# MARA Holdings, Inc.: Form 10-Q for the period ended Mar 31, 2024

- Company: [MARA Holdings, Inc.](/companies/mara.md) (CIK 1507605)
- Form: 10-Q
- Filed: 2024-05-09
- Accepted by EDGAR: May 9, 2024, 20:17 ET
- Period: 2024-03-31
- Accession: 0001628280-24-022243
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1507605/000162828024022243/mara-20240331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1507605/000162828024022243/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-01-01 to 2024-03-31 | $43.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-01-01 to 2024-03-31 | $168.2m | us-gaap:CostOfGoodsAndServicesSold |
| Research and development | 3 months, 2024-01-01 to 2024-03-31 | $2.5m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-01-01 to 2024-03-31 | $369.7m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-01-01 to 2024-03-31 | $1.3m | us-gaap:InterestExpense |
| Income tax | 3 months, 2024-01-01 to 2024-03-31 | $38.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-01-01 to 2024-03-31 | $337.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-01-01 to 2024-03-31 | $1.26 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-01-01 to 2024-03-31 | $1.30 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-01-01 to 2024-03-31 | 267,912,443 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2024-01-01 to 2024-03-31 | −$88.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2024-01-01 to 2024-03-31 | $9.1m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 3 months, 2024-01-01 to 2024-03-31 | $16.5m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-03-31 | $324.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-31 | $1.64bn | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-31 | $2.96bn | us-gaap:Assets |
| Current liabilities | at 2024-03-31 | $71.1m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2024-03-31 | $2.48bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 64,041 characters.

*Unless otherwise indicated or the context otherwise requires, references to “Marathon,” “we,” “us,” and the “Company” refer to Marathon Digital Holdings, Inc. and its consolidated subsidiaries. All dollar amounts referenced in this Item 2 are in thousands, except per share, bitcoin, and per bitcoin amounts.*

*You should read the following discussion and analysis together with our financial statements and related notes in Part I, Item 1 of this Quarterly Report on Form 10-Q for the quarter ended March 31, 2024 (this “Quarterly Report”).*

*This Quarterly Report contains forward-looking statements within the meaning of the federal securities laws, which statements are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this Quarterly Report, other than statements of historical fact, are forward-looking statements. You can identify forward-looking statements by the use of words such as “may,” “will,” “could,” “anticipate,” “expect,” “intend,” “believe,” “continue” or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to such statements. Our forward-looking statements are based on our management’s current assumptions and expectations about future events and trends, which affect or may affect our business, strategy, operations or financial performance. Although we believe that these forward-looking statements are based upon reasonable assumptions, they are subject to numerous known and unknown risks and uncertainties and are made in light of information currently available to us. Our actual financial condition and results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth below in the section entitled “Risk Factors” in Part II, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2023 (our “Annual Report”), which is incorporated herein by reference, as well as in the other public filings we make with the Securities and Exchange Commission (the “SEC”). You should read this Quarterly Report with the understanding that our actual future financial condition and results may be materially different from and worse than what we expect.*

*Additionally, information regarding market and industry statistics contained in this Quarterly Report is included based upon information available to us that we believe is accurate as of the date of this Quarterly Report. It is generally based upon industry and other publications that are not produced for purposes of securities offerings or economic analysis. We have not reviewed or included data from all sources and cannot assure investors of the accuracy or completeness of the data included in this Quarterly Report. Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services. We do not assume any obligation to update any forward-looking statement. As a result, investors should not place undue reliance on these forward-looking statements.*

### BUSINESS OVERVIEW

Marathon Digital Holdings, Inc. is one of the world’s largest publicly traded bitcoin mining companies with operations in North America, the Middle East, and Latin America. The Company’s core business is utility-scale Bitcoin mining, which produces or “mines” bitcoin using one of the industry’s largest and most energy-efficient fleets of specialized computers. As of March 31, 2024, the Company had approximately 226,000 energized and operational mining rigs, capable of producing 27.8 exahashes per second with an efficiency of 25 joules per terahash, which we believe to be amongst the most efficient in the industry. The Company believes it has one of the most efficient bitcoin mining fleets in the industry. The Company is also committed to a future of carbon-neutrality and is actively transitioning its operations to sustainable energy. As of March 31, 2024, sustainable energy sources accounted for 55% of the fleet’s power usage.

### RECENT DEVELOPMENTS

The Company has continued its recent focus on expanding its operational capabilities globally. Recent efforts include the following:

