compared with $13.6 million in the prior year period. This $18.6 million increase in expense was primarily due to the increase in the scale of the business, including higher payroll and benefits costs of $7.2 million, increased professional fees of $3.6 million, increased insurance costs of $3.8 million, higher travel and conference costs of $2.2 million and higher costs in various other areas related to the increased scale of the business, including higher property taxes, banking fees, rent expense, computer costs and equipment repairs.

Legal reserves: In connection with a dispute concerning the settlement of certain restricted stock unit awards previously granted to the Company’s former Chief Executive Officer and Chairman, the Company entered into a settlement agreement pursuant to which the Company agreed to pay $24.0 million during the year ended December 31, 2022. The Company also entered into agreements in respect to seven other recipients of the same restricted stock unit awards. Payments related to these agreements during the year ended December 31, 2022, totaled approximately $2.1 million in the aggregate.

Total impairments due to vendor bankruptcy filing: On September 22, 2022, Compute North filed for restructuring under Chapter 11 of the U.S. Bankruptcy Code. During the year ended December 31, 2022, the Company assessed the impairment of assets associated with Compute North due to the bankruptcy proceedings. As a result, the Company recorded impairment charges of approximately $24.7 million in operating expenses (related to deposits) and approximately $31.0 million (related to certain loans and preferred stock investments) as non-operating expenses.

•Impairment of digital assets: The Company incurred impairments of digital assets during the year ended December 31, 2022 of $182.9 million compared with impairments of $22.3 million in the prior year period. The Company’s impairment of digital assets for the years ending December 31, 2022 and 2021 includes the impact of the Company’s voluntary change in accounting principle to account for the disposition of digital assets on a first-in-first-out (“FIFO”) basis, of $9.7 million and $8.1 million, respectively.

•Gains (losses) on digital assets loan receivable and gains on digital assets: The Company incurred a loss of $14.5 million during the year ended December 31, 2022 compared with a gain of $2.2 million in the prior year period. The loss in the current year period was primarily a result of the decline in fair value of digital asset loan receivable prior to the repayment of the loan in June, 2022. The gain in the prior year period includes the impact of the Company’s voluntary change in accounting principle to account for the gains (losses) on digital assets on a FIFO basis of $1.6 million.

•Change in fair value of digital assets held in fund: On June 10, 2022, the Company withdrew all remaining bitcoin from its investment fund. Total changes in the fair value of investment fund from January 1, 2022 through the June 10, 2022 withdrawal date resulted in a realized loss of $85.0 million in the current year period. During the prior year period, the change in fair value of the bitcoin held in the investment fund was an unrealized gain of $74.7 million.

Impairment of patents: The Company recorded an impairment of $0.9 million in the current year period related to certain patents no longer utilized in its business operations.

Impairment of fixed assets and advances to vendors: In accordance with ASC 360-10 – Impairment and Disposal of Long-Lived Assets, any long-lived asset group that is held and used must be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the long-lived asset group might not be recoverable. Due to the significant decrease in fair values of bitcoin mining rigs during the fourth quarter ended December 31, 2022, the Company assessed the need for an impairment write-down of both bitcoin mining rigs (held as fixed assets) and advances to vendors (a non-current asset) representing deposits associated with the future delivery of mining rigs. In accordance with ASC 360-10, the Company determined that both of these asset categories had carrying values in excess of fair value, and accordingly, the Company recognized impairment charges for both the bitcoin mining rigs of $208.6 million and the advances to vendors of $124.3 million – a total impairment of approximately $332.9 million for the year ended December 31, 2022. In addition, as part of its periodic review of its fixed asset groups, the Company changed the estimated useful life for its asset group of mining rigs from 5 years to 3 years, effective January 1, 2023.

Gain on sales of equipment, net: In late 2021, the Company entered into an agreement with DCRBN in which the Company agreed to sell certain mining rigs to DCRBN in conjunction with the development of commercial activities at the McCamey, Texas facility. In conjunction with its closure from the Hardin, Montana facility, the Company also sold bitcoin mining rigs to various third parties. Total cash proceeds from the sale of assets for the year ended December 31, 2022 were $178.4 million and gains resulting from the asset sales totaled $83.9 million in the current year period. There were no such sales in 2021.

Other non-operating income (loss): Other non-operating income was $1.3 million during the current year period compared to a loss of $0.3 million in the prior year period. The $1.6 million, or approximately 545.5% increase was primarily due to the absence of warrant expense of $1.0 million recorded in the prior year period and to a lesser extent, increased interest and other income.

Interest expense: Interest expense increased $13.4 million from the prior year as a result of higher interest related to the convertible notes issued in November 2021 of $6.6 million, amortization of debt issuance costs of $3.7 million and other interest costs primarily related to the Term loan and revolving credit (“RLOC”) facilities.

