00015076052023trueFYhttp://marathondh.com/20231231#AccountingStandardsUpdate202308Member0.0131277iso4217:USDxbrli:sharesiso4217:USDxbrli:sharesmara:segmentxbrli:puremara:bitcoinmara:rigmara:loanmara:daymara:bitcoin_mining_sitemara:Megawatt00015076052023-01-012023-12-3100015076052023-06-3000015076052024-05-2300015076052023-12-3100015076052022-12-3100015076052022-01-012022-12-3100015076052021-01-012021-12-310001507605us-gaap:CommonStockMember2020-12-310001507605us-gaap:AdditionalPaidInCapitalMember2020-12-310001507605us-gaap:RetainedEarningsMember2020-12-310001507605us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-3100015076052020-12-310001507605us-gaap:CommonStockMember2021-01-012021-12-310001507605us-gaap:AdditionalPaidInCapitalMember2021-01-012021-12-310001507605us-gaap:RetainedEarningsMember2021-01-012021-12-310001507605us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-12-310001507605us-gaap:CommonStockMember2021-12-310001507605us-gaap:AdditionalPaidInCapitalMember2021-12-310001507605us-gaap:RetainedEarningsMember2021-12-310001507605us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-3100015076052021-12-310001507605us-gaap:CommonStockMember2022-01-012022-12-310001507605us-gaap:AdditionalPaidInCapitalMember2022-01-012022-12-310001507605us-gaap:RetainedEarningsMember2022-01-012022-12-310001507605us-gaap:CommonStockMember2022-12-310001507605us-gaap:AdditionalPaidInCapitalMember2022-12-310001507605us-gaap:RetainedEarningsMember2022-12-310001507605us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001507605us-gaap:CommonStockMember2023-01-012023-12-310001507605us-gaap:AdditionalPaidInCapitalMember2023-01-012023-12-310001507605us-gaap:RetainedEarningsMembersrt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2022-12-310001507605srt:CumulativeEffectPeriodOfAdoptionAdjustmentMember2022-12-310001507605us-gaap:RetainedEarningsMember2023-01-012023-12-310001507605us-gaap:CommonStockMember2023-12-310001507605us-gaap:AdditionalPaidInCapitalMember2023-12-310001507605us-gaap:RetainedEarningsMember2023-12-310001507605us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001507605mara:TreasuryBillsAndOtherGovernmentBackedSecuritiesMember2023-12-310001507605mara:BitcoinMember2023-01-012023-12-310001507605mara:SAFEInvestmentMember2023-12-310001507605mara:SAFEInvestmentMember2022-12-310001507605mara:AuradineIncMember2023-09-012023-09-300001507605us-gaap:PreferredStockMembermara:AuradineIncMember2022-09-272022-09-270001507605us-gaap:PreferredStockMembermara:AuradineIncMember2022-09-270001507605us-gaap:PreferredStockMembermara:SafeAgreementMember2022-05-030001507605us-gaap:PreferredStockMembermara:AuradineIncMember2022-05-030001507605us-gaap:PreferredStockMembermara:AuradineIncMember2022-05-032022-05-030001507605mara:ComputeNorthHoldingsInc.Memberus-gaap:ConvertiblePreferredStockMember2022-02-032022-02-030001507605mara:ADGMEntityMember2023-01-270001507605mara:ADGMEntityMember2023-01-012023-12-310001507605mara:ADGMEntityMember2023-12-310001507605mara:OperatorTransactionFeesMember2023-01-012023-12-310001507605mara:OperatorTransactionFeesMember2022-01-012022-12-310001507605mara:OperatorTransactionFeesMember2021-01-012021-12-310001507605mara:ParticipantMember2023-01-012023-12-310001507605mara:ParticipantMember2022-01-012022-12-310001507605mara:ParticipantMember2021-01-012021-12-3100015076052023-01-010001507605srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2022-12-310001507605us-gaap:CarryingReportedAmountFairValueDisclosureMember2022-12-310001507605us-gaap:EstimateOfFairValueFairValueDisclosureMember2022-12-310001507605mara:NYDIGDigitlAssetsFundIIILPMember2021-01-250001507605mara:NYDIGDigitlAssetsFundIIILPMember2021-01-252021-01-250001507605mara:NYDIGDigitlAssetsFundIIILPMember2022-06-102022-06-100001507605mara:NYDIGDigitlAssetsFundIIILPMember2022-06-100001507605mara:NYDIGDigitlAssetsFundIIILPMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2022-06-100001507605mara:NYDIGDigitlAssetsFundIIILPMember2023-12-310001507605mara:NYDIGDigitlAssetsFundIIILPMember2021-12-310001507605mara:NYDIGDigitlAssetsFundIIILPMember2022-01-012022-12-310001507605mara:NYDIGDigitlAssetsFundIIILPMember2022-12-310001507605us-gaap:MiningPropertiesAndMineralRightsMember2023-12-310001507605us-gaap:MiningPropertiesAndMineralRightsMember2022-12-310001507605us-gaap:ContainersMember2023-12-310001507605us-gaap:ContainersMember2022-12-310001507605mara:OtherMember2023-12-310001507605mara:OtherMember2022-12-310001507605us-gaap:ConstructionInProgressMember2023-12-310001507605us-gaap:ConstructionInProgressMember2022-12-310001507605stpr:MT2022-09-300001507605us-gaap:MiningPropertiesAndMineralRightsMemberstpr:MT2022-09-290001507605us-gaap:MiningPropertiesAndMineralRightsMemberstpr:MT2022-09-300001507605us-gaap:FairValueMeasurementsNonrecurringMember2022-12-310001507605us-gaap:MiningPropertiesAndMineralRightsMember2023-01-0100015076052021-08-012021-12-310001507605us-gaap:MoneyMarketFundsMember2023-12-310001507605us-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMember2023-12-310001507605us-gaap:FairValueInputsLevel2Memberus-gaap:MoneyMarketFundsMember2023-12-310001507605us-gaap:FairValueInputsLevel3Memberus-gaap:MoneyMarketFundsMember2023-12-310001507605us-gaap:FairValueInputsLevel1Member2023-12-310001507605us-gaap:FairValueInputsLevel2Member2023-12-310001507605us-gaap:FairValueInputsLevel3Member2023-12-310001507605us-gaap:MoneyMarketFundsMember2022-12-310001507605us-gaap:FairValueInputsLevel1Memberus-gaap:MoneyMarketFundsMember2022-12-310001507605us-gaap:FairValueInputsLevel2Memberus-gaap:MoneyMarketFundsMember2022-12-310001507605us-gaap:FairValueInputsLevel3Memberus-gaap:MoneyMarketFundsMember2022-12-3100015076052022-06-102022-06-100001507605us-gaap:FairValueMeasurementsNonrecurringMember2023-12-310001507605us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsNonrecurringMember2023-12-310001507605us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel2Member2023-12-310001507605us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel3Member2023-12-310001507605us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsNonrecurringMember2022-12-310001507605us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel2Member2022-12-310001507605us-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:FairValueInputsLevel3Member2022-12-310001507605mara:ContainersAndWebsiteAndLeaseholdImprovementsMember2022-12-310001507605us-gaap:DomesticCountryMember2023-12-310001507605us-gaap:StateAndLocalJurisdictionMember2023-12-310001507605mara:WarrantsToPurchaseCommonStockMember2023-01-012023-12-310001507605mara:WarrantsToPurchaseCommonStockMember2022-01-012022-12-310001507605mara:WarrantsToPurchaseCommonStockMember2021-01-012021-12-310001507605us-gaap:RestrictedStockMember2023-01-012023-12-310001507605us-gaap:RestrictedStockMember2022-01-012022-12-310001507605us-gaap:RestrictedStockMember2021-01-012021-12-310001507605us-gaap:ConvertibleDebtSecuritiesMember2023-01-012023-12-310001507605us-gaap:ConvertibleDebtSecuritiesMember2022-01-012022-12-310001507605us-gaap:ConvertibleDebtSecuritiesMember2021-01-012021-12-310001507605us-gaap:SeriesAPreferredStockMember2023-01-012023-12-310001507605us-gaap:SeriesAPreferredStockMember2022-01-012022-12-310001507605us-gaap:SeriesAPreferredStockMember2021-01-012021-12-310001507605mara:ComputeNorthHoldingsInc.Memberus-gaap:ConvertiblePreferredStockMember2022-09-222022-09-220001507605mara:ComputeNorthLLCMemberus-gaap:ConvertiblePreferredStockMember2022-09-222022-09-220001507605mara:KingMountainAndWolfHollowMemberus-gaap:ConvertiblePreferredStockMember2022-09-222022-09-2200015076052022-07-012022-09-3000015076052023-02-1600015076052023-07-270001507605us-gaap:SubsequentEventMembermara:A2024AtTheMarketOfferingAgreementMember2024-02-012024-02-280001507605srt:MaximumMembermara:A2023AtTheMarketOfferingAgreementMember2023-10-242023-10-240001507605mara:A2023AtTheMarketOfferingAgreementMember2023-01-012023-12-310001507605srt:MaximumMembermara:A2022AtTheMarketOfferingAgreementMember2022-02-112022-02-110001507605mara:A2022AtTheMarketOfferingAgreementMember2022-02-112023-10-230001507605us-gaap:RestrictedStockMember2023-01-012023-12-310001507605us-gaap:RestrictedStockMembersrt:DirectorMember2023-01-012023-12-310001507605us-gaap:RestrictedStockMember2021-12-310001507605us-gaap:RestrictedStockMember2022-01-012022-12-310001507605us-gaap:RestrictedStockMember2022-12-310001507605us-gaap:RestrictedStockMember2023-12-310001507605us-gaap:SeriesAPreferredStockMembermara:SecuritiesPurchaseAgreementMember2023-06-052023-06-050001507605us-gaap:SeriesAPreferredStockMembermara:SecuritiesPurchaseAgreementMember2023-06-082023-06-080001507605us-gaap:SeriesAPreferredStockMembermara:SecuritiesPurchaseAgreementMember2023-06-080001507605us-gaap:SeriesAPreferredStockMembermara:SecuritiesPurchaseAgreementMember2023-12-310001507605mara:ConvertibleNoteMember2023-12-310001507605mara:ConvertibleNoteMember2022-12-310001507605mara:TermLoanMemberus-gaap:RevolvingCreditFacilityMember2023-12-310001507605mara:TermLoanMemberus-gaap:RevolvingCreditFacilityMember2022-12-310001507605mara:TermLoanMember2023-12-310001507605mara:TermLoanMember2022-12-310001507605mara:TermLoanMember2023-03-082023-03-080001507605mara:ConvertibleSeniorNotesDueTwoThousandAndTwentySixMember2021-11-180001507605mara:ConvertibleSeniorNotesDueTwoThousandAndTwentySixMember2021-11-2300015076052021-11-230001507605mara:ExchangeAgreementMember2023-09-012023-09-300001507605mara:ExchangeAgreementMember2023-01-012023-12-310001507605mara:SilvergateBankMembersrt:MinimumMembermara:RevolvingCreditAndSecurityAgreementMember2021-10-010001507605mara:SilvergateBankMembersrt:MinimumMembermara:RevolvingCreditAndSecurityAgreementMember2022-07-280001507605mara:TermLoanMemberus-gaap:SecuredDebtMember2022-07-280001507605mara:TermLoanMemberus-gaap:SecuredDebtMember2023-02-062023-02-0600015076052021-11-182021-11-180001507605mara:ComputeNorthHoldingsInc.Member2023-02-092023-02-090001507605mara:ComputeNorthHoldingsInc.Membermara:ComputeNorthLLCMember2023-02-092023-02-090001507605srt:MinimumMembermara:ComputeNorthHoldingsInc.Member2022-12-190001507605srt:MaximumMembermara:ComputeNorthHoldingsInc.Member2022-12-190001507605mara:HardinMTMember2020-10-062020-10-060001507605mara:PlaintiffMichaelHoMember2022-02-242022-02-240001507605mara:AuradineIncMember2022-09-230001507605srt:ScenarioPreviouslyReportedMember2023-03-310001507605srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember2023-03-3100015076052023-03-3100015076052023-01-012023-03-310001507605srt:ScenarioPreviouslyReportedMember2023-01-012023-03-310001507605srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember2023-01-012023-03-310001507605srt:ScenarioPreviouslyReportedMember2023-06-300001507605srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember2023-06-3000015076052023-04-012023-06-3000015076052023-01-012023-06-300001507605srt:ScenarioPreviouslyReportedMember2023-04-012023-06-300001507605srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember2023-04-012023-06-300001507605srt:ScenarioPreviouslyReportedMember2023-01-012023-06-300001507605srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember2023-01-012023-06-300001507605srt:ScenarioPreviouslyReportedMember2023-09-300001507605srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember2023-09-3000015076052023-09-3000015076052023-07-012023-09-3000015076052023-01-012023-09-300001507605srt:ScenarioPreviouslyReportedMember2023-07-012023-09-300001507605srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember2023-07-012023-09-300001507605srt:ScenarioPreviouslyReportedMember2023-01-012023-09-300001507605srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember2023-01-012023-09-300001507605srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2022-01-012022-03-310001507605srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2022-04-012022-06-300001507605srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2022-07-012022-09-300001507605srt:CumulativeEffectPeriodOfAdoptionAdjustedBalanceMember2022-10-012022-12-310001507605us-gaap:SubsequentEventMembermara:GCDataCenterEquityHoldingsLLCMember2024-01-120001507605us-gaap:SubsequentEventMembermara:GCDataCenterEquityHoldingsLLCMember2024-01-122024-01-120001507605srt:ScenarioPreviouslyReportedMember2021-12-310001507605srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember2021-12-310001507605srt:ScenarioPreviouslyReportedMember2021-01-012021-12-310001507605srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember2021-01-012021-12-310001507605srt:ScenarioPreviouslyReportedMember2022-12-310001507605srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember2022-12-310001507605srt:ScenarioPreviouslyReportedMember2022-01-012022-12-310001507605srt:RevisionOfPriorPeriodAccountingStandardsUpdateAdjustmentMember2022-01-012022-12-31

