# MARA Holdings, Inc.: Form 10-Q for the period ended Jun 30, 2024

- Company: [MARA Holdings, Inc.](/companies/mara.md) (CIK 1507605)
- Form: 10-Q
- Filed: 2024-08-01
- Accepted by EDGAR: Aug 1, 2024, 20:45 ET
- Period: 2024-06-30
- Accession: 0001628280-24-034196
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1507605/000162828024034196/mara-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1507605/000162828024034196/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $26.4m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $69.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-04-01 to 2024-06-30 | $181.7m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 6 months, 2024-01-01 to 2024-06-30 | $349.9m | us-gaap:CostOfGoodsAndServicesSold |
| Research and development | 3 months, 2024-04-01 to 2024-06-30 | $3.8m | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2024-01-01 to 2024-06-30 | $6.3m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | −$232.4m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | $137.3m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-04-01 to 2024-06-30 | $1.4m | us-gaap:InterestExpenseNonoperating |
| Interest expense | 6 months, 2024-01-01 to 2024-06-30 | $2.6m | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | −$31.7m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $6.4m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | −$199.7m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | $137.5m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.72 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | $0.50 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.72 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | $0.51 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 278,674,506 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 277,959,660 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | −$203.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $26.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 6 months, 2024-01-01 to 2024-06-30 | $23.1m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2024-06-30 | $256.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $371.9m | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $3.12bn | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $99.2m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2024-06-30 | $2.64bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 57,200 characters.

*Unless otherwise indicated or the context otherwise requires, references to “MARA,” “we,” “us,” and the “Company” refer to Marathon Digital Holdings, Inc. and its consolidated subsidiaries.*

*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 June 30, 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, filed with the SEC on February 28, 2024, as amended by Amendment No. 1 on Form 10-K/A (our “Annual Report”), which is incorporated herein by reference, as well as in the other public filings we make with the U.S. 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

MARA is a global leader in leveraging digital asset compute to support the energy transformation with operations in North America, the Middle East, Europe, and Latin America. As of June 30, 2024, the Company has established a globally diversified portfolio of 13 digital asset data centers across four continents, with 1,100 megawatts of available energy capacity for computing. The Company uses different strategies and structures (self-owned and operated, joint ventures, and third-party hosted) to diversify risk across the organization. It is the Company’s intent that self-owned and operated sites will represent a greater proportion of our portfolio over time. The Company’s core business is Utility-Scale Computing, which produces or “mines” bitcoin using one of the industry’s largest and most energy-efficient fleets of specialized computers. As of June 30, 2024, the Company had approximately 250,000 energized and operational mining rigs, capable of producing 31.5 exahashes per second with an efficiency of 25 joules per terahash, which the Company believes to be amongst the most efficient in the industry. Additionally, as of June 30, 2024, the Company held approximately 18,488 bitcoin on the Condensed Consolidated Balance Sheets.

### RECENT DEVELOPMENTS

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

- On April 1, 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 $96.8 million cash consideration, including customary working capital adjustments that were paid during the second quarter of 2024. 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 MARA’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 per block. Transaction fees, which together with the block subsidy comprise the block reward for successfully solving a block, is not directly impacted by the halving.
- During the second quarter of 2024, the Company introduced three business teams, primarily to better align the Company’s internal structure with its pursuit of growth opportunities, to further the Company’s focus on strategic initiatives, to bolster accountability by allowing the Company to better assess business team performance, and to help drive the Company’s efforts to diversify its business portfolio. The three business teams are as follows: (i) Utility Scale Mining, (ii) Energy Harvesting, and (iii) Technology, as well as support organizations.
- During the second quarter of 2024, the Company announced its Kaspa mining operations, as a potential way to diversify revenue while continuing to utilize its current infrastructure and expertise in digital asset compute. After successfully deploying the first Kaspa Application Specific Integrated Circuit (“ASIC”) mining rigs, the Company began scaling its operations. As of June 30, 2024, the Company held approximately 89 million Kaspa coins on our Condensed Consolidated Balance Sheets. As of now we incur significantly less cost to produce Kaspa in US dollar terms, which helps pay for our expenses and allows us to hold a larger amount of bitcoin on our Condensed Consolidated Balance Sheets.
- On July 25, 2024 the Company purchased $100.0 million of bitcoin, increasing our bitcoin holdings to over 20,000 BTC on the Condensed Consolidated Balance Sheets. The Company announced the intent to adopt a full holding onto bitcoin approach (“HODL”) towards its bitcoin treasury policy, retaining all bitcoin mined in its operations, periodically making strategic open market purchases.

### NON-GAAP FINANCIAL MEASURES

In order to provide a more comprehensive understanding of the information used by our management team in financial and operational decision-making, we supplement our Condensed Consolidated Financial Statements that have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) with the non-GAAP financial measures of adjusted EBITDA and total margin excluding depreciation and amortization.

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.

Management uses adjusted EBITDA and total margin excluding depreciation and amortization, along with 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 uses non-GAAP financial measures only supplementally.

