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UNITED STATES
証券取引委員会
ワシントンD.C. 20549 
フォーム 10-Q 
1934年の証券取引所法第13条または第15条に基づく四半期報告
報告期間が終了した2023年6月30日をもって2024年9月30日 
または
証券取引法(1934年)第13条または第15条に基づく過渡的報告書
_____から_____への移行期間について

報告書番号:001-36555

 MARA HOLDINGS, INC.
(登録された憲章に指定された名称については)
ネバダ01-0949984
(State or other jurisdiction
(設立または組織の)書類
(I.R.S. 雇用主識別番号)
識別番号)
101 NE Third Avenue, Suite 1200, フォートローダーデール , FL
 33301
(本社の所在地) (郵便番号)
取引所の電話番号、市外局番を含む: 800-804-1690

法律に基づき登録された有価証券:
各クラスの名称 取引シンボル 登録されている各取引所の名称
普通株式、株式1株あたりの名目価値0.0001ドル  MARA 
取引所 ナスダック キャピタルマーケット
本登録者が、前述の12か月間(あるいは登録者が当該報告書を提出しなければならなかった短い期間)において、証券取引法第13条または15条(d)で定められた提出すべき報告書を全て提出したかどうかをチェックマークで示し、(2) 本登録者が過去90日間にわたってその提出要件に従っていたかどうかを示します。はい ☒ いいえ ☐

規則405に基づき、本章の§232.405に規定されている対話型データファイルを、過去12か月間(またはそのようなファイルを提出する義務があった期間の短い場合)に電子提出したかどうかをチェックマークで示してください。はい ☒ いいえ ☐

記録者が大幅高速申告者、高速申告者、非加速申告者、小規模報告会社、または新興成長企業であるかどうかをチェックマークで示してください。"大幅高速申告者"、"高速申告者"、"小規模報告会社"、および"新興成長企業"の定義については、取引所法第120億2条を参照してください。

大型加速ファイラー
加速ファイラー
非加速ファイラー
レポート義務のある中小企業
新興成長企業
新興成長企業の場合は、註記欄にチェックマークを付けてください。申請者は、証券取引法第13(a)条に基づく新しいまたは改訂された財務会計基準の遵守のために延長された移行期間を使用しないことを選択しましたか。 ☐

登録者が、Shell Company(「Exchange Act」ルール12b-2に定義される)かどうかをチェックマークで示してください。 はい☐ いいえ 

2024年11月5日現在、登録者の普通株式の発行済み株式数は1株当たり0.0001ドルの割合でした。 321,831,487.



目次
 
  ページ
アイテム1.
アイテム2.
アイテム3.
アイテム4.
アイテム1。
項目1A。
アイテム2.
アイテム3.
アイテム4.
項目5。
項目6。
 


表の 目次
第I部分

項目1.財務諸表

株式会社マラホールディングス及びその子会社
連結簡易貸借対照表

9月30日、12月31日
20242023
(千ドル、株式および株式当たり金額を除く)(未監査)
資産
流動資産:
現金及び現金同等物$164,256 $357,313 
制限付き現金12,000  
デジタル資産17,099 639,660 
売掛金の純額2,792  
預金26,497 7,240 
前払費用およびその他の流動資産16,728 25,590 
流動資産合計239,372 1,029,803 
デジタル資産
1,693,122  
有形固定資産、正味額1,092,140 671,772 
仕入先への前渡金240,322 95,589 
投資154,046 106,292 
長期預金56,185 59,790 
長期前払費用19,616 27,284 
運用リース契約に基づく資産9,363 443 
のれん45,362  
無形資産、純額1,975  
繰延税資産28,646  
新規買資産合計3,340,777 961,170 
資産合計$3,580,149 $1,990,973 
負債及び純資産
流動負債:
支払予定の勘定$12,561 $11,343 
未払費用36,861 22,291 
デリバティブ取引、流動部分6,276  
オペレーティングリース債務(流動負債)367 124 
ファイナンスリース債務(短期)179  
その他の流動負債3,545  
流動負債合計59,789 33,758 
長期負債:
債務不足額証券618,683 325,654 
流動部分を差し引いたデリバティブ契約
17,970  
現在の一部を除くオペレーティングリース債務15,014 354 
ファイナンスリース債務(一年以内相当分を除く)4,832  
繰延税金負債 15,286 
その他の長期負債8,268  
長期負債の合計 664,767 341,294 
連結財務諸表の注記をご参照ください

1

表の 目次
負債および義務 (16注)
株主資本:
優先株式、1株当たりの額 $0.0001 株式あたり、 50,000,000 株式の承認数; いいえ 2024年9月30日と2023年12月31日時点で発行済み株式数
  
普通株式、割当資本金 1株の額 $0.0001 株式あたり、 500,000,000 株式の承認数; 304,912,746 株と 242,829,391 2024年9月30日と2023年12月31日に発行済みで未払いの株式
30 24 
追加の資本金3,410,478 2,183,537 
累積欠損(554,915)(567,640)
純資産合計2,855,593 1,615,921 
負債および株主資本合計$3,580,149 $1,990,973 
連結財務諸表の注記をご参照ください

2

表の 目次
株式会社マラホールディングス及びその子会社
簡易合算損益計算書
(未監査)

9月30日に終了した3ヵ月間
9月30日までの9ヵ月間
(千ドル、株式および株式当たり金額を除く)2024202320242023
収益合計$131,647 $97,849 $441,984 $230,740 
費用と経費
売上総利益
マイニングおよびホスティングサービス
(97,527)(59,628)(281,625)(148,227)
減価償却費および償却費(101,136)(53,548)(266,939)(108,556)
売上総利益の総額(198,663)(113,176)(548,564)(256,783)
Operating expenses
一般管理費用(63,725)(19,428)(194,154)(54,404)
デジタル資産の公正価値の変化30,088 (44,692)370,896 117,868 
キャッシュフローヘッジとして分類される精算価額変動の公正価値変化
(58,234) (35,235) 
研究開発
(2,813)(713)(9,124)(1,573)
早期解約費用
(10,304) (38,061) 
無形資産の摘早償却(219) (22,658) 
総営業費用(105,207)(64,833)71,664 61,891 
営業収益(損益)
(172,223)(80,160)(34,916)35,848 
投資の利益(損失)
(1,000) 4,236  
ヘッジ取引における損失
  (2,292) 
非包括関連会社の純収益(2,133)(647)(825)(647)
債務帳消しによる純利益
 82,600  82,267 
利息所得3,894 426 8,655 1,366 
利子費用(2,342)(2,536)(4,967)(9,136)
その他の営業外収益(損失)
(146) 67  
所得税前利益(損失)
(173,950)(317)(30,042)109,698 
所得税の特典(費用)
49,161 (73)42,767 (351)
純利益(損失)
$(124,789)$(390)$12,725 $109,347 
Series A 优先股の割戻し価額
   (2,121)
普通株主に帰属する当期純利益(損失)
$(124,789)$(390)$12,725 $107,226 
普通株式の一株当たり当期純利益(損失)- 基本
$(0.42)$ $0.05 $0.63 
普通株式の加重平均株式数 - 基本
294,942,685179,602,722277,643,666169,162,821
普通株式の希薄化後当期純利益(損失)
$(0.42)$(0.34)$0.05 $0.27 
普通株式の希薄化後の加重平均株式数
294,942,685183,736,770282,651,034174,393,108
 
連結財務諸表の注記をご参照ください

3

表の 目次
株式会社マラホールディングス及びその子会社
株主資本に関する簡略化された連結財務諸表
(未監査)

2024年9月30日までの3か月間にわたる
普通株式資本剰余金累積赤字株主資本合計
(千ドル、株式データを除く)
2024年6月30日の残高287,046,579 $28 $3,072,753 $(430,126)$2,642,655 
株式報酬(税引き後)859,452 — 22,818 — 22,818 
普通株式発行手数料控除後17,313,059 2 320,759 — 320,761 
制限株の解除による株式の買い戻し(306,344)— (5,852)— (5,852)
純損失— — — (124,789)(124,789)
2024年9月30日の残高304,912,746 $30 $3,410,478 $(554,915)$2,855,593 
2024年9月30日までの9ヶ月間について
普通株式剰余資本金累積赤字株主資本の合計
(千単位、株式データを除く)金額
2023年12月31日の残高242,829,391 $24 $2,183,537 $(567,640)$1,615,921 
株式報酬金(税引控除後)4,180,445 — 100,908 — 100,908 
普通株式の発行、公募費用の差引き59,449,012 6 1,154,998 — 1,155,004 
制限株の清算による株式の取り消し(1,546,102)— (28,965)— (28,965)
当期純利益— — — 12,725 12,725 
2024年9月30日の残高304,912,746 $30 $3,410,478 $(554,915)$2,855,593 

連結財務諸表の注記をご参照ください

4

表の 目次
2023年9月30日までの3ヶ月間の売上高について
普通株式資本剰余金累積赤字株主資本合計
(千ドル、株式データを除く)
2023年6月30日の残高174,209,038 $17 $1,461,188 $(719,121)$742,084 
株式報酬、税金控除後70,963 — 5,598 — 5,598 
普通株式発行手数料控除後4,182,300 1 36,950 — 36,951 
普通株式への可換性ノートの取引31,722,417 3 318,768 — 318,771 
純損失— — — (390)(390)
2023年9月30日の残高210,184,718 $21 $1,822,504 $(719,511)$1,103,014 
2023年9月30日までの9か月間
普通株式資本剰余金累積赤字株主資本合計
(千ドル、株式データを除く)
2022年12月31日の残高145,565,916 $15 $1,226,267 $(840,341)$385,941 
税引き後の株式報酬590,831 — 13,807 — 13,807 
Issuance of common stock, net of offering costs32,305,554 3 265,783 — 265,786 
Series A Preferred Stock accretion to redemption value— — (2,121)— (2,121)
Exchange of convertible notes for common stock31,722,417 3 318,768 — 318,771 
Cumulative effect of the adoption of ASU 2023-08
— — — 11,483 11,483 
当期純利益— — — 109,347 109,347 
2023年9月30日の残高210,184,718 $21 $1,822,504 $(719,511)$1,103,014 
連結財務諸表の注記をご参照ください

5

表の 目次
株式会社マラホールディングス及びその子会社
現金フローの要約連結貸借対照表
(未監査)

9月30日までの9ヵ月間
(千単位で)20242023
営業活動からのキャッシュ・フロー
当期純利益
$12,725 $109,347 
当期純利益に対する調整:
減価償却費および償却費266,939 108,556 
繰延税金費用
(43,932)351 
デジタル資産の公正価値の変化(370,896)(117,868)
投資による利益
(4,236) 
ヘッジ取引における損失
2,292  
ストックベースの報酬103,585 13,907 
キャッシュフローヘッジとして分類される精算価額変動の公正価値変化
35,235  
早期解約費用
38,061  
無形資産の摘早償却22,658  
債務発行コストの減価償却1,434 2,780 
非包括関連会社の純収益825 647 
債務の返済による利益
 (82,267)
その他の営業活動からの調整、当期純利益(2,341)609 
運転資産および負債の変化(425,945)(260,549)
営業によるキャッシュフローの純流出
(363,596)(224,487)
投資活動によるキャッシュ・フローの現金流入
仕入先への前渡金(584,799)(87,315)
取得価額の純額(275,839) 
貸付金(178) 
有形固定資産の購入(64,303)(25,813)
不動産や設備の売却による受け取り金額
2,200  
デジタル・アセットの売却による収益118,358 179,509 
デジタル資産の購入(395,588) 
投資法適用関連会社への投資
(22,146)(66,754)
株式投資の購入(9,960) 
投資活動によるキャッシュフローの純流出
(1,232,255)(373)
財務活動からのキャッシュフロー
普通株式の発行による受取高(発行費用相殺済み)1,155,004 265,786 
シリーズA優先株式の発行に伴う収益(発行費用を控除したもの)
 13,629 
転換社債の発行に伴う収益(発行費用を控除したもの)291,595  
シリーズA優先株式の償還
 (15,750)
制限株の清算による株式の取り消し(28,965) 
ファイナンスリース債務返済(163) 
期間ローン借入金の償還 (50,000)
税金控除用に差し押さえられた株式の価値(2,677)(100)
財務活動による純現金流入額
1,414,794 213,565 
現金、現金同等物及び制限つきキャッシュの純減少額
(181,057)(11,295)
期初の現金、現金同等物及び制限された現金
357,313 112,505 
期末の現金、現金同等物及び制限された現金
$176,256 $101,210 
連結財務諸表の注記をご参照ください

6

表の 目次
株式会社マラホールディングス及びその子会社
非監査の連結財務諸表に関する注釈
(未監査)

注釈1-ビジネスと報告の基盤ビジネスの組織と説明
 
MARAホールディングス株式会社(その子会社とともに「会社」または「MARA」と呼ばれる)は、デジタル資産計算のグローバルリーダーであり、持続可能な未来を構築するための革新的なテクノロジーを開発・展開しています。MARAは、世界で最も優れたブロックチェーン台帳を確保し、クリーンで孤立した、またはその他の未活用のエネルギーを経済的価値に変換することでエネルギーの変革を支援しています。また、同社は、次世代液体浸漬冷却およびビットコインマイナー向けのファームウェアを含む、データセンターの運用を最適化するためのadvancedテクノロジーソリューションを提供しています。同社は、デジタル資産の計算、獲得、保有を長期的な投資として主に重視しています。ビットコインは採用が増加しており、その供給が限られているため、同社は価値の上昇とビジネスの長期的な成長見通しの機会を提供すると信じています。