 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-K/A
(Mark One)
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2023
 
or
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
 
For the transition period from _______to______
 
MARATHON DIGITAL HOLDINGS, INC.
(Exact name of registrant as specified in charter)
 
Nevada 001-36555 01-0949984
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(I.R.S Employer
Identification No.)
 
101 NE Third Avenue, Suite 1200, Fort Lauderdale, FL
 33301
(Address of principal executive offices) (Zip Code)
 
Registrant’s telephone number, including area code: 800-804-1690
 
Securities registered pursuant to Section 12(b) of the Act:
 
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, par value $0.0001 per share MARA 
The Nasdaq Capital Market
 
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
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”



“accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company  
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

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
 
The aggregate market value of the common stock, par value $0.0001 per share, held by non-affiliates of the registrant, based on the closing sale price of registrant’s common stock as quoted on The Nasdaq Capital Market on June 30, 2023 (the last business day of the registrant’s most recently completed second fiscal quarter) and the number of shares held by non-affiliates of the registrant as of that date, was approximately $2.4 billion. Accordingly, the registrant qualifies under the SEC’s revised rules as a “large accelerated filer.” This calculation does not reflect a determination that persons are affiliates for any other purpose.
 
As of May 23, 2024, the number of outstanding shares of the registrant’s common stock, par value $0.0001 per share, was 282,787,365.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement on Schedule 14A relating to the registrant’s 2024 annual meeting of stockholder, filed with the Securities and Exchange Commission within 120 days following the end of the fiscal year covered by this Annual Report on Form 10-K, are incorporated by reference in Part III within this Annual Report on Form 10-K. With the exception of the portions of the Proxy Statement specifically incorporated herein by reference, the Proxy Statement and related solicitation materials are not deemed to be filed as part of this Annual Report on Form 10-K.

EXPLANATORY NOTE

This Amendment No. 1 on Form 10-K/A (this “Amendment”) amends the Annual Report on Form 10-K of Marathon Digital Holdings, Inc. (“Marathon,” the” Company,” “we,” or “us”) for the fiscal year ended December 31, 2023, as filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2024 (the “Original Filing”). This Amendment is being filed to respond to a comment letter received from the SEC in connection with its review of the Original Filing. This Amendment amends and restates in its entirety Items 8 and 9A of Part II of the Original Filing. In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), new certifications by the Company’s Principal Executive Officer and Principal Financial and Accounting Officer are filed herewith as Exhibits 31.1, 3.1.2 and 32.1, respectively, to this Amendment pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act.

Nothing in this Amendment constitutes a restatement of any numbers set forth in the Original Filing, and this Amendment does not constitute a restatement or substantive amendment which would result in an inability to rely upon the information in the Original Filing or any of the financial statements or financial statement footnotes set



forth therein. Except as otherwise set forth, all information set forth herein is current as of the date of filing of the Original Filing.

Except as described above, no other changes have been made to the Original Filing. The Original Filing continues to speak as of the date of the Original Filing, and we have not updated the disclosures contained therein to reflect any events which occurred at a date subsequent to the filing of the Original Filing. Accordingly, this Amendment should be read in conjunction with the Original Filing and our other filings made with the SEC subsequent to the filing of the Original Filing.







ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
 
Index to Consolidated Financial Statements
 
  
  
  
  
  
 
The accompanying notes are an integral part to these audited Consolidated Financial Statements.

1


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Stockholders and Board of Directors of Marathon Digital Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Marathon Digital Holdings, Inc. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on the criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013. Our report dated February 28, 2024 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting because of the existence of material weaknesses.

Changes in Accounting Principle

As discussed in Notes 2 and 4 to the financial statements, the Company changed its method of accounting for digital assets during the year ended December 31, 2023 by:

making a voluntary change in accounting principle from last-in-first-out to first-in-first-out to reflect the disposition of its digital assets, effective January 1, 2023 using the full retrospective method; and

early adopting ASU 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Topic 350-60): Accounting for and Disclosure of Crypto Assets, effective January 1, 2023 using the modified retrospective method.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion
The accompanying notes are an integral part to these audited Consolidated Financial Statements.

2


on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Revenue Recognition

As disclosed in Note 3 to the financial statements, the Company’s ongoing major or central operation is to provide bitcoin transaction verification services to the transaction requestor, in addition to the bitcoin network through a Company-operated mining pool as the operator, and to provide a service of performing hash calculations to third-party pool operators alongside collectives of third-party bitcoin miners as a participant.

The principal consideration for our determination that performing procedures related to revenue recognition is a critical audit matter is due to the nature and extent of audit effort required to perform audit procedures over the completeness, and occurrence of revenue recognized.

Addressing this matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included, among others:

We performed site visits at the Company’s facilities where the mining hardware is located, which included observations of the physical controls and mining equipment inventory.

We independently traced certain financial and performance data directly to the blockchain network to test the occurrence and accuracy of mining revenue as the operator.

We independently confirmed with the third-party mining pool operator the significant contractual terms utilized in the determination of mining revenue, total mining rewards earned, and the digital asset wallet addresses in which the rewards are deposited to test the occurrence and accuracy of mining revenue as the participant.

We performed certain analytical procedures over the completeness and accuracy of revenue recognized by the Company.

We confirmed the year-end digital asset balances directly with the custodians of the Company’s wallets.


/s/ Marcum LLP

Marcum LLP

We have served as the Company’s auditor since 2021.


Costa Mesa, CA
February 28, 2024 (except for Notes 8 and 21, as to which the date is May 24, 2024)
The accompanying notes are an integral part to these audited Consolidated Financial Statements.

3


MARATHON DIGITAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

December 31,December 31,
(in thousands, except share and per share data)20232022
ASSETS
Current assets:
Cash and cash equivalents$357,313 $103,705 
Restricted cash 8,800 
Digital assets639,660 121,842 
Other receivables2,091 18 
Deposits7,240 2,350 
Prepaid expenses and other current assets23,499 40,833 
Total current assets1,029,803 277,548 
Property and equipment, net671,772 273,026 
Advances to vendors95,589 488,299 
Investments106,292 37,000 
Long-term deposits59,790 40,903 
Long-term prepaids27,284 8,317 
Right-of-use assets443 1,276 
Digital assets, restricted 68,875 
Total long-term assets961,170 917,696 
TOTAL ASSETS$1,990,973 $1,195,244 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$11,343 $1,312 
Accrued expenses22,015 22,295 
Legal reserve payable 1,171 
Operating lease liabilities124 326 
Accrued interest276 1,011 
Total current liabilities33,758 26,115 
Long-term liabilities:
Notes payable325,654 732,289 
Term loan 49,882 
Operating lease liabilities354 1,017 
Deferred tax liabilities15,286  
Total long-term liabilities341,294 783,188 
Commitments and Contingencies
Stockholders’ Equity:
Preferred stock, par value $0.0001 per share, 50,000,000 shares authorized and no shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively
  
Common stock, par value $0.0001 per share, 500,000,000 shares authorized; 242,829,391 shares and 145,565,916 shares issued and outstanding at December 31, 2023 and December 31, 2022, respectively
24 15 
Additional paid-in capital2,183,537 1,226,267 
Accumulated deficit(567,640)(840,341)
Total stockholders’ equity1,615,921 385,941 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY$1,990,973 $1,195,244 

The accompanying notes are an integral part to these audited Consolidated Financial Statements.