We believe that adjusted EBITDA and total margin excluding depreciation and amortization are useful measures to us and to our investors because they exclude certain financial, capital structure, and non-cash items that we do not believe directly reflect our core operations and may not be indicative of our recurring operations, in part because they may vary widely across time and within our industry independent of the performance of our core operations. We believe that excluding these items enables us to more effectively evaluate our performance period-over-period and relative to our competitors. Adjusted EBITDA and total margin excluding depreciation and amortization may not be comparable to similarly titled measures provided by other companies due to potential differences in methods of calculations.

### RESULTS OF OPERATIONS

### Three Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023

*(dollars in thousands)*

| Revenues | Three Months Ended June 30, 2024 | 2023 | Favorable (Unfavorable) |
| --- | ---: | ---: | ---: |
| Mining | $136,478 | $81,759 | $54,719 |
| Hosting services | 8,661 | — | 8,661 |
| **Total revenues** | 145,139 | 81,759 | 63,380 |
| **Costs and expenses** |  |  |  |
| Cost of revenues |  |  |  |
| Mining | (85,838) | (55,222) | (30,616) |
| Hosting services | (8,049) | — | (8,049) |
| Depreciation and amortization | (87,808) | (37,275) | (50,533) |
| Total cost of revenues | (181,695) | (92,497) | (89,198) |
| Operating expenses |  |  |  |
| General and administrative expenses | (57,118) | (19,840) | (37,278) |
| Change in fair value of digital assets | (147,999) | 25,162 | (173,161) |
| Change in fair value of derivative instrument | 38,251 | — | 38,251 |
| Research and development | (3,845) | (651) | (3,194) |
| Early termination expenses | (5,660) | — | (5,660) |
| Amortization of intangible assets | (19,470) | — | (19,470) |
| Total operating expenses | (195,841) | 4,671 | (200,512) |
| **Operating loss** | (232,397) | (6,067) | (226,330) |
| Equity in net earnings of unconsolidated affiliate | 49 | — | 49 |
| Interest income | 2,188 | 118 | 2,070 |
| Interest expense | (1,369) | (2,840) | 1,471 |
| Other non-operating income | 213 | 30 | 183 |
| **Loss before income taxes** | (231,316) | (8,759) | (222,557) |
| Income tax benefit (expense) | 31,657 | (203) | 31,860 |
| **Net loss** | $(199,659) | $(8,962) | $(190,697) |
| **Supplemental information:** |  |  |  |
| bitcoin (“BTC”) production during the period, in whole BTC (1) | 2,058 | 2,926 | (868) |
| Average bitcoin per day, in whole BTC | 22.9 | 32.2 | (9.3) |
| Total margin (total revenues less total cost of revenues) | $(36,556) | $(10,738) | $(25,818) |
| Total margin excluding the impact of depreciation and amortization: |  |  |  |
| Mining (2) | $50,640 | $26,537 | $24,103 |
| Hosting services (2) | $612 | $— | $612 |
| General and administrative expenses excluding stock-based compensation | $(28,786) | $(15,389) | $(13,397) |
| Installed Hash Rate (Exahashes per second) - at end of period (3) | 31.5 | 21.8 | 9.7 |
| Energized Hash Rate (Exahashes per second) - at end of period (3) | 31.5 | 17.7 | 13.8 |
| Average Operational Hash Rate (Exahashes per second) (4) | 24.0 | 12.1 | 11.9 |
| Cost per Petahash per day (5) | $41.0 | $50.4 | $(9.4) |
| Share of available miner rewards | 3.7% | 3.3% | 0.4% |
| Number of blocks won | 457 | 414 | 43 |
| Transaction fees as a percentage of total | 10.5% | 8.2% | 2.4% |

35

| Reconciliation to Adjusted EBITDA: |  |  |  |
| --- | ---: | ---: | ---: |
| **Net loss** | $(199,659) | $(8,962) | $(190,697) |
| Exclude: Interest expense | 1,369 | 2,840 | (1,471) |
| Exclude: Income tax expense (benefit) | (31,657) | 203 | (31,860) |
| **EBIT** | (229,947) | (5,919) | (224,028) |
| Exclude: Depreciation and amortization (6) | 110,815 | 37,275 | 73,540 |
| **EBITDA** | (119,132) | 31,356 | (150,488) |
| Exclude: Stock compensation expense | 28,332 | 4,451 | 23,881 |
| Exclude: Early termination expenses (7) | 5,660 | — | 5,660 |
| **Adjusted EBITDA** | $(85,140) | $35,807 | $(120,947) |

(1) Includes 97 bitcoin representing the Company’s share of the equity method investee for the three months ended June 30, 2024.

(2) Mining and hosting services margin excluding the impact of depreciation and amortization is calculated using revenues less cost of revenues, excluding depreciation and amortization, for mining and hosting services, respectively.

(3) 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.

(4) Defined as the daily Average Operational Hash Rate online during the period.

(5) Cost per Petahash 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, Abu Dhabi Global Markets company (the “ADGM Entity”).