- On January 12, 2024, the Company, through its wholly owned subsidiary MARA USA Corporation, completed the acquisition of 100% of the issued and outstanding equity interests (the “Transaction”) of GC Data Center Equity Holdings, LLC, pursuant to which, the Company acquired two operational bitcoin mining sites, for an aggregate 390 megawatts of operational capacity for $179.3 million cash consideration plus customary working capital adjustments. We hope to realize synergies from this transaction through the integration of our technology stack, which we expect will lower operating expenditures, improve efficiencies and scale our operating capacity.
- On April 2, 2024, the Company, through its wholly owned subsidiary MARA USA Corporation, completed the acquisition of a bitcoin mining data center in Garden City, Texas, with a capacity of 200 megawatts, from Applied Digital Corporation, for a purchase price of $87.3 million cash consideration, which is subject to customary purchase price adjustments. This is the Company’s second major acquisition of data centers dedicated to bitcoin mining and increases the amount of self-owned and operated megawatts in the Company’s mining portfolio to 54%. The bitcoin mining data center in Garden City, Texas is located adjacent to a wind farm and uses predominantly renewable energy. We are currently converting approximately 100 megawatts into economic value via bitcoin mining. We expect to expand our presence at the site in 2024 by an additional 100 megawatts to accommodate a total of 200-megawatts of capacity dedicated exclusively to Marathon’s bitcoin mining operations.
- On April 19, 2024, a Bitcoin halving event occurred on the Bitcoin network. Halving is a key part of the Bitcoin protocol and serves to control the overall supply and reduce the risk of inflation in digital assets using a proof-of-work consensus algorithm. The Bitcoin halving event reduced the block subsidy by half from 6.25 to 3.125 bitcoin. Transaction fees, which together with the block subsidy comprise the block reward for successfully solving a block, is not directly impacted by the halving, although the Bitcoin network and the Company experienced an increase in transaction fees.
- Introduced Anduro, a new multi-chain Bitcoin layer-two network aimed at accelerating Bitcoin development and adoption.
- Launched the Company’s first products and services to support the Bitcoin ecosystem, including:
- Slipstream – a direct Bitcoin transaction submission service designed to streamline confirmations of large or non-standard Bitcoin transactions;
- MARAFW – custom firmware designed to optimize the individual chip settings of Bitcoin miners;
- MARA UBC 2100 – a replacement control board, designed in-house by Marathon; and
- MARA 2PIC700 – a next generation two-phase immersion cooling system built to transform data center operations with industry leading power, density, and efficiency.

### NON-GAAP FINANCIAL MEASURES

In addition to the Company’s results determined in accordance with GAAP, throughout this Quarterly Report the Company provides adjusted EBITDA and total margin excluding depreciation and amortization, which are non-GAAP financial measures. The Company provides investors with reconciliations from net loss to adjusted EBITDA and total margin to total margin excluding depreciation and amortization as components of Management’s Discussion and Analysis. The Company defines adjusted EBITDA as (a) GAAP net income (loss) plus (b) adjustments to add back the impacts of (1) depreciation and amortization, (2) interest expense, (3) income tax expense (benefit) and (4) adjustments for non-cash and non-recurring items which currently include (i) stock compensation expense, (ii) early termination expenses, (iii) gain on investments, and (iv) losses from extinguishment of debt. The Company defines total margin excluding depreciation and amortization as (a) GAAP total margin less (b) depreciation and amortization.

The Company provides non-GAAP financial measures to provide information that may assist investors in understanding the results of operations and assessing the prospect of future performance. However, adjusted EBITDA and total margin excluding depreciation and amortization, as we present such information, may not necessarily be comparable to similarly titled measures presented by other companies. Non-GAAP financial measures are not intended to represent, and should not be considered to be more meaningful measures than, or alternatives to, measures of financial or operating performance prepared in accordance with GAAP. These non-GAAP measures are not meant to be considered in isolation and should be read only in conjunction with the Company’s Quarterly Reports on Form 10-Q and its Annual Reports on Form 10-K as filed with the SEC. Management uses adjusted EBITDA, total margin excluding depreciation and amortization, and the supplemental information provided herein as a means of understanding, managing, and evaluating business performance and to help inform operating decision making. The Company relies primarily on its Condensed Consolidated Financial Statements to understand, manage, and evaluate its financial performance and use the non-GAAP financial measures only supplementally.

### RESULTS OF OPERATIONS

### Three Months Ended March 31, 2024 Compared to March 31, 2023

*(dollars in thousands)*

| Revenues | Three Months Ended March 31, 2024 | 2023 | Favorable (Unfavorable) |
| --- | ---: | ---: | ---: |
| Mining | $144,423 | $51,132 | $93,291 |
| Hosting services | 20,775 | — | 20,775 |
| Total revenues | 165,198 | 51,132 | 114,066 |
| **Costs and expenses** |  |  |  |
| **Cost of revenues** |  |  |  |
| Mining | (71,240) | (33,377) | (37,863) |
| Hosting services | (18,971) | — | (18,971) |
| Depreciation and amortization | (77,995) | (17,733) | (60,262) |
| Total cost of revenues | (168,206) | (51,110) | (117,096) |
| **Operating expenses** |  |  |  |
| General and administrative expenses | (73,311) | (15,135) | (58,176) |
| Gains on digital assets | 488,807 | 137,398 | 351,409 |
| Change in fair value of derivative | (15,252) | — | (15,252) |
| Early termination expenses | (22,097) | — | (22,097) |
| Amortization of intangible assets | (2,969) | — | (2,969) |
| Research and development | (2,466) | (209) | (2,257) |
| Total operating expenses | 372,712 | 122,054 | 250,658 |
| **Operating income** | 369,704 | 122,076 | 247,628 |
| Gain on investments | 5,236 | — | 5,236 |
| Net loss from extinguishment of debt | — | (333) | 333 |
| Loss on hedge instruments | (2,292) | — | (2,292) |
| Equity in net income of unconsolidated affiliate | 1,259 | — | 1,259 |
| Interest expense | (1,256) | (3,760) | 2,504 |
| Other non-operating income | 2,573 | 791 | 1,782 |
| **Income before income taxes** | 375,224 | 118,774 | 256,450 |
| Income tax expense | (38,051) | (75) | (37,976) |
| **Net income** | $337,173 | $118,699 | $218,474 |

