MARA Holdings, Inc. (MARA)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with our Consolidated Financial Statements and the related notes and other financial information included elsewhere in this Annual Report. Some of the information contained in this MD&A or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. Please review Part I, Item 1A. “Risk Factors” of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following MD&A.

BUSINESS OVERVIEW

MARA is a vertically integrated energy and digital infrastructure company that leverages high-intensity compute, such as bitcoin mining, to monetize underutilized energy assets and optimize power management. As of December 31, 2024, our total energy portfolio consisted of approximately 1.7 gigawatts (“GW”) of capacity with 16 data centers deployed across North America, the Middle East, Europe, and Latin America. We believe we are the world’s largest publicly traded bitcoin mining company, with the majority of our production in the United States.

Historically, we were focused on establishing MARA as the largest and most efficient bitcoin miner. As of December 31, 2024, we operated approximately 400,000 bitcoin mining ASICs, capable of producing 53.2 EH/s with an efficiency of 19.2 joules per terahash, which is among the most efficient in the industry.

In 2024, we began our strategic transformation into a vertically integrated energy and digital infrastructure company to provide services and products, such as load management and immersion cooling systems, to data center operators and the energy sector. To support this transformation, we secured 300% more energy capacity, expanding our total energy portfolio from approximately 0.5 GW to approximately 1.7 GW, while increasing our owned data center portfolio capacity from nearly zero at the beginning of 2024 to approximately 70% to date. As part of this initiative, we secured approximately 1.2 GW of nameplate capacity across the United States.

In 2024, we adopted a full HODL strategy, retaining all bitcoin mined in our operations or opportunistically purchased in the open market using available cash and proceeds from private offerings of an aggregate principal amount of $2.2 billion of 2024 Convertible Notes. Using available cash and proceeds from the 2024 Convertible Notes, we purchased 22,065 bitcoin at an average price of $87,205 per bitcoin in 2024. As of December 31, 2024, we held approximately 44,893 bitcoin, of which 10,374 were loaned or collateralized.

In 2025, we expect to remain the dominant player in bitcoin mining while expanding our footprint in energy generation and investing in research and development to establish our presence in AI and adjacent markets, creating additional revenue opportunities over the long term. We believe the AI industry is shifting towards inference computing, which requires distributed, low-latency, and energy-efficient infrastructure. To support this shift, we are developing modular at the edge infrastructure solutions, including next-generation two-phase immersion cooling (“2PIC”) systems designed to improve efficiency and sustainability. We are also exploring power management solutions, including load balancing, to provide services to the variable energy demands of AI inference workloads. We intend to continue vertically integrating and further reduce energy costs.

HIGHLIGHTS

2024 was a transformative year for MARA, as we more than doubled our exahash, significantly enhancing our mining capabilities and reinforcing our position as a leader in the bitcoin mining space. Historically, we utilized an asset-light strategy to significantly grow our market share. In 2024, we strategically transitioned into a vertically integrated energy and digital infrastructure company by acquiring five data centers which we own and operate, increasing our percentage of owned capacity to approximately 70%. This is a critical step toward achieving greater operational control and efficiency.

Additionally, we strengthened our bitcoin holdings through both mining activities and strategic use of convertible debt, further enhancing our financial position. As we continue to scale, our goal is for MARA to be recognized

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primarily as an energy and digital infrastructure company, transforming every available stranded electron into digital gold – bitcoin – while unlocking new value for our stakeholders in the evolving energy and digital asset landscape.

Acquisitions

•Granbury, TX and Kearney, NE: In January 2024, we acquired two operational bitcoin mining sites totaling 390 MW of nameplate capacity. We believe our state-of-the-art 290 MW nameplate capacity data center in Granbury is one of the largest containerized liquid immersion-cooled sites worldwide. Since acquiring the site, profitability at the site has nearly doubled, we grew our hashrate to 12.1 EH/s in December 2024 and cost per petahash improved 45% during the year to 29.8. In addition, we have made significant investments in the local community and continue to be a strategic partner.

•Garden City, TX: In April 2024, we acquired an operational bitcoin mining site with 132 megawatts of operational capacity and 200 MW of nameplate capacity.

•Hannibal, Hopedale, and Findlay, OH: In November 2024, we acquired two operational data centers with 222 MW of interconnect-approved capacity. In addition to the acquired data centers, we began developing a 150 MW greenfield operational data center in Findlay, Ohio.

•Hansford County, TX: In February 2025, we acquired a wind farm with 240 MW of interconnection capacity and 114 MW of nameplate wind capacity.

Digital Assets

•Bitcoin Halving: On April 19, 2024, a halving event occurred on the Bitcoin network. The 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, are not directly impacted by the halving.

•Kaspa Mining: During the second quarter of 2024, we announced our Kaspa mining operations, and have continued to utilize Kaspa sales proceeds to fund operations, thereby enabling us to hold a larger amount of bitcoin.

•Line of Credit: In October 2024, we secured a $200.0 million line of credit, collateralized by a portion of our bitcoin holdings. We used the funds for general corporate purposes. As of December 31, 2024, approximately 2,997 bitcoin remained collateralized in connection with the line of credit.

•Bitcoin Lending Arrangements: Throughout the fourth quarter of 2024, we entered into lending arrangements with various counterparties to generate yield from our loaned bitcoin. As of December 31, 2024, a total of 7,377 bitcoin, or approximately $688.7 million, has been loaned to counterparties.

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Bitcoin HODL and Acquisition Strategy

During 2024, we adopted a HODL strategy, retaining all bitcoin mined in our operations or opportunistically purchased in the open market using available cash and proceeds from private offerings of an aggregate principal amount of $2.2 billion of 2024 Convertible Notes in private offerings. Using available cash and proceeds from the 2024 Convertible Notes, we purchased 22,065 bitcoin at an average price of $87,205 per bitcoin in 2024.

The following table presents our bitcoin digital asset holdings (including loaned and collateralized bitcoin) and the fair value per coin:

Low Cost Strategy

We aim not only to own and operate our infrastructure, but also energy generation assets. To achieve this, we will continue to identify potential sites where we can generate low cost energy. By owning energy assets, we can optimize how power is consumed, stored, and distributed. This allows us to better serve data centers, AI operators, and energy markets. We can co-locate with them, balance their load, and generate revenue to offset costs in ways that grid-reliant miners simply cannot. We have spent the last several months methodically executing a plan to build infrastructure that is not just about mining bitcoin, but about being the lowest-cost producer in an environment where efficiency and adaptability are paramount.

•We launched a 25 MW micro data center initiative at wellheads in Texas and North Dakota, converting excess flared gas into power for our operations. These sites reduce our reliance on grid power and provide us with the lowest cost per bitcoin of our currently operational sites.

•The wind farm in Hansford County, Texas will utilize prior-generation ASIC mining hardware to provide an avenue for the hardware to continue operating profitably beyond its normal lifecycle.

•In Finland, we deployed two pilot projects to recycle heat from our operations, providing heat to communities with a total population of approximately 80,000 residents. These sites offset our production costs through heat sales while reducing the local communities’ reliance on high carbon emitting biomass and delivering renewable and more affordable heating to communities.

TRENDS AND UNCERTAINTIES IMPACTING OUR BUSINESS AND INDUSTRY

Bitcoin Value

Our revenues are generally comprised of block rewards earned in bitcoin as a result of successfully solving blocks, and transaction fees earned for verifying transactions in support of the blockchain. After the halving event of April 2024, the current reward for each solved block is equal to 3.125 bitcoin plus transaction fees. The impacts of halving on our results of operations and financial condition may be exacerbated by changes in the market value of bitcoin, which has historically been subject to significant volatility. For example, as of December 31, 2024, the price of a bitcoin was $93,354, compared to $42,288 as of December 31, 2023. We held approximately 44,893 bitcoin, including loaned and collateralized bitcoin, on our Consolidated Balance Sheets with a carrying value of approximately $4.2 billion as of December 31, 2024, which value may be materially impacted as the market value of bitcoin fluctuates. Management believes, given our recent investments, coupled with our relative position and liquidity, we are well-positioned to execute on our long-term growth strategy.

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Mining Rig Capacity, Efficiency, and Hashrate

In response to an increased demand for bitcoin, we anticipate additional mining operators entering the market and existing competitors scaling their operations, which will grow the blockchain’s network hashrate and difficulty associated with solving a block. As the overall hashrate and difficulty of the Bitcoin network increases, we will need to continue growing our hashrate and remain competitive. During 2024, we mined 9,430 bitcoin, a decrease of 3,422 bitcoin, or 27%, over the prior year period. As of December 31, 2024, we operated approximately 400,000 mining rigs globally, with energized hashrate approximately 53.2 exahashes per second. To stay competitive, we remain focused on strategically deploying additional mining rigs and scaling our operations, while managing our fleet as it ages along the obsolescence curve. In addition, we continuously evaluate strategic opportunities to support our growth strategy, and seek to enhance operational efficiencies by utilizing efficient mining rigs and securing contracts with price protection clauses.

Energy Cost

Energy cost is the most significant cost driver for mining and represented 40.8%, as a percentage of our owned mining revenues for the year ended December 31, 2024. This excludes energy costs from third party hosted sites.

Energy cost can be highly volatile and sensitive to geopolitical events and weather conditions, such as winter storms and earthquakes, which impact supply and demand for power regionally. All of our owned mining sites and our hosted miners are subject to variable prices and market rate fluctuations with respect to wholesale energy costs. Such costs are governed by various power purchase agreements, and energy prices can change hour to hour and by location. While this renders energy prices less predictable, it also gives us greater ability and flexibility to actively manage the energy we consume with a goal of increasing profitability and energy efficiency. When such events occur, we may curtail our operations to avoid using power at increased rates. Although we do not directly receive compensation for curtailment, the dispatchable load of our bitcoin mining operations helps balance the grid and provides electricity to communities when in need. The average price for direct energy we paid in our owned facilities for the year ended December 31, 2024 was $0.04 per KWh.

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 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.

We define adjusted EBITDA as (a) GAAP net income plus (b) adjustments to add back the impacts of (1) interest, (2) income taxes, (3) depreciation and amortization and (4) adjustments for non-cash and/or non-recurring items which currently include (i) stock compensation expense, (ii) change in fair value of derivative instrument, (iii) early termination expenses and other, (iv) net gain from extinguishment of debt. We define 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. We rely primarily on our Consolidated Financial Statements to understand, manage and evaluate our 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 are not recognized measurements under GAAP. When analyzing our operating results, investors should use them in addition to, but not as an

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alternative for, the most directly comparable financial results calculated and presented in accordance with GAAP. Because our calculation of these non-GAAP financial measures may differ from other companies, our presentation of these measures may not be comparable to similarly titled measures of other companies.

Certain prior period information has been reclassified to conform to the current period presentation.

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RESULTS OF OPERATIONS

In accordance with Item 303 of Regulation S-K, we have excluded the discussion of 2022 results in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as this discussion can be found in our Annual Report on Form 10-K filed on February 28, 2024, as amended by Amendment No.1 filed on May 24, 2024.

The following table sets forth items derived from our Consolidated Statements of Operations for the years ended December 31, 2024 and 2023:

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(1) Includes 382 and 112 bitcoin representing our share of the equity method investee, the ADGM entity, for the year ended December 31, 2024 and 2023, respectively.