(6) Includes approximately $3.5 million of depreciation and amortization as the Company’s share in the results of its equity method investee reported in Equity in net earnings of unconsolidated affiliate for the three months ended June 30, 2024.

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

***Revenues***: The Company generated revenues of $145.1 million for the three months ended June 30, 2024, compared to $81.8 million in the prior year period. The $63.4 million or approximately 78% increase in revenues was primarily driven by a $78.6 million increase in the average price of bitcoin, partially offset by a $23.9 million decrease in bitcoin production, and the inclusion of $8.7 million in revenues generated from providing hosting services as a result of the GC Data Center Hosting, LLC acquisition in January of 2024. The average price of bitcoin mined was 136% higher than the average price of bitcoin mined in the prior year period and average daily bitcoin production was 22.9 bitcoin in the current year period compared with 32.2 in the prior year period. The Company produced 868 less bitcoin for the three months ended June 30, 2024 as compared to the prior year period primarily due to the halving event in April 2024, increased global hashrate and the continued impact of unexpected equipment failures at third-party operated sites and transmission line maintenance, partially offset by an improvement in average operational hashrate. Subsequent to June 30, 2024, the third-party site equipment failure and transmission line maintenance was completely resolved.

***Cost of revenues – mining*** during the three months ended June 30, 2024 totaled $85.8 million compared to $55.2 million in the prior year period. The $30.6 million or approximately 55% 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 facilities, which increased hosting and energy costs, compared to the prior year period. Partially offsetting the increase was the impact of unexpected equipment failures and transmission line maintenance, which resulted in downtime that reduced hosting and energy costs. The Company’s Cost per Petahash per day improved from $50.4 to $41.0, or approximately 18.7%, in the three months ended June 30, 2024 when compared with the prior year period, primarily due to increased capacity, improved efficiencies and a reduction of third-party costs. The Company believes Cost per Petahash per day to be a key metric to evaluate its operating costs and expects it to reduce as the Company grows its operations towards 50.0 exahash.

***Cost of revenues – hosting services*** of $8.0 million primarily includes cost of power and other hosting related operating costs to provide hosting services, which the company acquired through the GC Data Center Equity

Holdings, LLC acquisition in the first quarter of 2024. The Company continues to exit this business to strategically focus on its owned and operated mining business.

***Cost of revenues – depreciation and amortization*** during the three months ended June 30, 2024 totaled $87.8 million compared to $37.3 million in the prior year period. The $50.5 million or approximately 136% increase was primarily due to the deployment of mining rigs since the prior year period from the increased scale of the business and the acquisitions of GC Data Center Equity Holdings, LLC and the Garden City Acquisition.

***Total Margin*** was a loss of $36.6 million in the current year period compared to a loss of $10.7 million in the prior year period, a decrease of $25.8 million or approximately 240%. The following table summarizes the factors that impacted the decrease in total margin for the three months ended June 30, 2024 as compared to the prior year period:

*(in thousands)*

| Revenue: |  |  |
| --- | --- | ---: |
| ● | Higher average price of bitcoin produced and other revenue | $78,579 |
| ● | Lower amount of bitcoin produced | (23,860) |
| ● | Third-party hosting | 8,661 |
| Cost of revenue – energy, hosting and other: |  |  |
| ● | Higher costs due to growth in hash rate | (60,377) |
| ● | Decrease production on cost of revenues | 29,761 |
| ● | Third-party hosting | (8,049) |
| Cost of revenue – depreciation and amortization: |  |  |
| ● | Increased due to deployment of mining rigs | (47,805) |
| ● | Increased due to third-party hosting services | (2,728) |
|  |  | $(25,818) |

***General and administrative expenses***: General and administrative expenses were $57.1 million for the three months ended June 30, 2024, compared to $19.8 million in the prior year period, an increase of $37.3 million or approximately 188%. General and administrative expenses excluding stock-based compensation was $28.8 million in the current year period compared to $15.4 million in the prior year period. This $13.4 million or approximately 87% increase in expenses was primarily due to the increased scale of the business and acquisitions, including payroll and benefits, professional fees, facility and equipment expenses, and other third-party costs associated with growth in the business. The increase in stock-based compensation of $28.3 million in the current year period compared to $4.5 million in the prior year period resulted from issuing the Company's 2023 performance-based stock awards in January 2024 and the introduction of a new long-term performance-based stock award program for 2024 in May 2024. The Company’s increased headcount from 40 employees as of June 30, 2023 to approximately 109 employees as of June 30, 2024 further contributed to the increase in stock-based compensation expense.

***Change in fair value of digital assets:*** The Company recognized a loss on digital assets of $148.0 million for the three months ended June 30, 2024, compared to a gain of $25.2 million in the prior year period. The $173.2 million or approximately 688% decrease was primarily related to the unfavorable mark-to-market adjustment in the current year period due to the decrease in bitcoin price from $71,289 to $62,668, from March 31, 2024 to June 30, 2024, respectively and the underlying digital assets held at the respective dates. As of June 30, 2024, the Company had 18,488 bitcoin, an increase of 47% compared to the prior year period. The Company views bitcoin on its Condensed Consolidated Balance Sheets an important treasury reserve asset and expects to continue to invest in future.