「ビットコイン」という大文字の「B」を持つ用語は、高い可用性、公開性、永続性、および分散型台帳を実装するビットコインプロトコルを表すために使用されます。「bitcoin」という小文字の「b」を持つ用語は、トークン、ビットコインを指定するために使用されます。
 
注 2 − 重要な会計方針の概要と見積の使用見積もりの使用
 
プレゼンテーションの基礎となる考え方と連結の原則。当社の未監査の簡略化された連結財務諸表は、米国一般受容会計原則に従って準備されており、当社の口座および当社の完全子会社の口座を含んでいます。すべての関連会社口座および取引は、連結されます。

付属する未検証の簡約連結財務諸表には、同社および完全子会社、支配される企業の勘定が含まれています。グループ内取引および残高は連結時に除去されています。 同社は、最新の年次財務諸表以降に実質的に変わっていない範囲の情報を省略することを認められている、米国の一般に受け入れられている会計原則(「GAAP」)および米国証券取引委員会(「SEC」)の規制に準拠して、簡略化された連結財務諸表を作成しています。 これらの簡約連結財務諸表は、当該期間の会社の財務状況、業績、キャッシュ・フローを公正に提示するために必要な、通常の繰り返し調整のみから成る、経営陣の意見に基づくすべての調整を反映しています。 2024年の将来の財務期間や2024年12月31日までの年度末を示唆するものではない、中間期間の業績は将来の財務期間で期待される結果を必ずしも示唆していません。

これらの財務諸表は、2023年12月31日に終了する年度に関する年次報告書(Form 10-K)に含まれる財務諸表および関連ノートと併せてご参照ください。当該報告書は2024年2月28日にSECに提出され、Form 10-K/Aによる修正(以下、「年次報告書」)が適用され、2024年5月24日にSECに提出されました。

見積もりと仮定の使用
 
米国会計基準(GAAP)に準拠して財務諸表を作成するには、資産と負債の報告金額、及び財務諸表の日付時点における潜在的な資産と負債の開示、報告期間中の収益および費用の金額に影響を与える見積りと仮定を行う必要があります。会社の財務諸表の作成に伴う最も重要な会計上の見積りには、企業の合併において取得される資産の公正価値と引き受けられる負債、有形固定資産の有用生命の見積り、長期資産の実現、デリバティブ取引の評価、繰延税金、未実現の税務ポジション、デジタル資産の計量が含まれます。実際の結果はこれらの見積りと異なる可能性があります。

現金及び現金同等物
 
会社は、取得時に3か月以内の満期を持つすべての高度な流動性投資およびその他の短期投資を現金同等物と見なしています。 会社は、連邦預金保険公社(FDIC)によって保険された金融機関に現金及び現金同等物残高を維持しています。 2023年3月、会社は、実務上の可能な限りで、保険加入された現金スイーププログラムに参加し始め、それにより、各々の預金が25万ドルを超えないFDIC保険された口座間でその預金を“スイープ”しています。 2024年9月30日時点で、会社のほぼすべての現金及び現金同等物がFDICで保険されています。

7

表の 目次
制限付きの現金
 
制限現金として、 2024年9月30日 主に、商用信用状をサポートし、引き出しを制限された現金残高を主に表しています。

デジタルアセット
 
企業は2024年7月25日、ビットコイン資産方針においてビットコインの全セクター保有(HODL)手法を採用し、自社運用で採掘されたすべてのビットコインを保持し、ビットコインを戦略的に定期的にオープンマーケットで購入する可能性があります。その結果、ビットコインのデジタル資産は、ビットコインを保持し、中立する意向があるため、総括連結貸借対照表の非流動資産に含まれています。Kaspaのデジタル資産は、営業費用を賄う目的で保持されている場合、総括連結貸借対照表の流動資産に含まれています。デジタル資産の売却代金は、添付の総括連結キャッシュ・フロー計算書の投資活動内に含まれます。会計基準改定(ASU)2023-08の採用に伴い、 調整後のEBITDAは、2022年の損失から2023年の4億1990万ドルに改善しました。前年同期の償却前利益は4,500万ドルから総利益マージンを除いた164,200万ドルに改善し、前述の3億3150万ドルのデジタル資産の利益、債務の帳消しによる8230万ドルの利益、2022年に記録された減損の欠如に加えて、本年度の改善は主にこれらによるものです。2023年1月1日より、会社はデジタル資産を公正価値で計測し、その変動額は損益計算書の営業費用に認識されます。会社は、デジタル資産の原価を、会計上の先入れ先出し法に従い、ウォレットごとに追跡しています。詳細については、ノート5-デジタル資産を参照してください。

売掛金
 
会社は2024年1月12日、GCデータセンターエクイティホールディングスLLCを取得したことにより、取引債権である債権を取得しました。詳細は、取得に関するノート3を参照してください。 会社は、歴史的および顧客固有の経験、現在の経済および市場状況に基づいて、予想される回収不能金額に等しい信用損失引当金を提供しています。 信用損失引当金は$8.3 2024年9月30日現在、百万ドル

預金
 
その他の所有および運営サイトに加え、会社は機器のホスティング、データセンターでの運用サポート、リースサイト上のデータセンターの建設のために他のサービスプロバイダーと契約しています。これらの取引では、通常これらのサービスに関連する契約義務に従ってベンダーに前払いが必要となります。会社は、これらの支払いを「前払金」または「新規買前払金」として簡易連結貸借対照表に分類しています。

派生商品

会社は、ビットコインやエネルギー価格の変動リスクに対する露出を管理するためにデリバティブ契約を締結し、その他の目的ではありません。また、会社は財務およびサービス契約を評価し、一部の契約が会計基準コーディフィケーション(「ASC」)815に準拠して分離が必要な埋め込みデリバティブの特徴を有しているかどうかを判断します。 勘定科目に関するノート4。必要とされる分離が求められる埋め込みデリバティブは、ホスト契約または取引から分離され、それぞれ独立した金融商品として計上および評価されます。2024年9月30日および2023年12月31日時点で、分離が必要な埋め込みデリバティブが存在しました。 いいえ 2024年9月30日および2023年12月31日時点で、ホスト契約から分離が必要な埋め込みデリバティブがありました。

会社は会計目的のために派生商品をヘッジとして指定せず、そのため、派生商品を公正値で計上し、その後の公正値の変動および決済を収益として認識します。会社は、債務超過や資産超過を現在または非流動として分類します。契約の期間に基づいて、複数回の決済がある派生商品を債権または債務として分類します。

ビットコインデリバティブ

会社はビットコイン市場価格の変動リスクを軽減するために時折デリバティブ契約を締結しています。2024年9月30日までの9か月間に、会社は収益計算書の非運営費として$の損失を記録しました。2.3総合損益計算書において非運営費として解決金支払いを通じて精算された、百万ドルのデリバティブによる損失が記録されました。 いいえ 2024年9月30日および2023年12月31日時点で、ビットコイン市場価格の変動リスクを緩和するためのデリバティブ契約がありました。

エネルギー先物取引

会社は2024年1月12日にGCデータセンター株式会社を取得した結果、コモディティ・スワップ契約を獲得しました。詳細については、取得に関する注記3を参照してください。コモディティ・スワップ契約は、電力の価格変動リスクをヘッジし、2027年12月31日に満期となります。
8

表の 目次
ネット決済を提供する条件により、派生商品の定義に該当します。2024年9月30日現在、会社の派生商品負債証書の見積もり公正価値は$24.2発生の貴重な市場ベースの情報源を使用して推定された、$ミリオン、公正価値階層のLevel 2に分類される。見積もり公正価値を算出する割引キャッシュフローモデルで使用される重要な仮定には、割引率と電気フォワードカーブが含まれています。 それにより、会社は派生商品の公正価値の変化を簿記上の総合損益計算書に記載します。

次の表は、デリバティブ取引の公正価値の変化を示しています:

(千単位で)
2023年12月31日の残高
$ 
ベンチマークスワップ契約10,989 
キャッシュフローヘッジとして分類される精算価額変動の公正価値変化
(35,235)
2024年9月30日の残高
$(24,246)

固定資産
 
資産および設備は、累積減価償却および必要に応じて減損を差し引いた原価で表示されています。企業結合によって取得された資産および設備は、取得日の公正価値で計上されます。減価償却は、資産の見込み有用生命にわたる直線法を用いて計算されます。当社の資産および設備は主にデジタル資産マイニングリグで構成されており、ほとんど均質でほぼ同じ有用生命を有しています。そのため、当社はデジタル資産マイニングリグに対してグループ法による減価償却を適用しています。マイニング機器の稼働状況に関する情報が変更が必要であることを示す場合、当社は定期的にデジタル資産マイニングサーバーグループの見込み有用生命を更新します。マイニング資産の生産性が割り当てられた見込み有用生命よりも長いか短い場合、当社はマイニング機器の見込み有用生命を評価および調整します。
 
のれん

グッドウィルは、企業の組合せによって取得された資産の公正価値を超える買収価格を表します。グッドウィルは償却の対象とならず、代わりに毎年会計年度の終わりに減損を評価されます。また、ASC350に従い、報告単位の公正価値が帳簿価額を下回る可能性が高いことを示すイベントや状況の変化がある場合、さらに頻繁に評価されます。 - 無形資産 - グッドウィルおよびその他.

会社は、報告単位の公正価値が帳簿価額を上回る可能性が高いと判断されるかどうかを判断するために、まず質的要因を評価するオプションがあり、その場合、数量的な減損テストは必要ありません。

ASU 2017-04によって定められたように、 商譲収益の測定を簡素化するため、定量的商譲収益の測定は、報告単位の公正価値と商譲を含む帳簿価額を比較して行われます。報告単位の公正価値が帳簿価額を上回る場合、商譲は減損されません。報告単位の帳簿価額がその公正価額を超過する部分は、報告単位に割り当てられた商譲の額まで、商譲の減損損失が認識されます。報告単位の帳簿価額に税金控除可能な商譲による所得税効果がある場合、商譲の減損損失の計測時に考慮されます。

有限-生存期間固定無形資産

無形資産は、取得原価から累計償却額と累計減損損失を差し引いた金額で記録されます。 ビジネス組合せにより取得される無形資産は、取得日の公正価値で評価されます。

有限寿命の無形資産は、顧客関係と知的財産で構成され、経済的利益の予想パターンに基づいて加速償却される見積もられた役立ち期間を超えて。有限寿命の無形資産は、毎年減損の対象となり、またはイベントや状況の変化が、公典額を超えて減少する恐れが高いと示唆する場合には、その価値が減少している可能性が高いときなど、それ以上の頻度でレビューされます。

事業再編

会社は、ASC 805に従って財務諸表を記述しており、取得方法による会計処理を行っています。 事業再編取得された識別可能な有形および無形資産、および引受けた負債を、取得日の公正価値で計上します。公正価値の決定には、想定、見積もり、および判断が関与します。購入価格の初期割り当ては、予備的なものと見なされています。
9

表の 目次
したがって、計測期間の終了まで(取得日から1年間)は変更される可能性があります。購入日時点の商標の価値は、取得された純資産を超える対価として測定されます。将来発生する支払いは買収価格に含まれ、取得日時点で公正価値として初めて認識されます。買収時点で公正価値として初めて認識される未定の支払いは、アセットまたは負債のどちらかに分類され、予告条件が解消されるまで各報告期間ごとに公正価値で再測されます。期間ごとの未定支払いの変更は、収益として認識されます。

取得に関連する費用はビジネスの組み合わせとは別に認識され、発生した際に費用として計上されます。

投資

投資は戦略的な理由から随時行われる可能性があり、収支ベースの貸借対照表には非流動資産に含まれています。詳細については、ノート8の「投資」を参照してください。

持分法適用投資

会社は、普通株式の20%から50%を所有し、出資先に対して実質的な影響力を行使する能力を有する投資について、ASC 323に従って持分法による会計処理を行います。 持分法投資および合弁事業持分法では、投資家はまず、出資先への投資を原価で記録し、投資の簿価を調整して、出資日以降の出資先の利益または損失の割合を認識します。

その他の投資である。

会社が重要な影響力を行使する能力を持たず、公正価値を容易に決定できない投資は、ASC 321に記載された計測の代替手法に従い、コストから減損金額を減じた値に記録されます。同一発行体の同等または類似の投資に対する取引価格の可観察な変動による増減も加減算されます。 投資 - 株式証券.