31

| Supplemental information: |  |  |  |
| --- | ---: | ---: | ---: |
| bitcoin (“BTC”) production during the period, in whole BTC (1) | 2,811 | 2,195 | 616 |
| Average bitcoin per day, in whole BTC | 30.9 | 24.4 | 6.5 |
| Total margin (total revenues less total cost of revenues) | $(3,008) | $22 | $(3,030) |
| Total margin excluding the impact of depreciation and amortization: |  |  |  |
| Mining | $73,183 | $17,755 | $55,428 |
| Hosting services | $1,804 | $— | $1,804 |
| General and administrative expenses excluding stock-based compensation | $(21,398) | $(11,399) | $(9,999) |
| Installed Hash Rate (Exahashes per second) - at end of period (2) | 27.8 | 15.4 | 12.4 |
| Energized Hash Rate (Exahashes per second) - at end of period (2) | 27.8 | 11.5 | 16.3 |
| Average operational Hash Rate (Exahashes per second) (3) | 18.2 | 6.9 | 11.3 |
| Cost per Petahash Rate per day (4) | $45.2 | $53.7 | $(8.5) |
| Share of available miner rewards | 3.1% | 2.5% | 0.6% |
| Number of blocks won | 368 | 221 | 147 |
| Transaction fees as a percentage of total | 7.0% | 2.4% | 4.6% |
| **Reconciliation to Adjusted EBITDA:** |  |  |  |
| **Net income** | $337,173 | $118,699 | $218,474 |
| Exclude: Interest expense | 1,256 | 3,760 | (2,504) |
| Exclude: Income tax expense | 38,051 | 75 | 37,976 |
| **EBIT** | 376,480 | 122,534 | 253,946 |
| Exclude: Depreciation and amortization (5) | 83,548 | 17,733 | 65,815 |
| **EBITDA** | 460,028 | 140,267 | 319,761 |
| Exclude: Stock compensation expense | 51,913 | 3,945 | 47,968 |
| Exclude: Early termination expenses (6) | 22,097 | — | 22,097 |
| Exclude: Gain on investments | (5,236) | — | (5,236) |
| Exclude: Net loss from extinguishment of debt | — | 333 | (333) |
| **Adjusted EBITDA** | $528,802 | $144,545 | $384,257 |

(1) Includes 171 bitcoin representing the Company’s share of the equity method investee, the ADGM entity, for the three months ended March 31, 2024.

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

(3) Defined as the daily Average operational Hash Rate online during the period.

(4) Cost per Petahash Rate per day is calculated using mining cost of revenues, excluding depreciation and amortization, divided by the Average operational Hash Rate, excluding the Company’s share of the hash rate for the equity method investee, the ADGM entity.

(5) Includes approximately $2.6 million of depreciation and amortization from the Company’s share in the results of its equity method investee, the ADGM entity, reported in Equity in net earnings of unconsolidated affiliate for the three months ended March 31, 2024.

(6) Early termination expenses represent amounts recognized as the cost to early terminate data center hosting agreements.

***Revenues***: The Company generated revenues of $165.2 million for the three months ended March 31, 2024, compared to $51.1 million in the prior year period. The $114.1 million or approximately 223% increase in revenues was primarily driven by an $82.9 million increase in the average price of bitcoin mined and other revenue, a $10.4 million increase in bitcoin production, and $20.8 million in revenues generated from providing hosting services as a result of the acquisition of GC Data Center Equity Holdings, LLC on January 12, 2024. Revenues during the quarter was negatively impacted by unexpected equipment failures, transmission line maintenance, and higher than anticipated weather-related curtailments at our Garden City and other sites which we are working to address. The average price of bitcoin mined was 126% higher than the average price of bitcoin mined in the prior year period and average daily bitcoin production was 30.9 bitcoin in the current year period compared with 24.4 in the prior year period.

***Cost of revenues – mining*** during the three months ended March 31, 2024, totaled $71.2 million compared to $33.4 million in the prior year period. The $37.9 million or approximately 113% increase was primarily driven by the growth in the Company’s hash rate from the deployment and energization of mining rigs in existing and new hosting facilities, which increased hosting and energy costs, compared to the prior year period. Cost of revenues was also negatively impacted by an increase in the global hash rate, which increased 86% in the current period compared to the prior year period. Partially offsetting the increase was the impact of unexpected equipment failures, transmission line maintenance, and higher than anticipated weather-related curtailment at our Garden City and other sites which resulted in downtime that reduced hosting and energy costs.