***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 on December 31, 2027. The commodity swap contract is a derivative instrument and remeasured at fair value each reporting period with changes recognized on the Condensed Consolidated Statements of Operations. The fair value increased for the three months ended June 30, 2024, primarily due to the increase in the electricity forward curve prices during the current period compared to the contracted fixed price.

***Research and development:*** Research and development expenses were $3.8 million for the three months ended June 30, 2024 compared to $0.7 million in the prior year period. These expenses consisted primarily of contractor costs, equipment, supplies, personnel, and related expenses for our mining and technology businesses.

***Early termination expenses***: During the three months ended June 30, 2024, the Company finalized an agreement to early terminate a data center hosting agreement with one of its customers for $5.7 million, net of deposit refund.

***Amortization of intangible assets:*** During the three months ended June 30, 2024, the Company fully amortized the customer relationships acquired in the GC Data Center Equity Holdings, LLC acquisition for $19.3 million, due to the Company’s strategic decision to exit hosting services business and termination of customer relationships during the period. There was no amortization expense of intangible assets in the prior year period.

***Interest income***: Interest income was $2.2 million for the three months ended June 30, 2024 compared to $0.1 million in the prior year period. The $2.1 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.

***Interest expense***: Interest expense was $1.4 million for the three months ended June 30, 2024 compared to $2.8 million in the prior year period. The $1.5 million, or approximately 52% 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.

***Income tax benefit (expense)***: The Company recorded income tax benefit of $31.7 million for the three months ended June 30, 2024 compared to an income tax expense of $0.2 million in the prior year period. The $31.7 million tax benefit was primarily due to the release of its valuation allowance associated with deferred tax assets and the reduction of deferred tax liabilities for the decrease in fair value of bitcoin during the current period.

***Net loss***: The Company recorded a net loss of $199.7 million for the three months ended June 30, 2024 compared to a net loss of $9.0 million in the prior year period. The $190.7 million decrease in earnings was primarily driven by an increase in the average price of bitcoin, an increase in the change of fair value of derivative instrument, and revenues generated from providing hosting service. These increases were offset by an unfavorable mark-to-market adjustment of digital assets, a decrease in bitcoin production, 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.

***Adjusted EBITDA***: Adjusted EBITDA loss was $85.1 million for the three months ended June 30, 2024 compared to an adjusted EBITDA of $35.8 million in the prior year period. The $120.9 million decrease was primarily driven by an unfavorable fair value adjustment to digital assets of $148.0 million and lower production of bitcoin.

### RESULTS OF OPERATIONS

### Six Months Ended June 30, 2024 Compared to the Six Months Ended June 30, 2023

*(dollars in thousands)*

| Revenues | Six Months Ended June 30, 2024 | 2023 | Favorable (Unfavorable) |
| --- | ---: | ---: | ---: |
| Mining | $280,901 | $132,891 | $148,010 |
| Hosting services | 29,436 | — | 29,436 |
| Total revenues | 310,337 | 132,891 | 177,446 |
| **Costs and expenses** |  |  |  |
| Cost of revenues |  |  |  |
| Mining | (157,078) | (88,599) | (68,479) |
| Hosting services | (27,020) | — | (27,020) |
| Depreciation and amortization | (165,803) | (55,008) | (110,795) |
| Total cost of revenues | (349,901) | (143,607) | (206,294) |
| Operating expenses |  |  |  |
| General and administrative expenses | (130,429) | (34,976) | (95,453) |
| Change in fair value of digital assets | 340,808 | 162,560 | 178,248 |
| Change in fair value of derivative | 22,999 | — | 22,999 |
| Research and development | (6,311) | (860) | (5,451) |
| Early termination expenses | (27,757) | — | (27,757) |
| Amortization of intangible assets | (22,439) | — | (22,439) |
| Total operating expenses | 176,871 | 126,724 | 50,147 |
| **Operating income** | 137,307 | 116,008 | 21,299 |
| Gain on investments | 5,236 | — | 5,236 |
| Loss on hedge instruments | (2,292) | — | (2,292) |
| Equity in net earnings of unconsolidated affiliate | 1,308 | — | 1,308 |
| Net loss from extinguishment of debt | — | (333) | 333 |
| Interest income | 4,761 | 910 | 3,851 |
| Interest expense | (2,625) | (6,600) | 3,975 |
| Other non-operating income | 213 | 30 | 183 |
| **Income before income taxes** | 143,908 | 110,015 | 33,893 |
| Income tax expense | (6,394) | (278) | (6,116) |
| **Net income** | $137,514 | $109,737 | $27,777 |