ビジネスの方針として、資本を保全し、リストラテギ家投資機会のリターンを最大限にするために、会社はときどき株式投資や将来エクイティに対するシンプルな契約(“SAFE”)を行うことがあります。会社の投資の性質や時期は、特定の時点で利用可能な資本や会社に利用可能な投資機会に依存します。ただし、会社は一般的に投機目的での投資を行わず、投資ビジネスに従事する意向はありません。

株式ベースの報酬
 
会社は、従業員および非従業員に対して、授与日の公正価値に基づいて必要な勤務期間を超えて株式報酬を費用計上しています。詳細については、ノート12「株主資本」を参照してください。
 
有形固定資産の減損
 
管理は、資産の帳簿価額が回収可能でないと示すイベントや状況の変化がある場合に、長期資産を減損損失を検討します。持続目的に保持される資産の回収可能性は、資産の帳簿価額と、資産によって生じる未割引の将来キャッシュフローとを比較して測定されます。このような資産が減損と見なされる場合、認識される減損は、資産の帳簿価額が資産の公正価値を上回る金額で測定されます。

売上高
 
会社はASC 606に基づいて売上高を認識しています。 契約に基づく収益売上基準の中核原則は、報告エンティティが顧客に約束した商品やサービスの譲渡を描写し、その商品やサービスに対して期待される対価を反映した金額で収益を認識すべきであるということです。詳細については、収益に関する注記4を参照してください。

10

表の 目次
研究開発

研究開発費用は主に請負業者費用、機器、消耗品、人員、および関連費用を含む研究開発活動にかかるものです。研究開発費用は、ASC 730に準拠して発生時に費用処理されます。 研究開発 並びに、研究開発費用は収益計算書の営業費用に含まれます。 研究開発費用は、$2.8 百万ドル、および$9.1 百万であり、それぞれ、$0.7 百万と$1.6 2023年9月30日までの3か月および9か月間で、各々新規買万ドル

所得税
 
有効税率

継続する事業における実効税率(「ETR」)は 28.26% および 142.36%であり、それぞれ2024年9月30日までの3か月と9か月間は 23.03% および 0.32%であり、それぞれ2023年9月30日までの3か月と9か月間は。米国の法定税率21%との差は、現行年の活動の結果としての評価引当金の変更に主に起因しています。

2024年9月30日までの9か月間にわたり、企業はすべての利用可能な証拠に基づいて、将来の課税所得が企業の連邦および州の繰延税金資産を実現する可能性が高いことをより可能性の高いと判断しました。その結果、企業は繰延税金資産に関連する評価引当金を解消し、繰延税金資産に関する所得税からの対応する利益を決算済み総合損益計算書に認識しました。企業がそのような繰延税金資産の実現可能性についての結論は、繰延税金負債のスケジュールされた債務の反転に基づいています。

中間期の所得税

会社は、推定年次有効税率を使用して中間ベースで税金の費用または利益を記録します。この税率は、現在の期間の通常の所得または損失に適用され、中間期間に割り当てられる所得税の費用または利益を決定します。非通常またはまれなアイテムの所得税効果は、推定年次有効税率から除外され、影響を受けた中間期間で認識されます。

見積もられた年間実効所得税率の調整は、その見積もりが修正された期間に認識されます。

不確実性

会社は連邦および州の所得税申告書を提出しています。2020年から2023年の税制は一般的に内国歳入庁および各州の課税当局による審査の対象となりますが、現在、会社はどの管轄区でも審査を受けていません。

現在、会社は残っている未認識の税金控除が次の12か月で認識されることはないと予想していません。

最近の会計原則
 
会社は常に新しい会計基準を評価して適用性を判断します。新しい会計基準が会社の財務諸表に影響を及ぼす可能性があると判断された場合、会社は財務諸表に必要な変更があるかどうかを判断するための分析を行い、会社の財務諸表が適切に変更を反映していることを確認するための適切な管理が行われています。

2023年12月に、財務会計基準審議会(「FASB」)は会計基準改正(「ASU」)第2023-09号を発行しました。 所得税 (トピック740):所得税開示の改善。ASU 2023-09は、企業が特定の税率調整、連邦と個別の管轄区域ごとの所得税の額、ならびに連邦州および外国の区分での所得(損失)からの継続的業務の所得税費用(利益)前の金額を開示することを要求します。この新しい基準は、2025年1月1日より始まる年次期間に対して、会社に適用され、早期適用が許可されています。会社は現在、この基準を採用することによる影響を評価しています。

2023年11月、FASbはASU No. 2023-07を発行しました。この改訂により、重要なセグメント費用の開示を強化することにより、報告対象セグメント開示要件が改善されました。この改訂は、連結財務諸表に提示されたすべての前期に遡及的に適用する必要があり、2023年12月31日以降開始する財務年度および2024年12月31日以降開始する財務年度内の中間期間に効力を発揮します。早期採用は認められます。当社は、この指針が当社の要約連結財務諸表に与える潜在的な影響を現在評価しています。 セグメントレポーティング (トピック280): 報告セグメント開示の改善点。ASU 2023-07は、報告セグメント開示要件を向上させることを目的としています。主に、会社の最高執行意思決定グループ(「CODM」と呼ばれる)に定期的に提供される重要セグメント経費に関する開示を強化します。新基準は、有効です。
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表の 目次
2024年1月1日から開始する年次期および2025年1月1日から開始する中間期に適用される企業、早期適用を許可。企業は現在、基準を採用することの影響を評価中です。

NOTE 3 – ストックコンペンセーション2023年5月3日、企業のコアテクノロジーの開発に関連して、当社はDM Lab Co.、LTD(「DM Lab」)と資産購入契約を締結し、一定の資産と一定の負債を取得するため16,012,750株の普通株式を交換し、公正価値が16,012,750ドルである現金対価を含む257,112ドルを現金で支払った。

APLD - ラトルスネーク・デンI、LLCの買収(ガーデンシティ、テキサス)

2024年4月1日、当社はテキサス州ガーデンシティにある運用中のビットコインマイニングサイトを買収しました。 132 メガワットの運用容量と 200 APLD-Rattlesnake Den I, LLC(「ガーデンシティの買収」)のネームプレート容量はメガワットで、現金対価総額はドル96.82024年6月30日までの3か月間に支払われた運転資本調整を含めて、百万ドル。この買収は、会社の技術スタックの統合と相乗効果の実現を通じて、効率と事業規模の改善を目的としています。

次の表は、総購入価考慮の部品を要約しています:

(千単位で)2024年4月1日
取得した現金を差し引いた初期現金対価$92,025 
運転資本調整
4,748 
開発されたテクノロジーは、Broadbeanが内部開発したソフトウェアに関連します。会社は、既存の開発されたテクノロジーによって生成される予想収益に対してロイヤルティ率を適用することにより、開発された技術の評価を実施しました。経済的有用寿命は、開発された技術に関連する技術サイクル、および予測期間中のキャッシュフローのタイミングに基づいて決定されました。顧客関係は、商品やサービスの販売がBroadbeanの既存の顧客ベースに関連しています。会社は、既存の顧客関係に対して、所与の期間の余剰利益法を使用して顧客関係の価値を決定しました。この方法は、既存の顧客関係によって生成される予定のキャッシュフローの現在価値を反映します。そのキャッシュフローに他の資産の貢献を表す費用を差し引いたものです。経済的有用寿命は、歴史的顧客離反率、および予測期間中のキャッシュフローのタイミングに基づいて決定されました。$96,773 

その買収はASC 805に従い、会計の取得方法を使用してビジネスの組み合わせとして計上されました。 事業再編.

以下の表は、2024年4月1日時点の取得資産および負債の見積もり公正価値に基づく購入価格の予備割り当てを要約しています。

(千単位)2024年4月1日
資産
その他の流動資産$4,644 
資産と設備78,759 
ファイナンスリース使用権資産4,040 
グッドウィル14,510 
総資産$101,953 
負債
ファイナンスリース負債$5,180 
負債総額5,180 
購入対価総額$96,773 

購入価格が取得された純資産を上回る余剰として算出されるのが商標です。会社は、商標残高が税務上15年間にわたって控除可能であることを期待しています。商標は、主に成長および効率の機会、および企業の運用を組み合わせることによるビットコインのマイニングサイトの事業との予期されるシナジーに帰属しています。

資産と設備の公正価値は、費用アプローチを適用して見積もられました。このアプローチは、補正や再生産コストを用いて資産の公正価値を推定し、減価償却および経済的陳腐化による価値の減少を調整します。また、ファイナンスリース負債の公正価値は、割引キャッシュフローアプローチを使用して見積もられ、類似資産の現在の市場価格、推定期間、割引率に関する仮定が含まれています。

GCデータセンター株式会社の株式取得(Granbury、TexasおよびKearney、Nebraska)

2024年1月12日、同社は取得しました。 two テキサス州グランベリーとネブラスカ州カーニーにある運用中のビットコインマイニングサイト、総計 390 メガワットの定格容量をGCデータセンター・エクイティ・ホールディングスLLCから取得しました。総額は、2024年3月31日までに支払われた運転資金調整金を含めて、総額189.6百万ドルに加えて、買収施設での追加メガワット容量の拡張が特定のマイルストーン日までに行われた場合に最大で百万ドルの現金を支払う契約条件が含まれています。19.6 3年 期間
12

表の 目次
クローズ記念日に続いて。この買収は、会社のテクノロジー スタックの統合とシナジーの実現を通じて、効率と事業規模の向上を意図しています。

これらの場所において新しいホスティングサービスの顧客を受け入れないことと、既存の顧客契約が満了するか早期解除された際にセルフマイニングに移行することになります。 two サイトは、既存の顧客契約が満了するか早期解除された際にセルフマイニングに移行します。

次の表は、総購入価考慮の部品を要約しています:

(千単位で)2024年1月12日
取得した現金を差し引いた初期現金対価$175,734 
運転資本の調整8,081 
見積もり公正価値条件付きの達成・その他
5,832 
開発されたテクノロジーは、Broadbeanが内部開発したソフトウェアに関連します。会社は、既存の開発されたテクノロジーによって生成される予想収益に対してロイヤルティ率を適用することにより、開発された技術の評価を実施しました。経済的有用寿命は、開発された技術に関連する技術サイクル、および予測期間中のキャッシュフローのタイミングに基づいて決定されました。顧客関係は、商品やサービスの販売がBroadbeanの既存の顧客ベースに関連しています。会社は、既存の顧客関係に対して、所与の期間の余剰利益法を使用して顧客関係の価値を決定しました。この方法は、既存の顧客関係によって生成される予定のキャッシュフローの現在価値を反映します。そのキャッシュフローに他の資産の貢献を表す費用を差し引いたものです。経済的有用寿命は、歴史的顧客離反率、および予測期間中のキャッシュフローのタイミングに基づいて決定されました。$189,647 

その買収はASC 805に従い、会計の取得方法を使用してビジネスの組み合わせとして計上されました。 事業再編.

以下の表は、2024年1月12日時点で取得した資産の見積もり公正価値に基づく購入価格の予備的配分を要約しています:

(千単位)2024年1月12日
資産
売掛金$20,411 
その他の流動資産8,506 
資産と設備132,148 
使用権資産8,852 
グッドウィル30,852 
顧客との関係22,000 
デリバティブ商品10,989 
その他の非流動資産6,250 
総資産$240,008 
負債
買掛金と未払費用$13,940 
リース責任13,992 
その他の長期負債22,429 
負債総額50,361 
購入対価総額$189,647 

購入価格が取得された純資産を上回る余剰として算出されるのが商標です。会社は、商標残高が税務上15年間にわたって控除可能であることを期待しています。商標は、主に成長および効率の機会、および企業の運用を組み合わせることによるビットコインのマイニングサイトの事業との予期されるシナジーに帰属しています。

受取可能な総契約金額は$です24.0百万ドルであり、そのうち$は3.6百万ドルは回収不能と見込まれています

不動産や設備の公正価値は、代替費用または複製費用を適用して推定され、類似の有用性を持つ資産の減価償却および経済的陳腐化による価値の減少を考慮して調整後の公正価値を推定するコストアプローチによって評価されました。デリバティブの公正価値は、現在の市場価格や電力先物曲線、時間価値、およびその他の関連する経済指標を考慮する割引現金流アプローチを使用して推定されました。コンティンジェントな収益の公正価値は、特定の能力開発のマイルストーンを達成する確率加重のキャッシュフローに関する仮定を含む割引現金流アプローチを使用して推定され、これらはレベル3のインプットとされます。リース債務の公正価値は、現在の
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類似資産の市場価格、見積もられた期間および割引率。資産および負債の公正価値の変動は、経営陳述書に記録されます。.