***Cost of revenues – hosting services*** of $19.0 million primarily includes cost of power and other hosting related operating costs to provide hosting services. Hosting services includes results beginning from January 12, 2024, the acquisition date of GC Data Center Equity Holdings, LLC.

***Cost of revenues – depreciation and amortization*** during the three months ended March 31, 2024 totaled $78.0 million compared to $17.7 million in the prior year period. The $60.3 million or approximately 340% increase was primarily due to the deployment of mining rigs since the prior year period from the increased scale of the business. Depreciation and amortization also increased $2.7 million as a result of the January 12, 2024, acquisition of GC Data Center Equity Holdings, LLC.

***Total Margin*** was a negative $3.0 million in the current year period compared to nearly zero in the prior year period, a decrease of approximately $3.0 million. The following table summarizes the factors that impacted the decrease in total margin for the three months ended March 31, 2024 as compared to the prior year period:

*(in thousands)*

| Revenue: |  |
| --- | ---: |
| ● Impact of higher average price of bitcoin produced and other revenue | $82,925 |
| ● Impact of third-party hosting | 20,775 |
| ● Impact of higher amount of bitcoin produced | 10,366 |
| Cost of revenue – energy, hosting and other: |  |
| ● Impact of higher costs due to growth in hash rate | (25,855) |
| ● Impact of third-party hosting | (18,971) |
| ● Impact of increased production on cost of revenues | (12,008) |
| Cost of revenue – depreciation and amortization: |  |
| ● Increased due to deployment of mining rigs | (57,643) |
| ● Increased due to third-party hosting services | (2,619) |
| **Total margin** | $(3,030) |

***General and administrative expenses***: General and administrative expenses were $73.3 million for the three months ended March 31, 2024, compared to $15.1 million in the prior year period, an increase of $58.2 million or approximately 384%. The Company’s general and administrative expenses included stock-based (non-cash) compensation expense of $51.9 million in the current year period and $3.9 million in the prior year period. The increase in stock-based compensation expense was primarily due to additional restricted stock unit awards granted in the current year period and as a result of an increase in the Company’s headcount, which grew from 30 employees as of March 31, 2023 to approximately 60 employees as of March 31, 2024. General and administrative expenses excluding stock-based compensation was $21.4 million in the current year period compared with $11.4 million in the prior year period. The $10.0 million or approximately 88% increase in expenses was primarily due to the increased scale of the business, including payroll and benefits, professional fees, and other third-party costs associated with the growth in the business.

***Gains on digital assets***: The Company recognized a gain on digital assets of $488.8 million, compared to a gain of $137.4 million in the prior year period. The $351.4 million or approximately 256% increase was primarily related to the increase in the price of bitcoin as of March 31, 2024 of $71,289 compared to $28,474 for the prior year period ended March 31, 2023.

***Change in fair value of derivative***: The Company acquired a commodity swap contract as a result of its January 12, 2024 acquisition of GC Data Center Equity Holdings, LLC. The commodity swap contract hedges price variability in electricity purchases and expires December 31, 2027. The commodity swap contract is a derivative instrument and remeasured at fair value each reporting period with changes recognized on the Consolidated Condensed Statement of Operations. The change in fair value of derivative is the result of the change in estimated fair value of the derivative as of March 31, 2024 compared to January 12, 2024, the acquisition date of GC Data Center Equity Holdings, LLC.

***Early termination expenses***: On January 30, 2024, the Company entered into a termination and transition agreement (“Agreement”) with the operator, US Bitcoin Corp (“USBTC”), of the two sites from the January 12, 2024, acquisition of GC Data Center Equity Holdings, LLC. The Company and USBTC agreed to terminate the acquired operating agreement for a termination fee of $13.5 million. In addition, the Company entered into an agreement to early terminate a data center hosting agreement with one of its customers and in accordance with the agreement, the Company forgave the outstanding accounts receivable balance of $8.6 million.

***Amortization of intangible assets:*** During the three months ended March 31, 2024, the Company recorded a $3.0 million amortization expense for intangible assets. The Company acquired customer relationships in the January 12, 2024 acquisition of GC Data Center Equity Holdings, LLC, in addition to intellectual property purchased during the three months ended March 31, 2024. There was no amortization expense of intangible assets in the prior year period.

***Research and development:*** Research and development expenses were $2.5 million for the three months ended March 31, 2024 compared to $0.2 million in the prior year period. Research and development expenses consisted primarily of contractor costs, equipment, supplies, personnel, and related expenses for research and development activities which increased in the current year period.

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

***Loss on hedge instruments:*** During the three months ended March 31, 2024, the Company recorded a $2.3 million realized loss related to bitcoin hedging activities. The Company has significant bitcoin holdings on its balance sheet and from time to time will evaluate as part of its risk management and treasury management process, short-term hedging or yield enhancing opportunities. The Company has an Investment Committee composed of members of its senior executive team, that evaluates market conditions to set hedging, investments, and monetization of bitcoin strategies. There were no outstanding hedging transactions as of the three months ended March 31, 2024 and there were no such activities in the prior year period.