4


MARATHON DIGITAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Year Ended December 31,
20232022
2021
(in thousands, except share and per share data)(as Adjusted)(as Adjusted)
Total revenues$387,508 $117,753 $159,163 
Costs and expenses
Cost of revenues
Cost of revenues - energy, hosting and other(223,338)(72,715)(27,492)
Cost of revenues - depreciation and amortization(179,513)(78,709)(14,904)
Total cost of revenues(402,851)(151,424)(42,396)
Operating expenses
General and administrative expenses(95,230)(56,739)(174,356)
Gains (losses) on digital assets and digital assets loan receivable
331,484 (14,460)2,157 
Legal reserves (26,131) 
Impairment of deposits due to vendor bankruptcy filing (24,661) 
Impairment of digital assets (182,891)(22,252)
Impairment of patents (919) 
Impairment of mining equipment and advances to vendors (332,933) 
Gain on sale of equipment, net of disposals 83,879  
Gains (losses) on digital assets held within investment fund
 (85,017)74,696 
Total operating expenses236,254 (639,872)(119,755)
Operating income (loss)
220,911 (673,543)(2,988)
Net gain from extinguishment of debt
82,267   
Loss on hedge instruments
(17,421)  
Equity in net earnings of unconsolidated affiliate(617)  
Impairment of loan and investment due to vendor bankruptcy filing (31,013) 
Interest expense(10,350)(14,981)(1,569)
Other non-operating income (loss)
2,809 1,283 (288)
Income (loss) before income taxes
277,599 (718,254)(4,845)
Income tax benefit (expense)
(16,426)24,232 (24,968)
Net income (loss)
$261,173 $(694,022)$(29,813)
Series A preferred stock accretion to redemption value
(2,121)  
Net income (loss) attributable to common stockholders
$259,052 $(694,022)$(29,813)
Net income (loss) per share of common stock - basic
$1.41 $(6.12)$(0.30)
Weighted average shares of common stock - basic
183,855,570113,467,83799,337,587
Net income (loss) per share of common stock - diluted
$1.06 $(6.12)$(0.30)
Weighted average shares of common stock - diluted
192,293,277113,467,83799,337,587
Other comprehensive income (loss)
Series A preferred stock accretion to redemption value
2,121   
Foreign currency translation adjustments  (451)
Comprehensive income (loss)
$261,173 $(694,022)$(30,264)

 
The accompanying notes are an integral part to these audited Consolidated Financial Statements.

5


MARATHON DIGITAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

Common StockAdditional Paid-in CapitalAccumulated DeficitAccumulated Other Comprehensive LossTotal Stockholders’ Equity
(in thousands, except share data)
NumberAmount
Balance at December 31, 202081,974,619 $8 $428,243 $(116,055)$(451)$311,745 
Stock-based compensation, net of tax withholding7,671,317 1 156,072 — — 156,073 
Issuance of common stock, net of offering costs/At-the-Market offering12,500,000 1 237,428 — — 237,429 
Options exercised on cashless basis23,500 — — — — — 
Warrant exercised for cash221,946 — 1,445 — — 1,445 
Common stock issued for cashless exercise of warrants29,797 — 1,371 — — 1,371 
Common stock issued for service and license agreements312,094 — 11,135 — — 11,135 
Net income (loss)— — — (30,264)451 (29,813)
Balance at December 31, 2021 (as Adjusted)
102,733,273 $10 $835,694 $(146,319)$ $689,385 
Stock-based compensation, net of tax withholding490,910 1 24,514 — — 24,515 
Issuance of common stock, net of offering costs/At-the-Market offering42,141,733 4 361,482 — — 361,486 
Common stock issued for service and license agreements200,000 — 4,577 — — 4,577 
Net loss— — — (694,022)— (694,022)
Balance at December 31, 2022145,565,916 $15 $1,226,267 $(840,341)$ $385,941 
Stock-based compensation, net of tax withholding1,269,230 — 32,264 — — 32,264 
Issuance of common stock, net of offering costs/At-the-Market offering64,271,828 6 608,359 — — 608,365 
Series A preferred stock accretion to redemption value— — (2,121)— — (2,121)
Exchange of convertible notes for common stock31,722,417 3 318,768 — — 318,771 
Cumulative effect of the adoption of ASU 2023-08— — — 11,483 — 11,483 
Other— — — 45 — 45 
Net income— — — 261,173 — 261,173 
Balance at December 31, 2023242,829,391 $24 $2,183,537 $(567,640)$ $1,615,921 
The accompanying notes are an integral part to these audited Consolidated Financial Statements.

6


MARATHON DIGITAL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
Year Ended December 31,
20232022
2021
(in thousands)(as Adjusted)(as Adjusted)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)
$261,173 $(694,022)$(29,813)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization179,513 78,709 14,904 
Amortization of prepaid service contract 22,781  
Gain on sale of equipment, net of disposals
 (83,879) 
Deferred tax expense (benefit)
15,286 (24,968)24,968 
(Gains) losses on digital assets held within investment fund
 85,017 (74,696)
(Gains) losses on digital assets and digital assets loan receivable
(331,484)14,460 (2,157)
Impairment of digital assets 182,891 22,252 
Impairment of mining equipment and advances to vendors 332,933  
Loss on hedge instruments
17,421   
Stock-based compensation32,644 24,595 160,786 
Amortization of debt issuance costs3,168 3,945  
Equity in net earnings of unconsolidated affiliate617   
Impairment of patents 919  
Impairment of deposits due to vendor bankruptcy filing 55,674  
Gain on extinguishment of debt, net
(82,267)  
Other adjustments from operations, net484 1,030 1,069 
Changes in operating assets and liabilities:
Revenues from digital assets production(385,959)(117,747)(150,513)
Deposits(23,777)(24,469) 
Prepaid expenses and other assets(1,881)(48,887)987 
Accounts payable and accrued expenses146 13,225 12,382 
Legal reserve payable 1,171  
Accrued interest(735)144 867 
Net cash used in operating activities
(315,651)(176,478)(18,964)
CASH FLOWS FROM INVESTING ACTIVITIES
Advances to vendors(158,940)(483,840)(435,065)
Loan receivable  (30,000)
Purchase of property and equipment(27,611)(41,108)(273,851)
Sale of property and equipment 178,371  
Proceeds from sale of digital assets264,945   
Payments on hedge settlements
(2,004)  
Purchase of digital assets in investment fund  (150,000)
Investment in joint venture(71,795)  
Purchase of equity investments (44,000)(3,000)
Deconsolidation of fund (500) 
Sale of digital assets in investment fund 849 780 
Net cash provided by (used in) investing activities
4,595 (390,228)(891,136)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock, net of issuance costs608,365 361,486 312,196 
Proceeds from issuance of Series A preferred stock, net of issuance costs
13,629   
Redemption of Series A preferred stock
(15,750)  
The accompanying notes are an integral part to these audited Consolidated Financial Statements.

7


Proceeds from term loan borrowings, net of issuance costs 49,250  
Proceeds from issuance of convertible debt, net of issuance costs  728,406 
Borrowings from revolving credit agreement
 120,000 77,500 
Repayments of revolving credit agreement
(50,000)(120,000)(77,500)
Value of shares withheld for taxes(380)(81)(4,714)
Proceeds received on exercise of options and warrants  1,445 
Net cash provided by financing activities
555,864 410,655 1,037,333 
Net increase (decrease) in cash, cash equivalents and restricted cash
244,808 (156,051)127,233 
Cash, cash equivalents and restricted cash — beginning of period112,505 268,556 141,323 
Cash, cash equivalents and restricted cash — end of period$357,313 $112,505 $268,556 
The accompanying notes are an integral part to these audited Consolidated Financial Statements.

8


MARATHON DIGITAL HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements

NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
 
Organization

Marathon is a digital asset technology company that is principally engaged in producing or “mining” digital assets with a focus on the Bitcoin ecosystem. Marathon’s strategic initiatives primarily focus on mining and holding bitcoin as a long-term investment. Bitcoin is seeing increasing adoption, and, due to its limited supply, the Company believes it offers opportunity for appreciation in value and long-term growth prospects for its business.

In addition to mining and holding bitcoin, from time to time Marathon has explored, and 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, Marathon has 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. Marathon’s 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.
 
The term “Bitcoin” with a capital “B” is used to denote the Bitcoin protocol which implements a highly available, public, permanent, and decentralized ledger. The term “bitcoin” with a lower case “b” is used to denote the token, bitcoin.
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Basis of Presentation and Principles of Consolidation
 
The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly owned and controlled subsidiaries. Intercompany balances and transactions have been eliminated in consolidation. The Company consolidates the financial results of the following 100% owned entities:
 
Subsidiaries
MARA USA Corporation
MARA Tech, Inc.
Marathon Digital International, Inc.
Marathon Digital Leasing, LLC
Crypto Currency Patent Holding Company, LLC
MARA Pool LLC
Marathon Crypto Mining, Inc.
Soems Acquisition Corp.

Use of Estimates and Assumptions
 
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The most significant accounting estimates inherent in the preparation of the Company’s financial statements include estimates associated with the useful lives of property and equipment, realization of long-lived assets, deferred income taxes, unrealized tax positions, and measurement of digital assets. Actual results could differ from those estimates.
 
F-9


Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications have no effect on the reported financial position, results of operations, or cash flows. The impact on any prior period disclosures were immaterial.
 
Segment Information
 
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision–making group, in deciding how to allocate resources and assess performance. The Company’s chief operating decision–making group (“CODM”) is composed of the chief executive officer and chief financial officer. The Company currently operates in the Digital Currency Blockchain segment. The CODM has determined that the Company operates as one operating segment as the CODM reviews financial information on a consolidated basis in making decisions regarding resource allocation and performance assessment.
 