以下の表は、GC idc関連エクイティホールディングス、LLCの条件付き対価負債の見積もり公正価値の変動を示しています:

(千単位で)
2023年12月31日の残高
$ 
コンティンジェント・コンシネレーション・リアビリティ3,523 
コンティンジェントな支払可能な金額の公正価値の変動(38)
2024年9月30日の残高
$3,485 

無形資産は、取得した有形資産や引き受けた負債とは別に認識基準を満たすことが決定されました。無形資産の公正価値は、様々な評価技術に基づいて推定され、その中には、ディスカウントキャッシュフロー分析や、重要な観測不可能な入力、つまり公正価値階層で定義されるレベル3の入力を用いた多期間超過利益評価アプローチが含まれます。これらの評価入力には、予測された将来のキャッシュフロー、長期的な売上高成長率、割引率に関する推定値や仮定が含まれました。顧客関係の無形資産の公正価値は、超過利益法を組み込んだディスカウントキャッシュフローモデルを使用して決定され、約 4 年にわたり、経済的利益の予測パターンに基づいて加速的に償却されます。2024年9月30日現在、会社は$で取得した顧客関係を完全に償却しました。22.0百万。

取得した施設の結果は、取得日時点での会社の要約連結損益計算書に含まれています。

以下の表は、取得した施設の、ガーデンシティ・アクイジションおよびGCデータセンター・エクイティ・ホールディングスLLCの買収が2023年1月1日からそれぞれの期間ごとに発生したと仮定した未監査の合算見込み結果を示しています。

9月30日に終了した3か月間、9月30日に終了した9か月間
(千単位)2024202320242023
収入$131,647 $122,648 $445,077 $305,676 
税引前利益(損失)
(173,950)(3,982)(21,933)75,829 
普通株式1株あたりの利益:
ベーシック$(0.42)$(0.03)$0.03 $0.45 
希釈しました(0.42)(0.03)0.03 0.09 

未監査の形式財務情報は、取得済施設の取得を反映するために、取得が2023年1月1日に発生したと仮定して、会社の歴史的な財務諸表に形式上の調整を適用したものです。未監査の形式財務情報は、実際に取得が行われた場合に達成された可能性のある実績を示すものではなく、会社の将来の財務状況や業績を示すものと見なされるべきではありません。これらの形式財務結果には、無形資産などの購入会計調整の償却の影響や取得が利子や所得税費用に与える影響が含まれています。予想される成長や効率向上のための形式財務情報には、調整が反映されていません。未監査の形式財務情報には、取得に直接帰属する実質的な一時的な形式調整は含まれていません。

注記4 – 収益

会社はASC 606に従って売上高を認識しています。売上基準の中心原則は、企業が約束された商品やサービスの移転を描写するために、その商品やサービスに対して会社が交換の対価として受け取ることを期待している金額で売上高を認識すべきであることです。その中心原則を達成するためには、次の5つのステップが適用されます:
 
Step 1: Identify the contract with the customer;

Step 2: Identify the performance obligations in the contract;
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Step 3: Determine the transaction price;

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

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

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

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

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

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

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

Variable consideration

Constraining estimates of variable consideration

The existence of a significant financing component in the contract

Noncash consideration

Consideration payable to a customer

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

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

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

Application of the Five-Step Model to the Company’s Mining and Hosting Operations

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

On January 12, 2024, the Company acquired two operational bitcoin mining sites for the purpose of improving efficiencies and the scale of the Company’s mining operations. The Company provides hosting services to institutional-scale crypto mining companies at these sites. The Company will not be taking on any new hosting services customers at these locations and will transition to self-mining at these two sites as existing customer agreements expire or are terminated early. Refer to Note 3 - Acquisitions, for further information.

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

Three Months Ended September 30,
Nine Months Ended September 30,
(in thousands)2024202320242023
Revenues from contracts with customers
Mining operator - transaction fees$2,836 $2,378 $16,743 $9,787 
Mining participant13,876 2,677 40,157 23,404 
Hosting services (1)
341  29,777  
Total revenues from contracts with customers17,053 5,055 86,677 33,191 
Mining operator - block rewards and other revenue114,594 92,794 355,307 197,549 
Total revenues$131,647 $97,849 $441,984 $230,740 

(1) Includes revenue beginning January 12, 2024, the date of the GC Data Center Equity Holdings, LLC acquisition. The Company made a strategic decision to exit hosting services business upon acquisition. Intercompany transactions have been eliminated in consolidation. Refer to Note 3 - Acquisitions, for further information.

Mining Operator

As Operator, the Company provides transaction verification services to the transaction requestor, in addition to the Bitcoin network. Transaction verification services are an output of the Company’s ordinary activities; therefore, the Company views the transaction requestor as a customer and recognizes the transaction fees as revenue from contracts with customers under ASC 606. The Bitcoin network is not an entity such that it may not meet the definition of a customer; however, the Company has concluded that it is appropriate to apply ASC 606 by analogy to block rewards earned from the Bitcoin network. The Company is currently entitled to the block reward of 3.125 bitcoin, subsequent to the halving that occurred on April 19, 2024. Prior to the halving, the Company was entitled to the block reward of 6.25 bitcoin from each successful validation of a block. The Company is also entitled to the transaction fees paid by the transaction requester payable in bitcoin for each successful validation of a block. The Company assessed the following factors in the determination of the inception and duration of each individual contract to validate a block and satisfaction of its performance obligation as follows:

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

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

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

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

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

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

Mining Participant

The Company participates in third-party operated mining pools. When the Company is a Participant in a third-party operated mining pool, the Company provides a service to perform hash calculations to the third-party pool operators. The Company considers the third-party mining pool operators to be its customers under Topic 606. Contract inception and the Company’s enforceable right to consideration begins when the Company commences 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 midnight UTC and ending 23:59:59 UTC on a daily basis. The non-cash consideration that the Company is 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 the Company 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 the Company earned for the same 24-hour period noted above.

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

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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 the Company performs; the amount of transaction fees the Company is 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 they are 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 midnight 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 midnight 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 the Company’s 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 the Company’s fractional share of consideration earned by the pool operator also cause variability. The Company does not have the ability to estimate whether a block will be successfully validated with reasonable certainty at contract inception. The Company constrains the variable consideration at contract inception because it is not probable that a significant reversal in the amount of revenue recognized from the contract will not occur when the uncertainty is subsequently resolved. Once a block is successfully validated, the constraint is lifted. The Company recognizes the non-cash consideration on the same day that control is transferred, which is the same day as contract inception.

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

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

Hosting Services

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

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

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

NOTE 5 – DIGITAL ASSETS

Effective January 1, 2023, the Company early adopted ASU 2023-08, which requires entities to measure crypto assets at fair value with changes recognized in the Condensed Consolidated Statements of Operations each reporting period. The Company’s digital assets were within the scope of ASU 2023-08 and a cumulative-effect adjustment of $11.5 million as of the beginning of the fiscal year ended December 31, 2023 was recorded for the difference between the carrying amount of the Company’s digital assets and fair value.

The following table presents the Company’s significant digital asset holdings as of September 30, 2024 and December 31, 2023, respectively:

(in thousands, except for quantity)QuantityCost BasisFair Value
Bitcoin26,747$1,256,486 $1,693,122 
Kaspa107,891,91915,171 17,099 
Total digital assets held as of September 30, 2024
$1,271,657 $1,710,221 

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

The Company earned 95 and 48 bitcoin that were pending distribution from the Company’s equity method investee, the ADGM Entity (as defined below), which are excluded from the Company’s holdings as of September 30, 2024 and December 31, 2023, respectively.

During the three months ended September 30, 2024, the Company purchased $100.0 million of bitcoin using cash on hand and an additional 4,144 bitcoin, or approximately $249.0 million, using the net proceeds from the issuance of the 2031 Notes (as defined below). Refer to Note 14 - Debt, for additional information.

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NOTE 6 – ADVANCES TO VENDORS AND DEPOSITS

The Company contracts with bitcoin mining equipment manufacturers to procure equipment necessary for the operation of its bitcoin mining operations. These agreements typically require a certain percentage of the value of the total order to be paid in advance at specific intervals, usually within several days of execution of a specific contract and periodically thereafter with final payments due prior to each shipment date. The Company accounts for these payments as “Advances to vendors” on the Condensed Consolidated Balance Sheets.
 
As of September 30, 2024 and December 31, 2023, such advances totaled approximately $240.3 million and $95.6 million, respectively.

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

As of September 30, 2024 and December 31, 2023, such deposits totaled approximately $82.7 million and $67.0 million, respectively.

NOTE 7 – PROPERTY AND EQUIPMENT

The components of property and equipment as of September 30, 2024 and December 31, 2023 are:

(in thousands, except useful life)Useful life (Years)September 30, 2024December 31, 2023
Land (1)
$4,649 $ 
Land improvements925,246  
Building and improvements2550,866  
Mining rigs31,191,928 862,055 
Containers
10 - 15
56,977 5,676 
Equipment
4 - 15
65,622  
Software and hardware23,307  
Asset retirement obligation87,879  
Construction in progress145,311 
Other7839242
Total gross property, equipment1,552,624867,973
Less: Accumulated depreciation and amortization(460,484)(196,201)
Property and equipment, net$1,092,140 $671,772 
 
(1) Refer to Note 15 - Leases, for further information regarding the Company’s finance land lease.

The Company recorded an asset retirement obligation of $7.9 million for the Granbury data center land lease. The asset retirement obligation represents the estimated cost to return the site to its original state. The asset retirement obligation is being depreciated over the term of the lease which is approximately 8 years.
 
The Company’s accretion expense related to the asset retirement obligation for the three and nine months ended September 30, 2024 was $0.2 million and $0.7 million, respectively.

The Company’s depreciation expense related to property and equipment for the three months ended September 30, 2024 and 2023 was $101.1 million and $53.5 million, respectively. The Company’s depreciation expense related to property and equipment for the nine months ended September 30, 2024 and 2023 was $266.9 million and $108.6 million, respectively.
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NOTE 8 – INVESTMENTS

As of September 30, 2024 and December 31, 2023, investments totaled approximately $154.0 million and $106.3 million, respectively. The following summarizes the Company’s current investments.

Equity Method Investments

The ADGM Entity

On January 27, 2023, the Company and Zero Two (formerly known as FS Innovation, LLC) entered into a Shareholders’ Agreement to form an Abu Dhabi Global Markets company (the “ADGM Entity”) in which the Company has a 20% ownership interest, which is accounted for as an equity method investment. The ADGM Entity commenced mining operations in September 2023.

During the nine months ended September 30, 2024, the Company received a non-monetary dividend in the amount of $4.4 million associated with approximately 1,950 mining rigs distributed by Zero Two. The Company recorded the mining rigs to property and equipment at fair value and, accordingly, recognized an impairment of $4.1 million that reduced the Company’s investment in the ADGM Entity for the nine months ended September 30, 2024.

The Company’s share of net losses was $2.1 million and $0.8 million for the three and nine months ended September 30, 2024, respectively, and $0.6 million for both the three and nine months ended September 30, 2023. As of September 30, 2024, the Company’s investment in the ADGM Entity was $66.9 million and is reflected in “Investments” on the Condensed Consolidated Balance Sheets.

Other Investments

Other investments consist of strategic investments made from time to time in equity securities and SAFE investments.

Investments in Equity Securities

Auradine

As of September 30, 2024, the total carrying amount of the Company’s investment in Auradine, Inc. (“Auradine”) preferred stock was $50.7 million.

On September 26, 2024, the Company purchased additional shares of Auradine preferred stock with a purchase price of $0.8 million.

On January 10, 2024, the Company purchased additional shares of Auradine preferred stock with a purchase price of $8.0 million. The preferred stock purchased on January 10, 2024 was similar to the Company’s other investments in Auradine preferred stock and, as a result, the Company recorded $5.2 million to “Gain on investments” on the Condensed Consolidated Statements of Operations to adjust the carrying amount of its investments to an observable price in accordance with the measurement alternative in ASC 321.

SAFE Investments

During the nine months ended September 30, 2024, the Company entered into two SAFE agreements, for a total carrying value of $1.4 million. During the three months ended September 30, 2024, the Company wrote-down a previous SAFE investment of $1.0 million. As of December 31, 2023, the Company had one SAFE investment with a carrying value of $1.0 million, with no impairments or other adjustments.

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NOTE 9 – GOODWILL AND INTANGIBLE ASSETS

Goodwill

The components of goodwill as of September 30, 2024 are as follows:

As of September 30, 2024
GC Data Center Equity Holdings, LLC$30,852 
Garden City Acquisition14,510 
Total goodwill
$45,362 

The Company acquired goodwill from the GC Data Center Equity Holdings, LLC acquisition on January 12, 2024 and the Garden City Acquisition on April 1, 2024, refer to Note 3 – Acquisitions, for further information.

There was no goodwill as of December 31, 2023.

Intangible assets

The following table presents the Company’s intangible assets as of September 30, 2024:

As of September 30, 2024
(in thousands)CostAccumulated amortizationNet
Customer relationships$22,000 $(22,000)$ 
Intellectual property
2,633 (658)1,975 
Total intangible assets$24,633 $(22,658)$1,975 

In June 2024, the Company fully amortized customer relationships acquired in the GC Data Center Equity Holdings, LLC due to the Company’s strategic decision to exit hosting services business and termination of customer relationships during the period. Refer to Note 3 - Acquisitions, for further information.

There were no intangible assets as of December 31, 2023.

The following table presents the Company’s estimated future amortization of finite-lived intangible assets as of September 30, 2024:

Year
Amount
(in thousands)
2024 (remaining)$220 
2025878 
2026877 
Thereafter 
Total$1,975 

NOTE 10 – FAIR VALUE MEASUREMENT
 
The Company measures certain financial and non-financial assets and liabilities at fair value on a recurring or non-recurring basis. The Company uses a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price, based on the highest and best use of the asset or liability.

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

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

Recurring measurement of fair value

The following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis and the Company’s estimated level within the fair value hierarchy for each of those assets and liabilities as of September 30, 2024 and December 31, 2023, respectively:

(in thousands)
Total carrying value at September 30, 2024
Quoted prices in active markets
(Level 1)
Significant other observable inputs
(Level 2)
Significant unobservable inputs
(Level 3)
Assets:
Money market funds$105,130 $105,130 $ $ 
Digital assets1,710,221 1,710,221   
Liabilities:
Derivative instrument (1)
24,246  24,246  
Contingent consideration liability (2)
3,485   3,485 
 
(in thousands)
Total carrying value at December 31, 2023
Quoted prices in active markets
(Level 1)
Significant other observable inputs
(Level 2)
Significant unobservable inputs
(Level 3)
Assets:
Money market funds$141,147 $141,147 $ $ 
U.S. Treasury Bills60,541 60,541   
Digital assets639,660 639,660   

(1) The fair value of the derivative instrument was estimated using a discounted cash flow approach that considers various assumptions including current market prices and electricity forward curves, which are considered Level 2 inputs. Increases (decreases) in market prices and electricity forward curves could result in significant increases (decreases) in the fair value of derivative instruments. Refer to Note 2 - Summary of Significant Accounting Policies - Derivatives, for further information.
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(2) Represents the estimated amount of acquisition-related consideration expected to be paid in the future as of September 30, 2024 for the GC Center Equity Holdings, LLC acquired on January 12, 2024. Increases (decreases) in the probability of achieving the milestones could result in significant increases (decreases) in the fair value of the contingent consideration. Refer to Note 3 - Acquisitions, for further information.