***Equity in net income of unconsolidated affiliate:*** During the three months ended March 31, 2024, the Company recorded its share of net earnings for its 20% interest in the Abu Dhabi Global Markets company (the “ADGM Entity”) in the amount of $1.3 million, which began mining operations during the third quarter of 2023. The Company’s share of the ADGM Entity’s operating results included earnings from the production of 171 bitcoin, a $4.1 million impairment of property, plant and equipment and approximately $2.6 million of depreciation and amortization during the three months ended March 31, 2024.

***Interest expense***: Interest expense was $1.3 million for the three months ended March 31, 2024 compared to $3.8 million in the prior year. The $2.5 million, or approximately 67% decrease was primarily a result of lower interest costs following the exchange of $416.8 million aggregate principal amount of Notes for shares of the Company’s common stock during the year ended December 31, 2023. Additionally, the Company prepaid and terminated its revolving line of credit and term loan facilities during March 2023.

***Other non-operating income***: Other non-operating income was $2.6 million during the three months ended March 31, 2024 compared to income of $0.8 million in the prior year period. The $1.8 million increase was primarily due to the higher balance of cash and cash equivalents and an increase in interest rates in the current year period.

***Income tax expense***: The Company recorded income tax expense of $38.1 million for the three months ended March 31, 2024 compared to an income tax expense of $0.1 million in the prior year period. The $38.1 million tax expense was primarily due to the establishment of deferred tax liabilities for the significant increase in fair value of bitcoin during the current year period partially offset by the release of its valuation allowance associated with deferred tax assets. During the three months ended March 31, 2024, the Company determined that sufficient taxable income will be generated to support the utilization of its deferred tax assets.

***Net income***: The Company recorded net income of $337.2 million for the three months ended March 31, 2024 compared to net income of $118.7 million in the prior year period. The $218.5 million, or approximately 184%, increase in earnings was primarily driven by the favorable mark-to-market adjustment of digital assets, an increase in the average price of bitcoin and production, and revenues generated from providing hosting services as a result of the January 12, 2024 acquisition of GC Data Center Equity Holdings, LLC. These increases were partially offset by increased mining costs associated with the growth in our energized hash rate as we deployed additional mining rigs, increased general and administrative expenses, and increased costs related to the acquisition and operation of our new data centers, including early termination fees incurred to exit customers in pursuit of the Company’s objective to self-mine at these sites.

***Adjusted EBITDA***: Adjusted EBITDA was $528.8 million for the three months ended March 31, 2024 compared to an adjusted EBITDA of $144.5 million in the prior year period. The $384.3 million increase was primarily driven by favorable fair value adjustments to digital assets of $488.8 million and higher production of bitcoin.

### FINANCIAL CONDITION AND LIQUIDITY

The following table presents a summary of the Company’s cash flow activity for the three months ended March 31, 2024 and 2023:

*(in thousands)*

|  | For the Three Months Ended March 31, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(88,340) | $(91,458) |
| Net cash used in investing activities | (416,591) | (9,383) |
| Net cash provided by financing activities | 471,886 | 113,218 |
| Net increase (decrease) in cash, cash equivalents and restricted cash | (33,045) | 12,377 |
| Cash, cash equivalents and restricted cash — beginning of period | 357,313 | 112,505 |
| Cash, cash equivalents and restricted cash — end of period | $324,268 | $124,882 |

***Cash flows for the three months ended March 31, 2024:*** Cash and cash equivalents totaled $324.3 million at March 31, 2024, a decrease of $33.0 million from December 31, 2023.

Cash flows from operating activities resulted in a use of funds of $88.3 million, as net income, adjusted for non-cash and non-operating items, in the amount of $56.7 million was more than offset by the use of cash of $145.0 million from changes in operating assets and liabilities. When the Company produces and holds bitcoin on its Condensed Consolidated Balance Sheets, it excludes such produced and held bitcoin from its operating cash flows. As the Company monetizes bitcoin in the future, those proceeds are reported as cash flows from investing activities. Changes in cash flows from operating assets and liabilities were driven by a use of funds associated with changes in digital assets of $144.4 million due to the non-cash adjustment for bitcoin mining revenues and deposits of $1.3 million resulting from increased deposits associated with hosting agreements.

Cash flows from investing activities resulted in a use of funds of $416.6 million, primarily resulting from the use of funds for advances to vendors of $225.2 million, payment for the acquisition of a business of $183.8 million, payment of a deposit for the GC Data Center Equity Holdings, LLC acquisition of $25.0 million, capital expenditures of $9.1 million, purchase of digital assets of $7.3 million, purchase of $8.0 million of Auradine’s preferred stock, and an investment in an equity method investee of $3.0 million, partially offset by proceeds from the sale of digital assets of $44.8 million.

Cash flows from financing activities resulted in a source of cash of $471.9 million, primarily from the periodic issuance of common stock under the Company’s 2023 ATM (as defined below) of $489.3 million and the repurchase of shares in settlement of employee taxes upon restricted stock vesting.