Cash and Cash Equivalents
 
The Company considers all highly liquid investments and other short-term investments with a maturity of three months or less, when purchased, to be cash equivalents. The Company maintains cash and cash equivalent balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”). During March 2023, the Company began to participate, to the extent practicable, in insured cash sweep programs which “sweep” its deposits across multiple FDIC insured accounts, each with deposits of no more than $250.0 thousand. For the year ended December 31, 2023, the Company had a cash and cash equivalent balance of $357.3 million, of which $225.0 million was FDIC insured, and approximately $95.7 million was invested in treasury bills and other government backed securities. For the year ended December 31, 2022, the Company had a cash balance of $103.7 million, all held at one financial institution.
 
Restricted Cash
 
Restricted cash as of December 31, 2022, principally represented those cash balances that support commercial letters of credit and are restricted from withdrawal. During March 2023, the Company eliminated its outstanding letters of credit.
 
Digital Assets
 
Digital assets are included in current assets in the Consolidated Balance Sheets due to the Company’s ability to sell bitcoin in a highly liquid marketplace and the sale of bitcoin to fund operating expenses to support operations. In addition, digital assets provided as collateral for long-term loans were reported as Digital assets, restricted at December 31, 2022 and classified as long-term assets in the Consolidated Balance Sheets. The proceeds from the sale of digital assets are included within investing activities in the accompanying Consolidated Statement of Cash Flows. Following the adoption of ASU 2023-08 effective January 1, 2023, the Company measures digital assets at fair value with changes recognized in operating expenses in the Consolidated Statement of Comprehensive Income (Loss). The Company tracks its cost basis of digital assets by-wallet in accordance with the first-in-first-out (“FIFO”) method of accounting. Refer to Note 4 Digital Assets, for further information regarding the Company’s impact of the adoption of ASU 2023-08.

Additionally, during the quarter ended March 31, 2023 and effective January 1, 2023, the Company enacted a voluntary change in accounting principle from last-in-first-out (“LIFO”) to FIFO in order to more accurately reflect the disposition of its digital assets. The change in accounting principle resulted in an increase in gain on digital assets for the year ended December 31, 2021 and resulted in an impairment of digital assets for the years ending December 31, 2021 and 2022. The voluntary change in accounting principle has been reflected in the Consolidated Financial Statements.

Deposits
 
The Company contracts with other service providers for hosting of its equipment and operational support in data centers where the Company’s equipment is deployed. These arrangements typically require advance payments to vendors pursuant to the contractual obligations associated with these services. The Company classifies these payments as “Deposits” or “Long-term deposits” on the Consolidated Balance Sheets.
 
As of December 31, 2023 and 2022, such deposits totaled approximately $67.0 million and $43.3 million, respectively.

F-10


Derivatives

The Company occasionally enters into derivative financial instruments to manage its exposure to fluctuations in the price of bitcoin. During the third and fourth quarters of 2023, the Company entered into fixed strike option collar contracts with financial institutions to mitigate Bitcoin short-term market pricing volatility risk. In addition, the Company evaluates its financing and service arrangements to determine whether certain arrangements contain features that qualify as embedded derivatives requiring bifurcation in accordance with Accounting Standard Codification (“ASC”) 815 - Derivatives and Hedging. Embedded derivatives that are required to be bifurcated from the host instrument or arrangement are accounted for and valued as separate financial instruments.

Derivatives are initially recorded at fair value with subsequent changes in fair value recognized as gains or losses on hedge instruments in the Consolidated Statements of Comprehensive Income (Loss). The Company classifies derivative assets or liabilities in the Consolidated Balance Sheets as current or non-current based on whether settlement of the instrument could be required within 12 months of the date of the Consolidated Balance Sheets. During the year ended December 31, 2023, the Company recorded a $17.4 million loss on hedge contracts, which contracts were settled through payments of $15.4 million in bitcoin and $2.0 million in cash. The Company had no open derivative contracts as of December 31, 2023 and 2022.

Property and Equipment
 
Property and equipment are stated at cost, net of accumulated depreciation and impairment, as applicable. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The Company’s property and equipment is primarily composed of bitcoin mining rigs, which are largely homogeneous and have approximately the same useful lives. Accordingly, the Company utilizes the group method of depreciation for its bitcoin mining rigs. The Company will update the estimated useful lives of its bitcoin mining server group periodically as information on the operations of the mining equipment indicates changes are required. The Company will assess and adjust the estimated useful lives of its mining equipment when there are indicators that the productivity of the mining assets is longer or shorter than the assigned estimated useful lives.
 
Investments
 
Investments, which may be made from time to time for strategic reasons, are included in non-current assets in the Consolidated Balance Sheets. Investments without a readily determinable fair value are recorded at cost minus impairment, plus or minus changes from observable price changes in orderly transactions for identical or similar investments of the same issuer, in accordance with the measurement alternative described in ASC 321 - Investments – Equity Securities.

As part of the Company’s policy to maximize return on strategic investment opportunities, while preserving capital and limiting downside risk, the Company may at times enter into equity investments or Simple Agreements for Future Equity (“SAFE”). The nature and timing of the Company’s investments will depend on available capital at any particular time and the investment opportunities identified and available to the Company. However, we generally do not make investments for speculative purposes and do not intend to engage in the business of making investments.

As of December 31, 2023 and 2022, the Company has one remaining SAFE investment with a carrying value of $1.0 million, with no noted impairments or other adjustments.

During September 2023, the Company entered into an agreement with Auradine, Inc. (“Auradine”) to secure certain rights to future purchases by the Company from Auradine for which the Company paid $15.0 million and recorded to “Long-term prepaids” in the Consolidated Balance Sheets. The purchase rights that the Company secured do not expire, do not require minimum purchases and include most favored nation and right of first refusal provisions.

On September 27, 2022, the Company purchased additional shares of Auradine preferred stock with a purchase price of $30.0 million, bringing the total carrying amount of its investment in Auradine preferred stock to $35.5 million, with no noted impairments or other adjustments. Refer to Note 17Related Party Transactions, for further information.

On May 3, 2022, the Company converted $2.0 million from its prior Auradine SAFE investment into preferred stock while purchasing additional Auradine preferred stock with a purchase price of $3.5 million. At the same time, the Company entered into a commitment to acquire additional shares of Auradine preferred stock with a purchase price of $30.0 million. This forward contract was accounted for under ASC 321 as an equity security.

On February 3, 2022, the Company purchased convertible preferred stock of Compute North Holdings, Inc. with a purchase price of approximately $10.0 million. The Company impaired this investment by approximately
F-11


$10.0 million following Compute North’s chapter 11 bankruptcy filing during September 2022. Refer to Note 11 – Compute North Bankruptcy, for further information.

Equity Method Investments

The Company accounts for investments in which it owns between 20% and 50% of the common stock or has the ability to exercise significant influence, but not control, over the investee using the equity method of accounting in accordance with ASC 323 - Equity Method Investments and Joint Ventures. Under the equity method, an investor initially records an investment in the stock of an investee at cost and adjusts the carrying amount of the investment to recognize the investor’s share of the earnings or losses of the investee after the date of acquisition.

On January 27, 2023, the Company and Zero Two (formerly known as FS Innovation, LLC) entered into a Shareholders’ Agreement regarding the formation of an Abu Dhabi Global Markets company (the “ADGM Entity”) in which the Company has a 20% ownership interest. The ADGM Entity started mining operations during September 2023. The Company’s share of net losses was $0.6 million for the year ended December 31, 2023. As of December 31, 2023, the Company’s investment in the ADGM Entity was $69.3 million and which is reflected in “Investments” in the Consolidated Balance Sheets.

Stock-based Compensation
 
The Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the grant date fair value of the awards. Refer to Note 12 – Stockholders' Equity, for further information.
 
Impairment of Long-lived Assets
 
Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.
 
Revenues
 
The Company recognizes revenue under ASC 606 – Revenue from Contracts with Customers. The core principle of the revenue standard is that a reporting entity should recognize revenues to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Refer to Note 3 – Revenues, for further information.

Income Taxes
 
The Company accounts for income taxes under the asset and liability method, in which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. A valuation allowance is required to the extent any deferred tax assets may not be realizable.
 
ASC 740 - Income Taxes, also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
  
Recently Issued Accounting Pronouncements
 
The Company continually assesses any new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement may affect the Company’s financial reporting, the Company undertakes an analysis to determine any required changes to its Consolidated Financial Statements.

On December 14, 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. ASU 2023-09
F-12


requires entities to disclose specific rate reconciliations, amount of income taxes separated by federal and individual jurisdiction, and the amount of income (loss) from continuing operations before income tax expense (benefit) disaggregated between federal, state, and foreign. The new standard is effective for the Company for its fiscal year beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard.

On December 13, 2023, the FASB issued ASU No. 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Topic 350-60): Accounting for and Disclosure of Crypto Assets. ASU 2023-08 requires entities to measure crypto assets that meet specific criteria at fair value with changes recognized in net income each reporting period. Additionally, ASU 2023-08 requires an entity to present crypto assets measured at fair value separately from other intangible assets in the balance sheets and record changes from remeasurement of crypto assets separately from changes in the carrying amounts of other intangible assets in the income statement. The new standard is effective for the Company for its fiscal year beginning January 1, 2025, with early adoption permitted. The Company early adopted ASU 2023-08 effective as of January 1, 2023, which had a material impact on the Consolidated Financial Statements. Refer to Note 4 – Digital Assets, for further information.

On November 27, 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. ASU 2023-07 is designed to improve the reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses that are regularly provided to the CODM. The new standard is effective for the Company for its fiscal year beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard.

On August 23, 2023, the FASB issued ASU No. 2023-05, Business Combinations - Joint Venture Formations (Subtopic 805-60): Recognition and Initial Measurement. ASU 2023-05 addresses the accounting for contributions made to a joint venture and requires contributions received by the joint venture to be measured at fair value upon formation. ASU 2023-05 is designed to provide useful information to investors and reduce diversity in practice. The new standard is effective for the Company for its fiscal year beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard.

On March 28, 2023, the FASB issued ASU No. 2023-01, Leases (Topic 842): Common Control Arrangements. ASU 2023-01 is designed to clarify the accounting for leasehold improvements associated with common control leases, thereby reducing diversity in practice. The new standard is effective for the Company for its fiscal year beginning January 1, 2024, with early adoption permitted. The Company is currently evaluating the impact of adopting the standard.

On June 30, 2022, the FASB issued ASU No. 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. ASU 2022-03 clarifies that a contractual sale restriction prohibiting the sale of an equity security is a characteristic of the reporting entity holding the equity security and should not be included in the equity security’s unit of account. The new standard is effective for the Company for its fiscal year beginning January 1, 2024, with early adoption permitted. The Company adopted ASU 2022-03 on July 1, 2023, which did not have a material impact on the Consolidated Financial Statements.
 