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

Effective January 1, 2023, the Company early adopted ASU 2023-08, measuring digital assets at fair value on a recurring basis. There were no transfers among Levels 1, 2 or 3 during the nine months ended September 30, 2024.

Fair value of financial instruments not recognized at fair value

The following tables present information about the Company’s financial instruments that are not recognized at fair value on the Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023, respectively, is as follows:

(in thousands)
Total carrying value at September 30, 2024
Quoted prices in active markets
(Level 1)
Significant other observable inputs
(Level 2)
Significant unobservable inputs
(Level 3)
Liabilities:
Notes payable
$618,683 $561,291 $ $ 

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

There were no transfers among Levels 1, 2 or 3 during the nine months ended September 30, 2024. As of September 30, 2024 and December 31, 2023 there were no other assets and liabilities measured at fair value on a non-recurring basis.

NOTE 11 – NET INCOME (LOSS) PER SHARE
 
Net income (loss) per share is calculated in accordance with ASC 260 - Earnings Per Share. Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. For the three and nine months ended September 30, 2024 and 2023, the Company recorded net income (loss) and as such, the Company calculated the impact of dilutive common stock equivalents in determining diluted earnings per share.
 
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The following table presents the total potential securities that were not included in the computation of diluted income (loss) per share, as their inclusion would have been anti-dilutive:

Three Months Ended September 30,
Nine Months Ended September 30,
2024202320242023
Warrants324,375 324,375 324,375 324,375 
Restricted stock units8,064,856 3,753,431   
Performance-based restricted stock units (1)
5,614,236    
Convertible notes20,224,952 4,341,422 20,224,952 4,341,422 
Series A Preferred Stock 249,066  331,145 
Total dilutive shares34,228,419 8,668,294 20,549,327 4,996,942 

 (1) Anti-dilutive performance-based restricted stock units are presented at 200% as the total potential vested shares. Refer to Note 13 - Stock-based Compensation, for further information.

The following table sets forth the computation of basic and diluted income (loss) per share:

Three Months Ended September 30,
Nine Months Ended September 30,
(in thousands, except share and per share data)2024202320242023
Basic earnings per share of common stock:
Net income (loss) per share of common stock - basic
$(124,789)$(390)$12,725 $107,226 
Weighted average shares of common stock - basic
294,942,685 179,602,722 277,643,666 169,162,821 
Net income (loss) per share of common stock - basic
$(0.42)$ $0.05 $0.63 
Diluted earnings per share of common stock:
Net income (loss) per share of common stock - basic
$(124,789)$(390)$12,725 $107,226 
Add: Notes interest expense, net of tax 938  3,416 
Less: Gain from extinguishment of debt, net of tax
 (62,910) (62,910)
Net income (loss) per share of common stock - diluted
$(124,789)$(62,362)$12,725 $47,732 
Weighted average shares of common stock - basic
294,942,685 179,602,722 277,643,666 169,162,821 
Restricted stock units  4,426,110 209,813 
Performance-based restricted stock units  581,258  
Convertible notes 4,134,048  5,020,474 
Weighted average shares of common stock - diluted
294,942,685 183,736,770 282,651,034 174,393,108 
Net income (loss) per share of common stock - diluted
$(0.42)$(0.34)$0.05 $0.27 
 
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NOTE 12 – STOCKHOLDERS' EQUITY
 
Common Stock

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

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

In February 2024, the Company commenced a new at-the-market (“ATM”) offering program with H.C. Wainwright & Co., LLC (“Wainwright”) acting as sales agent (the “2024 ATM”) pursuant to an ATM agreement, under which the Company may offer and sell shares of its common stock from time to time through Wainwright having an aggregate offering price of up to $1,500.0 million. During the nine months ended September 30, 2024, the Company sold 34,785,661 shares of common stock for an aggregate purchase price of $665.7 million, net of offering expenses of $7.5 million and $17.0 million for the three and nine months ended September 30, 2024, respectively, pursuant to the 2024 ATM. As a result, the Company had $817.2 million aggregate offering price remaining under the 2024 ATM.

NOTE 13 – STOCK-BASED COMPENSATION

2018 Equity Incentive Plan
 
On January 1, 2018, the Board adopted the 2018 Equity Incentive Plan (as amended, the “2018 Plan”), which was subsequently approved by the Company’s shareholders on March 7, 2018. The 2018 Plan provides for the issuance of stock options, restricted stock, restricted stock units (“RSUs”), preferred stock and other awards to employees, directors, consultants and other service providers.

In June 2024, the Company’s shareholders approved an amendment to the 2018 Plan that increased the number of shares authorized for issuance thereunder by 15,000,000 shares. As of September 30, 2024, the Company had an aggregate of 16,525,736 shares of common stock reserved for future issuance under the 2018 Plan.

A summary of the Company’s stock-based compensation, by category, is as follows:

Three Months Ended September 30,
Nine Months Ended September 30,
(in thousands)2024202320242023
Performance-based stock awards$6,437 $ $11,606 $ 
Service-based stock awards16,903 5,511 91,979 13,907 
Total stock-based compensation$23,340 $5,511 $103,585 $13,907 

Restricted Stock Units

The Company grants service-based RSUs to employees, directors, and consultants. RSUs granted to employees generally vest over a four-year period from the date of grant; however, in certain instances, all or a portion of a grant may vest immediately. RSUs granted to directors generally vest over a one-year period. The Company measures the fair value of RSUs at the grant date and recognizes expenses on a straight-line basis over the requisite service period from the date of grant for each separately-vesting tranche under the graded-vesting attribution method.

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A summary of the Company’s service-based RSU activity for the nine months ended September 30, 2024, is as follows:

Number of RSUsWeighted Average Grant Date Fair Value
Nonvested at December 31, 2023
5,765,529 $9.40 
Granted6,990,136 18.02 
Forfeited(687,257)14.18 
Vested(4,003,552)15.29 
Nonvested at September 30, 2024
8,064,856 $13.54 

As of September 30, 2024, there was approximately $67.2 million of aggregate unrecognized stock-based compensation related to unvested service-based RSUs that is expected to be recognized over the next 2.7 years.

Performance-based Restricted Stock Units

The Company granted performance-based restricted stock units (“PSUs”) on May 1, 2024 to employees which generally vest over a four-year period from the date of grant. Awards are issued in the form of RSUs and are granted pursuant to the 2018 Plan. The number of PSUs that are subject to vest is directly correlated with the Company’s achievements of a pre-determined metric relating to total stockholder return (“TSR”) for the period from January 1, 2024 through December 31, 2024 (the “Performance Period”).

Based on the Company’s TSR performance relative to the peer group for the Performance Period, the PSU awards will vest between 0% to 200% of the target amount over an approximate four-year period. Determination regarding the Company’s performance relative to the TSR metric will establish the maximum number of shares that are subject to vesting pursuant to the PSU awards. Once determined, (i) 25% of the PSU awards will vest on January 31, 2025, and (ii) the balance of the awards will vest in 12 equal calendar quarters (with 6.25% of the shares vesting each quarter). The Company measures the fair value of the PSUs at the grant date using the Monte Carlo simulation model.

The Monte Carlo simulation model requires the input of subjective assumptions, including risk-free interest rate, expected term, expected stock price volatility, market capitalization of peer group, and dividend yield. The risk-free interest rate assumption is based upon observed interest rates for constant maturity U.S. Treasury securities as of the grant date. Expected term is consistent with the Performance Period of the awards. Expected volatility is based on the historical volatility of the Company’s common stock over the estimated expected life. The Company does not pay a dividend, therefore, the dividend yield is assumed to be zero.

A summary of the Company’s PSU activity for the nine months ended September 30, 2024, is as follows:

Number of PSUsWeighted Average Grant Date Fair Value
Nonvested at December 31, 2023
 $ 
Granted2,807,118 14.33 
Nonvested at September 30, 2024
2,807,118 $14.33 

As of September 30, 2024, there was approximately $28.6 million of aggregate unrecognized stock-based compensation related to unvested PSUs that is expected to be recognized over the next 3.3 years.

Common Stock Warrants

As of September 30, 2024, the Company’s issued and outstanding common stock warrants had no change from December 31, 2023. The Company continues to have 324,375 outstanding warrants, at a weighted average exercise price of $25.00, that are expected to expire in approximately 1.3 years.

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NOTE 14 – DEBT

The net carrying value of the Company’s outstanding debt as of September 30, 2024 and December 31, 2023, consisted of the following:

(in thousands)September 30, 2024December 31, 2023
2026 Notes$330,707 $330,707 
2031 Notes300,000  
Less: unamortized debt discount(12,024)(5,053)
Total convertible notes, net of discount$618,683 $325,654 

The Company issued the following convertible notes (collectively, the “Notes”) in private offerings:

$300.0 million aggregate principal amount of 2.125% Convertible Senior Notes due 2031 (the “2031 Notes”)

$330.7 million aggregate principal amount of 1.0% Convertible Senior Notes due 2026 (the “2026 Notes”)

The following table summarizes the key terms of each of the Notes:

2026 Notes2031 Notes
Issuance DateNovember 2021August 2024
Maturity DateDecember 1, 2026September 1, 2031
Remaining Principal (in thousands)
$330,707 $300,000 
Stated Interest Rate1.0 %2.125 %
Interest Payment DatesJune 1 & December 1March 1 & September 1
Net Proceeds (1) (in thousands)
$728,082 $291,595 
Initial Conversion Rate13.1277 52.9451 
Initial Conversion Price$76.17 $18.89 
Share Principal Price$1,000 $1,000 

(1) Net proceeds are net of customary offering expenses associated with the issuance of each of the Notes (the “issuance costs”). The Company accounts for these issuance costs as a reduction to the principal amount and amortizes the issuance costs to interest expense from the respective debt issuance date through the Maturity Date, on the Condensed Consolidated Statements of Operations.

Issuance of 2031 Notes

On August 14, 2024, the Company issued $250.0 million principal of 2.125% Convertible Senior Notes due 2031. In addition, on August 14, 2024, the initial purchasers of the 2031 Notes purchased an additional $50.0 million principal of 2031 Notes for an aggregate principal amount of $300.0 million. The 2031 Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”) with respect to the 2031 Notes between the Company and the U.S. Bank Trust Company, National Association, as trustee (the “Trustee”).

The 2031 Notes are senior unsecured obligations of the Company and bear interest at a rate of 2.125% per annum, payable semi-annually in arrears on March 1 and September 1 of each year, beginning on March 1, 2025. The 2031 Notes will mature on September 1, 2031, unless earlier repurchased, redeemed or converted in accordance with their terms. The 2031 Notes are convertible into shares of the Company’s common stock at an initial conversion rate of 52.9451 shares per one thousand dollar principal amount of 2031 Notes, which represents an initial conversion price of approximately $18.89 per share of common stock. The conversion rate is subject to customary anti-dilution adjustments. In addition, following certain events that occur prior to the maturity date or if the Company delivers a notice of redemption, the Company will increase the conversion rate for a holder who elects to convert its 2031 Notes in connection with such corporate event or notice of redemption, as the case may be, in certain circumstances as provided by the Indenture.

Prior to March 1, 2031, the 2031 Notes are convertible only upon the occurrence of certain events. On or after March 1, 2031 until the close of business on the second scheduled trading day immediately preceding the maturity
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date of the 2031 Notes, holders may convert the 2031 Notes at any time. Upon conversion of the 2031 Notes, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock or a combination of cash and shares of common stock, at the Company’s election.

Prior to September 6, 2028, the Company may not redeem the 2031 Notes. The Company may redeem for cash all or any portion of the 2031 Notes, at its option, on or after September 6, 2028, if the last reported sale price of the Company’s common stock has been at least 130% of the conversion price then in effect for at least 20 trading days, whether or not consecutive, including the trading day immediately preceding the date on which the Company provides a notice of redemption, during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Company provides notice of redemption. The redemption price will be equal to 100% of the principal amount of the 2031 Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

Holders have the right to require the Company to repurchase for cash all or any portion of their 2031 Notes on March 1, 2029 at a repurchase price equal to 100% of the principal amount of the 2031 Notes to be repurchased, plus accrued and unpaid interest to, but excluding the repurchase date. In addition, if the Company undergoes a “fundamental change,” as defined in the Indenture, prior to the maturity, subject to certain conditions, holders may require the Company to repurchase for cash all or any portion of their 2031 Notes at a fundamental change repurchase price equal to 100% of the principal amount of the 2031 Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date.

The Indenture contains customary terms and covenants, including that upon certain events of default occurring and continuing, either the Trustee or the holders of at least 25% in principal amount of the outstanding 2031 Notes may declare 100% of the principal of, and accrued and unpaid special interest, if any, on, all the 2031 Notes to be due and payable.