***Bitcoin holdings as of March 31, 2024:*** At March 31, 2024, the Company held approximately 17,320 bitcoin on its Condensed Consolidated Balance Sheets with a fair value of $1,234.7 million. The Company’s holdings as of March 31, 2024 excluded 61 bitcoins owned by the Company’s equity method investee, the ADGM Entity, but allocable to the Company, and pending distribution to the Company. At March 31, 2024, the fair value of a single bitcoin was approximately $71,289. As a result, the fair market value of the Company’s bitcoin holdings at March 31, 2024, was approximately $1,234.7 million. The Company expects that its future bitcoin holdings will generally increase but will fluctuate from time to time, both in number of bitcoin held and fair value in US dollars, depending upon operating and market conditions. The Company intends to add to its bitcoin holdings primarily through its production activities and will also continue to sell bitcoin as a means of generating cash to fund monthly operating costs and for general corporate purposes.

During the third quarter of 2023, the Company hedged a portion of its bitcoin holdings to mitigate near-term volatility while maintaining a long-term strategy of maximizing the size and value of the Company's treasury. Gains and losses on hedging activity will impact earnings; however, the Company believes the strategy provides resiliency to the organization and downside risk during volatile market conditions such as the halving event while maximizing the Company's bitcoin valuation potential.

***At-the-Market Offering Programs and Proceeds:*** In October 2023, the Company commenced an at-the-market offering program (the “2023 ATM”) with H.C. Wainwright & Co., LLC (“Wainwright”), acting as sales agent, which allowed the Company to sell and issue shares of its common stock from time to time with an aggregate offering price up to $750.0 million. As of March 31, 2024, the Company had sold 44,254,912 shares of common stock under the 2023 ATM for an aggregate purchase price of $731.2 million, net of commissions expenses, concluding the 2023 ATM. In February 2024, the Company commenced an at-the-market offering program (the

“2024 ATM”) with Wainwright acting as sales agent pursuant to an ATM Agreement, under which the Company may offer and sell shares of its common stock from time to time through Wainwright having an aggregate offering price of up to $1,500.0 million.

***Liquidity and Capital Resources:*** Cash and cash equivalents totaled $324.3 million and the fair value of bitcoin holdings was $1,234.7 million at March 31, 2024. The combined value of cash and cash equivalents and bitcoin, as of March 31, 2024, was $1,559.0 million.

The Company expects to have sufficient liquidity, including cash on hand, cash received from sales of its bitcoin holdings, and access to public capital markets to support ongoing operations. The Company will continue to seek to fund its business activities, and especially its growth opportunities, through the public capital markets, primarily through periodic equity issuances using its at-the-market facilities.

The risks to the Company’s liquidity outlook would include events that materially diminish its access to capital markets and/or the value of its bitcoin holdings and production capabilities, including:

- Failure to effectively execute the Company’s growth strategies;
- Challenges in the bitcoin mining space and/or additional contagion events (such as the FTX collapse and subsequent bankruptcies of bitcoin mining companies in 2022 and 2023) which could damage the credibility of, and therefore investor confidence in, companies engaged in the digital assets space including Marathon;
- Declines in bitcoin prices and/or production, including the impacts from the bitcoin halving event, which would impact both the value of the Company’s bitcoin holdings and its ongoing profitability;
- Significant increases in electricity costs if these cost increases were not accompanied by increases in the price of bitcoin, as this would also reduce profitability; and
- Deteriorating macroeconomic conditions, including the impacts of inflation and increased interest rates, as well as instability in the banking system.

### CONTRACTUAL OBLIGATIONS AND COMMITMENTS

The Company contracts with service providers for hosting its equipment and operational support in data centers where the Company’s equipment is deployed. Under these arrangements, the Company expects to pay at a minimum approximately (i) $182.8 million during the remainder of calendar year 2024, (ii) $708.9 million in total payments during the calendar years 2025 through 2027, and (iii) $15.7 million in total payments during the calendar year 2028. Under certain of these arrangements, the Company is required to pay variable pass-through power and service fees in addition to these estimated minimum amounts.

The Company has purchase agreements to purchase miners and other mining equipment for a total purchase price of $517.3 million that are expected to be delivered during 2024. To date, we have made installment payments totaling $261.1 million. We expect to make periodic payments in accordance with the payment schedule with the final payment expected to occur during 2024.

Assuming the Notes due 2026 are not converted into common stock, repurchased or redeemed prior to maturity, (i) remaining interest payments relating to the Notes will approximate $2.5 million through the remainder of the calendar year 2024, (ii) annual interest payments of approximately $3.3 million in each calendar year from 2025 through 2026, and (iii) principal in the amount of $330.7 million upon the maturity in November 2026, will be payable under the Notes due 2026. Refer to Note 12 – Debt, for further information.

### CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The following accounting policies relate to the significant areas involving management’s judgments and estimates in the preparation of the Company’s financial statements, and are those that it believes are the most critical to aid the understanding and evaluation of this management discussion and analysis:

- Digital assets
- Revenues
- Long-lived assets
- Income taxes
- Assets acquired and liabilities assumed in a business combination
- Goodwill impairment

### Digital Assets

Digital assets (bitcoin) are included in current and other assets in the accompanying Condensed Consolidated Balance Sheets due to the Company’s ability to sell bitcoin in a highly liquid marketplace and the selling of bitcoin to fund operating expenses to support operations. Digital assets awarded to the Company through its mining activities are accounted for in accordance with the Company’s revenue recognition policy below.