NOTE 3 – REVENUES

The Company recognizes revenue in accordance with ASC 606. The core principle of the revenue standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
 
Step 1: Identify the contract with the customer;

Step 2: Identify the performance obligations in the contract;

Step 3: Determine the transaction price;

Step 4: Allocate the transaction price to the performance obligations in the contract; and

Step 5: Recognize revenue when the Company satisfies a performance obligation.

In order to identify the performance obligations in a contract with a customer, an entity must assess the promised goods or services in the contract and identify each promised good or service that is distinct. A performance obligation meets ASC 606’s definition of a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:

F-13


The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct); and

The entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).

If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.

The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:

Variable consideration

Constraining estimates of variable consideration

The existence of a significant financing component in the contract

Noncash consideration

Consideration payable to a customer

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized under the accounting contract will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The transaction price is allocated to each performance obligation on a relative standalone selling price basis.

The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time, as appropriate.

Application of the five-step model to the Company’s mining operations

The Company’s ongoing major or central operation is to provide bitcoin transaction verification services to the transaction requestor, in addition to the bitcoin network through a Company-operated mining pool as the operator (“Operator”) (such activity, “mining”) and to provide a service of performing hash calculations to third-party pool operators alongside collectives of third-party bitcoin miners (such collectives, “mining pools”) as a participant (“Participant”).

The following table presents the Company’s revenues disaggregated for those arrangements in which the Company is the Operator and Participant:

Year ended December 31,
(in thousands)20232022
2021
Revenues from contracts with customers
Operator - Transaction fees$32,598 $5,231 $3,317 
Participant25,101 4,652 20,903 
Total revenues from contracts with customers57,699 9,883 24,220 
Operator - Block rewards and other revenue329,809 107,870 134,943 
Total revenues$387,508 $117,753 $159,163 

F-14


Operator

As Operator, the Company provides transaction verification services to the transaction requestor, in addition to the bitcoin network. Transaction verification services are an output of the Company’s ordinary activities; therefore, the Company views the transaction requestor as a customer and recognizes the transaction fees as revenue from contracts with customers under ASC 606. The bitcoin network is not an entity such that it may not meet the definition of a customer; however, the Company has concluded that it is appropriate to apply ASC 606 by analogy to block rewards earned from the bitcoin network. The Company is currently entitled to the block reward of 6.25 bitcoin from the bitcoin network upon each successful validation of a block. The Company is also entitled to the transaction fees paid by the transaction requester payable in bitcoin for each successful validation of a block. The Company assessed the following factors in the determination of the inception and duration of each individual contract to validate a block and satisfaction of its performance obligation as follows:

For each individual contract, the parties’ rights, the transaction price, and the payment terms are fixed and known as of the inception of each individual contract.

The transaction requestor and the bitcoin network each have a unilateral enforceable right to terminate their respective contracts at any time without penalty.

For each of these respective contracts, contract inception and completion occur simultaneously upon block validation; that is, the contract begins upon, and the duration of the contract does not extend beyond, the validation of an individual blockchain transaction; and each respective contract contains a single performance obligation to perform a transaction validation service and this performance obligation is satisfied at the point-in-time when a block is successfully validated.

From September 2021 until May 2022, the Company engaged unrelated third-party mining enterprises (“pool participants”) to contribute hash calculations, and in exchange, remitted transaction fees and block rewards to pool participants on a pro rata basis according to each respective pool participant’s contributed hash calculations. The MaraPool wallet (owned by the Company as Operator) is recorded on the distributed ledger as the winner of proof of work block rewards and assignee of all validations and, therefore, the transaction verifier of record. The pool participants entered into contracts with the Company as Operator; they did not directly enter into contracts with the network or the requester and were not known verifiers of the transactions assigned to the pool. As Operator, the Company delegated mining work to the pool participants utilizing software that algorithmically assigned work to each individual miner. By virtue of its selection and operation of the software, the Company as Operator controlled delegation of work to the pool participants. This indicated that the Company directed the mining pool participants to contribute their hash calculations to solve in areas that the Company designated. Therefore, the Company determined that it controlled the service of providing transaction verification services to the network and requester. Accordingly, the Company recorded all of the transaction fees and block rewards earned from transactions assigned to MaraPool as revenue, and the portion of the transaction fees and block rewards remitted to MaraPool participants as cost of revenues.

In accordance with ASC 606-10-32-21, the Company measures the estimated fair value of the non-cash consideration (block reward and transaction fees) at contract inception, which is at the time the performance obligation to the requester and the network is fulfilled by successfully validating a block. The Company measures the non-cash consideration which is fixed as of the inception of each individual contract using the quoted spot rate for bitcoin determined using the Company’s primary trading platform for bitcoin at the time the Company successfully validates a block.

Expenses associated with providing bitcoin transaction verification services, such as hosting fees, electricity costs, and related fees are recorded as cost of revenues. Depreciation on digital asset mining equipment is also recorded as a component of cost of revenues.

Participant

The Company participates in third-party operated mining pools. When the Company is a Participant in a third-party operated mining pool, the Company provides a service to perform hash calculations to the third-party pool operators. The Company considers the third-party mining pool operators to be its customers under Topic 606. Contract inception and our enforceable right to consideration begins when we commence providing hash calculation services to the mining pool operators. Each party to the contract has the unilateral right to terminate the contract at any time without any compensation to the other party for such termination. As such, the duration of a contract is less than a day and may be continuously renewed multiple times throughout the day. The implied renewal option is not a material right because there are no upfront or incremental fees in the initial contract and the terms, conditions, and compensation amount for the renewal options are at the then market rates.

F-15


The Company is entitled to non-cash compensation based on the pool operator’s payout model. The payout methodologies differ depending on the type of third-party operated mining pool. Full-Pay-Per-Share (“FPPS”) pools pay block rewards and transaction fees, less mining pool fees and Pay-Per-Share (“PPS”) pools pay block rewards less mining pool fees but no transaction fees. For FPPS and PPS pools, the Company is entitled to non-cash consideration even if a block is not successfully validated by the mining pool operators. Success-based mining pools pay a fractional share of the successfully mined block and transaction fees, reduced by pool operator expenses only if a block is successfully validated.

During 2023, the Company primarily participated in FPPS mining pools and, to a lesser extent, success-based mining pools. During 2022 and 2021, the Company primarily participated in success-based mining pools and, to a lesser extent, PPS mining pools.

FPPS Mining Pools

The Company primarily participates in mining pools that use the FPPS payout method for the year ended December 31, 2023. The Company is entitled to compensation once it begins to perform hash calculations for the pool operator in accordance with the operator’s specifications over a 24-hour period beginning mid-night UTC and ending 23:59:59 UTC on a daily basis. The non-cash consideration that we are entitled to for providing hash calculations to the pool operator under the FPPS payout method is made up of block rewards and transaction fees less pool operator expenses determined as follows:

The non-cash consideration in the form of a block reward is based on the total blocks expected to be generated on the Bitcoin Network for the daily 24-hour period beginning midnight UTC and ending 23:59:59 UTC in accordance with the following formula: the daily hash calculations that we provided to the pool operator as a percent of the Bitcoin Network’s implied hash calculations as determined by the network difficulty, multiplied by the total Bitcoin Network block rewards expected to be generated for the same daily period.

The non-cash consideration in the form of transaction fees paid by transaction requestors is based on the share of total actual fees paid over the daily 24-hour period beginning midnight UTC and ending 23:59:59 UTC in accordance with the following formula: total actual transaction fees generated on the Bitcoin Network during the 24-hour period as a percent of total block rewards the Bitcoin Network actually generated during the same 24-hour period, multiplied by the block rewards we earned for the same 24-hour period noted above.

The block reward and transaction fees earned by the Company is reduced by mining pool fees charged by the operator for operating the pool based on a rate schedule per the mining pool contract. The mining pool fee is only incurred to the extent we perform hash calculations and generate revenue in accordance with the pool operator’s payout formula during the same 24-hour period beginning mid-night UTC daily.

The above non-cash consideration is variable in accordance with paragraphs ASC 606-10-32-5 to 606-10-32-7, since the amount of block reward earned depends on the amount of hash calculations we perform; the amount of transaction fees we are entitled to depends on the actual Bitcoin Network transaction fees over the same 24-hour period; and the operator fees for the same 24-hour period are variable since it is determined based on the total block rewards and transaction fees in accordance with the pool operator’s agreement. While the non-cash consideration is variable, the Company has the ability to estimate the variable consideration at contract inception with reasonable certainty without the risk of significant revenue reversal. The Company does not constrain this variable consideration because it is probable that a significant reversal in the amount of revenue recognized from the contract will not occur when the uncertainty is subsequently resolved and recognizes the non-cash consideration on the same day that control is transferred, which is the same day as contract inception.

The Company measures the non-cash consideration based on the simple average daily spot rate of bitcoin determined using the Company’s primary trading platform for bitcoin over a 24-hour period beginning mid-night UTC and ending 23:59:59 UTC on the day of contract inception. The Company recognizes non-cash consideration on the same day that control of the contracted service is transferred to the pool operator, which is the same day as the contract inception.

PPS Mining Pools

The Company participates in PPS pools that provide non-cash consideration similar to the FPPS pools except PPS pools do not include transaction fees, therefore, the non-cash consideration received by the Company is made up of block rewards less mining pool fees. While the non-cash consideration is variable, the Company has the ability to estimate the variable consideration at contract inception with reasonable certainty. The Company does not constrain this variable consideration because it is probable that a significant reversal in the amount of revenue recognized from
F-16


the contract will not occur when the uncertainty is subsequently resolved and recognizes the non-cash consideration on the same day that control is transferred, which is the same day as contract inception.

The Company measures the non-cash consideration based on the simple average daily spot rate of bitcoin determined using the Company’s primary trading platform for bitcoin over a 24-hour period beginning mid-night UTC and ending 23:59:59 UTC on the day of contract inception. The Company recognizes non-cash consideration on the same day that control of the contracted service is transferred to the pool operator, which is the same day as the contract inception.

Success-based Mining Pools

The Company also participates, to a lesser extent, in third-party mining pools that pay rewards only when the pool successfully validates a block. For these pools, the Company only earns a reward when the third-party pool successfully mines a block and its reward is the fractional share of the successfully mined block and transaction fees, reduced by pool operator expenses, based on the proportion of hash calculations the Company performed for the mining pool operator to the total hash calculations performed by all mining pool participants in validating the block during the 24-hour period beginning at midnight UTC and ending 23:59:59 UTC daily.