2026 Notes Partial Extinguishment of Debt

In September 2023, the Company entered into privately negotiated exchange agreements with certain holders of its 2026 Notes. In total, the Company exchanged $416.8 million principal amount of 2026 Notes for an aggregate 31,722,417 shares of Company common stock. Due to the addition of a substantive conversion feature, the Company determined that the exchange was an extinguishment of debt. The Company measured an $82.6 million gain on extinguishment of debt based on the carrying value of the 2026 Notes, the fair value of the Company’s common stock issued in the exchange and related transaction costs on the Condensed Consolidated Statements of Operations.

The Company is permitted and may seek to repurchase additional notes prior to the maturity date, whether through privately negotiated purchases, open market purchases, or otherwise.
 
NOTE 15 – LEASES
 
The Company has operating and finance leases primarily for office space, mining facilities and land in the United States.

The Company also entered into an arrangement with Applied Digital Corporation for the use of energized cryptocurrency mining facilities under which the Company pays for electricity per megawatt based on usage. The Company has determined that it has embedded operating leases at two of the facilities governed by this arrangement that commenced in January and March 2023, and has elected not to separate lease and non-lease components. Payment for these two operating leases are entirely variable and are based on usage of electricity, and the Company therefore does not record a right-of-use (“ROU”) asset or lease liability associated with the leases.

The Company has amortized the ROU assets totaling $0.4 million and $0.1 million for the three months ended September 30, 2024 and 2023, respectively, and $1.1 million and $0.2 million for the nine months ended September 30, 2024 and 2023, respectively.

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The following table presents the assets and liabilities related to the Company’s operating and finance leases as of September 30, 2024 and December 31, 2023:

(in thousands)
September 30, 2024
December 31, 2023
Assets
Balance Sheet Classification
Operating lease ROU assets
Operating lease right-of-use assets$9,363 $443 
Finance lease ROU assets
Property and equipment, net4,019  
Total ROU assets
$13,382 $443 
Liabilities
Current portion:
Operating lease liabilities
Operating lease liabilities, current portion$367 $124 
Finance lease liability
Finance lease liability, current portion179  
Long-term portion:
Operating lease liabilitiesOperating lease liabilities, net of current portion15,014 354 
Finance lease liabilityFinance lease liability, net of current portion4,832  
Total lease liabilities$20,392 $478 

Lease costs are recorded on a straight-line basis within operating expenses. The Company’s total lease expenses are comprised of the following:

For the Three Months Ended September 30,
For the Nine Months Ended September 30,
(in thousands)2024202320242023
Lease costs:
Operating lease cost$437 $65 $1,402 $250 
Finance lease cost:
Amortization of ROU asset (1)
11  21  
Short-term lease rent expense66 8 103 28 
Variable lease cost31,107 26,263 74,336 46,201 
Total rent expense$31,621 $26,336 $75,862 $46,479 

(1) Amortization of finance lease ROU asset is included in “Cost of revenues - depreciation and amortization” on the Condensed Consolidated Statements of Operations.
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Additional information regarding the Company’s leasing activities is as follows:

For the Nine Months Ended September 30,
20242023
Operating cash flows from operating leases$1,250$319
Financing cash flows from finance lease$163$
Weighted-average remaining lease term (in years):
Operating leases6.63.3
Finance lease96.5
Weighted-average discount rate:
Operating leases6.7 %5.0 %
Finance lease7.2 % %

The following table presents the Company’s future minimum lease payments as of September 30, 2024:
 
(in thousands)
YearOperating LeasesFinance Lease
2024 (remaining)$99 $ 
2025457 168 
20261,080 173 
20272,835 178 
20282,782 183 
Thereafter6,973 89,096 
Total14,226 89,798 
Less: Imputed interest (3,503)(85,921)
Present value of lease liability (1)
$10,723 $3,877 

(1) Present value of lease liability exclude unfavorable lease liabilities associated with the GC Data Center Equity Holdings, LLC operating lease and the Garden City acquisition finance lease for a net value of $4.7 million and $1.1 million, respectively. Refer to Note 3 - Acquisitions, for further information.

NOTE 16 - LEGAL PROCEEDINGS
 
The Company, and its subsidiaries, from time to time may be subject to various claims, lawsuits and legal proceedings that arise from the ordinary course of business.

In accordance with ASC 450 - Contingencies, if a loss contingency associated with the following legal matters are probable to be incurred and the amount of loss can be reasonably estimated, an accrual is recorded on the Condensed Consolidated Balance Sheets. As of September 30, 2024, the Company has determined that the liabilities associated with certain litigation matters are not expected to have a material impact on the Company’s Financial Statements. The Company will continue to monitor each related legal issue and adjust accruals as new information and developments occur.

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Moreno v. Marathon

On March 30, 2023, a putative class action complaint was filed in the United States District Court for the District of Nevada, against the Company and present and former senior management, alleging claims under Section 10(b) and 20(a) of the Exchange Act arising out of the Company’s announcement of accounting restatements on February 28, 2023. On March 29, 2024, the court appointed lead plaintiffs and counsel. On June 4, 2024, lead plaintiffs filed an amended class action complaint, styled as Langer et al. v. Marathon et al. The allegations in the amended class action complaint are substantially similar to those in the March 30, 2023 putative class action complaint. On August 5, 2024, the defendants moved to dismiss the amended class action complaint.

Derivative Complaints

On June 22, 2023, a shareholder derivative complaint was filed in the Circuit Court of the 17th Judicial Circuit for Broward County, Florida, against current members of the Company’s Board and senior management, alleging claims for breach of fiduciary duty and unjust enrichment based on allegations substantially similar to the allegations in the March 30, 2023 putative class action complaint in Moreno.

On July 8, 2023, a second shareholder derivative complaint was filed in the United States District Court for the District of Nevada, against current and former members of the Company’s Board and senior management, alleging claims under Sections 14(a), 10(b), and 21D of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and for breach of fiduciary duty, unjust enrichment, and waste of corporate assets, based on allegations substantially similar to the allegations in the March 30, 2023 putative class action complaint in Moreno.

On July 12, 2023, a third shareholder derivative complaint was filed in the United States District Court for the District of Nevada, against current and former members of the Company’s Board and senior management, alleging claims under Section 14(a) of the Exchange Act and for breach of fiduciary duty, based on allegations substantially similar to the allegations in the March 30, 2023 putative class action complaint in Moreno.

On July 13, 2023, a fourth shareholder derivative complaint was filed in the Circuit Court of the 17th Judicial Circuit for Broward County, Florida (together with the complaint filed on June 22, 2023, the “Florida Derivative Actions”), against current members of the Company’s Board and senior management, alleging claims for breach of fiduciary duty, unjust enrichment, and waste of corporate assets, based on allegations substantially similar to the allegations in the March 30, 2023 putative class action complaint in Moreno.

On August 14, 2023, the two derivative actions pending in the United States District Court for the District of Nevada were consolidated (the “Nevada Derivative Action”). On April 1, 2024, the United States District Court for the District of Nevada appointed co-lead counsel for plaintiffs in the Nevada Derivative Action. On June 25, 2024, plaintiffs filed an amended consolidated complaint alleging breaches of fiduciary duties, unjust enrichment, waste of corporate assets, claims under Section 14(a) of the Exchange Act, and for contribution under Sections 10(b) and 21D of the Exchange Act. On August 9, 2024, the defendants moved to dismiss the amended complaint.

On October 16, 2023, the parties to the derivative actions pending in the Circuit Court of the 17th Judicial Circuit for Broward County, Florida filed an agreed order to stay both actions pending completion of the Nevada Derivative Action. On July 25, 2024, the Florida Derivative Actions were administratively closed.

Information Subpoena
 
On October 6, 2020, the Company entered into a series of agreements with multiple parties to design and build a data center for up to 100-megawatts in Hardin, Montana. In conjunction therewith, the Company filed a Current Report on Form 8-K on October 13, 2020 disclosing that, pursuant to a Data Facility Services Agreement, the Company issued 6,000,000 shares of restricted common stock, in transactions exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). During the quarter ended September 30, 2021, the Company and certain of its executives received a subpoena to produce documents and communications concerning the Hardin, Montana data center facility. The Company received an additional subpoena from the SEC on April 10, 2023, relating to, among other things, transactions with related parties. The Company understands that the SEC may be investigating whether or not there may have been any violations of the federal securities law. The Company is cooperating with the SEC.

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Ho v. Marathon
 
On January 14, 2021, plaintiff Michael Ho (“Ho”) filed a civil complaint (the “Complaint”) in which he alleged, among other things, that the Company breached the terms of a non-disclosure agreement, profited from commercially sensitive information he shared with the Company, and refused to compensate him for his role in securing the Company’s acquisition of an energy supplier. The Complaint initially alleged six causes of action including: (1) breach of written contract, (2) breach of implied contract, (3) quasi-contract, (4) services rendered, (5) intentional interference with prospective economic relations, and (6) negligent interference with prospective economic relations. On February 22, 2021, the Company responded to the Complaint with a general denial of the claims and asserted certain affirmative defenses. On February 25, 2021, the Company removed the action to the United States District Court in the Central District of California (the “Court”). The Company filed a motion for summary judgment with respect to each of the causes of action, and the Court dismissed all of the causes of action other than breach of written contract.

On July 8, 2024, the Court commenced a jury trial with respect to the sole remaining claim. On July 18, 2024, the jury determined that the Company had breached certain provisions of the non-disclosure agreement and returned a verdict in the amount of $138.8 million. On September 18, 2024, the Court entered a judgment of the same amount, plus post-judgment interest. The Company has not paid any portion of the award. On October 16, 2024, the Company filed a renewed motion for judgment as a matter of law (or in the alternative for a new trial and remittitur), which, based on applicable law, seeks to overturn, or at a minimum significantly reduce, the damage award. Also on October 16, 2024, the Company filed a motion to correct the judgment’s interest rate, and Ho filed a motion requesting an award of pre-judgment interest. Subsequent to September 30, 2024, the Company acquired a surety bond for the amount owing. The Company intends to defend its positions vigorously and assert its various well-founded legal claims to challenge both the verdict and the amount of the award.
 
NOTE 17 - RELATED PARTY TRANSACTIONS

During September 2023, the Company entered into an agreement with Auradine to secure certain rights to future purchases by the Company from Auradine for which the Company paid $15.0 million.

On September 26, 2024, the Company purchased additional shares of Auradine preferred stock with a purchase price of $0.8 million, bringing the Company’s total investment holdings in Auradine to $50.7 million based upon previous purchases of additional preferred stock and a SAFE instrument.

In addition, during the three and nine months ended September 30, 2024, the Company made advances of $11.6 million and $16.7 million, respectively, for future purchases resulting in total advances to Auradine of $31.5 million as of September 30, 2024.
 
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NOTE 18 – SUPPLEMENTAL CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following table provides supplemental disclosure of Condensed Consolidated Statements of Cash Flows information:

Nine Months Ended September 30,
20242023
Cash and cash equivalents
$164,256 $357,313 
Restricted cash
12,000  
Total cash, cash equivalents and restricted cash
$176,256 $357,313 
Supplemental information:
Cash paid for income taxes
$1,256 $785 
Cash paid for interest
25 6,200 
Supplemental schedule of non-cash investing and financing activities:
Series A Preferred Stock accretion to redemption value$ $2,121 
Reclassifications from advances to vendor to property and equipment upon receipt of equipment404,133 551,650 
Reclassifications from advances to vendor to investments
30,587  
Reclassifications from advances to vendor to other assets3,421  
Reclassifications from long-term prepaid to property and equipment
3,273  
Reclassifications from long-term prepaid to intangible assets2,633  
Exchange of convertible notes for common stock 318,771 
Dividends received from equity method investment
18,950  

NOTE 19 – SUBSEQUENT EVENTS 

On October 15, 2024, the Company announced it had secured a $200.0 million line of credit, collateralized by a portion of the Company’s bitcoin holdings. The Company may use the funds to capitalize on strategic opportunities and for other general corporate purposes. As of October 17, 2024, the facility was fully utilized.

On November 5, 2024, the Company acquired two operational data centers located in Hannibal and Hopedale, Ohio, with 222 megawatts of interconnect-approved capacity. These sites have 122 megawatts of capacity and interconnection approval to expand by another 100 megawatts. Simultaneously, the Company has begun developing a 150-megawatt operation in Findlay, Ohio, which already has 30 megawatts of capacity. These three facilities have a combined interconnect-approved capacity of 372 megawatts.

Subsequent to September 30, 2024, the Company issued an aggregate 16,860,005 shares of common stock under the 2024 ATM. As a result, the Company had $520.2 million aggregate offering price remaining under the 2024 ATM.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

You should read the following discussion and analysis together with our financial statements and related notes in Part I, Item 1 of this Quarterly Report on Form 10-Q for the quarter ended September 30, 2024 (this “Quarterly Report”).