39

| Supplemental information: |  |  |  |
| --- | ---: | ---: | ---: |
| bitcoin (“BTC”) production during the period, in whole BTC (1) | 4,869 | 5,121 | (252) |
| Average bitcoin per day, in whole BTC | 26.8 | 28.3 | (1.5) |
| Total margin (total revenues less total cost of revenues) | $(39,564) | $(10,716) | $(28,848) |
| Total margin excluding the impact of depreciation and amortization: |  |  |  |
| Mining | $123,823 | $44,292 | $79,531 |
| Hosting services | $2,416 | $— | $2,416 |
| General and administrative expenses excluding stock-based compensation | $(50,184) | $(26,580) | $(23,604) |
| Installed Hash Rate (Exahashes per second) - at end of period | 31.5 | 21.8 | 9.7 |
| Energized Hash Rate (Exahashes per second) - at end of period | 31.5 | 17.7 | 13.8 |
| Average Operational Hash Rate (Exahashes per second) | 21.2 | 12.1 | 9.1 |
| Cost per Petahash per day | $42.8 | $51.7 | $(8.9) |
| Share of available miner rewards | 3.2% | 2.9% | 0.3% |
| Number of blocks won | 825 | 635 | 190 |
| Transaction fees as a percentage of total | 8.8% | 6.2% | 2.5% |
| **Reconciliation to Adjusted EBITDA:** |  |  |  |
| **Net income** | $137,514 | $109,737 | $27,777 |
| Exclude: Interest expense | 2,625 | 6,600 | (3,975) |
| Exclude: Income tax expense | 6,394 | 278 | 6,116 |
| **EBIT** | 146,533 | 116,615 | 29,918 |
| Exclude: Depreciation and amortization (2) | 194,363 | 55,008 | 139,355 |
| **EBITDA** | 340,896 | 171,623 | 169,273 |
| Exclude: Stock compensation expense | 80,245 | 8,396 | 71,849 |
| Exclude: Early termination expenses | 27,757 | — | 27,757 |
| Exclude: Gain on investments | (5,236) | — | (5,236) |
| Exclude: Net loss from extinguishment of debt | — | 333 | (333) |
| **Adjusted EBITDA** | $443,662 | $180,352 | $263,310 |

(1) Includes 268 bitcoin representing the Company’s share of the equity method investee, the ADGM entity, for the six months ended June 30, 2024.

(2) Includes approximately $6.1 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 six months ended June 30, 2024.

***Revenues***: The Company generated revenues of $310.3 million for the six months ended June 30, 2024, compared to $132.9 million in the prior year period. The $177.4 million or approximately 134% increase in revenues was primarily driven by a $161.5 million increase in the average price of bitcoin mined, partially offset by a $13.5 million decrease in bitcoin production, and the inclusion of $29.4 million in revenues generated from providing hosting services as a result of the GC Data Center Hosting, LLC acquisition in January of 2024. The average price of bitcoin mined was 125% higher than the average price of bitcoin mined in the prior year period and average daily bitcoin production was 26.8 bitcoin in the current year period compared with 28.3 in the prior year period. The Company produced 252 less bitcoin for the six months ended June 30, 2024 as compared to the prior year period primarily due to the halving event in April 2024, increased global hashrate and the continued impact of unexpected equipment failures at third-party operated sites and transmission line maintenance, partially offset by an improvement in average operational hashrate. Subsequent to June 30, 2024, the third-party site equipment failure and transmission line maintenance was completely resolved.

***Cost of revenues – mining*** during the six months ended June 30, 2024, totaled $157.1 million compared to $88.6 million in the prior year period. The $68.5 million or approximately 77% 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 facilities, which increased hosting and energy costs, compared to the prior year period. Partially offsetting the increase was the impact of unexpected equipment failures and transmission line maintenance, which resulted in downtime that reduced hosting and energy costs. The Company’s Cost per Petahash per day improved from $51.7 to $42.8, or approximately 17.1%, in the six months ended June 30, 2024 when compared to the prior year period, primarily due to increased capacity, improved efficiencies and a reduction of third-party costs. The Company believes Cost per Petahash per day to be a key metric to evaluate its operating costs and expects it to reduce as the Company grows its operations towards 50.0 exahash.

***Cost of revenues – hosting services*** of $27.0 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 date of the acquisition of GC Data Center Equity Holdings, LLC.

***Cost of revenues – depreciation and amortization*** during the six months ended June 30, 2024 totaled $165.8 million compared to $55.0 million in the prior year period. The $110.8 million or approximately 201% increase was primarily due to the deployment of mining rigs since the prior year period from the increased scale of the business and the acquisitions of GC Data Center Holdings, LLC and the Garden City Acquisition.

***Total Margin*** was a loss of $39.6 million in the current year period compared to a loss of $10.7 million in the prior year period, a decrease of approximately $28.8 million. The following table summarizes the factors that impacted the decrease in total margin for the six months ended June 30, 2024 as compared to the prior year period:

*(in thousands)*

| Revenue: |  |
| --- | ---: |
| ● Higher average price of bitcoin produced and other revenue | $161,504 |
| ● Lower amount of bitcoin produced | (13,494) |
| ● Third-party hosting | 29,436 |
| Cost of revenue – energy, hosting and other: |  |
| ● Higher costs due to growth in hash rate | (86,232) |
| ● Decrease production on cost of revenues | 17,753 |
| ● Third-party hosting | (27,020) |
| Cost of revenue – depreciation and amortization: |  |
| ● Increased due to deployment of mining rigs | (105,448) |
| ● Increased due to third-party hosting services | (5,347) |
| **Total margin** | $(28,848) |