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 Condensed Consolidated Statements of Operations 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.

Prior to the adoption of ASU 2023-08, Digital assets were accounted for as intangible assets with indefinite useful lives and are recorded at cost less impairment in accordance with Accounting Standard Codification (“ASC”) 350 – Intangibles-Goodwill and Other. An intangible asset with an indefinite useful life is not amortized but 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 asset is impaired. Whenever the exchange-traded price of digital assets declines below its carrying value, the Company has determined that it is more likely than not that an impairment exists and records impairment equal to the amount by which the carrying value exceeds the fair value at that point in time. The Company has deemed the price of digital assets to be a Level 1 input under the ASC 820 - Fair Value Measurement hierarchy as these were based on observable quoted prices in the Company’s principal market for identical assets. Subsequent reversal of impairment losses is not permitted.

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, 2022 and 2021. The voluntary change in accounting principle has been reflected in the Consolidated Financial Statements.

Digital assets awarded to the Company through its mining activities are included as a reconciling item within operating activities on the accompanying Condensed Consolidated Statements of Cash Flows. The sales of digital assets are included within investing activities in the accompanying Condensed Consolidated Statements of Cash Flows and any gains or losses from such sales are included in operating expenses in the Condensed Consolidated Statements of Operations.

### 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:

- 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 and Hosting 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”). On January 12, 2024, the Company acquired two operational bitcoin mining sites for the purpose of improving efficiencies and the scale of the Company’s mining operations. The acquired mining sites provide hosting services to institutional-scale crypto mining companies.

### Mining 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.

### Mining 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.

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 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.

### Hosting Services

The Company operates two bitcoin mining sites, which were acquired on January 12, 2024, that provide hosting services to institutional-scale crypto mining companies. Hosting services include colocation and managed services. Colocation services include providing mining companies with sheltered data center space, electrical power, cooling, and internet connectivity. Managed services generally include providing customers with technical support and maintenance services, in addition to colocation services. The Company will not be taking on any new hosting services customers and will transition to self-mining at these two sites as existing customer agreements expire or are terminated early.

Colocation services revenue is recognized over time as the customer simultaneously receives and consumes the benefits of the Company’s performance. Managed services revenue is recognized at a point-in-time as the customer simultaneously receives and consumes the benefits of the Company’s performance. The transaction price for colocation services is variable based on the consumption of energy and the managed services price is a fixed rate per miner basis. The Company recognizes hosting services revenue to the extent that a significant reversal of such revenue will not occur. Hosting services customers are generally invoiced in advance of the month in which the Company satisfies its performance obligation, and deferred revenue is recorded for any upfront payments received in advance of the Company’s performance. The monthly transaction price is generally variable based on the amount of megawatt hours (“MWh”) consumed by the customers equipment and when other monthly contracted services are performed. At the end of each month, the customer is billed for the actual amount owed for services performed. The Company recognizes revenue for hosting services under the right-to-invoice practical expedient in ASC 606-10-55-18, which allows for the recognition of revenue over time as the Company’s right-to-invoice for final payment corresponds directly with the value of services transferred to the customer to-date.

Expenses associated with providing hosting services are recorded as cost of revenues and depreciation on hosting equipment is recorded as a separate component of cost of revenues.

### Long-Lived Assets

The Company has long-lived assets that consist primarily of property and equipment stated at cost, net of accumulated depreciation and impairment, as applicable. The depreciation charge is calculated on a straight-line basis and depends on the estimated useful lives of each type of asset and, in certain circumstances, estimates of fair values and residual values. 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 updates the estimated useful lives of its asset group of bitcoin mining rigs periodically as information on the operations of the mining rigs indicates changes are required. The Company assesses and adjusts the estimated useful lives of its mining rigs when there are indicators that the productivity of the mining assets are higher or lower than the assigned estimated useful lives.

Management reviews the Company’s long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (asset group) may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of their carrying amount to the undiscounted future cash flows expected to be generated thereby. If such assets are not recoverable based on that test, impairment is recorded in the amount by which the carrying amount of the assets exceeds their fair value as determined in accordance with ASC 820.

### Income Taxes

The primary objectives of accounting for income taxes are to recognize the amount of income taxes payable or refundable for the current year, and to recognize deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. The Company accounts for income taxes in accordance with ASC 740 - *Income Taxes*, using the asset and liability method. Under this method, deferred tax assets and liabilities are calculated based on enacted tax rates and are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities and for operating losses and tax credit carryforwards. 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. Management must make assumptions, judgments and estimates to determine the Company’s income tax benefit or expense and deferred tax assets and liabilities. The Company recognizes tax positions when they are more likely than not of being sustained. Recognized tax positions are measured at the largest amount of benefit greater than 50% likely of being realized. Each period, the Company evaluates tax positions and adjust related tax assets and liabilities in light of changing facts and circumstances.