Contract inception and our enforceable right to consideration begins when the Company commences the performance of hash calculations for the mining pool operator. The non-cash consideration is variable in accordance with paragraphs ASC 606-10-32-5 to 606-10-32-7 as it depends on whether the third-party mining pool successfully validates a block during each 24-hour period. In addition, other inputs such as the amount of hash calculations and our fractional share of consideration earned by the pool operator also cause variability. The Company does not have the ability to estimate whether a block will be successfully validated with reasonable certainty at contract inception. The Company constrains the variable consideration at contract inception because it is not probable that a significant reversal in the amount of revenue recognized from the contract will not occur when the uncertainty is subsequently resolved. Once a block is successfully validated, the constraint is lifted. The Company recognizes the non-cash consideration on the same day that control is transferred, which is the same day as contract inception.

The Company’s policy was to measure non-cash consideration based on the spot rate of bitcoin at the time the pool successfully validates a block, which was not in accordance with ASC 606-10-32-21 which requires measurement to coincide with contract inception. Additionally, this measurement was not consistent with the measurement of non-cash consideration for FPPS and PPS pools. During the three months ended December 31, 2023, the Company corrected this error and changed its measurement of non-cash consideration to the simple average daily spot rate of bitcoin determined using the Company’s primary trading platform for bitcoin on the date of contract inception, which is the same day that control of the contracted service (hash calculations) is transferred to the pool operator. The change in measurement did not have a material impact to the results of operations for any of the periods presented.

Expenses associated with providing hash calculation services to third-party operated mining pools, such as hosting fees, electricity costs, and related fees, are recorded as cost of revenues. Depreciation on digital asset mining equipment is also recorded as a component of cost of revenues.

NOTE 4 – DIGITAL ASSETS

Adoption of ASU 2023-08, Accounting for and Disclosure of Crypto Assets

Effective January 1, 2023, the Company early adopted ASU 2023-08, which requires entities to measure crypto assets at fair value with changes recognized in the Consolidated Statement of Comprehensive Income (Loss) each reporting period. The Company’s digital assets are within the scope of ASU 2023-08 and the transition guidance requires a cumulative-effect adjustment as of the beginning of the current fiscal year for any difference between the carrying amount of the Company’s digital assets and fair value. As a result of the Company’s early adoption of ASU 2023-08, the Company recorded a $11.5 million increase to digital assets and a $11.5 million decrease to accumulated deficit on the Consolidated Balance Sheets as of the beginning of the fiscal year ended December 31, 2023.
F-17



The following table presents the Company’s significant digital asset holdings as of December 31, 2023:

(in thousands, except for quantity)QuantityCost BasisFair Value
Bitcoin15,126 $515,315 $639,660 
Total digital assets held as of December 31, 2023
$515,315 $639,660 

At December 31, 2023, the Company had earned 48 bitcoin that were pending distribution from the Company’s equity method investee, the ADGM Entity, which are excluded from the Company’s holdings as of December 31, 2023.

The following table presents a roll-forward of total digital assets (including digital assets, restricted) for the year ended December 31, 2023, based on the fair value model under ASU 2023-08:

(in thousands)
Fair Value
Digital assets and digital assets, restricted at December 31, 2022
$190,717 
Cumulative effect of the adoption of ASU 2023-08
11,483 
Beginning Balance: Digital assets and digital assets, restricted at January 1, 2023
202,200 
Addition of digital assets
385,959 
Disposition of digital assets(264,945)
Realized gain (loss) on digital assets
28,738 
Unrealized gain (loss) on digital assets
287,708 
Digital assets at December 31, 2023
$639,660 
During the year ended December 31, 2023, the Company acquired $386.0 million of digital assets through mining activities and disposed of $264.9 million digital assets through the sale of digital assets. During the year ended December 31, 2023, the Company realized total gains on digital assets of $52.5 million and total losses on digital assets of $23.8 million.

During the first quarter of 2023, the term loan was terminated, and the restrictions lapsed on the digital assets that had previously been classified as digital assets, restricted. Refer to Note 14 Debt, for further information.

Prior to Adoption of ASU 2023-08, Accounting for and Disclosure of Crypto Assets

Digital assets and Digital assets, restricted

Prior to the adoption of ASU 2023-08, digital assets were accounted for as indefinite-lived intangible assets and were initially measured in accordance with ASC 350 - Intangible-Goodwill and Other. Digital assets were not amortized, but were assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived intangible asset is impaired. Whenever the exchange-traded price of digital assets declined below its carrying value, the Company was required to determine if an impairment existed and to record an impairment equal to the amount by which the carrying value exceeded the fair value.

F-18


The following table presents a roll-forward of digital assets and digital assets, restricted for the year ended December 31, 2022, based on the cost-impairment model under ASC 350:

(in thousands)
Digital assets and digital assets, restricted at December 31, 2021
$95,226 
Additions of digital assets117,557 
Transfer of digital assets from digital assets held in Fund137,844 
Recognition of loaned digital assets13,324 
Impairment of digital assets(173,214)
Disposition of digital assets(20)
Digital assets and digital assets, restricted at December 31, 2022
$190,717 

As of December 31, 2022, the Company held approximately 12,232 bitcoin, relating to digital assets and digital assets, restricted, with a carrying value of $190.7 million and a fair value of $202.4 million based on Level 1 inputs. Refer to Note 8 - Fair Value Measurement, for further information.
 
Digital assets held in Fund
 
On January 25, 2021, the Company entered into a limited partnership agreement with NYDIG Digital Assets Fund III, LP (the “Fund”) pursuant to which the Fund purchased 4,813 bitcoin for an aggregate purchase price of $150.0 million. The Company owned 100% of the limited partnership interests and consolidated the Fund under a voting interest model. The consolidated assets in the Fund were included in the Consolidated Balance Sheets under the caption “Digital assets held in Fund”.
 
The Fund qualified and operated as an investment company for accounting purposes pursuant to the accounting and reporting guidance under ASC 946 – Financial Services – Investment Companies, which requires fair value measurement of the Fund’s investments in digital assets. The Company retains the Fund’s investment company specific accounting principles under ASC 946 upon consolidation. The Company recorded changes in the fair value of the assets in the Consolidated Statements of Comprehensive Income (Loss) under the caption “Gains (losses) on digital assets held within investment fund.”
 
On June 10, 2022, the Company redeemed 100% of its limited partnership interest in the Fund in exchange for approximately 4,769 bitcoin with a fair market value of approximately $137.8 million. This bitcoin was transferred from the Fund’s custodial wallet to the Company’s digital wallet. Upon redemption, the Company no longer had a majority voting interest in the Fund and therefore deconsolidated the Fund in accordance with ASC 810 – Consolidation. The Company did not record any gain or loss upon deconsolidation as the digital assets in the Fund were measured at fair value. Subsequent to the transfer, the bitcoin transferred to the Company’s digital wallet was accounted for at cost less impairment in line with its digital assets measurement policy. The activity in the Fund for the year ended December 31, 2022, was as follows. There was no activity in the Fund as of December 31, 2023.

(in thousands)
Digital assets held in Fund at December 31, 2021
$223,916 
Unrealized appreciation on digital assets held in Fund
(74,723)
Disposition of digital assets held in Fund(794)
Realized loss on in-kind distribution(10,555)
Digital assets transferred out of Fund(137,844)
Digital assets held in Fund at December 31, 2022
$ 

NOTE 5 – ADVANCES TO VENDORS AND DEPOSITS

The Company contracts with bitcoin mining equipment manufacturers to procure equipment necessary for the operation of its bitcoin mining operations. These agreements typically require a certain percentage of the value of the total order to be paid in advance at specific intervals, usually within several days of execution of a specific contract and periodically thereafter with final payments due prior to each shipment date. The Company accounts for these payments as “Advances to vendors” on the Consolidated Balance Sheets.
 
F-19


As of December 31, 2023 and 2022, such advances totaled approximately $95.6 million and $488.3 million, respectively.

In addition, the Company contracts with other service providers for the hosting of its equipment and operational support in data centers where the Company’s equipment is deployed. These arrangements also typically require advance payments to be made to vendors in conjunction with the contractual obligations associated with these services. The Company classifies these payments as “Deposits” and “Long-term deposits” on the Consolidated Balance Sheets.

NOTE 6 – PROPERTY AND EQUIPMENT

The components of property and equipment as of December 31, 2023 and 2022 are:

(in thousands, except useful life)Useful life (Years)December 31, 2023December 31, 2022
Mining rigs3$862,055 $116,634 
Containers105,6761,614
Other7242 206 
Construction in progress171,194
Total gross property, equipment867,973289,648
Less: Accumulated depreciation(196,201)(16,622)
Property and equipment, net$671,772 $273,026 
 
The Company records mining rigs not yet placed into service as construction in progress. Upon energization of the mining rigs, the mining rigs are reclassified to “Mining rigs” and depreciated over the estimated useful life.
 
The Company’s depreciation expense related to property and equipment for the years ended December 31, 2023 and 2022 was $179.5 million and $78.7 million, respectively.
 
In late 2021, the Company entered into an agreement with DCRBN Ventures Development and Acquisition LLC (“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 in September 2022 (the “Hardin Transaction”), the Company also sold bitcoin mining rigs to various third parties. Total cash proceeds from these sales of assets for the year ended December 31, 2022, were $178.4 million and gains resulting from the asset sales totaled $83.9 million. There were no such sales in 2023.
 
In connection with the Hardin Transaction, the Company recorded additional depreciation expense related to approximately 1,800 bitcoin mining rigs that were previously deployed and were no longer in operating condition based on inspections of the assets at the facility and experience with the assets formerly deployed at Hardin in the weeks following redeployment. In addition, the Company determined that the useful lives of the remaining mining rigs formerly deployed at Hardin should be reduced from 36 months to 24 months.
 
In accordance with ASC 360 - Impairment and Disposal of Long-Lived Assets, a 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 decrease in the cost of bitcoin mining rigs that was driven by the drop in bitcoin prices during the fourth quarter ended December 31, 2022, the Company assessed the need for an impairment write-down of its bitcoin mining rigs. In accordance with ASC 360-10, the Company initially determined that the carrying value of its bitcoin miners was not recoverable. As its bitcoin mining rigs had a carrying value in excess of fair value, the Company recognized an impairment charge of approximately $208.6 million for the year ended December 31, 2022. The fair value of the bitcoin miners determined primarily using observable prices for similar assets as of December 31, 2022 was $271.3 million.
 