***General and administrative expenses***: General and administrative expenses were $130.4 million for the six months ended June 30, 2024, compared to $35.0 million in the prior year period, an increase of $95.5 million or approximately 273%. General and administrative expenses excluding stock-based compensation was $50.2 million in the current year period compared to $26.6 million in the prior year period. The $23.6 million or approximately 89% increase in expenses was primarily due to the increased scale of the business and acquisitions, including payroll and benefits, professional fees, facility and equipment expenses, and other third-party costs associated with the growth in the business. The increase in stock-based compensation of $80.2 million in the current year period and $8.4 million in the prior year period resulted from issuing the Company's 2023 performance-based stock awards in January 2024 and the introduction of a new long-term performance-based stock award program for 2024 in May 2024. The Company’s headcount increased from 40 employees as of June 30, 2023 to 109 employees as of June 30, 2024, further contributed to the increase in stock-based compensation expense.

***Change in fair value of digital assets***: The Company recognized a gain on digital assets of $340.8 million, compared to a gain of $162.6 million in the prior year period. The $178.2 million or approximately 110% increase was primarily related to the increase in bitcoin price from $42,288 to $62,668 from December 31, 2023 to June 30, 2024, respectively and the underlying digital assets held at the respective dates. As of June 30, 2024, the Company had 18,488 bitcoin, an increase of 47% compared to the prior year period. The Company views bitcoin on its Condensed Consolidated Balance Sheets an important treasury reserve asset and expects to continue to invest in future.

***Change in fair value of derivative***: The Company acquired a commodity swap contract as a result of its acquisition of GC Data Center Equity Holdings, LLC. The commodity swap contract hedges price variability in electricity purchases and expires on December 31, 2027. The commodity swap contract is a derivative instrument and remeasured at fair value each reporting period with changes recognized on the Condensed Consolidated Statements of Operations. The fair value increased for the six months ended June 30, 2024, primarily due to the increase in the electricity forward curve prices during the current year period compared to the contracted fixed price.

***Research and development:*** Research and development expenses were $6.3 million for the six months ended June 30, 2024 compared to $0.9 million in the prior year period. These expenses consisted primarily of contractor costs, equipment, supplies, personnel, and related expenses for our mining and technology businesses.

***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 $19.5 million, net of deposit refund. In addition, the Company finalized 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 $8.3 million.

***Amortization of intangible assets:*** During the six months ended June 30, 2024, the Company fully amortized the customer relationships acquired in the GC Data Center Equity Holdings, LLC acquisition for $22.0 million, due to the Company’s strategic decision to exit hosting services business and termination of customer relationships during the period. There was no amortization expense of intangible assets in the prior 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 Company’s revolving credit 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.

***Equity in net earnings of unconsolidated affiliate:*** During the six months ended June 30, 2024, the Company recorded its share of net earnings for its 20% interest in 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 268 bitcoin, a $4.1 million impairment of property, plant and equipment and approximately $6.1 million of depreciation and amortization during the six months ended June 30, 2024.

***Loss on hedge instruments:*** During the six months ended June 30, 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 cross functional 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 six months ended June 30, 2024 and there were no such activities in the prior year period.

***Interest income***: Interest income was $4.8 million for the six months ended June 30, 2024 compared to $0.9 million in the prior year period. The $3.9 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.

***Interest expense***: Interest expense was $2.6 million for the six months ended June 30, 2024 compared to $6.6 million in the prior year period. The $4.0 million or approximately 60% decrease was primarily a result of lower interest costs following the exchange of $416.8 million aggregate principal amount of the Notes for shares of the Company’s common stock in September 2023.

***Income tax expense***: The Company recorded income tax expense of $6.4 million for the six months ended June 30, 2024 compared to an income tax expense of $0.3 million in the prior year period. The $6.4 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.

***Net income***: The Company recorded net income of $137.5 million for the six months ended June 30, 2024 compared to net income of $109.7 million in the prior year period. The $27.8 million or approximately 25% increase in earnings was primarily driven by the favorable mark-to-market adjustment of digital assets, an increase in the average price of bitcoin, an increase in the change of fair value of derivative instruments, and revenues generated from providing hosting services. These increases were partially offset by a decrease in bitcoin production, 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 $443.7 million for the six months ended June 30, 2024 compared to adjusted EBITDA of $180.4 million in the prior year period. The $263.3 million increase was primarily driven by favorable fair value adjustments to digital assets of $340.8 million and an increase in the average price of bitcoin.