Income tax (expense) benefit: The Company recorded an income tax benefit of $24.2 million for the year ended December 31, 2022, compared to an income tax expense of $25.0 million in the prior year period. The primary drivers of the $49.2 million, or approximately 197.1% favorable tax variance were favorable federal impacts versus the prior year period of $145.7 million, favorable state tax impacts versus the prior year period of $18.7 million,

Net loss: The Company recorded a net loss of $694.0 million in the current year period compared to a net loss of $29.8 million in the prior period. The $664.2 million decline in earnings was primarily driven by declines in the carrying value of digital assets of $317.6 million, the impairment of mining rigs and advances to vendors of $332.9 million, lower total margins of $150.4 million, impairments of $55.7 million related to the Compute North bankruptcy, legal reserves of $26.1 million, increased interest expense of $13.4 million, and the Company’s voluntary change in accounting principle impacts. Partially offsetting these unfavorable variances was a significant reduction in general and administrative expenses of $117.6 million primarily associated with lower stock-based compensation, gains on sales of mining rigs of $83.9 million, a $49.2 million favorable income tax variance and a slight increase in other non-operating income.

Adjusted EBITDA: Adjusted EBITDA was a loss of $543.4 million for the year ended December 31, 2022 compared to a positive adjusted EBITDA of $172.4 million in the prior year period. The $715.8 million decline was primarily driven by declines in the carrying value of digital assets of $337.0 million, the impairment of mining rigs and advances to vendors of $332.9 million, lower total margin excluding depreciation and amortization of $86.6 million, legal reserves of $26.1 million, and higher general and administrative expenses, excluding non-cash stock-based compensation costs of $18.6 million, and the Company’s voluntary change in accounting principle impacts. Partially offsetting these unfavorable variances were gains on the sales of mining rigs of $83.9 million and increases in non-operating income of $1.6 million.

Cash flows for the year ended December 31, 2023: Cash and cash equivalents totaled $357.3 million at December 31, 2023, an increase of $244.8 million from December 31, 2022. There was no restricted cash as of December 31, 2023 as the Company replaced cash-collateralized letters of credit with cash deposits during March 2023, as a result of the closure of Signature Bank.

Cash flows for the year ended December 31, 2022: Cash, cash equivalents and restricted cash totaled $112.5 million at December 31, 2022, a decrease of $156.1 million from December 31, 2021.

Bitcoin holdings as of December 31, 2023: At December 31, 2023, the Company held approximately 15,126 bitcoin on its Consolidated Balance Sheets with a carrying value of $639.7 million. The Company’s holdings as of December 31, 2023 excluded 48 bitcoins owned by the Company’s equity method investee, the ADGM Entity, but allocable to the Company, and pending distribution to the Company. At December 31, 2023, the fair value of a single bitcoin was approximately $42,288. As a result, the fair market value of the Company’s bitcoin holdings at December 31, 2023, was approximately $639.7 million. The Company expects that its future bitcoin holdings will generally increase but will fluctuate from time to time, both in number of bitcoin held and fair value in US dollars, depending upon operating and market conditions. The Company intends to add to its bitcoin holdings primarily through its production activities and will also continue to sell bitcoin as a means of generating cash to fund monthly operating costs and for general corporate purposes. The Company does not intend to make any significant purchases of bitcoin on the open market as means of increasing its bitcoin holdings, although it may buy and sell bitcoin from time to time (separately from what is outlined above) for treasury management purposes.

Bitcoin holdings outlook: The Company expects that its future bitcoin holdings will generally increase but will fluctuate from time to time, both in number of bitcoin held and fair value in US dollars, subject to market conditions and other factors outside of the Company’s control. For example, the Company would expect:

•The Company’s bitcoin holdings and the value of those holdings will increase most significantly in periods where it experiences both higher production and higher bitcoin prices;

•The Company’s bitcoin holdings and value of those holdings will be mixed in periods with either (1) higher production combined with lower bitcoin prices, or (2) lower production combined with higher bitcoin prices; and

•The Company’s bitcoin holdings and the value of those holdings will most likely decrease in periods where it experiences both lower production and lower bitcoin prices.

  

Company's At-the-Market Offering Programs and Proceeds: In October 2023, the Company commenced the 2023 ATM with Wainwright, acting as a sales agent, which allowed the Company to sell and issue shares of its common stock from time to time with an aggregate offering price up to $750.0 million. As of December 31, 2023, the Company had sold 19,591,561 shares of common stock under the 2023 ATM for an aggregate purchase price of $248.1 million, net of commissions expenses. Subsequent to December 31, 2023, we sold additional shares of common stock under the 2023 ATM such that the aggregate offering price of shares sold under the 2023 ATM is approximately $750.0 million. In February 2024, Marathon intends to commence the 2024 ATM with Wainwright acting as sales agent pursuant to the ATM Agreement, under which the Company may offer and sell shares of its common stock from time to time through Wainwright having an aggregate offering price of up to $1.5 billion.

Liquidity and Capital Resources: Cash and cash equivalents totaled $357.3 million and the fair value of bitcoin holdings was $639.7 million at December 31, 2023. The combined value of cash and cash equivalents and bitcoin, as of December 31, 2023, was $997.0 million.

•Failure to effectively execute the Company’s growth strategies;

•Challenges in the bitcoin mining space and/or additional contagion events (such as the FTX collapse and subsequent bankruptcies of bitcoin mining companies in 2022 and 2023) which could damage the credibility of, and therefore investor confidence in, companies engaged in the digital assets space including Marathon;