(2) We define Energized Hashrate as the total hashrate that could theoretically be generated if all mining rigs that have been operational are currently in operation and running at 100% of manufacturers’ specifications. We use this metric as an indicator of progress in bringing mining rigs online. We believe this metric is a useful indicator of potential bitcoin production. However, metrics cannot be tied directly to any production level expected to be actually achieved as (a) there may be delays in the energization of hashrate (b) we cannot predict when operational mining rigs may be offline for any reason, including curtailment or machine failure and (c) we cannot predict Global Hashrate (and therefore our share of the Global Hashrate), which has a significant impact on our ability to generate bitcoin in any given period.

(3) Direct Energy Cost per bitcoin is calculated as the amounts paid to utility companies for power consumed divided by the quantity of bitcoin produced during the period related to our owned mining operations.

(4) Cost per KWh is calculated using the amounts paid to utility companies for power consumed divided by the KWh consumed. Prior to 2024, the Company operated an asset-light strategy and did not own mining facilities.

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(5) Cost per Petahash per day is calculated using mining cost of revenues, excluding depreciation and amortization, divided by the daily average operational hashrate online during the period, excluding our share of the hashrate for the equity method investee, the ADGM Entity, by a factor of 1,000.

(6) BTC Yield is a key performance indicator that represents the percentage change period-to-period of the ratio between our bitcoin holdings and our Assumed Fully Diluted Shares Outstanding. Assumed Fully Diluted Shares Outstanding refers to the aggregate of our actual shares of common stock outstanding as of the end of the applicable period plus all additional shares that would result from the assumed conversion of all outstanding convertible notes, exercise of all outstanding warrants and settlement of all outstanding restricted stock units and performance-based restricted stock units.

(7) Average cost of BTC mined is calculated using the bitcoin mining cost of revenues, excluding depreciation and amortization, divided by the bitcoin production, excluding our share of the bitcoin produced for the equity method investee, the ADGM entity. Average cost of BTC produced is calculated using the total cost of bitcoin purchased divided by the total bitcoin purchased.

(8) Includes approximately $12.4 million and $2.1 million of depreciation and amortization from our share in the results of our equity method investee, the ADGM entity, reported in “Equity in net earnings of unconsolidated affiliate” for the year ended December 31, 2024 and 2023, respectively, on the Consolidated Statements of Operations.

(9) Early termination expenses represent amounts recognized as the cost to early terminate data center hosting agreements in addition to the gain on investments during the period.

Revenues: We generated revenues of $656.4 million for the year ended December 31, 2024, compared to $387.5 million in the prior year period. The $268.9 million or approximately 69% increase in revenues was primarily driven by a $326.7 million increase in the average price of bitcoin mined, which was partially offset by a $111.3 million decrease in bitcoin production due to the April 2024 halving, and the inclusion of $31.6 million in revenues generated from providing hosting services as a result of acquisitions during 2024. The average price of bitcoin mined was 120% higher than the average price of bitcoin mined in the prior year period and average daily bitcoin production was 25.8 bitcoin in the current year period compared with 35.2 in the prior year period. We produced 3,422 less bitcoin for the year ended December 31, 2024 compared to the prior year period primarily due to the halving event in April 2024, increase in global hashrate and the impact of unexpected equipment failures at third-party operated sites and transmission line maintenance during the second and third quarters of 2024, partially offset by an increase in our share of the network hashrate.

Cost of revenues – mining during the year ended December 31, 2024 totaled $381.6 million compared to $223.3 million in the prior year period. The $158.3 million or approximately 71% increase was primarily driven by the growth in our hashrate from the deployment and energization of mining rigs 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. We believe Cost per Petahash per day to be a key metric to evaluate our operating costs. Our Cost per Petahash per day improved to $38.6 from $46.4, or approximately 17%, in the year ended December 31, 2024 when compared to the prior year period, primarily due to strategic acquisitions with more efficient cost structures and deployment of more efficient miners. Our Direct Energy Cost per bitcoin for owned mining sites was $28,801.

Cost of revenues – hosting services during the year ended December 31, 2024 totaled $30.4 million which includes cost of power and other hosting related operating costs to provide hosting services as a result of the GC Data Center Acquisition and the Arkon Acquisition. As of December 31, 2024, we exited a majority of our hosting facilities to strategically focus on our owned mining business.

Cost of revenues – depreciation and amortization during the year ended December 31, 2024 totaled $403.7 million compared to $179.5 million in the prior year period. The $224.2 million or approximately 125% increase was primarily due to the deployment of mining rigs since the prior year period, the acquisitions of GC Data Center Acquisition, the Garden City Acquisition and the Arkon Acquisition and overall increased scale of the business.

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Total margin excluding impact of depreciation and amortization for the year ended December 31, 2024 was $244.3 million compared to $164.2 million for the prior year period. The following table summarizes the factors that impacted the increase in total margin excluding impact of depreciation and amortization for the year ended December 31, 2024 compared to the prior year period.

General and administrative expenses: General and administrative expenses were $272.1 million for the year ended December 31, 2024, compared to $92.4 million in the prior year period, an increase of $179.7 million or approximately 194%. General and administrative expenses excluding stock-based compensation was $114.4 million in the current year period compared to $59.8 million in the prior year period. The $54.7 million or approximately 91% increase in expenses was primarily due to the increased scale of the business and our strategic shift to an asset-heavy strategy, including payroll and benefits, professional fees, facility and equipment repair and maintenance expenses, and other third-party costs associated with growth in the business. The increase in stock-based compensation of $32.6 million in the prior year period to $157.6 million in the current year was primarily due to (1) restricted stock unit awards related to 2023 performance awarded and partially expensed in 2024, (2) 2024 performance-based restricted stock units awarded and partially expensed in 2024, (3) an accounting charge related to the modification of our peer index to consist exclusively of publicly traded bitcoin mining companies and (4) threefold increase in our headcount from 48 to 152 due to growth and a pivot towards an asset-heavy strategy. As such, 2024 stock-based compensation expense reflects the impact of two annual grant awards.

Change in fair value of digital assets: We recognized a gain on digital assets of $813.8 million, compared to a gain of $331.5 million in the prior year period. The $482.3 million or approximately 146% increase was primarily related to the increase in bitcoin price from $42,288 to $93,354 from December 31, 2023 to December 31, 2024, respectively and the underlying digital assets held at the respective dates. As of December 31, 2024, we had 44,893 bitcoin, an increase of 197% compared to the prior year period, primarily due to the 22,065 bitcoin purchased throughout the year ended 2024. We view bitcoin on our Consolidated Balance Sheets as an important treasury reserve asset and expect to continue to invest in the future.

Change in fair value of derivative instrument: We acquired a commodity swap contract as a result of our acquisition of GC Data Center Acquisition. The commodity swap contract hedges price variability in electricity purchases and expires on December 31, 2027. The commodity swap contract meets the definition of a derivative instrument and is remeasured at fair value each reporting period with changes recognized on the Consolidated Statements of Operations. The fair value of this derivative decreased for the year ended December 31, 2024, primarily due to unfavorable movement in electricity forward curve prices during the current year period.

Research and development: Research and development expenses were $13.2 million for the year ended December 31, 2024 compared to $2.8 million in the prior year period. These expenses consisted primarily of contractor costs, supplies, personnel, and related expenses for our mining and technology businesses.

Early termination expenses: On January 30, 2024, we 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 Acquisition. MARA and USBTC agreed to terminate the acquired operating agreement for a termination fee of $19.6 million, net of deposit refund. In addition, during the year ended December 31, 2024, we terminated the remaining hosting agreements with customers from the GC Data Center Acquisition, and recognized early termination expenses of $18.4 million, to expand self-mining capacity.

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Amortization of intangible assets: During the year ended December 31, 2024, we fully amortized the customer relationships acquired in the GC Data Center Acquisition for $22.0 million, due to our strategic decision to exit hosting services business and termination of customer relationships. There was no amortization expense of intangible assets in the prior year period.

Change in fair value of digital assets - receivable, net: During the year ended December 31, 2024, we entered into four separate lending agreements with various counterparties and collateralized a portion of our bitcoin holdings in connection with a line of credit. We recognized a gain on digital assets - receivables, net of $299.8 million for the year ended December 31, 2024. There were no such activities in the prior year period.

Gain on investments: During the year ended December 31, 2024, we purchased additional shares in Auradine, Inc. (“Auradine”) preferred stock and recorded a gain on investments of $5.2 million to adjust the carrying amount of our investment. Additionally, during the year ended December 31, 2024 we wrote-down a previous SAFE investment for a loss of $1.0 million.

Net gain from extinguishment of debt: During the year ended December 31, 2024, in connection with the issuance of the June 2031 Notes and March 2030 Notes, we entered into agreements to repurchase approximately $263.2 million principal amount of the December 2026 Notes and as a result, recorded a gain of $13.1 million. In the prior year period, we entered into agreements with certain holders of December 2026 Notes to exchange an aggregate $416.8 million principal amount of December 2026 Notes for 31,722,417 shares of our common stock and recorded a gain in the amount of $82.6 million.

Loss on hedge instruments: Loss on hedge instruments during the year ended December 31, 2024, was $0.6 million compared to $17.4 million in the prior year period for losses related to bitcoin hedging activities. The decrease was due to a larger loss in the prior period related to the increase in the fair value of the sold call portion of the collar as a result of the significant increase in the fair value of bitcoin. These modified collars protect against the downside price risk of bitcoin while retaining some upside exposure. There were various outstanding bitcoin hedging transactions as of the year ended December 31, 2024 and 2023.

Equity in net earnings of unconsolidated affiliate: During the year ended December 31, 2024, we recorded our share of net losses for our 20% interest in the ADGM Entity in the amount of $1.5 million, compared to $0.6 million in the prior year period. Our share of the ADGM Entity’s operating results included earnings from the production of 382 bitcoin, a $4.1 million impairment of property and equipment and approximately $12.4 million of depreciation and amortization during the year ended December 31, 2024, whereas in the prior year period, our share of ADGM Entity’s operating results included earnings from production of 112 bitcoin and approximately $2.1 million of depreciation and amortization.

Interest income: Interest income was $16.7 million for the year ended December 31, 2024 compared to $2.8 million in the prior year period. The $13.9 million increase was primarily due to the higher average balance of cash and cash equivalents and interest earned on loaned bitcoin in the current year period.

Interest expense: Interest expense was $13.0 million for the year ended December 31, 2024 compared to $10.4 million in the prior year period. The $2.6 million or approximately 26% increase was a result of the exchange of $416.8 million aggregate principal amount of the December 2026 Notes for shares of our common stock in September 2023 and the issuance of the 2024 Convertible Notes during the year ended December 31, 2024.

Other non-operating loss: During the year, we launched a program to generate additional return by loaning bitcoin and collateralized a portion of our bitcoin holdings to secure a line of credit. We recorded a corresponding allowance for credit loss of $8.4 million, for the bitcoin loaned and collateralized during the year ended December 31, 2024. There were no such activities in the prior year period.

Income tax benefit (expense): We recorded income tax expense of $75.5 million for the year ended December 31, 2024 compared to an income tax expense of $16.4 million in the prior year period. The $75.5 million income tax expense primarily arises from the release of the valuation allowance on deferred tax assets, driven by the increase in bitcoin’s fair value and positive forecasts for its future value.

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Net income: We recorded net income of $541.0 million for the year ended December 31, 2024 compared to net income of $261.2 million in the prior year period. The $279.8 million increase in net income was primarily driven by a $85.2 million increase in operating income and a $299.8 million change in fair value of digital assets - receivable, net, partially offset by a $69.1 million decrease in net gain from the extinguishment of debt and a $59.1 million income tax expense in the current period compared to the prior year period.