### FINANCIAL CONDITION AND LIQUIDITY

The following table presents a summary of the Company’s cash flow activity for the six months ended June 30, 2024 and 2023:

*(in thousands)*

|  | For the Six Months Ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(203,511) | $(142,868) |
| Net cash used in investing activities | (694,587) | (33,951) |
| Net cash provided by financing activities | 808,812 | 192,275 |
| Net increase (decrease) in cash, cash equivalents and restricted cash | (89,286) | 15,456 |
| Cash, cash equivalents and restricted cash — beginning of period | 357,313 | 112,505 |
| Cash, cash equivalents and restricted cash — end of period | $268,027 | $127,961 |

***Cash flows for the six months ended June 30, 2024:*** Cash, cash equivalents and restricted cash totaled $268.0 million at June 30, 2024, a decrease of $89.3 million from December 31, 2023.

Cash flows from operating activities resulted in a use of funds of $203.5 million, as net income, adjusted for non-cash and non-operating items, in the amount of $70.7 million was more than offset by the use of cash of $274.2 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 $280.7 million due to the non-cash adjustment for bitcoin mining revenues and deposits of $16.5 million resulting from increased deposits associated with hosting agreements.

Cash flows from investing activities resulted in a use of funds of $694.6 million, primarily resulting from the use of funds for advances to vendors of $465.3 million, payment for the acquisition of businesses of $275.9 million, capital expenditures of $26.3 million, purchase of digital assets of $19.0 million, purchase of $8.0 million of Auradine’s preferred stock, and an investment in an equity method investee of $13.8 million, partially offset by proceeds from the sale of digital assets of $113.7 million.

Cash flows from financing activities resulted in a source of cash of $808.8 million, primarily from the periodic issuance of common stock under the Company’s 2024 ATM (as defined below) of $834.2 million and the repurchase of shares in settlement of employee taxes upon restricted stock vesting.

***Bitcoin holdings as of June 30, 2024:*** At June 30, 2024, the Company held approximately 18,488 bitcoin on its Condensed Consolidated Balance Sheets with a fair value of $1,158.6 million. The Company’s holdings as of June 30, 2024 excluded 50 bitcoins owned by the Company’s equity method investee, the ADGM Entity, but allocable to the Company, and pending distribution to the Company. At June 30, 2024, the fair value of a single bitcoin was approximately $62,668. As a result, the fair market value of the Company’s bitcoin holdings at June 30, 2024, was approximately $1,158.6 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 U.S. dollars, depending upon operating and market conditions. The Company intends to add to its bitcoin holdings primarily through its production activities and from time to time purchases. The Company historically sold bitcoin as a means of generating cash to fund monthly operating costs and for general corporate purposes. During the six months ended June 30, 2024, the Company purchased 271 bitcoin for $16.1 million. Subsequent to the quarter end, the Company announced acquiring $100.0 million bitcoin as part of its strategy to hold bitcoin and not sell for the foreseeable future. As a result of the Company’s adoption of the aforementioned strategy, the Company anticipates funding its operations and investing activities principally from available cash and cash equivalents and from its financing activities.

***Kaspa holdings as of June 30, 2024:*** In 2023, the Company began evaluating Kaspa as a potential way to diversify its revenue while continuing to utilize its current infrastructure and expertise in digital asset compute. After successfully deploying its first Kaspa ASICs in September 2023, the Company began scaling its operations. At June 30, 2024, the Company held approximately 88,969,525 Kaspa coins on its Condensed Consolidated Balance Sheets with a fair value of $17.1 million. At June 30, 2024, the fair value of a single Kaspa coin was approximately $0.1924. As a result, the fair market value of the Company’s Kaspa holdings at June 30, 2024 was approximately $17.1 million. The Company intends to add to its Kaspa holdings primarily through its production activities. As of now we incur significantly less cost to produce Kaspa in US dollar terms, which helps pay for our expenses and allows us to hold a larger amount of Bitcoin on our Condensed Consolidated Balance Sheets.

***At-the-Market Offering Programs and Proceeds:*** As of June 30, 2024, the Company has sold 17,472,602 shares of common stock for an aggregate purchase price of $344.9 million, net of offering costs, pursuant to the 2024 ATM.

***Liquidity and Capital Resources:*** Cash and cash equivalents, excluding restricted cash, totaled $256.0 million and the fair value of digital asset holdings was $1,175.7 million at June 30, 2024. The combined value of cash and cash equivalents, excluding restricted cash, and digital assets, as of June 30, 2024, was $1,431.8 million.

The Company expects to have sufficient liquidity, including cash on hand 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 MARA;
- Declines in bitcoin prices and/or production, as well as impacts from bitcoin halving events, 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) $110.5 million during the remainder of calendar year 2024, (ii) $595.8 million in total payments during the calendar years 2025 through 2027, and (iii) $1.6 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 $508.0 million that are expected to be delivered during 2024. To date, we have made installment payments totaling $448.0 million. We expect to make periodic payments in accordance with the payment schedule with the final payment expected to occur during 2024.

Assuming the remaining Notes are not converted into common stock, repurchased or redeemed prior to maturity, (i) remaining interest payments relating to the Notes will approximate $1.7 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. Refer to Note 13 – Debt, for further information.

### CRITICAL ACCOUNTING ESTIMATES

The following accounting estimates 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:

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

### 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 digital asset mining rigs, which are largely homogeneous and have approximately the same useful lives. Accordingly, the Company utilizes the group method of depreciation for its digital asset mining rigs. The Company updates the estimated useful lives of its asset group of digital asset 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 is 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 Accounting Standard Codification (“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.