As a result of the impairment charge of its bitcoin mining rigs, the Company re-evaluated and reduced the estimated useful life for its asset group of mining rigs from 5 to 3 years, effective January 1, 2023. No impairment indicators were identified during the year ended December 31, 2023.
 
NOTE 7 – DIGITAL ASSET LOAN RECEIVABLE, NET OF ALLOWANCE

The Company’s digital asset loan receivable represents two separate digital asset loans made to NYDIG Funding, LLC (“NYDIG”) in August 2021 and December 2021 under a master securities loan agreement, which was terminated at the point of full repayment in kind for both loans in June 2022. A total of 600 bitcoin were loaned to
F-20


NYDIG. No collateral was posted to Marathon under the terms of the two loans. The digital assets loan receivables were initially and subsequently measured at the fair value of the underlying bitcoin lent at the time of the transfer, approximately $27.2 million, and adjusted for expected credit losses, with changes in fair value recorded as unrealized gains and losses in the Consolidated Statements of Comprehensive Income (Loss). A loan fee was accrued daily, based on the daily closing price of the underlying bitcoin and a set percentage rate, and paid in cash on a monthly basis consistent with each loan’s confirmation terms.
The loans were fully repaid by NYDIG in June 2022 at which time the 600 bitcoin were reclassified into digital assets at the carrying value of the digital assets loan receivable immediately prior to its derecognition at the end of loan. The Company did not have any digital asset loan receivables outstanding as of December 31, 2023 or 2022. As such, the Company recorded an allowance for loan losses as of December 31, 2021 with an initial provision expense of approximately $0.9 million. As of December 31, 2022, the Company recognized a corresponding provision benefit of approximately $0.9 million for the June 2022 repayment in full.

NOTE 8 – FAIR VALUE MEASUREMENT
 
The Company measures certain financial and non-financial assets and liabilities at fair value on a recurring or non-recurring basis. The Company uses a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price, based on the highest and best use of the asset or liability.

The levels of the fair value hierarchy are:
 
 Level 1:Observable inputs such as quoted market prices in active markets for identical assets or liabilities
 Level 2:Observable market-based inputs or unobservable inputs that are corroborated by market data
 Level 3:Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions
 
The carrying amounts reported in the Consolidated Balance Sheets for cash and cash equivalents, restricted cash, other receivables, deposits, prepaid expenses and other current assets, property and equipment, advances to vendors, accounts payable, accrued expenses, and legal reserve payable, approximate their estimated fair market value based on the short-term maturity of these instruments. Additionally, the carrying amounts reported in the Consolidated Balance Sheets for the Company’s term loan, operating lease liabilities and other long-term liabilities approximate fair value as the related interest rates approximate rates currently available to the Company.

Financial assets and liabilities are classified in their entirety within the fair value hierarchy based on the lowest level of input that is significant to their fair value measurement. The Company measures the fair value of its marketable securities and investments by taking into consideration valuations obtained from third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs included reported trades of and broker-dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities and other observable inputs.

F-21


Recurring measurement of fair value

The following tables present information about the Company’s assets measured at fair value on a recurring basis and the Company’s estimated level within the fair value hierarchy of those assets and liabilities as of December 31, 2023 and December 31, 2022, respectively:

Recurring fair value measured at December 31, 2023
(in thousands)Total carrying valueQuoted prices in active markets
(Level 1)
Significant other observable inputs
(Level 2)
Significant unobservable inputs
(Level 3)
Assets:
Money market funds$141,147 $141,147 $ $ 
U.S. Treasury Bills60,541 60,541 — — 
Digital assets639,660 639,660   
 
Recurring fair value measured at December 31, 2022
(in thousands)Total carrying valueQuoted prices in active markets
(Level 1)
Significant other observable inputs
(Level 2)
Significant unobservable inputs
(Level 3)
Assets:
Money market funds$92,044 $92,044 $ $ 

The Company includes the above money market funds and U.S. treasury bills in cash and cash equivalents in the Consolidated Balance Sheets. The Company’s U.S. treasury bills all had original remaining maturities of three months or less.

Effective January 1, 2023, the Company early adopted ASU 2023-08, measuring digital assets at fair value on a recurring basis. Refer to Note 4 Digital Assets, for further information. Additionally, during March 2023, the fair value of digital assets were transferred from Level 2 to Level 1, as a result of using the quoted price in the active market in accordance with ASC 820. There were no other transfers among Levels 1, 2 or 3 during the years ended December 31, 2023 and December 31, 2022.

On June 10, 2022, the Company withdrew approximately 4,769 bitcoin from its investment in NYDIG Digital Assets Fund III, LP and transferred the bitcoin directly into the Company’s account.

Non-recurring measurement of fair value

The following tables present information about the Company’s assets and liabilities measured at fair value on a non-recurring basis and are, therefore, not included in the tables above. These assets and liabilities include (a) digital assets and digital assets, restricted that are initially recorded at cost and subsequently impaired as the fair value falls below its carrying value, (b) mining rigs and advances to vendors that are written down to fair value due to the decrease in the cost of bitcoin mining rigs that was driven by the drop in bitcoin prices during the fourth quarter ended December 31, 2022, and (c) outstanding convertible notes measured at fair value based on quoted prices in active markets. These assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (e.g., impairment). The Company’s estimated level within the fair value hierarchy for each of these assets and liabilities as of December 31, 2022 are as follows. As of December 31, 2023, the Company had no assets and liabilities that were measured on a non-recurring basis, due to the early adoption of ASU 2023-08 and the requirement to measure crypto assets at fair value. Refer to Note 4 Digital Assets, for further information.

F-22


Non-recurring fair value measured at December 31, 2023
(in thousands)Total carrying valueQuoted prices in active markets
(Level 1)
Significant other observable inputs
(Level 2)
Significant unobservable inputs
(Level 3)
Liabilities:
Notes payable
$325,654 $269,725 $ $ 

Non-recurring fair value measured at December 31, 2022
(in thousands)Total carrying valueQuoted prices in active markets
(Level 1)
Significant other observable inputs
(Level 2)
Significant unobservable inputs
(Level 3)
Assets:
Digital assets$121,842 $ $129,201 $ 
Property and equipment, net (1)
271,280  271,280  
Advances to vendors488,299  488,299  
Digital assets, restricted68,875  72,998  
Liabilities:
Notes payable
732,289 173,200   

 (1) Represents mining rigs. Excludes $1.7 million of property and equipment relating to containers, website, and leasehold improvements as of December 31, 2022.

There were no transfers among Levels 1, 2 or 3 during the years ended December 31, 2023 and December 31, 2022.

NOTE 9 – INCOME TAXES
 
The Company accounts for income taxes under ASC 740 - Income Taxes, which requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carry-forwards. ASC 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets.
 
Income tax expense (benefit) attributable to income from continuing operations was $16.4 million, $(24.2) million, and $25.0 million for the years ended December 31, 2023, 2022, and 2021, respectively, and differed from the amounts computed by applying the U.S. federal income tax rate of 21% to pretax income from continuing operations as a result of the following:

(in thousands, except percentage data)20232022
2021
Federal income tax expense (benefit) at the statutory rate21.0 %$58,296 (21.0)%$(150,785)(21.0)%$(1,097)
State income taxes, net of federal tax expense0.9 %2,559 (1.6)%(11,495)150.7 %7,876 
Executive compensation deduction limitation0.9 %2,587 1.0 %7,358 578.1 %30,213 
Excess tax benefit related to share-based compensation0.2 %470  %285 (36.5)%(1,909)
Nondeductible other expenses0.6 %1,798  %14 4.3 %225 
Change in valuation allowance(18.9)%(52,502)18.2 %130,462 (277.0)%(14,477)
Prior year true-ups1.2 %3,346  %127 81.9 %4,281 
Other, net %(128) %(198)(2.8)%(144)
Income tax expense (benefit) from continuing operations5.9 %$16,426 (3.4)%$(24,232)477.7 %$24,968 
F-23


  
The components of the provision for income taxes are as follows:

(in thousands)
December 31, 2023
December 31, 2022
December 31, 2021
Current income tax expense (benefit)
Federal$ $ $ 
State1,140 733 2 
Total current income tax expense1,140 733 2 
Deferred expense
Federal66,129 (143,598)31,569 
State1,659 (11,829)7,874 
Total deferred tax expense (benefit)67,788 (155,427)39,443 
Change in valuation allowance(52,502)130,462 (14,477)
Net deferred tax expense after valuation allowance (benefit)15,286 (24,965)24,966 
Income tax provision (benefit)$16,426 $(24,232)$24,968 
 
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2023 and 2022 are presented below:
 
(in thousands)
December 31, 2023
December 31, 2022
Deferred tax assets:
Tax credit carryforwards$517 $386 
Net operating loss carryforwards144,081 48,703 
Intangible assets1,602 1,727 
Stock compensation3,898 2,133 
Digital assets 52,535 
Disallowed Interest3,093 2,215 
Bad debt reserve9,957 10,039 
Research and development costs1,619 541 
Accruals, reserves and other286 239 
Impairment loss36,100 36,397 
Capital losses
11,950  
Gain on hedge instruments
3,798  
Total gross deferred tax assets216,901 154,915 
Less valuation allowance(77,960)(130,462)
Net deferred tax assets138,941 24,453 
Deferred tax liabilities:
Unrealized gains (2,494)
Property and equipment, net(117,094)(21,959)
Digital assets
(37,133) 
Total gross deferred liabilities(154,227)(24,453)
Net deferred tax liability$(15,286)$ 
F-24


 
The valuation allowance for deferred tax assets as of December 31, 2023 and 2022 was $78.0 million and $130.5 million, respectively. The net change in the total valuation allowance was a decrease of $52.5 million in the year ended December 31, 2023.
 
At year ended December 31, 2023, the Company concluded, based upon all available evidence, it was more likely than not that it would not have sufficient future taxable income to realize the Company’s federal and state deferred tax assets. As a result, the Company established a valuation allowance against deferred tax assets that are not supported by reversing deferred tax liabilities.
 
At December 31, 2023, the Company has federal and state net operating loss carryforwards of $772.1 million, which are available to offset future taxable income. In addition, the Company has interest expense carryforwards of $14.2 million.
 