Adjusted EBITDA: Adjusted EBITDA was $1.2 billion for the year ended December 31, 2024 compared to adjusted EBITDA of $417.1 million in the prior year period. The $815.1 million increase was primarily due to an $80.2 million margin improvement from higher average bitcoin price mined at a lower Cost per Petahash per day and a $782.1 million increase in the change in fair value of digital assets, partially offset by an $54.7 million increase in general and administrative excluding stock-based compensation.

FINANCIAL CONDITION AND LIQUIDITY

The following table presents a summary of our cash flow activity for the years ended December 31, 2024 and 2023:

Cash flows for the year ended December 31, 2024: Cash, cash equivalents and restricted cash totaled $403.8 million at December 31, 2024, an increase of $46.5 million from December 31, 2023.

Cash flows from operating activities resulted in a use of funds of $677.0 million, as net income, adjusted for non-cash and non-operating items, in the amount of $121.6 million was more than offset by the use of cash of $798.6 million from changes in operating assets and liabilities. When we produce and hold bitcoin on our Consolidated Balance Sheets, we exclude such produced and held bitcoin from our operating cash flows. If we monetize 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 $624.7 million due to the non-cash adjustment for bitcoin mining revenues and deposits of $189.6 million resulting from increased deposits associated with hosting agreements and a surety bond.

Cash flows from investing activities resulted in a use of funds of $3.2 billion, primarily resulting from the use of funds for advances to vendors of $817.3 million, purchase of digital assets of $1.9 billion from the issuance of 2024 Convertible Notes, payment for the acquisition of businesses of $335.6 million as we increased our percentage of owned capacity to approximately 70%, acquiring 812 MW of nameplate capacity throughout the year ended December 31, 2024, capital expenditures of $250.8 million, partially offset by proceeds from the sale of digital assets of $152.3 million.

Cash flows from financing activities resulted in a source of cash of $4.0 billion, primarily from the periodic issuance of common stock under our 2024 ATM of $1.9 billion, the issuance of the 2024 Convertible Notes of $2.2 billion, net of issuance costs, partially offset by the repayment of $247.3 million of the December 2026 Notes.

Cash flows for the year ended December 31, 2023: Cash and cash equivalents totaled $357.3 million at December 31, 2023, an increase of $244.8 million from December 31, 2022.

Bitcoin holdings as of December 31, 2024: At December 31, 2024, we held a total of 44,893 bitcoin, including loaned and collateralized bitcoin, on our Consolidated Balance Sheets with a total fair value of $4.2 billion. The fair value of a single bitcoin was approximately $93,354 at December 31, 2024.

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Approximately 7,377 of our total bitcoin holdings were loaned to third parties to generate additional return and 2,997 bitcoin were utilized as collateral for borrowings. Loaned and collateralized bitcoin are classified as “Digital asset - receivables, net” on the Consolidated Balance Sheets with a carrying value of $960.1 million.

The remaining 34,519 of unrestricted bitcoin were classified as long-term digital assets, as part of our strategy to hold bitcoin on the Consolidated Balance Sheets with a fair value of $3.2 billion. Our holdings as of December 31, 2024 excluded 51 bitcoin held by our equity method investee, pending dividend to us.

We expect that our 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. We intend to add to our bitcoin holdings primarily through our production activities and from time to time purchases. During the year ended December 31, 2024, we purchased 22,065 bitcoin for $1.9 billion. We purchased bitcoin from cash on hand and from the proceeds from the issuances of the 2024 Convertible Notes throughout the year, as part of our strategy to hold bitcoin and not sell for the foreseeable future. As a result of our adoption of the aforementioned strategy, we anticipate funding our operating and investing activities principally from available cash and cash equivalents and from our financing activities.

Kaspa holdings as of December 31, 2024: In 2023, we began evaluating Kaspa as a potential way to diversify our revenue while continuing to utilize our current infrastructure and expertise in digital asset compute. At December 31, 2024, we held approximately $4.3 million, or 34,817,098 Kaspa coins, on our Consolidated Balance Sheets. During the year ended December 31, 2024, we incurred significantly less cost to produce Kaspa compared to bitcoin, which helps pay for our expenses and allows us to hold a larger amount of bitcoin on our Consolidated Balance Sheets.

At-the-Market Offering Programs and Proceeds: As of December 31, 2024, we sold 93,411,158 shares of common stock for an aggregate purchase price of $1.9 billion, net of commission and offering expenses of $47.5 million, pursuant to our at-the-market offerings.

Liquidity and Capital Resources: Cash and cash equivalents, excluding restricted cash, totaled $391.8 million and the fair value of digital asset holdings, including loaned and collateralized bitcoin, was $4.2 billion at December 31, 2024. The combined value of cash and cash equivalents, excluding restricted cash, and digital assets, including loaned and collateralized bitcoin, totaled nearly $4.6 billion as of December 31, 2024.

During 2024, our primary sources of liquidity and capital resources were proceeds from convertible notes issuances, sales under our ATM, sales of digital assets, lending facilities and available cash and cash equivalents. During the year ended December 31, 2024, we significantly reduced our reliance solely on ATM. Our ATM usage represented 43% of our cash needs, compared to 97% in the prior year period. We expect as commercial banks open up our sector due to abolishment of Staff Accounting Bulletin (“SAB”) 121, as rescinded by SAB 122, that we will have expanded access to traditional financing, such as debt financing, project financing and other capital.

While we classify our digital assets and digital asset receivables as long-term, consistent with the announced HODL strategy, both asset types are readily convertible to cash, and therefore considered a liquid resource.

We expect to have sufficient liquidity, including cash on hand and access to public capital markets, to support ongoing operations in the next 12 months and beyond. We will continue to seek to fund our business activities, and especially our growth opportunities, through the public capital markets, primarily through periodic equity issuances using our at-the-market facilities.

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

•Failure to effectively execute our growth strategies;

•Declines in bitcoin prices and/or production, as well as impacts from bitcoin halving events, which would impact both the value of our bitcoin holdings and our ongoing profitability;

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•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

We contract with service providers for hosting our equipment and operational support in data centers where our equipment is deployed. Under these arrangements, we expect to pay at a minimum approximately (i) $471.3 million in total payments during the calendar years 2025 through 2027, and (ii) $9.9 million in total payments during the calendar years 2028 through 2029. Under certain of these arrangements, we are required to pay variable pass-through power and service fees in addition to these estimated minimum amounts.

We have purchase agreements to purchase miners and other mining equipment for a total purchase price of $962.7 million. As of December 31, 2024, we have made installment payments totaling $823.5 million. We expect to make periodic payments in accordance with the payment schedule with the final payment expected to occur during 2025.

Assuming the remaining outstanding 1.0% Convertible Senior Notes due 2026 (the “December 2026 Notes”) and the 2024 Convertible Notes (collectively, the “Convertible Notes”) are not converted into common stock, repurchased or redeemed prior to maturity, (i) annual interest payments of approximately $0.7 million in each calendar year from 2025 through 2026 in connection with the December 2026 Notes and annual interest payments of approximately $6.4 million in each calendar year from 2025 through 2031 in connection with the 2.125% Convertible Senior Notes due 2031 and (ii) principal for each of the Convertible Notes upon maturity, for a total of $2.3 billion, will be payable under the terms of the Convertible Notes. Refer to Note 17 – Debt in the notes to our Consolidated Financial Statements included in this Annual Report for further information.

We have operating and finance lease obligations related to land and office buildings. We expect to make payments of $1.9 million and $0.2 million related to operating and finance leases, respectively, in 2025 and $32.3 million and $89.6 million related to operating and finance leases, respectively, thereafter. Refer to Note 18 – Leases in the notes to our Consolidated Financial Statements included in this Annual Report, for further information.

On October 15, 2024, we announced securing a $200.0 million line of credit, collateralized by approximately 2,997 of our bitcoin holdings. We used the funds for general corporate purposes. As of October 17, 2024, the facility was fully utilized.

CRITICAL ACCOUNTING ESTIMATES

The following accounting estimates relate to the significant areas involving management’s judgments and estimates in the preparation of our 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 - receivable, net

•Long-lived assets

•Income taxes

•Assets acquired and liabilities assumed in a business combination

•Goodwill impairment

•Loss contingencies

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Digital assets - receivable, net

When we loan digital assets to a third-party entity, we first evaluate whether to derecognize such digital assets based on an evaluation of relevant control and asset derecognition considerations that include whether:

•We have transferred present rights to the economic benefits associated with the digital asset for a different right to receive digital assets in the future;

•We cannot sell, pledge, loan, or otherwise use the lent digital assets while the loan is outstanding, as those rights have been transferred to the borrower;

•Inherent in the realization of the economic benefits associated with the digital asset receivable is exposure to credit risk of the third-party entity; and

•The third-party entity that holds the digital assets can deploy those assets at its discretion for the duration of the lending arrangement and bears the risk of loss or theft of those assets, and otherwise has the ability to direct the use of the assets transferred.

If we conclude derecognition is appropriate, we derecognize the loaned digital assets that we no longer control and recognizes a right to receive back in the future such loaned digital assets.

In accordance with ASU 2023-08, digital asset receivable is recorded at the fair value of the underlying digital assets. Throughout the period that the digital asset receivable is outstanding, the receivable will be measured at fair value of the underlying loaned digital asset with changes recorded in other non-operating income (loss) in current period earnings.

At loan commencement and throughout the loan period, we consider and account for the credit risk of the borrower using the principles in Topic 326 – Financial Instruments - Credit Losses (“Topic 326”) to measure any credit impairment. The digital asset receivable is presented net of any allowance for credit losses. We utilize the probability of default (“PD”) loss given default (“LGD”) approach to estimating the allowance for credit loss (“ACL”) at origination and subsequent reporting periods. In order to apply the PD LGD approach, management considers the lifetime of the digital asset receivable, the reasonable and supportable forecast period, and the PD LGD. We use each instrument’s life of loan period for estimating current expected credit losses, unadjusted by any prepayment risk as any risk would be immaterial to either the repayment in kind or the accrued loan fee receivable.

Long-Lived Assets

We have 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. Our property and equipment is primarily composed of digital asset mining rigs, which are largely homogeneous and have approximately the same useful lives. Accordingly, we utilize the group method of depreciation for our digital asset mining rigs. We update the estimated useful lives of our asset group of digital asset mining rigs periodically as information on the operations of the mining rigs indicate changes are required. We assess and adjust the estimated useful lives of our 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 our 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.

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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 our financial statements or tax returns. We account 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 our income tax benefit or expense and deferred tax assets and liabilities. We recognize 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, we evaluate 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

We account 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 it is 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, we may be involved in legal proceedings, claims and governmental and/or regulatory reviews. Management periodically reviews estimates of potential costs to be incurred by us 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. From time to time, we may challenge unfavorable outcomes and obtain surety bonds in connection therewith, and our exposure under such surety bonds will depend on the outcome of our challenge. We have in the past used, and may in the future use, borrowings under our master lending agreements or other financing sources to post such surety bonds, collateralized by bitcoin. If the price of bitcoin drops substantially, we may face a margin call on our borrowings under the master lending agreements, which would require us to provide additional collateral to avoid liquidation by lenders of pledged bitcoin to cover amounts owing.

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RECENT ACCOUNTING PRONOUNCEMENTS

See Note 2 – Summary of Significant Accounting Policies to our Consolidated Financial Statements for a discussion of recent accounting standards and pronouncements.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended as a review of significant factors affecting the Company’s financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with Marathon’s Consolidated Financial Statements and the notes presented herein. In addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. The Company’s actual results could differ significantly from those expressed, implied, or anticipated in these forward-looking statements as a result of certain factors discussed herein and any other periodic reports filed and to be filed with the SEC.