This Quarterly Report contains forward-looking statements within the meaning of the federal securities laws, which statements are subject to considerable risks and uncertainties. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements included or incorporated by reference in this Quarterly Report, other than statements of historical fact, are forward-looking statements. You can identify forward-looking statements by the use of words such as “may,” “will,” “could,” “anticipate,” “expect,” “intend,” “believe,” “continue” or the negative of such terms, or other comparable terminology. Forward-looking statements also include the assumptions underlying or relating to such statements. Our forward-looking statements are based on our management’s current assumptions and expectations about future events and trends, which affect or may affect our business, strategy, operations or financial performance. Although we believe that these forward-looking statements are based upon reasonable assumptions, they are subject to numerous known and unknown risks and uncertainties and are made in light of information currently available to us. Our actual financial condition and results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth below in the section entitled “Risk Factors” in Part II, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 28, 2024, as amended by Amendment No. 1 on Form 10-K/A (our “Annual Report”), which is incorporated herein by reference, as well as in the other public filings we make with the U.S. Securities and Exchange Commission (the “SEC”). You should read this Quarterly Report with the understanding that our actual future financial condition and results may be materially different from and worse than what we expect.

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

BUSINESS OVERVIEW

MARA is a global leader in leveraging digital asset compute to support the energy transformation with operations in four continents and 14 data centers in North America, the Middle East, Europe and Latin America. As of September 30, 2024, the Company had 1,100 megawatts of available energy capacity for computing. The Company uses different strategies and structures (self-owned and operated, joint ventures, and third-party hosted) to diversify risk across the organization. It is the Company’s intent that self-owned and operated sites will represent a greater proportion of our portfolio over time. The Company’s core business is Utility-Scale Computing, which produces or “mines” bitcoin using one of the industry’s largest and most energy-efficient fleets of specialized computers while providing dispatchable compute as an optionality to the electric grid operators to balance electric demands on the grid. As of September 30, 2024, the Company had approximately 268,000 energized and operational mining rigs, capable of producing 36.9 exahashes per second with an efficiency of 22.7 joules per terahash, which the Company believes to be amongst the most efficient in the industry. The Company also operates its own mining pool that it believes provides it a competitive advantage over other mining companies, has its own firmware and state of the art liquid cooling technology, all of which help enhance its margins. The Company tripled its compute capacity in 2023 and is slated to double the capacity again in 2024 as it gears towards 50.0 exahash. Additionally, as of September 30, 2024, the Company held approximately 26,747 bitcoin on the Condensed Consolidated Balance Sheets.

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The following table presents the approximate number of digital assets held and the approximate fair value of a single digital asset, as of the following dates:

BitcoinKaspa
Quantity
Fair Value per coin
Quantity
Fair Value per coin
September 30, 202426,747 $63,301 107,891,919 $0.158 
June 30, 202418,488 62,668 88,969,525 0.192 
March 31, 202417,320 71,289 N/AN/A
December 31, 202315,126 42,288 N/AN/A
September 30, 202313,716 26,961 N/AN/A

RECENT DEVELOPMENTS

Highlights from the quarter ended September 30, 2024:

On July 25, 2024, the Company purchased $100.0 million of bitcoin using cash on hand, increasing our bitcoin holdings to over 20,000 BTC on the Condensed Consolidated Balance Sheets. The Company announced the intent to adopt a full holding onto bitcoin approach (“HODL”) towards its bitcoin treasury policy, retaining all bitcoin mined in its operations, periodically making strategic open market purchases.

On August 14, 2024, the Company issued an aggregate principal amount of $300.0 million of 2.125% Convertible Senior Notes due 2031 (the “2031 Notes”). Refer to Note 14Debt in the notes to the Company’s Condensed Consolidated Financial Statements included in this Quarterly Report, for further information. With the net proceeds of the 2031 Notes, the Company purchased an additional 4,144 bitcoin, or approximately $249.0 million, during the quarter.

On September 5, 2024, the Company announced the appointment of Janet George and Barbara Humpton to its Board of Directors and announced the appointment of current board member Doug Mellinger as lead independent director, effective September 1, 2024. Ms. George and Ms. Humpton bring extensive expertise in artificial intelligence, data centers and energy. Their proven track records in driving innovation and growth across complex industries will be invaluable to the Company’s strategic growth.

On October 15, 2024, the Company announced securing a $200 million line of credit, collateralized by a portion of the Company’s bitcoin holdings. The Company plans to use the funds to capitalize on strategic opportunities and for other general corporate purposes.

First publicly traded digital bitcoin mining company to submit a climate-related disclosure report to the Climate Disclosure Project (CDP).

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

The Company defines adjusted EBITDA as (a) GAAP net income (loss) plus (b) adjustments to add back the impacts of (1) interest income (2) interest expense, (3) income tax expense (benefit), (4) depreciation and amortization and (5) 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 and (iv) net gain from extinguishment of debt. The Company defines total margin excluding depreciation and amortization as (a) GAAP total margin less (b) depreciation and amortization.

Management uses adjusted EBITDA and total margin excluding depreciation and amortization, along with the supplemental information provided herein, as a means of understanding, managing and evaluating business performance and to help inform operating decision-making. The Company relies primarily on its Condensed Consolidated Financial Statements to understand, manage and evaluate its financial performance and uses non-GAAP financial measures only supplementally.

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

The Company acquired a commodity swap agreement, which meets the definition of a derivative, in conjunction with its acquisition of GC Data Center Equity Holdings, LLC on January 12, 2024. The change in fair value of this derivative instrument has fluctuated significantly since we acquired this contract, and we believe these fluctuations do not reflect the performance of our core operations. In addition, we believe excluding the change in fair value of derivative instruments enables us to more effectively evaluate our performance period-over-period and relative to our competitors who make similar adjustments to adjusted EBITDA. As such, beginning with the period ended September 30, 2024, the Company has updated its calculation of adjusted EBITDA to exclude the change in fair value of derivative instrument. Accordingly, certain prior period information has been reclassified to conform to the current period presentation.
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RESULTS OF OPERATIONS

Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023
 
Three Months Ended September 30,
Favorable
(dollars in thousands)
20242023(Unfavorable)
Revenues
Mining$131,306 $97,849 $33,457 
Hosting services341 — 341 
Total revenues131,647 97,849 33,798 
Costs and expenses
Cost of revenues
Mining(97,149)(59,628)(37,521)
Hosting services(378)— (378)
Depreciation and amortization(101,136)(53,548)(47,588)
Total cost of revenues(198,663)(113,176)(85,487)
Operating expenses
General and administrative expenses(63,725)(19,428)(44,297)
Change in fair value of digital assets30,088 (44,692)74,780 
Change in fair value of derivative instrument
(58,234)— (58,234)
Research and development
(2,813)(713)(2,100)
Early termination expenses
(10,304)— (10,304)
Amortization of intangible assets(219)— (219)
Total operating expenses(105,207)(64,833)(40,374)
Operating loss
(172,223)(80,160)(92,063)
Loss on investments
(1,000)— (1,000)
Equity in net earnings of unconsolidated affiliate(2,133)(647)(1,486)
Net gain from extinguishment of debt
— 82,600 (82,600)
Interest income3,894 426 3,468 
Interest expense(2,342)(2,536)194 
Other non-operating loss
(146)— (146)
Loss before income taxes
(173,950)(317)(173,633)
Income tax benefit (expense)
49,161 (73)49,234 
Net loss
$(124,789)$(390)$(124,399)
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Supplemental information:
bitcoin (“BTC”) production during the period, in whole BTC (1)
2,070 3,490 (1,420)
Average bitcoin per day, in whole BTC22.5 37.9 (15.4)
Total margin (total revenues less total cost of revenues)
$(67,016)$(15,327)$(51,689)
Cost of revenues - depreciation and amortization
$(101,136)$(53,548)$(47,588)
Total margin excluding the impact of depreciation and amortization:
Mining(2)
$34,157 $38,221 $(4,064)
Hosting services (2)
$(37)$— $(37)
General and administrative expenses excluding stock-based compensation$(40,385)$(13,917)$(26,468)
Installed Hash Rate (Exahashes per second) - at end of period (3)
36.9 23.1 13.8 
Energized Hash Rate (Exahashes per second) - at end of period (3)
36.9 19.1 17.8 
Average Operational Hash Rate (Exahashes per second) (4)
28.8 14.5 14.3 
Cost per Petahash per day (5)
$37.1 $45.2 $8.1 
Share of available miner rewards4.8 %4.0 %0.8 %
Number of blocks won604 528 76 
Transaction fees as a percentage of total2.4 %2.5 %(0.1)%
Reconciliation to Adjusted EBITDA:
Net loss
$(124,789)$(390)$(124,399)
Interest income
(3,894)(426)(3,468)
Interest expense
2,342 2,536 (194)
Income tax expense (benefit)
(49,161)73 (49,234)
Depreciation and amortization (6)
104,463 54,032 50,431 
EBITDA(71,039)55,825 (126,864)
Stock compensation expense
23,340 5,511 17,829 
Change in fair value of derivative instrument (7)
58,234 — 58,234 
Early termination expenses and other (8)
11,304 — 11,304 
Net gain from extinguishment of debt
— (82,600)82,600 
Adjusted EBITDA$21,839 $(21,264)$43,103 

(1) Includes 46 and 23 bitcoin representing the Company’s share of the equity method investee, Abu Dhabi Global Markets company (the “ADGM Entity”), for the three months ended September 30, 2024 and September 30, 2023, respectively.

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

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

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

(5) Cost per Petahash per day is calculated using mining cost of revenues, excluding depreciation and amortization, divided by the Average Operational Hash Rate, excluding the Company’s share of the hash rate for the equity method investee, the ADGM Entity, by a factor of 1,000.

(6) Includes approximately $3.1 million of depreciation and amortization from the Company’s share in the results of its equity method investee, the ADGM Entity, reported in “Equity in net earnings of unconsolidated affiliate” for the three months ended September 30, 2024 on the Condensed Consolidated Statements of Operations.

(7) For the three months ended March 31, 2024, the reported adjusted EBITDA was $528.8 million, revised for the change in fair value of derivative instrument of a $15.3 million loss, results in a revised adjusted EBITDA of $541.5 million. For the three months ended June 30, 2024, the reported adjusted EBITDA loss was $85.1 million, revised for the change in fair value of derivative instrument of $38.3 million, results in a
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revised adjusted EBITDA loss of $125.6 million. Refer to the discussion within “Non-GAAP Financial Measures” herein for the reasons of the Company’s exclusion of change in fair value of derivative instrument from adjusted EBITDA.

(8) Early termination expenses represent amounts recognized as the cost to early terminate data center hosting agreements in addition to the gain (loss) on investments during the period.
 
Revenues: The Company generated revenues of $131.6 million for the three months ended September 30, 2024, compared to $97.8 million in the prior year period. The $33.8 million or approximately 35% increase in revenues was primarily driven by a $74.0 million increase in the average price of bitcoin, partially offset by a $40.5 million decrease in bitcoin production due to the April 2024 halving event. The average price of bitcoin mined was 116% higher than the average price of bitcoin mined in the prior year period and average daily bitcoin production was 22.5 bitcoin in the current year period compared with 37.9 in the prior year period. The Company produced 1,420 less bitcoin for the three months ended September 30, 2024 compared to the prior year period primarily due to the halving event in April 2024 and increased global hashrate, partially offset by an increase in the Company’s share of the network hashrate, which resulted in a 14% increase in number of blocks won. During the three months ended September 30, 2024, the third-party site equipment failure and transmission line maintenance were completely resolved.
 
Cost of revenues – mining during the three months ended September 30, 2024 totaled $97.1 million compared to $59.6 million in the prior year period. The $37.5 million or approximately 63% increase was primarily driven by the growth in the Company’s hash rate from the deployment and energization of mining rigs compared to the prior year period. The Company’s Cost per Petahash per day improved to $37.1 from $45.2, or approximately 18%, in the three months ended September 30, 2024 when compared with the prior year period, primarily due to strategic acquisitions with more efficient cost structures and deployment of more efficient miners. The Company believes Cost per Petahash per day to be a key metric to evaluate its operating costs and expects it to reduce as the Company grows its operations towards 50.0 exahash by the end of 2024.

Cost of revenues – hosting services during the three months ended September 30, 2024 totaled $0.4 million which includes cost of power and other hosting related operating costs to provide hosting services. The Company exited this business during the three months ended September 30, 2024 to strategically focus on its owned and operated mining business.

Cost of revenues – depreciation and amortization during the three months ended September 30, 2024 totaled $101.1 million compared to $53.5 million in the prior year period. The $47.6 million or approximately 89% increase was primarily due to the deployment of mining rigs since the prior year period, the acquisitions of GC Data Center Equity Holdings, LLC and the Garden City Acquisition and overall increased scale of the business.
 
Total Margin was a loss of $67.0 million in the current year period compared to a loss of $15.3 million in the prior year period, a decrease of $51.7 million or approximately 337%. The following table summarizes the factors that impacted the decrease in total margin for the three months ended September 30, 2024 compared to the prior year period:
 
Revenue:(in thousands)
Higher average price of bitcoin produced and other revenue$74,006 
Lower amount of bitcoin produced(40,549)
Third-party hosting341 
Cost of revenue – energy, hosting and other:
Higher costs due to growth in hash rate(57,506)
Decrease in hash costs and other costs
19,985 
Third-party hosting(378)
Cost of revenue – depreciation and amortization:
Increased due to deployment of mining rigs(41,665)
Increased due to third-party hosting services(5,923)
$(51,689)

Total margin excluding the impact of depreciation and amortization, for the three months ended September 30, 2024 was $34.1 million compared to $38.2 million in the prior year period.
 