### Loss Contingencies

In the ordinary course of business, the Company may be involved in legal proceedings, claims and governmental and/or regulatory reviews. Management periodically reviews estimates of potential costs to be incurred by the Company in connection with the adjudication or settlement, if any, of these matters. These estimates are developed, as applicable in consultation with outside counsel, and are based on an analysis of potential outcomes. In accordance with ASC 450, *Contingencies*, loss contingencies are accrued if, in the opinion of management, an adverse outcome is probable and such financial outcome can be reasonably estimated. The accruals may change in the future due to new developments in each matter or changes in our litigation strategy. It is possible that future results for any particular quarter or annual period may be materially affected by changes in our estimates or outcomes relating to these matters.

Given the uncertain nature of litigation generally, we are not able in all cases to estimate the amount or range of loss that could result from an unfavorable outcome of the litigation to which we are a party. In view of these uncertainties, we could incur charges in excess of any currently established accruals and, to the extent available, liability insurance. In the opinion of management, any such future charges, individually or in the aggregate, could have a material adverse effect on our consolidated results of operations, financial condition and/or consolidated cash flows.

### 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, 987 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 June 30, 2024, we held approximately 18,488 bitcoin and the fair value of a single bitcoin was approximately $62,668, meaning that the fair value of our bitcoin holdings on that date was approximately $1,158.6 million.

## Controls and procedures

As filed, 5,370 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 Securities Exchange Act of 1934, as amended (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 June 30, 2024 due to a material weakness in internal control over financial reporting as described below.

### 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 June 30, 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, 5,559 characters.

Other than the additional risk factors herein, we are not aware of any additional 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.

***Regulatory changes or actions may restrict the use of digital assets or the operation of the Bitcoin network in a manner that adversely affects an investment in our securities.***

Until recently, little regulatory attention was directed toward digital assets and the Bitcoin network by U.S. federal and state governments, foreign governments and self-regulatory agencies. As digital assets have grown in popularity and in market size, the Federal Reserve Board, U.S. Congress and certain U.S. agencies (e.g., the Commodity Futures Trading Commission, the SEC, the Financial Crimes Enforcement Network and the Federal Bureau of Investigation) have begun to examine the operations of the Bitcoin network, digital asset users and the digital asset exchange market. Many of these entities have called for heightened regulatory oversight. As the regulatory and legal environment evolves, including as a result of the 2024 U.S. presidential and congressional elections, our business and industry, and the price of digital assets, may be adversely affected.

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

Furthermore, one or more countries such as China and Russia may take regulatory actions in the future that severely restricts the right to acquire, own, hold, sell or use digital assets or to exchange digital assets for fiat currency. Such an action may also result in the restriction of ownership, holding or trading in our securities.

***Exercise or conversion of warrants and other convertible securities, along with new issuances of our common stock, will dilute our stockholder’s percentage of ownership.***

We have issued convertible securities, options and warrants to purchase shares of our common stock to our officers, directors, consultants and certain stockholders. In the future, we may grant additional options, warrants and convertible securities. The exercise, conversion or exchange of options, warrants or convertible securities, including for other securities, will dilute the percentage ownership of our stockholders. The dilutive effect of the exercise or conversion of these securities may adversely affect our ability to obtain additional capital. The holders of these securities may be expected to exercise or convert such options, warrants and convertible securities at a time when it would be able to obtain additional equity capital on terms more favorable than such securities or when our common stock is trading at a price higher than the exercise or conversion price of the securities. The exercise or conversion of outstanding warrants, options and convertible securities will have a dilutive effect on the securities held by our stockholders. We have in the past, and may in the future, exchange outstanding securities for other securities on terms that are dilutive to the securities held by other stockholders not participating in such exchange.

Additionally, our stockholders have experienced and will continue to experience dilution due to the issuance of our common stock through at-the-market offerings. Dilution could intensify as a result of our strategy to hold all of the bitcoin on our balance sheet, which may necessitate increased issuances through at-the-market offerings to fund our operations.

***Our digital asset lending arrangements expose us to risks of nonrepayment by borrowers and operational and cybersecurity failures.***

From time to time, we may generate income from digital asset lending arrangements. Lending digital assets involves risk of default, particularly in a highly volatile market. Borrowers may fail to repay their loans due to market downturns, fraud or other financial challenges. As our digital asset loans are unsecured, they would rank subordinate to a borrower’s secured loans if the borrower becomes insolvent, which could result in substantial financial losses.

Additionally, digital asset lending platforms are susceptible to operational and cybersecurity risks. Technical failures, software bugs and system outages can disrupt lending activities or cause transaction errors. Cybersecurity breaches and attacks could result in the loss or theft of our loaned digital assets, leading to significant financial damage.

Filed Aug 1, 2024.
Source: SEC EDGAR, the filing index for accession 0001628280-24-034196. Last ingested by Listed: Oct 24, 2026, 15:12 ET. No prices; not investment advice.