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. The Company is also committed to carbon neutrality and growing operations through predominately renewable energy sources. As of December 31, 2023, the Company had approximately 210,000 energized and operational mining rigs, capable of producing 24.7 exahashes per second with an efficiency of 25 joules per terahash. The Company believes it has one of the most efficient bitcoin mining fleets in the industry. As of December 31, 2023, sustainable energy sources accounted for 55% of the fleet’s power usage.

Historically, the Company has grown quickly to become one of the world’s largest publicly traded bitcoin mining companies. The Company achieved this milestone through an asset-light strategy, which involved deploying its bitcoin miners at third-party hosted sites. This approach saved the Company significant amounts of capital that would have otherwise been invested in data center infrastructure and allowed it to allocate more capital into revenue-generating assets, like Bitcoin miners. The Company has shifted its strategy from an asset-light business model to a diversified and resilient portfolio approach to bitcoin mining operations. This approach involves managing a strategic mix of third-party hosted sites and self-owned and operated sites, which the Company believes can help the business weather market downturns by optimizing its cost structure. In January 2024, the Company acquired two data centers totaling 390 megawatts. Following this acquisition, the Company’s operations are moving towards being more evenly split between third-party hosted and self-owned and operated sites.

In 2023, the Company launched a joint venture in Abu Dhabi, United Arab Emirates, that operates two sites with a total capacity of 250 megawatts, of which the Company owns 20%. The Company believes that these sites operate in one of the world’s most challenging environments, with summertime temperatures of approximately 115 degrees Fahrenheit and 98% humidity. The Company believes its state-of-the-art immersion technology deployed at these sites has resulted in the bitcoin mining rigs operating with minimal human intervention and need for repairs. The Company also has a 20 megawatts joint venture project in Paraguay that is currently underway. The Company intends to continue its international expansion efforts into 2024.

To support this shift in strategy and to capitalize on opportunities for international expansion and industry consolidation, the Company strengthened its liquidity position – a priority that will continue in 2024. The Company’s combined cash and cash equivalents and bitcoin reserve totaled nearly $1.0 billion as of December 31, 2023. Refer to the “Liquidity and Capital Resources” section, for further information.

The Company also expects to deploy several technological innovations developed by its technology team and partners. These innovations include new immersion-cooling systems, hardware, and software solutions that are designed to optimize mining rig performance and the reliability of its operations. Moreover, the Company is exploring novel sources of underutilized or wasted energy sources, which may reduce bitcoin production costs.

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 $179.0 million cash consideration plus customary working capital adjustments. The Company hopes to realize synergies from this transaction through the integration of its technology stack, which the Company expects will improve efficiencies and scale its operating capacity.

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

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

In addition to its focus on scaling its operational capacity, the Company has improved its liquidity position and balance sheet during and subsequent to the year ended December 31, 2023.

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

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

Effective January 1, 2023, the Company early adopted ASU No. 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Topic 350-60): Accounting for and Disclosure of Crypto Assets (ASU 2023-08), which requires entities to measure crypto assets at fair value (the “fair value model”) with changes recognized in income each reporting period. During the year ended December 31, 2023, the Company recognized a gain on digital assets of $331.5 million under the new fair value model. Refer to Note 4 - Digital Assets, for further information.

TRENDS AND UNCERTAINTIES IMPACTING OUR BUSINESS AND INDUSTRY

Bitcoin Value

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

Mining Rig Capacity, Efficiency, and Hash Rate

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

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bitcoin, the Company anticipates additional mining operators entering the market and existing competitors scaling their operations, which will grow the blockchain’s network hash rate and difficulty associated with solving a block. As the overall hash rate and difficulty of the Bitcoin network increases, the Company will need to continue growing its hash rate to retain its market share and remain competitive. During 2023, the Company mined 12,852 bitcoin, an increase of 8,708 bitcoin, or 210.1%, over the prior year, and as of December 31, 2023, it operated approximately 210,000 mining rigs globally, with installed and energized hash rate of approximately 25.2 and 24.7 exahashes per second, respectively. To stay competitive, the Company remains focused on strategically deploying additional mining rigs and scaling its operations, while managing its fleet as it ages along the obsolescence curve. In addition, Marathon continuously evaluates strategic opportunities to support its growth strategy, and seeks to enhance operational efficiencies by utilizing efficient mining rigs and securing contracts with price protection clauses.

NON-GAAP FINANCIAL MEASURES

In addition to the Company’s results determined in accordance with GAAP, throughout this Annual 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) impairments of patents and (iii) gains and losses on 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 Consolidated Financial Statements to understand, manage, and evaluate its financial performance and use the non-GAAP financial measures only supplementally.

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RESULTS OF OPERATIONS

Year ended December 31, 2023 compared to December 31, 2022

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

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

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

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

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

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

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

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

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

Total change in carrying value of digital assets:

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

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

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

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

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

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

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

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carrying values in excess of fair value, and accordingly, the Company recognized impairment charges for both the bitcoin mining rigs and advances to vendors for a total impairment of approximately $332.9 million for the year ended December 31, 2022. There were no such impairments for the year ended December 31, 2023.

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

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

On September 7, 2023, the Company entered into agreements with certain holders of the Notes to exchange an aggregate $416.8 million principal amount of Notes for 31,722,417 shares of the Company's common stock and recorded a gain on extinguishment of debt in the amount of $82.6 million.

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

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

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

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

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

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

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

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

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Year ended December 31, 2022 compared to December 31, 2021

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

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

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

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

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

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

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

Total change in carrying value of digital assets:

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

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

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

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

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

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

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

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

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

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beneficial impacts of changes in executive compensation deduction limitations of $22.9 million, and the impact of the Company’s voluntary change in accounting principle to account for digital assets on a FIFO basis of $4.8 million, partially offset by the unfavorable impact of changes in the valuation allowance of $145.0 million.

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

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

Financial Condition and Liquidity

The following table presents a summary of the Company’s cash flow activity for the year ended December 31, 2023 and 2022:

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

Cash flows from operating activities resulted in a use of funds of $315.7 million, as net income, adjusted for non-cash and non-operating items, in the amount of $96.6 million was more than offset by the use of cash of $412.2 million from changes in operating assets and liabilities. When the Company produces and holds bitcoin on its 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 $386.0 million due to the non-cash adjustment for bitcoin mining revenues, deposits of $23.8 million resulting from increased deposits associated with hosting agreements and prepaid expenses of $1.9 million.

Cash flows from investing activities resulted in a source of cash of $4.6 million, primarily resulting from proceeds from the sale of digital assets of $264.9 million, which were offset by investments made as part of the establishment of the ADGM Entity of $71.8 million, advances to vendors of $158.9 million, capital expenditures of $27.6 million, and the payments on hedge settlements of $2.0 million.

Cash flows from financing activities resulted in a source of cash of $555.9 million, primarily from the periodic issuance of common stock under the Company’s 2022 ATM of $608.4 million, partially offset by the repayment of the Company’s term loan facility of $50.0 million. On March 8, 2023, the Company terminated both its term loan and its RLOC facilities with Silvergate Bank.

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

Cash flows from operating activities resulted in a use of funds of $176.5 million, primarily due to a $176.6 million use of cash from changes in operating assets and liabilities driven by bitcoin mining revenues, and, to a lesser extent prepaid expenses associated with new hosting arrangements (a $48.9 million use of funds) and deposits associated with new hosting arrangements (a $24.5 million use of funds). These uses of funds were partially offset by a source of funds from changes in accounts payable and other accrued expenses.

Cash flows from investing activities resulted in a use of funds of $390.2 million, primarily resulting from advances of $483.8 million to vendors related to orders of ASICs miners for future deployment, a $44.0 million use of funds for investment purposes primarily due to an investment in Auradine, Inc. (“Auradine”), to secure certain rights to future purchases by the Company from Auradine and capitalized costs of $41.1 million associated with purchases of equipment, partially offset by proceeds of $178.4 million from the sales of bitcoin mining rigs.

Cash flows from financing activities resulted in a source of cash of $410.7 million, primarily from proceeds from the periodic issuance of common stock under the Company’s ATM of $361.5 million and proceeds from borrowings outstanding under the term loan agreement of $49.3 million.

The maximum borrowings outstanding under the Company’s revolving credit facilities during the year ended December 31, 2022, was $70.0 million. Total borrowings and repayments under the RLOC facilities were $120.0 million during the year ended December 31, 2022, and there were no borrowings outstanding under the RLOC facility at December 31, 2022.

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

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 due to the upcoming halving while maximizing the Company's bitcoin valuation potential.

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

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

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

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

The Company intends to add to its bitcoin holdings primarily through its production activities and it also intends to sell bitcoin as a means of generating cash to cover monthly operating costs and for general corporate purposes. The Company does not intend to make any significant purchases of bitcoin on the open market as means of increasing its bitcoin holdings, although it may buy and sell bitcoin from time to time (separately from what is outlined above) for treasury management purposes.

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

In February 2022, the Company commenced the 2022 ATM with Wainwright, as sales agent, which allowed it to sell and issue shares of up to approximately $750.0 million of its common stock from time to time (the “2022 ATM”). As of October 23, 2023, the Company sold 86,822,000 shares of common stock under the 2022 ATM for an aggregate purchase price of $727.9 million, net of commissions and other offering related expenses, completing the 2022 ATM.

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

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, 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) $920.8 million in total payments during the calendar years 2024 through 2026, and (ii) $139.0 million in total payments during the calendar years 2027 through 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.

Assuming the Notes due 2026 are not converted into common stock, repurchased or redeemed prior to maturity, (i) annual interest payments of approximately $3.3 million in each calendar year from 2024 through 2026, and (ii) 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 14 – 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:

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•Digital assets

•Digital assets loan receivable

•Revenues

•Long-lived assets

•Income taxes

Digital assets

Digital assets (bitcoin) are included in current and other assets in the accompanying 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 Consolidated Statement of Comprehensive Income (Loss) each reporting period. The Company’s digital assets are within the scope of ASU 2023-08 and the transition guidance requires a cumulative-effect adjustment as of the beginning of the current fiscal year for any difference between the carrying amount of the Company’s digital assets and fair value.

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 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 Consolidated Statements of Cash Flows. The sales of digital assets are included within investing activities in the accompanying Consolidated Statements of Cash Flows and any gains or losses from such sales are included in operating expenses in the Consolidated Statements of Comprehensive Income (Loss).

Digital assets loan receivable

When the Company loans digital assets to a third-party entity, the Company first evaluates whether to derecognize such digital assets based on an evaluation of relevant control and asset derecognition considerations that include whether:

•The Company has transferred present rights to the economic benefits associated with the digital asset for a different right to receive digital assets in the future;

•The Company cannot sell, pledge, loan, or otherwise use the lent digital assets while the loan is outstanding, as those rights have been transferred to the borrower;

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•Inherent in the realization of the economic benefits associated with the digital asset loan receivable is exposure to credit risk of the third-party entity; and

•The third-party entity that holds the digital assets can deploy those assets at its discretion for the duration of the lending arrangement and bears the risk of loss or theft of those assets, and otherwise has the ability to direct the use of the assets transferred.

If the Company concludes derecognition is appropriate, the Company derecognizes the loaned digital assets that it no longer controls and recognizes a right to receive back in the future such loaned digital assets.

The digital asset loan receivable is recorded at the fair value of the underlying digital assets. Throughout the period that the digital asset loan receivable is outstanding, the receivable will be measured at the fair value of the underlying loaned digital asset with changes recorded in operating income (loss) in current period earnings.