The Company has the following attributes and credit carryforwards:
 
(in thousands)Gross AmountExpiring
Federal net operating loss carryforwards$3,314 
2034-2035
Federal net operating loss carryforwards651,476 Indefinite
State net operating loss carryforwards117,286 Various
Interest expense carryforwards14,189 Indefinite
Federal tax credit carryforwards477 
2040-2043
State tax credit carryforwards40 Indefinite

Section 382 and Section 383 of the Internal Revenue Code limit the utilization of U.S. tax attribute carryforwards following a change of control. Based on the Company’s analysis under Section 382, approximately $85.5 million of tax attributes are limited by Section 382/383 as of December 31, 2023. The Section 382/383 limitation in conjunction with the twenty-year carryforward limitation caused $33.5 million of attributes to be deemed worthless, which resulted in a write-off of the related deferred tax assets in 2021.
 
A reconciliation of the beginning and ending amount of total unrecognized tax benefits for the tax years ended December 31, 2023 and 2022 is as follows:

(in thousands)
December 31, 2023
December 31, 2022
December 31, 2021
Balance, beginning of year$5,252 $44 $ 
Increase (decrease) related to prior year tax positions
(31)21 25 
Increase related to current year tax positions75 5,187 19 
Balance, end of year$5,296 $5,252 $44 
 
The Company has established a reserve against its federal research and development (“R&D”) tax credits generated in 2023 and previous years. The Company has also established a reserve related to its executive compensation deduction limitation in 2022.
 
As of December 31, 2023, the total amount of unrecognized tax benefits was $5.3 million, all of which was offset against deferred tax assets. If the unrecognized tax benefits were recognized as of December 31, 2023, there would be a $5.3 million favorable impact that would affect the effective rate on income from continuing operations. The Company also accrues for interest and penalties on its uncertain tax positions and includes such charges in its income tax provision in the Consolidated Statements of Comprehensive Income (Loss). The Company had no interest and penalty expenses in the years ended December 31, 2023 and 2022.
The Company did not accrue either interest or penalties for the years ended December 31, 2023 and 2022. The Company does not currently expect any of its remaining unrecognized tax benefits to be recognized in the next twelve months.
 
The Company files federal and state income tax returns. The 2019-2022 tax years generally remain subject to examination by the IRS and various state taxing authorities, although the Company is not currently under examination in any jurisdiction.
F-25


 
NOTE 10 – NET INCOME (LOSS) PER SHARE
 
Net income (loss) per share is calculated in accordance with ASC 260 - Earnings Per Share. Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. For the year ended December 31, 2023, the Company recorded net income and as such, the Company calculated the impact of dilutive common stock equivalents in determining diluted earnings per share. For the year ended December 31, 2022, the Company recorded a net loss and as such, the computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares outstanding, as they would have been anti-dilutive.
 
The following table presents the securities that were not included in the computation of diluted income (loss) per share, as their inclusion would have been anti-dilutive:

For the year ended December 31,
202320222021
Warrants
324,375 324,375 326,779 
Restricted stock units 1,255,648 642,094 
Convertible notes
 9,812,955 9,812,955 
Series A Preferred Stock322,654   
Total dilutive shares647,029 11,392,978 10,781,828 
  
The following table sets forth the computation of basic and diluted income (loss) per share:

For the year ended December 31,
(in thousands, except share and per share data)2023
2022
2021
Basic earnings per share of common stock:
Net income (loss) per share of common stock - basic
$259,052 $(694,022)$(29,813)
Weighted average shares of common stock - basic
183,855,570 113,467,837 99,337,587 
Net income (loss) per share of common stock - basic
$1.41 $(6.12)$(0.30)
Diluted earnings per share of common stock:
Net income (loss) per share of common stock - basic
$259,052 $(694,022)$(29,813)
Add: Notes interest expense, net of tax7,421   
Less: Gain from extinguishment of debt, net of tax
(62,909)  
Net income (loss) per share of common stock - diluted
$203,564 $(694,022)$(29,813)
Weighted average shares of common stock - basic
183,855,570 113,467,837 99,337,587 
Restricted stock units330,928   
Convertible notes8,106,779   
Weighted average shares of common stock - diluted
192,293,277 113,467,837 99,337,587 
Net income (loss) per share of common stock - diluted
$1.06 $(6.12)$(0.30)
 
NOTE 11 – COMPUTE NORTH BANKRUPTCY
 
On September 22, 2022, Compute North Holdings, Inc. (along with its affiliated debtors, collectively, “Compute North”), filed for chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of Texas under chapter 11 of the U.S. Bankruptcy Code (11 U.S. Code section 101 et seq.). The Company’s financial exposure to Compute North at the time of the bankruptcy filing included:

Approximately $10.0 million in convertible preferred stock of Compute North Holdings, Inc.

Approximately $21.0 million related to an unsecured Senior Promissory note with Compute North LLC.

F-26


Approximately $50.0 million in operating deposits with Compute North primarily related to the King Mountain and Wolf Hollow hosting facilities.
 
The Company recorded an impairment charge of $39.0 million during the third quarter of 2022. During the fourth quarter of 2022, the company estimated that an additional $16.6 million in deposits had likely been impaired and as such recorded an additional impairment charge. On February 16, 2023, the Bankruptcy Court approved the Debtors Plan of Reorganization, pursuant to which Marathon’s claim was fixed at $40.0 million as an unsecured claim to be paid out according to the timing and percentages within the approved Debtor’s plan. The Company has yet to receive the settlement funds.
 
NOTE 12 – STOCKHOLDERS' EQUITY
 
Common Stock

On July 27, 2023, the Company’s shareholders approved an amendment to the Company’s articles of incorporation that increased the amount of common stock authorized for issuance to 500,000,000 with a par value of 0.0001 per share.

Shelf Registration Statements on Form S-3 and At-the-Market Offering Agreements

In February 2024, we intend to commence a new at-the-market offering program with H.C. Wainwright & Co., LLC (“Wainwright”) acting as sales agent (the “2024 ATM”) pursuant to the ATM Agreement, under which we may offer and sell shares of our common stock from time to time through Wainwright having an aggregate offering price of up to $1.5 billion.

On October 24, 2023, the Company entered into a new at-the-market offering program (the “2023 ATM”) with Wainwright relating to shares of the Company’s common stock. In accordance with the terms of the sales agreement, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $750.0 million from time to time through Wainwright acting as its sales agent. As of December 31, 2023, the Company has sold 19,591,561 shares of common stock for an aggregate purchase price of $248.1 million, net of offering costs, pursuant to the 2023 ATM.

On February 11, 2022, the Company entered into an at-the-market Offering Agreement (the “2022 ATM”), or sales agreement, with Wainwright relating to shares of the Company’s common stock. In accordance with the terms of the sales agreement, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $750.0 million from time to time through Wainwright acting as its sales agent. As of October 23, 2023, the Company has sold 86,822,000 shares of common stock for an aggregate purchase price of $727.9 million, net of offering costs, pursuant to the 2022 ATM, completing the agreement.

Common Stock Warrants

A summary of the Company’s issued and outstanding common stock warrants and changes during the year ended December 31, 2023 and 2022 is as follows:

Number of WarrantsWeighted Average Exercise PriceWeighted Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2021326,779 $25.54 3.5
Forfeited(2,404)52.00 
Outstanding as of December 31, 2022324,375 25.00 2.5
Outstanding as of December 31, 2023324,375 $25.00 2.5
 
Restricted Stock Units
 
On January 1, 2018, the Board adopted the 2018 Equity Incentive Plan (as amended, the “2018 Plan”), which was subsequently approved by the Company’s shareholders on March 7, 2018, The 2018 Plan provides for the issuance of stock options, restricted stock, restricted stock units, preferred stock and other awards to employees, directors, consultants and other service providers.

F-27


The Company has granted restricted stock units (“RSU”) to employees, which generally vest over a four-year period from the date of grant; however, in certain instances, all or a portion of a grant may vest immediately. RSUs granted to directors generally vest over a one-year period or, in certain instances, immediately. The Company measures the fair value of RSUs at the grant date and recognizes expense on a straight-line basis over the requisite service period from the date of grant for each separately-vesting tranche under the graded-vesting attribution method.

A summary of the Company’s RSU activity for the years ended December 31, 2023 and 2022, is as follows:

Number of RSUsWeighted Average Grant Date Fair Value
Nonvested at December 31, 2021642,094 $35.93 
Granted1,167,339 19.35 
Forfeited(60,000)42.19 
Vested(493,785)29.87 
Nonvested at December 31, 20221,255,648 22.60 
Granted6,258,700 8.73 
Forfeited(309,337)9.85 
Vested(1,439,482)17.90 
Nonvested at December 31, 20235,765,529 9.40 

As of December 31, 2023, there was approximately $43.1 million of aggregate unrecognized stock-based compensation related to unvested RSUs that is expected to be recognized over the next 2.5 years.

Series A Preferred Stock

On June 5, 2023, the Company entered into a securities purchase agreement for the offering of 15,000 shares of the Company’s Series A redeemable convertible preferred stock. On June 8, 2023, upon closing of the offering, the Company issued 15,000 shares of Series A Preferred Stock for total gross proceeds of $14.3 million before deducting the placement agent’s fees and other estimated offering expenses. Each share of Series A Preferred Stock had a purchase price of $952.38, representing an original issue discount of approximately 5% of the $1,000 stated value of each share. Each share of Series A Preferred Stock was convertible into shares of the Company’s common stock at an initial conversion price of $14.52 per share, at the option of the holder, at any time following the Company’s receipt of stockholder approval for an increase in its authorized shares of common stock.

The Series A Preferred Stock was recorded outside of stockholder’s equity as mezzanine equity. At June 30, 2023, the Company increased the carrying value of Series A Preferred Stock to its redemption value and recorded the difference to additional paid-in capital.

As of December 31, 2023, all of the outstanding Series A Preferred Stock were redeemed at 105% of the $1,000 stated value per share for $15.8 million.

NOTE 13 – ACCRUED EXPENSES
 
As of December 31, 2023 and 2022, the Company’s accrued expenses consisted of the following:

(in thousands)20232022
Interest$276 $1,011 
Non-income taxes6,926 14,509 
Payroll and related expenses
6,073 2,345 
Other8,740 4,430 
Total accrued expenses$22,015 $22,295 
F-28


NOTE 14 – DEBT
 
As of December 31, 2023 and 2022, the Company’s debt consists of the following:

(in thousands, except for interest rate data)Maturity DateInterest RateDecember 31, 2023December 31, 2022
Convertible noteDecember 1, 20261%$330,707 $747,500 
Less: unamortized debt discount(5,053)(15,211)
Total convertible notes, net of discount$325,654 $732,289 
Term loan (1)
August 5, 2024
Variable 50,000 
Less: unamortized deferred fees (118)
$ $49,882 
Total325,654 782,171 
Less: current portion  
Long-term portion$325,654