### Assets Acquired and Liabilities Assumed in a Business Combination

The Company accounts for business combinations under the acquisition method of accounting in accordance with ASC 805 - *Business Combinations*, by recognizing the identifiable tangible and intangible assets acquired and liabilities assumed, measured at the acquisition date fair value. The determination of fair value involves assumptions, estimates and judgments. Any purchase consideration in excess of the estimated fair values of net assets acquired is recorded as goodwill.

### Goodwill Impairment

Goodwill is not subject to amortization, and instead, assessed for impairment annually, or more frequently when events or changes in circumstances indicate is it more likely than not that the fair value of a reporting unit is less than its carrying amount in accordance with ASC 350.

### RECENT ACCOUNTING PRONOUNCEMENTS

See Note 2 – Summary of Significant Accounting Policies to the Company’s Condensed Consolidated Financial Statements for a discussion of recent accounting standards and pronouncements.

### OFF-BALANCE SHEET ARRANGEMENTS

None.

## Market risk

As filed, 988 characters.

The following discussion about our market risk exposures involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements.

***Market Price Risk of Bitcoin.*** We hold a significant amount of bitcoin, as such, we are exposed to the impact of market price changes in bitcoin on its bitcoin holdings. This exposure would generally manifest itself in the following areas:

- Declines in the fair market value of bitcoin will impact the cash value that would be realized if we were to sell our bitcoin for cash, therefore having a negative impact on our liquidity.
- We occasionally enter into derivative financial instruments to manage our exposure resulting from fluctuations in the price of bitcoin.

At March 31, 2024, we held approximately 17,320 bitcoin and the fair value of a single bitcoin was approximately $71,289, meaning that the fair value of our bitcoin holdings on that date was approximately $1,234.7 million.

## Controls and procedures

As filed, 5,280 characters.

### Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of its principal executive officer and principal financial officer, has evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in the reports the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures. Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that its disclosure controls and procedures were not effective at the reasonable assurance level as of March 31, 2024 due to the previously identified material weakness.

### Material Weaknesses in Internal Control and Plan for Remediation

Based on its evaluation, management previously identified a material weakness in internal control over financial reporting that remained open as of year-end. The material weakness included:

- A material weakness related to the ineffective design or implementation of information technology general controls or an alternative key manual control to prevent or detect material misstatements in revenue.

The material weaknesses associated with the design and implementation of the manual control over revenue recognition did not result in a material misstatement to the Company’s previously issued Consolidated Financial Statements, nor in the Consolidated Financial Statements included in this Quarterly Report.

### Remediation

The Company’s Board of Directors and management take internal control over financial reporting and the integrity of its financial statements seriously. Management continues to work to improve its controls related to the material weaknesses described above. Management will continue to implement measures to remediate the material weaknesses, such that these controls are designed, implemented, and operating effectively. In order to achieve the timely implementation of the above, management has commenced the following actions and will continue to assess additional opportunities for remediation on an ongoing basis:

- Continue to utilize external third-party audit and implementation firms under Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”) to enable the Company to improve the Company’s controls related to its material weaknesses; and
- Continue to evaluate existing processes and implement new processes and controls where necessary in connection with remediating the Company’s material weaknesses, such that these controls are designed, implemented, and operating effectively.
- Continue to work and guide our vendors in the industry that are not accustomed to the requirements of SOX to enhance and progress the industry forward to be fully compliant with SOX.

The Company recognizes that the material weaknesses in its internal control over financial reporting will not be considered remediated until the remediated controls operate for a sufficient period of time and can be tested and concluded by management to be designed and operating effectively. Because the Company’s remediation efforts are ongoing, it cannot provide any assurance that these remediation efforts will be successful or that its internal control over financial reporting will be effective as a result of these efforts.

The Company continues to evaluate and work to improve its internal control over financial reporting related to the identified material weaknesses, and management may determine to take additional measures to address control deficiencies or determine to modify the remediation plan described above. In addition, the Company will report the progress and status of the above remediation efforts to the Audit Committee on a periodic basis.

As part of the Company’s ongoing program to implement changes and further improve its internal controls and in conjunction with is Code of Ethics, the Company’s independent directors have been working with management to include protocols and measures aimed at ensuring quality of its internal controls. Among those measures is the implementation of a whistle blower hotline, which allows third parties to anonymously report noncompliant activity. The hotline may be accessed as follows:

To file a report, use the Client Code “MarathonPG” and pick one of the following options:

- Call: 1-877-647-3335
- Click: http://www.RedFlagReporting.com

### Change in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the three months ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting other than the ongoing remediation efforts undertaken by management.

## Risk factors

As filed, 463 characters.

We are not aware of any material changes to the risk factors set forth under the caption “Risk Factors” in Part II, Item 1A of our Annual Report, which are incorporated herein by reference. The risks described in our Annual Report are not the only ones we face. Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business, financial condition, operating results, liquidity, and future prospects.

Filed May 9, 2024.
Source: SEC EDGAR, the filing index for accession 0001628280-24-022243. Last ingested by Listed: Oct 24, 2026, 15:12 ET. No prices; not investment advice.