At loan commencement and throughout the loan period, the Company considers and accounts for the credit risk of the borrower using the principles in Topic 326 – Financial Instruments - Credit Losses (“Topic 326”) to measure any credit impairment. The digital asset loan receivable is presented net of any allowance for credit losses. The Company utilizes the probability of default (“PD”) loss given default (“LGD”) approach to estimating the allowance for credit loss (“ACL”) at origination and subsequent reporting periods. In order to apply the PD LGD approach, management considers the lifetime of the digital asset loan receivable, the reasonable and supportable forecast period, and the PD LGD. The Company uses each instrument’s life of loan period for estimating current expected credit losses, unadjusted by any prepayment risk as any risk would be immaterial to either the repayment in kind or the accrued loan fee receivable.

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

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may include fixed amounts, variable amounts, or both. When determining the transaction price, an entity must consider the effects of all of the following:

•Variable consideration

•Constraining estimates of variable consideration

•The existence of a significant financing component in the contract

•Noncash consideration

•Consideration payable to a customer

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

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

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

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

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

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

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delegation of work to the pool participants. This indicated that the Company directed the mining pool participants to contribute their hash calculations to solve in areas that the Company designated. Therefore, the Company determined that it controlled the service of providing transaction verification services to the network and requester. Accordingly, the Company recorded all of the transaction fees and block rewards earned from transactions assigned to MaraPool as revenue, and the portion of the transaction fees and block rewards remitted to MaraPool participants as cost of revenues.

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

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

Participant

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

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.

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•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

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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.

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.

The Company recorded a valuation allowance to reduce deferred tax assets to the net amount that the Company believes is more likely than not to be realized. Accordingly, the need to establish such allowance is assessed periodically by considering matters such as future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and results of recent operations.

RECENT ACCOUNTING PRONOUNCEMENTS

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

OFF-BALANCE SHEET ARRANGEMENTS

None.

ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis is intended
as a review of significant factors affecting our financial condition and results of operations for the periods indicated. The discussion
should be read in conjunction with our Consolidated Financial Statements and the notes presented herein. In addition to historical information,
the following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements
that involve risks and uncertainties. Our actual results could differ significantly from those expressed, implied, or anticipated in
these forward-looking statements as a result of certain factors discussed herein and any other periodic reports filed and to be filed
with the Securities and Exchange Commission.

Cautionary
Note Regarding Forward-Looking Statements

This
report and other documents that we file with the Securities and Exchange Commission contain forward-looking statements that are based
on current expectations, estimates, forecasts and projections about our future performance, our business, our beliefs, and our management’s
assumptions. Statements that are not historical facts are forward-looking statements. Words such as “expect,” “outlook,”
“forecast,” “would,” “could,” “should,” “project,” “intend,”
“plan,” “continue,” “sustain”, “on track”, “believe,” “seek,”
“estimate,” “anticipate,” “may,” “assume,” and variations of such words and similar expressions
are often used to identify such forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These forward- looking statements are not guarantees of future performance and involve risks, assumptions,
and uncertainties, including, but not limited to, those described in our reports that we file or furnish with the Securities and Exchange
Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual
results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not
to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except to the extent required
by law, we undertake no obligation to update publicly any forward-looking statements after the date they are made, whether as a result
of new information, future events, changes in assumptions or otherwise.

Restatement
of Previously Issued Financial Statements

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS has been amended and restated to give effect to the restatement, as more fully described
in NOTE 2 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENT to our accompanying audited Consolidated Financial Statements
contained in this Form 10-K. For further detail regarding the Restatement, see EXPLANATORY NOTE and Part II, ITEM 9A. CONTROLS AND PROCEDURES
contained in this Form 10-K.

Business
Overview

The
Company was incorporated in the State of Nevada on February 23, 2010 under the name Verve Ventures, Inc. On December 7, 2011, the
Company changed its name to American Strategic Minerals Corporation and were engaged in exploration and potential development of
a uranium and vanadium minerals business. In June 2012, the Company discontinued the minerals business and began to invest in real
estate properties in Southern California. In October 2012, the Company discontinued its real estate business and the Company
commenced IP licensing operations, at which time the Company’s name was changed to Marathon Patent Group, Inc. The Company
commenced mining bitcoin in 2018 and changed its name to Marathon Digital Holdings, Inc. on March 1, 2021. As of December 31, 2022,
the Company is solely focused on the mining of bitcoin and ancillary opportunities within the Bitcoin ecosystem under the name
Marathon Digital Holdings, Inc.

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Significant
crypto market developments and impacts to the Company

The
year ended December 31, 2022 was a challenging year for the crypto sector in general, as macroeconomic conditions (including higher inflation
and a rising interest rates environment as compared to recent years) resulted in weaker equity markets and a general “risk off”
sentiment that had a negative impact on bitcoin prices. This challenging set of circumstances was exacerbated by a series of unforeseen
events which hit the sector, including:

The Company’s operating results, Consolidated Balance Sheets and
stock price were adversely impacted by this series of events and the overall unfavorable macroeconomic climate in 2022. The resulting
declines in financial performance and operational challenges faced by the Company in 2022 were primarily evident in the following areas:

Operating
results:

Fair
value of digital assets and impacts to loan collateral and primary lender:

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On
March 1, 2023, Silvergate Bank filed disclosures with the SEC regarding its troubled financial condition, including doubts about
its ability to continue operating as a going concern, and notice to postpone the filing of its Annual Report on Form 10-K with the SEC
due to a material decline in its client deposits and inadequate capitalization. This has led to leading crypto business clients leaving
the bank, creating both a credit void as well as reputational risk for crypto clients. On March 8, 2023, Silvergate announced its
intention to wind down operations and voluntarily liquidate the bank.

On
February 6, 2023, the Company provided Silvergate Bank with the required 30-day notice stating the Company’s intent to prepay the
outstanding balance on its term loan facility as well as the Company’s intent to terminate the term loan facility. The Company
and Silvergate Bank subsequently agreed to terminate the RLOC facility. On March 8, 2023, the Company prepaid the term loan and terminated
the RLOC facility with Silvergate Bank.

We anticipate that businesses in this and related business sectors may
continue to experience economic volatility and operational challenges, and the first half of 2023 will likely continue to be a period
of challenge and uncertainty in the industry. We are continuously monitoring the economic environment in which we operate and evaluating
strategic opportunities which we may decide to undertake as part of our strategic growth initiatives; however, we offer no assurances
that any strategic opportunities we choose to pursue will be successful or achieved on a time scale or within the budget we anticipate,
if at all, in our competitive and evolving industry. See ITEM 1A. RISK FACTORS for additional discussion regarding potential impacts our
competitive and evolving industry may have on our business.

Critical
Accounting Policies and Estimates

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

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Digital
assets

Digital assets (bitcoin) are included in current and other assets in the
accompanying Consolidated Balance Sheets. Digital assets awarded to the Company through its mining activities are accounted for in accordance
with the Company’s revenue recognition policy below.

Digital
assets are accounted for as intangible assets with indefinite useful lives and are recorded at cost less impairment in accordance with
ASC 350 – “Intangibles-Goodwill and Other” (“ASC 350”). 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 two input under the ASC 820 - “Fair Value Measurement” (“ASC 820”) hierarchy as there are
multiple observable inputs (exchanges) that provide slightly differing benchmarks of digital asset value. Subsequent reversal of impairment
losses is not permitted.

Purchases of digital assets by the Company are included within investing
activities in the accompanying Consolidated Statements of Cash Flows, while digital assets awarded to the Company through its mining activities
are included as a reconciling item within operating activities on the accompanying Consolidated Statements of Cash Flows. The sales of
digital assets are included within investing activities in the accompanying Consolidated Statements of Cash Flows and any realized gains
or losses from such sales are included in other income (expense) in the Consolidated Statements of Other Comprehensive Income (Loss).

Digital
assets loan receivable

When
the Company loans digital assets to a borrower for a specific period of time in exchange for a fee akin to interest, the Company first
evaluates whether to derecognize such loaned digital assets based on an evaluation of relevant control and asset derecognition considerations
that include whether:

If
the Company concludes derecognition is appropriate, the Company derecognizes the loaned digital assets it no longer controls and recognizes
a right to receive back in the future the loaned digital assets.

The digital asset loan receivable is recorded at the fair value of the
underlying loaned digital assets. Any difference between the fair value of the loaned digital assets and their pre-transfer carrying amount
(i.e., derecognition amount) is recognized as a gain in the Consolidated Statements of Other Comprehensive Income (Loss). Throughout the
loan period, the digital asset loan receivable continues to be measured at the fair value of the underlying loaned digital asset with
changes recorded in operating income (loss) in current period earnings. When the digital assets on loan are returned to the Company, the
receivable is derecognized and such loaned digital assets are re-recorded on the Company’s Consolidated Balance Sheets at the pre-derecognition
carrying value of the digital asset loan receivable with no gain or loss realized at the derecognition of the loan.

36

At loan commencement and throughout the loan period, the Company considers
and accounts for the credit risk of the borrower using the principles in Topic 326 – “Financial Instruments - Credit Losses”
(“Topic 326”) to measure any credit impairment. The digital asset loan receivable is presented net of any allowance for credit
losses. The Company utilizes the probability of default (“PD”) loss given default (“LGD”) approach to estimating
the allowance for credit loss (“ACL”) at origination and subsequent reporting periods. In order to apply the PD LGD approach,
management considers the lifetime of the digital asset loan receivable, the reasonable and supportable forecast period, and the PD LGD.
The Company uses each instrument’s life of loan period for estimating current expected credit losses, unadjusted by any prepayment
risk as any risk would be immaterial to either the repayment in kind or the accrued loan fee receivable.

Revenues
from contracts with customers

The Company recognizes revenue in accordance with FASB ASC Topic 606 –
“Revenue from Contracts with Customers” (“ASC 606”). The core principle of the revenue standard is that a company
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:

In
order to identify the performance obligations in a contract with a customer, a company 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:

37

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 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.

The
Company’s ongoing major or central operation is to provide computing power to collectives of third-party bitcoin miners (such collectives,
“mining pools”) as a participant (“Participant”) and bitcoin transaction verification services to the bitcoin
network through a Company-operated mining pool as the operator and a participant (“Operator”) (such activity as Participant
and Operator, collectively, “mining”). The Company currently mines in a self-operated pool, which was previously open to
third-party pool participants from September 2021 until May 2022.

Operator

As an Operator, the Company provides transaction verification services.
Transaction verification services are an output of the Company’s ordinary activities; therefore, the Company views the transaction
requestor as a customer and accounts for the transaction fees it earns as revenue from contracts with customers under ASC 606. The bitcoin
network is not an entity such that it may meet the definition of a customer; however, the Company has concluded it is appropriate to apply
ASC 606 by analogy to block rewards earned from the network. A contract exists under ASC 606 at the point the Company successfully validates
a transaction to the distributed ledger. At this point, the performance obligation to validate the requested transaction has been satisfied
and a contract is deemed to exist.

The Company also, from time to time, engages unrelated third-party
mining enterprises (“pool participants”) to contribute computing power, and in exchange, remits transaction fees and
block rewards to pool participants on a pro rata basis according to each respective pool participant’s contributed computing
power (hash rate). The Company determined that it controls the service of providing transaction verification services to the network
and requester as the Company’s wallet as Operator is recorded on the distributed ledger as the transaction verifier of record,
the pool participants enter into contracts with the Company and not the network or requester, and the Company delegates mining work
to pool participants. Therefore, the Company records 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.

ASC
606-10-32-21 requires entities to measure the estimated fair value of noncash consideration at contract inception, which is the same
the time the block reward and transaction fee is earned and the performance obligation to the requester and the network is fulfilled
by successfully validating the applicable block of transactions. For reasons of operational practicality, the Company applies an
accounting convention to use the daily quoted closing U.S. dollar spot rate of bitcoin each day to determine the fair value of
bitcoin earned as transaction fees and block rewards in the Company’s wallet during that day. This accounting convention does
not result in materially different revenue recognition from using the fair value of the bitcoin earned at contract inception (i.e.,
the moment a block is earned) and has been consistently applied in all periods presented.

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Participant

As a Participant, the Company has entered into digital asset mining pools
by executing contracts, with the mining pool operators to provide computing power to the mining pool. The contracts are terminable at
any time by either party and the Company’s enforceable right to compensation only begins when the Company provides computing power
to the mining pool operator. In exchange for providing computing power, the Company is entitled to a fractional share of the fixed block
award and transaction fees the mining pool operator receives, for successfully adding a block to the blockchain. The Company’s fractional
share of the block reward and transaction fee is based on the proportion of computing power the Company contributed to the mining pool
operator to the total computing power contributed by all mining pool participants in solving the block.

Providing computing power on rigs to solve complex cryptographic algorithms
in support of blockchain mining (in a process known as “solving a block”) is the primary output of the Company’s ordinary
activities. The provision of providing such computing power is the only performance obligation in the Company’s contracts with mining
pool operators. The transaction consideration the Company receives is non-cash (i.e., bitcoin) and entirely variable as it is unknown
at each contract inception whether the Company will earn any consideration during the period, and if it does become entitled to consideration,
how much consideration it will be entitled to.

In accordance with FASB ASC 606-10-32-11 and 32-12, the Company constrains
the variable consideration to which it is entitled and does not recognize revenue for such amounts until it receives confirmation of the
amount, usually via the settlement of the fractional share of block reward and transaction fee in the Company’s digital wallet (i.e.,
at that point, the variability is resolved and there is no longer the reasonable possibility of significant reversal of revenue). Before
settlement occurs, estimation of the variable consideration to which the Company is entitled, which depends on inputs unknowable to the
Company, carries the risk of a significant revenue reversal from mis-estimation. Settlement of consideration typically occurs within 24
hours of when a block is won unless such block is won over a weekend or holiday, in which case settlement can take up to 72 hours.

The Company uses its accounting convention to recognize revenue using the
daily quoted closing U.S. dollar spot rate of bitcoin on the day the transaction fees and block rewards are settled in the Company’s
wallet. However, this accounting convention does not result in materially different revenue recognition from using the fair value of the
bitcoin earned at contract inception and has been consistently applied in all periods presented.

There is currently no definitive guidance under GAAP or alternative accounting
framework for the accounting for digital assets recognized as revenue or held, and management expects to exercise significant judgment
in determining the appropriate accounting treatment. In the event authoritative guidance is enacted by the FASB, the Company may be required
to change its policies, which could have an effect on the Company’s consolidated financial position and results from operations.

Property
and Equipment

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 composed
of bitcoin miners which are largely homogeneous and have approximately the same useful lives. Accordingly, the Company utilizes the group
method of depreciation for its bitcoin miners. 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.

39

Impairment
tests for items of property and equipment other than mining rigs are performed annually and the recoverable amounts in property equipment
are determined based on the higher of value-in-use or fair value less costs to sell.

Impairment
of long-lived assets

Management
reviews long-lived assets that consist primarily of bitcoin mining rigs, and other long-lived assets such as patents held, for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future cash flows expected to be generated
by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. The Company determines the amount of impairment to record based on the fair
value of the asset following the fair value measurement framework in 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 deferred tax liabilities and assets for the future tax consequences of events that have been recognized in our financial statements
or tax returns. The Company accounts for income taxes in accordance with ASC 740 - “Income Taxes” (“ASC 740”),
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 our income tax benefit or expense and our deferred tax assets and liabilities. We recognize 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, we evaluate tax positions and adjust related tax assets and liabilities in light
of changing facts and circumstances.

We
record a valuation allowance to reduce our deferred tax assets to the net amount that we believe is more likely than not to be realized.
Accordingly, the need to establish such allowance is assessed periodically by considering matters such as future reversals of existing
taxable temporary differences, projected future taxable income, tax planning strategies and results of recent operations.

Recent
Accounting Pronouncements

See NOTE 3 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES to our Consolidated Financial Statements for a discussion of recent accounting standards and pronouncements.

Non-GAAP
Financial Measures

We provide investors with a reconciliation from net loss to the non-GAAP
measure known as adjusted EBITDA as a component of Management’s Discussion and Analysis. For each period in question, we define
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) impairments of patents and (iii) impairment losses related to the Compute North bankruptcy.

40

Adjusted
EBITDA is not a measurement of financial performance under GAAP and, as a result, this measure may not be comparable to similarly titled
measures of other companies. Non-GAAP financial measures are subject to material limitations as they are not in accordance with, or a
substitute for, measurements prepared in accordance with GAAP. Adjusted EBITDA is not meant to be considered in isolation and should
be read only in conjunction with our Interim Reports on Form 10-Q and our Annual Reports on Form 10-K as filed with the Securities and
Exchange Commission. Management uses both adjusted EBITDA and the supplemental information provided herein as a means of understanding,
managing, and evaluating business performance and to help inform operating decision making. We rely primarily on our Consolidated Condensed
Financial Statements to understand, manage, and evaluate our financial performance and use the non-GAAP financial measures only supplementally.

Operations
Summary

During
the first quarter of 2022, the Company announced its intention of exiting the facility in Hardin, MT (“Hardin”). On July
28, 2022, the Company terminated its power purchase agreements and commenced the acceleration of its exit from Hardin. This exit was
completed in September 2022. The Company had deployed approximately 30,000 mining rigs at Hardin. During the year ended December 31,
2022, the Company recorded accelerated hosting and depreciation costs related to this early exit from the Hardin facility. In addition
to the accelerated depreciation expense, upon exiting the facility the Company determined that the useful lives of the remaining mining
rigs formerly deployed at Hardin should be reduced from 36 months to 24 months.

In
late 2021, the Company contracted with a joint venture among Compute North and affiliates of NextEra Energy for hosting services in McCamey,
TX and expected its mining rigs to begin coming online during the second quarter of 2022. King Mountain Upton Wind, LLC (“King
Mountain”) had filed a petition on April 5, 2022 seeking a declaratory order to confirm its status as an exempt wholesale generator
(“EWG”). In the Petition, King Mountain stated that it proposed to share ownership of interconnection facilities that are
currently eligible facilities within the meaning of section 32(a)(2) of the Public Utility Holding Company Act (PUHCA) as tenants-in
common with a retail energy customer. However, the approval of this petition was delayed until July 15, 2022, when the Federal Energy
Regulatory Commission (“FERC”) found that King Mountain would retain its status as an EWG notwithstanding a proposal to share
ownership of the Interconnection Facilities as tenants-in-common with a retail energy customer. As a result, the bulk of the Company’s
rigs did not come online until the early part of the fourth quarter. On December 15, 2022, US
Bitcoin Corp (“US Bitcoin”) replaced Compute North as a joint venture partner (and the operator of the facility) as a result
of the Compute North bankruptcy.

In
July 2022, the Company expanded certain hosting arrangements
with Compute North in Granbury, TX. On December 15, 2022, US Bitcoin Corp replaced Compute
North as the operator of this facility as a result of the Compute North Bankruptcy.

During
the third and fourth quarters of 2022 the Company entered into a series of agreements to secure additional hosting capacity with Applied
Digital as the partner at Garden City, TX, Ellendale, ND, and Jamestown, ND. These sites are expected to come online in phases during
the first and second quarters of 2023.

41

Results
of Operations – Year ended December 31, 2022 compared to December 31, 2021 (Restated)

Financial
Summary Table:

42

Revenues:
We generated revenues of $117,753 thousand for the year ended December 31, 2022 compared with $159,163 thousand in 2021. The $41,410
thousand decrease in revenue was primarily driven by a $77,286 thousand decrease in revenue resulting from lower bitcoin prices in 2022,
partially offset by increased revenues of $44,570 thousand related to a 30% increase in production year-over-year. Revenues also declined
by $8,694 thousand in 2022 as the Company ceased operation of a mining pool that included third parties. Despite the overall increase
in production for the year, the company experienced significant production downtime in the second and third quarters as a result of the
aforementioned exit from Hardin and delays in energization at King Mountain. Production during the third quarter was down 50% from the
prior year. Our best production quarters of 2022 were the first quarter and the fourth quarter.

Cost of revenues: Cost of revenues
– energy, hosting and other during the year ended December 31, 2022, totaled $72,717 thousand compared with $27,491 thousand in
the prior-year period. The $45,226 thousand increase was driven by higher production costs of $30,134 thousand per bitcoin mined, accelerated
costs of $18,218 thousand associated with the early exit from Hardin and to a lesser extent, the impact of increased bitcoin production
on costs of $5,566 thousand. Partially offsetting these increased costs was an $8,694 thousand decline in cost of revenues related to
the discontinuation of the third party mining pool in 2022. Cost of revenues – depreciation and amortization was $78,709 thousand
in the current-year period compared with $14,904 thousand in the prior-year period, an increase of $63,805 thousand. This increase was
primarily due to the depreciation acceleration of $36,032 thousand related to our exit of the Hardin, MT facility and increased depreciation
costs of $27,773 thousand associated with a higher number of mining rigs in operation.

Total
Margin: Total margin was a loss of $33,673 thousand in the current-year period compared with income of $116,768 thousand in the
prior-year period, a decline of $150,441 thousand. This decline was driven by the factors discussed above, which are summarized in the
table below:

General and administrative expenses:
General and administrative expenses were $56,739 thousand for the year ended December 31, 2022, compared with expenses of $174,355 thousand
in the prior-year period. Our general and administrative expenses included stock-based (non-cash) compensation expense of $24,595
thousand in the current-year period and $160,786 thousand in the prior-year period. General and administrative expenses excluding
stock-based compensation was $32,144 thousand in the current-year period compared with $13,569 thousand in the prior-year
period. This $18,575 thousand increase in expense was primarily due to the increase in the scale of the business, including higher
payroll and benefits costs of $7,173 thousand, increased professional fees of $3,590 thousand, increased insurance costs of $3,810
thousand, higher travel and conference costs of $2,186 thousand and higher costs in various other areas related to the increased
scale of the business, including higher property taxes, banking fees, rent expense, computer costs and equipment repairs.

43

Legal
reserves: In connection with a dispute concerning the settlement of certain restricted stock unit awards previously granted to
the Company’s former Chief Executive Officer and Chairman, the Company entered into a settlement agreement pursuant to which the
Company agreed to pay $24,000 thousand during the year ended December 31, 2022. The Company also entered into agreements in respect to seven
other recipients of the same restricted stock unit awards. Payments related to these agreements during the year ended December 31, 2022
totaled approximately $2,131 thousand in the aggregate.

Total
impairments due to vendor bankruptcy filing: On September 22, 2022, Compute North filed for restructuring under chapter 11 of
the U.S. Bankruptcy Code. During the year ended December 31, 2022, the Company assessed the impairment of assets associated with Compute
North due to the bankruptcy proceedings. As a result, the Company recorded impairment charges of approximately $24,661 thousand in operating
expenses (related to deposits) and approximately $31,013 thousand (related to certain loans and preferred stock investments) as non-operating
expenses.

Total
change in carrying value of digital assets:

Impairment
of patents: The Company recorded an impairment of $919 thousand in the current-year period related to certain patents no longer
utilized in its business operations.

Impairment
of fixed assets and advances to vendors: In accordance with ASC 360-10 – “Impairment and Disposal of Long-Lived Assets”
(“ASC 360”), any long-lived asset group that is held and used must be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of the long-lived asset group might not be recoverable. Due to the significant decrease
in fair values of bitcoin mining rigs during the fourth quarter ended December 31, 2022, the Company assessed the need for an impairment
write-down of both bitcoin mining rigs (held as fixed assets) and advances to vendors (a current asset) representing deposits associated
with the future delivery of mining rigs. In accordance with ASC 360-10, the Company determined that both of these asset categories had
carrying values in excess of fair value, and accordingly, the Company recognized impairment charges for both the bitcoin mining rigs
of $208,622 thousand and the advances to vendors of $124,311 thousand – a total impairment of approximately $332,933 thousand for
the year ended December 31, 2022. In addition, as part of its periodic review of its fixed asset groups, the Company decided to change
the estimated useful life for its asset group of mining rigs from 5 years to 3 years, effective January 1, 2023.

Gain
on sales of equipment, net: In late 2021, the Company entered into an agreement with DCRBN Ventures Development and Acquisition
LLC (“DCRBN”) in which the Company agreed to sell certain mining rigs to DCRBN in conjunction with the development of commercial
activities at the McCamey, TX facility. In conjunction with its exit from the Hardin, MT facility, the Company also sold bitcoin mining
rigs to various third parties. Total cash proceeds from these sales of assets for the year ended December 31, 2022 were $178,371 thousand
and gains resulting from the asset sales totaled $83,880 thousand in the current-year period. There were no such sales in 2021.

Other non-operating income (loss):
Other non-operating income was $1,283 thousand during the current year period compared to a loss of $287 thousand in the prior-year period.
The $1,570 thousand favorable variances was primarily due to the absence of warrant expense of $1,048 thousand recorded in the prior-year
period to a lesser extent, increased interest income and other income.

Interest
expense: Interest expense increased $13,410 thousand from the prior year as a result of higher interest related to the
convertible notes issued in November 2021 of $6,633 thousand, amortization of debt issuance costs of $3,664 thousand and other
interest costs primarily related to the Company’s Term loan and revolving credit (“RLOC”) facilities.

44

Income tax (expense) benefit: The
Company recorded income tax benefit of $21,838 thousand for the year ended December 31, 2022 compared with an income tax expense of $22,576
thousand in the prior-year period. The primary drivers of the $44,414 thousand favorable tax variance were favorable federal impacts
vs. the prior-year period of $145,657 thousand), favorable state tax impacts vs. the prior-year period of $18,684 thousand, and beneficial
impacts of changes in executive compensation deduction limitations of $22,855 thousand partially offset by unfavorable impact of changes
in our valuation allowance of $145,004 thousand

Net loss: We recorded a net loss of
$686,740 thousand in the current-year period compared with net loss of $37,096 thousand in the prior period. The $649,644 thousand decline
in earnings was primarily driven by declines in the carrying value of our digital assets of $317,616 thousand in the aggregate, the impairment
of mining rigs and advances to vendors of $332,933 thousand in the aggregate, lower total margin of $150,441 thousand, impairments of
$55,674 thousand related to the Compute North bankruptcy, legal reserves of $26,131 thousand and increased interest expense of $13,410
thousand. Partially offsetting these unfavorable variances was a significant reduction in general and administrative expenses of $117,616
thousand primarily associated with lower stock-based compensation, gains on sales of rigs of $83,880 thousand, the $44,414 thousand favorable
income tax variance and a slight increase in other non-operating income.

Adjusted EBITDA: Adjusted EBITDA was
a loss of $533,701 thousand compared with a positive adjusted EBITDA of $162,740 thousand in the prior-year period. The $696,441 thousand
decline was primarily driven by declines in the carrying value of our digital assets of $317,616 thousand in the aggregate, the impairment
of mining rigs and advances to vendors of $332,933 thousand in the aggregate, lower total margin excluding depreciation and amortization
of $86,636 thousand, legal reserves of $26,131 thousand, and higher general and administrative expenses, excluding non-cash stock-based
compensation costs of $18,575 thousand. Partially offsetting these unfavorable variances were gains on the sales of mining rigs of $83,880
thousand and increases in non-operating income of $1,570 thousand.

Results
of Operations – Year ended December 31, 2021 (Restated) compared to December 31, 2020

Financial
Summary Table:

Revenues:
We generated revenues of $159,163 thousand during the year ended December 31, 2021, compared with $4,357 thousand during the prior-year
period. The $154,806 thousand increase was primarily attributable to the impact of significantly higher bitcoin prices, which resulted
in a $109,253 thousand increase in revenue, increased production, which resulted in a $36,854 thousand increase in revenue, and, to a lesser extent a $8,699 thousand increase in revenues related to the Company’s operation
of a mining pool that included third parties in 2021.

45

Cost
of revenues: Cost of revenues - energy, hosting and other during the year ended December 31, 2021, totaled $27,491 thousand compared
with $3,851 thousand in the prior-year period. The $23,640 thousand increase was driven by increased production of $32,574 thousand,
and increased cost of revenues associated with the third party mining pool of $8,699 thousand partially offset by lower production costs
per bitcoin mined of $17,633 thousand. Cost of revenues – depreciation and amortization was $14,904 thousand for the year ended
December 31, 2021, compared with $3,064 thousand in 2020, an increase of $11,840 thousand resulting from a higher number of mining rigs
in operation in 2021.

Total
Margin: Total margin was $116,768 thousand for the year ended December 31, 2021, compared with a loss of $2,558 thousand in 2020,
an increase of $119,326 thousand. This increase was driven by the factors discussed above, which are summarized in the table below:

General
and administrative expenses: General and administrative expenses were $174,355 thousand for year ended December 31, 2021 compared
with expenses of $6,404 thousand in 2020, an increase of $167,951 thousand. Our general and administrative expenses included stock-based
(non-cash) compensation expense of $160,786 thousand in the year ended December 31, 2021 compared with $1,178 thousand in the prior-year
period. General and administrative expenses excluding stock-based compensation increased to $13,569 thousand in 2021 from $5,226 thousand
in 2020, reflecting the increased scope of our operations in 2021 compared to 2020.

Total change
in carrying value of digital assets:

Impairment
of mining rigs: The Company recorded an impairment of $871 thousand on certain mining rigs in 2020.

Other
non-operating income: Other non-operating income was a loss of $287 thousand in 2021 and a loss of $607 thousand in 2020.

Interest
expense: Interest expense increased to $1,570 thousand for the year ended December 31, 2021
primarily as a result of interest related to the convertible notes issued in November 2021.

Income
tax expense: Income tax expense increased to $22,576 thousand in 2021 versus $2 thousand in 2020 primarily due to the impact
executive compensation deduction limitations in 2021 and higher state income taxes partially offset by the impact of a higher valuation
allowance in 2021.

Net loss: We recorded a net loss
of $37,096 thousand for the year ended December 31, 2021 compared with a net loss of $10,448 thousand in 2020. The $26,648 thousand decline
was primarily driven by the $167,951 thousand increase in general and administrative expenses, the $30,329 thousand impairment of digital
assets in 2021 and the $22,574 thousand increase in income tax expense in 2021, partially offset by the $119,326 thousand increase in
total margin and the $74,696 thousand unrealized gain on the value of bitcoin held in the investment fund.

46

Adjusted EBITDA: Adjusted EBITDA for
the year ended December 31, 2021 was $162,740 thousand compared with a adjusted EBITDA loss of $6,183 thousand in 2020. The $168,923
thousand increase in adjusted EBITDA was primarily driven by the $131,166 thousand increase in total margin excluding depreciation and
amortization and the $74,696 thousand unrealized gain on the value of bitcoin held in the investment fund, partially offset by the $30,329
thousand impairment of digital assets in 2021, and a $8,343 thousand increase in operating expenses excluding non-cash stock compensation
costs.

Financial
Condition and Liquidity

Cash
flows for the year ended December 31, 2022: Cash, cash equivalents and restricted cash totaled $112,502 thousand at December
31, 2022, a decrease of $156,054 thousand from December 31, 2021.

Cash flows from operating activities resulted in a use of funds of $176,481
thousand, primarily due to a $176,566 thousand use of cash from changes in operating assets and liabilities driven by bitcoin mining revenues,
and, to a lesser extent prepaid expenses associated with new hosting arrangements (a $48,886 thousand use of funds) and deposits associated
with new hosting arrangements (a $24,469 thousand use of funds). These uses of funds were partially offset by a source of funds from changes
in accounts payable and other accrued expenses.

Cash flows from investing activities resulted in a
use of funds of $390,228 thousand, primarily resulting from advances of $483,840 thousand to vendors related to orders of ASICs miners
for future deployment, a $44,000 thousand use of funds for investment purposes (primarily an increased investment in Auradine) and capitalized
costs of $41,108 thousand associated with purchases of equipment, partially offset by proceeds of $178,371 thousand from the sales of
bitcoin mining rigs.

Cash flows from financing activities resulted in a source of cash of $410,655
thousand, primarily from proceeds from the periodic issuance of common stock under the Company’s At-The-Market facility of $361,486
thousand and proceeds from borrowings outstanding under the term loan agreement of $49,250 thousand.

The maximum borrowings outstanding under the Company’s
revolving credit facilities during the year ended December 31, 2022 was $70,000 thousand. Total borrowings and repayments under the RLOC
facilities were $120,000 thousand during the year ended December 31, 2022 and there were no borrowings outstanding under the RLOC facility
at December 31, 2022.

Cash flows for the year ended December 31,
2021: Cash, cash equivalents and restricted cash totaled $268,554 thousand at December 31, 2021, an increase of $127,233
thousand from December 31, 2020.

Cash flows from operating activities resulted in a use of funds of $18,966
thousand. Cash flows from operating activities before the impact of changes in operating assets and liabilities was a $117,311 thousand
source of funds primarily due to the impact of non-cash stock-based compensation. This source of funds was more than offset by a $136,277
thousand use of funds from changes in operating assets and liabilities. This was primarily caused by a use of funds from changes in digital
assets (primarily due to revenues from bitcoin mining) partially offset by a source of funds resulting from changes in accounts payable
and accrued expenses.

47

Cash flows from investing activities resulted in a use of funds of $891,136
thousand, primarily resulting from advances to vendors of $435,065 thousand, capitalized costs associated with equipment purchases of
$273,851 thousand, purchases of digital assets in the investment fund of $150,000 thousand, and a loan receivable from Compute North of
$30,000 thousand.

Cash
flows from financing activities resulted in a source of cash of $1,037,333 thousand, primarily from proceeds from the issuance of convertible
debt of $728,406 thousand and common stock of $312,196 thousand. Total borrowings and repayments under the Company’s 2021 RLOC
facility were $77,500 thousand during the year ended December 31, 2021 and there were no borrowings outstanding under the 2021 RLOC facility
at December 31, 2021.

Bitcoin holdings as of December 31, 2022:
At December 31, 2022, the Company held approximately 12,232 bitcoin on its balance sheet with a carrying value of $190,717 thousand.
Approximately 4,416 of these bitcoin ($68,875 thousand book value) were being utilized as collateral for borrowings and classified as
digital assets restricted. The remaining 7,816 bitcoin, with $121,842 thousand book value, were unrestricted bitcoin holdings classified
as digital assets.

At
December 31, 2022, the fair value of a single bitcoin was approximately $16,548. As a
result, the fair market value of our bitcoin holdings at December 31, 2022 was approximately (stated in thousands):

Bitcoin
held as collateral for loans (“Digital assets, restricted”): The Company’s $49,882 thousand
term loan and its $100,000 thousand RLOC facility are collateralized by bitcoin at a “loan-to-value” ratio of 65%, meaning
that the initial collateral for a $50,000 thousand loan is bitcoin with a market value of $76,900 thousand. If the fair market value of
bitcoin held as collateral declines such that the loan-to-value ratio is above 75%, or approximately $66,700 thousand for a $50,000 thousand
loan, the Company is required to add collateral to bring the ratio back to 65%. If the value of the collateral increases such that the
loan-to-value ratios falls below 65%, the Company can require a return of collateral to bring the ratio back to 65%.

During the month of October 2022, the Company borrowed an additional $50,000
thousand under its RLOC facility for general corporate purposes and provided an additional 3,993 of bitcoin as collateral for this borrowing.
This increased the Company’s collateral balance at that time (for its outstanding $49,882 thousand term loan and the additional
$50,000 thousand RLOC borrowing) to 7,821 bitcoin. On November 9, 2022, bitcoin prices declined to a new yearly low on concerns of financial
instability in the industry as a result of the FTX collapse. As a result, the Company was required to provide an additional 1,669 bitcoin
(fair valued at $16,213 per bitcoin) as collateral for its outstanding borrowings, bringing its total collateral balance to 9,490 bitcoin
(or approximately $153,900 thousand fair value). The Company’s total bitcoin holdings as of November 9, 2022, were 11,440 bitcoin,
of which 1,950 (approximately $31,600 thousand) were unrestricted. During November and December 2022, the Company repaid the $50,000 thousand
in RLOC borrowings. This repayment enabled the Company to reduce its bitcoin held as collateral to approximately 4,416 bitcoin (with a
fair value of approximately $73,074 thousand) by December 31, 2022.

Bitcoin
holdings outlook: We expect that our 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. For example, we would expect:

48

We intend to add to our bitcoin holdings primarily through our production
activities and we also intend to sell bitcoin as a means of generating cash to cover monthly operating costs and for general corporate
purposes. We do not intend to make any significant purchases of bitcoin on the open market as means of increasing our bitcoin holdings,
although we may buy and sell bitcoin from time-to-time (separately from what is outlined above) for treasury management purposes.

Liquidity
outlook: Cash and cash equivalents, excluding restricted cash, totaled $103,705 thousand at December 31, 2022. The Company expects
to have sufficient liquidity, including cash on hand, cash received from sales of our bitcoin holdings, and access to public capital
markets to support ongoing operations. Our primary source of funding during 2022 and 2021 (other than the asset sales described above
during 2022) has been capital markets activities (primarily through our At-The-Market facility and our 2021 convertible debt offering).
We will continue to seek to fund our business activities, and especially our growth opportunities, through the public capital markets,
primarily through periodic equity issuances using our At-The-Market facility.

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

Subsequent
Events

On
January 27, 2023, the Company and FSI entered into an Agreement regarding formation of an Abu Dhabi Global Markets company (the “ADGM
Entity”), whose purpose shall be to jointly (a) establish and operate one or more mining facilities for digital assets; and (b)
mine digital assets. The initial project by the ADGM Entity shall consist of two digital asset mining sites comprising 250 MW in Abu
Dhabi, and the initial equity ownership in the ADGM Entity shall be 80% FSI and 20% the Company, and capital contributions will be made,
subject to the satisfaction or waiver of certain conditions, during the 2023 development period in those proportions, consisting of both
cash and in kind, in amounts of approximately $406,000 thousand in aggregate.

On February 6, 2023, the Company
provided Silvergate Bank with the required 30-day notice stating the Company’s intent to prepay the outstanding balance on its term
loan facility as well as the Company’s intent to terminate the term loan facility. The Company and Silvergate subsequently agreed
to also terminate the revolving line of credit (“RLOC”) facility. On March 8, 2023, the term loan prepayment was completed,
and the Company’s term loan and RLOC facilities with Silvergate Bank were terminated.

On March 12, 2023, Signature
Bank was closed by its state chartering authority, the New York State Department of Financial Services. On the same date the Federal Deposit Insurance Corporation (“FDIC”) was
appointed as receiver and transferred all customer deposits and substantially all of the assets of Signature Bank to Signature Bridge Bank,
N.A., a full-service bank that is being operated by the FDIC. The Company automatically became a customer of Signature Bridge Bank, N.A.
as part of this action. The Company held approximately $142,000 thousand cash deposits at
Signature Bridge Bank, N.A.as of March 12, 2023. Normal banking activities resumed on Monday, March 13, 2023.

Off-Balance
Sheet Arrangements

None.

49

ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The
following discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations
for the periods indicated. The discussion should be read in conjunction with our consolidated financial statements and the notes presented
herein. In addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results
of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly
from those expressed, implied or anticipated in these forward-looking statements as a result of certain factors discussed herein and
any other periodic reports filed and to be filed with the Securities and Exchange Commission.

Cautionary
Note Regarding Forward-Looking Statements

This
report and other documents that we file with the Securities and Exchange Commission contain forward-looking statements that are based
on current expectations, estimates, forecasts and projections about our future performance, our business, our beliefs and our management’s
assumptions. Statements that are not historical facts are forward-looking statements. Words such as “expect,” “outlook,”
“forecast,” “would,” “could,” “should,” “project,” “intend,”
“plan,” “continue,” “sustain”, “on track”, “believe,” “seek,”
“estimate,” “anticipate,” “may,” “assume,” and variations of such words and similar expressions
are often used to identify such forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. These forward- looking statements are not guarantees of future performance and involve risks, assumptions
and uncertainties, including, but not limited to, those described in our reports that we file or furnish with the Securities and Exchange
Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual
results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not
to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except to the extent required
by law, we undertake no obligation to update publicly any forward-looking statements after the date they are made, whether as a result
of new information, future events, changes in assumptions or otherwise.

Business
of the Company

We
were incorporated in the State of Nevada on February 23, 2010 under the name Verve Ventures, Inc. As of the date of this filing, our
name has been changed to Marathon Digital Holdings, Inc. On December 7, 2011, we changed our name to American Strategic Minerals Corporation
and were engaged in exploration and potential development of uranium and vanadium minerals business. In June 2012, we discontinued our
minerals business and began to invest in real estate properties in Southern California. In October 2012, we discontinued our real estate
business and we commenced our IP licensing operations, at which time the Company’s name was changed to Marathon Patent Group, Inc.
On November 1, 2017, we entered into a merger agreement with Global Bit Ventures, Inc. (“GBV”), which is focused on mining
digital assets. We have since purchased our cryptocurrency mining machines and established a data center in Canada to mine digital assets.
Following the merger, we intended to add GBV’s existing technical capabilities and digital asset miners and expand our activities
in the mining of new digital assets, while at the same time harvesting the value of our remaining IP assets. On June 28, 2018, the board
has determined that it is in the best interests of the Company and its shareholders to allow the Amended Merger Agreement to expire on
its current termination date of June 28, 2018 without further negotiation or extension. The Board approved to issue 750,000 shares of
our common stock to GBV as a termination fee for cancelling the proposed merger between the two companies. The fair value of the common
stocks was $2,850,000.

41

Recent
Developments

See
“Business – Recent Developments”

Critical
Accounting Policies and Estimates

We
believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this management
discussion and analysis:

Digital
Currencies

Digital
currencies are included in current assets in the consolidated balance sheets as intangible assets with indefinite useful lives. Digital
currencies are recorded at cost less impairment.

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. Impairment
exists when the carrying amount exceeds its fair value, which is measured using the quoted price of the digital currency at the time
its fair value is being measured. In testing for impairment, the Company has the option to first perform a qualitative assessment to
determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that
an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform
a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset.
Subsequent reversal of impairment losses is not permitted.

At
December 31, 2021, we carried $123.2 million of digital assets on our balance sheet, consisting of the approximately 3,321 bitcoins,
and held $268.5 million in cash and cash equivalents, compared to $2.3 million of digital assets and $141.3 million in cash and cash
equivalents at December 31, 2020, reflecting the shift in our liquid assets. As of March 9, 2022, we held approximately 9,007
bitcoins, of which, 4,794 bitcoins were acquired at an aggregate purchase price of $150 million at an average purchase price
of approximately $31,168 per bitcoin, inclusive of fees and expenses. We expect to purchase additional bitcoin in future periods,
though we may also sell bitcoin in future periods as needed to generate Cash Assets for treasury management purposes.

Impairment
of Long-lived Assets

Management
reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted
future cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized
is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. On January 14, 2021, the Company
sold its inventory of approximately 5,900 S9, 13.5 TH/s miners. As such, management determined that those crypto-currency machines were
impaired by a total of $871,302 based upon an assessment as of December 31, 2020. During the year ended December 31, 2019 we moved certain
of our bitcoin miners to a new location in the United States and recorded an impairment of $447,776 in our leasehold improvements in
Canada.

Non-GAAP
Financial Measures

We
are providing supplemental financial measures for (i) non-GAAP income from operations that excludes the impact of depreciation and amortization
of fixed assets, impairment losses on mined cryptocurrency, server maintenance contract amortization and stock compensation expense and
(ii) non-GAAP net income and non-GAAP diluted earnings per share that exclude the impact of depreciation and amortization of fixed assets,
impairment losses on mined cryptocurrency, change in fair value of warrant liability, server maintenance contract amortization and stock
compensation expense, net of withholding taxes. These supplemental financial measures are not measurements of financial performance under
generally accepted accounting principles in the United States (“GAAP”) and, as a result, these supplemental financial measures
may not be comparable to similarly titled measures of other companies. Management uses these non-GAAP financial measures internally to
help understand, manage, and evaluate our business performance and to help make operating decisions.

We
believe that these non-GAAP financial measures are also useful to investors and analysts in comparing our performance across reporting
periods on a consistent basis. The first supplemental financial measure excludes non-cash operational expenses that we believe are not
reflective of our general business performance such as (i) depreciation and amortization of fixed assets, (ii) significant impairment
losses on mined cryptocurrency, (iii) server maintenance contract amortization and (iv) stock compensation expense, net of withholding
taxes that could vary significantly in comparison to other companies.

42

The
second set of supplemental financial measures excludes the impact of (i) depreciation and amortization of fixed assets, (ii) significant
impairment losses on mined cryptocurrency, (iii) change in fair value of warrant liability (iv) server maintenance contract amortization
and (v) stock compensation expense, net of withholding taxes. We believe the use of these non-GAAP financial measures can also facilitate
comparison of our operating results to those of our competitors.

Non-GAAP
financial measures are subject to material limitations as they are not in accordance with, or a substitute for, measurements prepared
in accordance with GAAP. For example, we expect that share-based compensation expense, which is excluded from the first two non-GAAP
financial measures, will continue to be a significant recurring expense over the coming years and is an important part of the compensation
provided to certain employees, officers, and directors. Similarly, we expect that depreciation and amortization of fixed assets will
continue to be a recurring expense over the term of the useful life of the assets. We have also excluded impairment losses on mined cryptocurrency
from the first two non-GAAP financial measures, which may occur in future periods as a result of our continued holdings of significant
amounts of bitcoin. Our non-GAAP financial measures are not meant to be considered in isolation and should be read only in conjunction
with our Consolidated Condensed Financial Statements, which have been prepared in accordance with GAAP. We rely primarily on such Consolidated
Condensed Financial Statements to understand, manage, and evaluate our business performance and use the non-GAAP financial measures only
supplementally.