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General and administrative expenses: General and administrative expenses were $63.7 million for the three months ended September 30, 2024, compared to $19.4 million in the prior year period, an increase of $44.3 million or approximately 228%. General and administrative expenses excluding stock-based compensation was $40.4 million in the current year period compared to $13.9 million in the prior year period. This $26.5 million or approximately 190% increase in expenses was primarily due to the increased scale of the business and acquisitions, 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 $23.3 million in the current year period compared to $5.5 million in the prior year period resulted from issuing the Company's 2023 performance-based stock awards in January 2024 and the introduction in May 2024 of a new long-term performance-based stock award program for 2024 that, unlike the 2023 stock award, meets the criteria to begin expensing immediately. The Company’s headcount increased from 48 employees as of September 30, 2023 to approximately 130 employees as of September 30, 2024, further contributed to the increase in stock-based compensation expense.

Change in fair value of digital assets: The Company recognized a gain on digital assets of $30.1 million for the three months ended September 30, 2024, compared to a loss of $44.7 million in the prior year period. The $74.8 million or approximately 167% increase was primarily related to the favorable mark-to-market adjustment in the current year period due to the increase in bitcoin price from $62,668 to $63,301, from June 30, 2024 to September 30, 2024, respectively, and the underlying digital assets held at the respective dates. As of September 30, 2024, the Company had 26,747 bitcoin, an increase of 95% compared to the prior year period. The Company views bitcoin on its Condensed Consolidated Balance Sheets as an important treasury reserve asset and expects to continue to invest in the future.

Change in fair value of derivative instrument: The Company acquired a commodity swap contract as a result of the GC Data Center Equity Holdings, LLC acquisition. The fair value decreased for the three months ended September 30, 2024, primarily due to the decrease in the electricity forward curve prices during the current period compared to the contracted fixed price.

Research and development: Research and development expenses were $2.8 million for the three months ended September 30, 2024 compared to $0.7 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: During the three months ended September 30, 2024, the Company terminated the remaining hosting agreements with customers from the GC Data Center Equity Holdings, LLC acquisition, and recognized early termination expenses of $10.3 million, to expand self-mining capacity.

Amortization of intangible assets: During the three months ended September 30, 2024, the Company recorded a $0.2 million amortization expense for intangible assets. There was no amortization expense of intangible assets in the prior year period.

Loss on investments: During the three months ended September 30, 2024, the Company wrote-down a previous SAFE investment for a loss of $1.0 million.

Net gain on extinguishment of debt: In September 2023, the Company entered into agreements with certain holders of Convertible Senior Notes due 2026 (the “2026 Notes”) to exchange an aggregate $416.8 million principal amount of 2026 Notes for 31,722,417 shares of the Company's common stock and recorded a gain in the amount of $82.6 million.

Equity in net income of unconsolidated affiliate: During the three months ended September 30, 2024, the Company recorded its share of net earnings for its 20% interest in the ADGM Entity in the amount of $2.1 million, compared to $0.6 million in the prior year period. The Company’s share of the ADGM Entity’s operating results included earnings from the production of 46 bitcoin and approximately $3.1 million of depreciation and amortization during the three months ended September 30, 2024, whereas in the prior year period, the Company’s share of ADGM Entity’s operating results included earnings from production of 23 bitcoin and approximately $0.5 million of depreciation and amortization.

Interest income: Interest income was $3.9 million for the three months ended September 30, 2024 compared to $0.4 million in the prior year period. The $3.5 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 of $2.3 million for the three months ended September 30, 2024 remained relatively flat compared to the prior year period. Interest costs were impacted by the exchange of $416.8 million aggregate principal amount of 2026 Notes for shares of the Company’s common stock September 2023 and the issuance of the 2031 Notes during the three months ended September 30, 2024.
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Income tax benefit (expense): The Company recorded income tax benefit of $49.2 million for the three months ended September 30, 2024 compared to an income tax expense of $0.1 million in the prior year period. The $49.2 million income tax benefit 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.

Net loss: The Company recorded a net loss of $124.8 million for the three months ended September 30, 2024 compared to a net loss of $0.4 million in the prior year period. The $124.4 million decrease in net loss was primarily driven by a $92.1 million increase in operating loss, the absence of an $82.6 million net gain from the extinguishment of debt, partially offset by a $49.2 million income tax benefit in the current period compared to the prior year period.
 
Adjusted EBITDA: Adjusted EBITDA was $21.8 million for the three months ended September 30, 2024 compared to an adjusted EBITDA loss of $21.3 million in the prior year period. The $43.1 million increase was primarily impacted by an increase in net loss, adjusted for an increase in stock compensation expense, and an unfavorable change in fair value derivative instrument, early termination expenses during the current period and the absence of a net gain from the extinguishment of debt from the prior year period.
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RESULTS OF OPERATIONS

Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023
 
Nine Months Ended September 30,
Favorable
(dollars in thousands)
20242023(Unfavorable)
Revenues
Mining$412,207 $230,740 $181,467 
Hosting services29,777 — 29,777 
Total revenues441,984 230,740 211,244 
Costs and expenses
Cost of revenues
Mining(254,227)(148,227)(106,000)
Hosting services(27,398)— (27,398)
Depreciation and amortization(266,939)(108,556)(158,383)
Total cost of revenues(548,564)(256,783)(291,781)
Operating expenses
General and administrative expenses(194,154)(54,404)(139,750)
Change in fair value of digital assets370,896 117,868 253,028 
Change in fair value of derivative instrument
(35,235)— (35,235)
Research and development
(9,124)(1,573)(7,551)
Early termination expenses
(38,061)— (38,061)
Amortization of intangible assets(22,658)— (22,658)
Total operating expenses71,664 61,891 9,773 
Operating income (loss)
(34,916)35,848 (70,764)
Gain on investments
4,236 — 4,236 
Loss on hedge instruments
(2,292)— (2,292)
Equity in net earnings of unconsolidated affiliate(825)(647)(178)
Net gain from extinguishment of debt
— 82,267 (82,267)
Interest income8,655 1,366 7,289 
Interest expense(4,967)(9,136)4,169 
Other non-operating income
67 — 67 
Income (loss) before income taxes
(30,042)109,698 (139,740)
Income tax benefit (expense)
42,767 (351)43,118 
Net income
$12,725 $109,347 $(96,622)
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Supplemental information:
bitcoin (“BTC”) production during the period, in whole BTC (1)
6,938 8,610 (1,672)
Average bitcoin per day, in whole BTC25.3 31.5 (6.2)
Total margin (total revenues less total cost of revenues)
$(106,580)$(26,043)$(80,537)
Cost of revenues - depreciation and amortization
$(266,939)$(108,556)$(158,383)
Total margin excluding the impact of depreciation and amortization:
Mining$157,980 $82,513 $75,467 
Hosting services$2,379 $— $2,379 
General and administrative expenses excluding stock-based compensation$(90,569)$(40,497)$(50,072)
Installed Hash Rate (Exahashes per second) - at end of period
36.9 23.1 13.8 
Energized Hash Rate (Exahashes per second) - at end of period
36.9 19.1 17.8 
Average Operational Hash Rate (Exahashes per second)
23.6 11.1 12.5 
Cost per Petahash per day
$40.7 $48.9 $8.2 
Share of available miner rewards3.6 %3.3 %0.3 %
Number of blocks won1,429 1,163 266 
Transaction fees as a percentage of total6.8 %4.6 %2.2 %
Reconciliation to Adjusted EBITDA:
Net income
$12,725 $109,347 $(96,622)
Interest income
(8,655)(1,366)(7,289)
Interest expense
4,967 9,136 (4,169)
Income tax expense (benefit)
(42,767)351 (43,118)
Depreciation and amortization (2)
298,826 109,040 189,786 
EBITDA265,096 226,508 38,588 
Stock compensation expense
103,585 13,907 89,678 
Change in fair value of derivative instrument (3)
35,235 — 35,235 
Early termination expenses and other
33,825 — 33,825 
Net gain from extinguishment of debt
— (82,267)82,267 
Adjusted EBITDA$437,741 $158,148 $279,593 

(1) Includes 313 and 23 bitcoin representing the Company’s share of the equity method investee, the ADGM entity, for the nine months ended September 30, 2024 and September 30, 2023, respectively.

(2) Includes approximately $9.2 million of depreciation and amortization from the Company’s share in the results of its equity method investee, the ADGM entity, reported in “Equity in net earnings of unconsolidated affiliate” for the nine months ended September 30, 2024 on the Condensed Consolidated Statements of Operations.

(3) For the three months ended March 31, 2024, the reported adjusted EBITDA was $528.8 million, revised for the change in fair value of derivative instrument of a $15.3 million loss, results in a revised adjusted EBITDA of $541.5 million. For the six months ended June 30, 2024, the reported adjusted EBITDA was $443.7 million, revised for the change in fair value of derivative instrument of $23.0 million, results in a revised adjusted EBITDA of $415.9 million. Refer to the discussion within “Non-GAAP Financial Measures” herein for the reasons of the Company’s exclusion of change in fair value of derivative instrument from adjusted EBITDA.

Revenues: The Company generated revenues of $442.0 million for the nine months ended September 30, 2024, compared to $230.7 million in the prior year period. The $211.2 million or approximately 92% increase in revenues was primarily driven by a $234.0 million increase in the average price of bitcoin mined, partially offset by a $52.6 million decrease in bitcoin production due to the April 2024 halving, and the inclusion of $29.8 million in revenues generated from providing hosting services as a result of the GC Data Center Hosting, LLC acquisition in January of 2024. The average price of bitcoin mined was 120% higher than the average price of bitcoin mined in the prior year period and average daily bitcoin production was 25.3 bitcoin in the current year period compared with 31.5 in the prior year period. The Company produced 1,672 less bitcoin for the nine months ended September 30, 2024 compared to the prior year period primarily due to the halving event in April 2024, increased global hashrate and the continued impact of unexpected equipment failures at third-party operated sites and transmission line maintenance, partially offset by an increase in the Company’s share of the network hashrate. During the quarter ended September 30, 2024, the third-party site equipment failure and transmission line maintenance were completely resolved.
 
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Cost of revenues – mining during the nine months ended September 30, 2024 totaled $254.2 million compared to $148.2 million in the prior year period. The $106.0 million or approximately 72% increase was primarily driven by the growth in the Company’s hash rate 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. The Company’s Cost per Petahash per day improved to $40.7 from $48.9, or approximately 17%, in the nine months ended September 30, 2024 when compared to the prior year period, primarily due to strategic acquisitions with more efficient cost structures and deployment of more efficient miners. The Company believes Cost per Petahash per day to be a key metric to evaluate its operating costs and expects it to reduce as the Company grows its operations towards 50.0 exahash by the end of 2024.

Cost of revenues – hosting services during the nine months ended September 30, 2024 totaled $27.4 million which includes cost of power and other hosting related operating costs to provide hosting services. Hosting services include results beginning January 12, 2024, the date of the acquisition of GC Data Center Equity Holdings, LLC. As of September 30, 2024, the Company exited all hosting facilities to strategically focus on its owned and operating mining business.

Cost of revenues – depreciation and amortization during the nine months ended September 30, 2024 totaled $266.9 million compared to $108.6 million in the prior year period. The $158.4 million or approximately 146% increase was primarily due to the deployment of mining rigs since the prior year period, the acquisitions of GC Data Center Equity Holdings, LLC and the Garden City Acquisition and overall increased scale of the business.
 
Total Margin was a loss of $106.6 million in the current year period compared to a loss of $26.0 million in the prior year period, a decrease of approximately $80.5 million. The following table summarizes the factors that impacted the decrease in total margin for the nine months ended September 30, 2024 compared to the prior year period.
 
Revenue:(in thousands)
Higher average price of bitcoin produced and other revenue$234,024 
Lower amount of bitcoin produced(52,557)
Third-party hosting29,777 
Cost of revenue – energy, hosting and other:
Higher costs due to growth in hash rate(154,904)
Decrease in hash costs and other costs48,904 
Third-party hosting(27,398)
Cost of revenue – depreciation and amortization:
Increased due to deployment of mining rigs(147,113)
Increased due to third-party hosting services(11,270)
Total margin
$(80,537)

Total margin excluding impact of depreciation and amortization for the nine months ended September 30, 2024 was $160.4 million compared to $82.5 million for the prior year period.

General and administrative expenses: General and administrative expenses were $194.2 million for the nine months ended September 30, 2024, compared to $54.4 million in the prior year period, an increase of $139.8 million or approximately 257%. General and administrative expenses excluding stock-based compensation was $90.6 million in the current year period compared to $40.5 million in the prior year period. The $50.1 million or approximately 124% increase in expenses was primarily due to the increased scale of the business and acquisitions, 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 $103.6 million in the current year period compared to $13.9 million in the prior year period resulted from issuing the Company's 2023 performance-based stock awards in January 2024 and the introduction of a new long-term performance-based stock award program for 2024 in May 2024 that, unlike the 2023 stock award, meets the criteria to begin expensing immediately. The Company’s headcount increased from 48 employees as of September 30, 2023 to approximately 130 employees as of September 30, 2024, further contributed to the increase in stock-based compensation expense.

Change in fair value of digital assets: The Company recognized a gain on digital assets of $370.9 million, compared to a gain of $117.9 million in the prior year period. The $253.0 million or approximately 215% increase was primarily related to the increase in bitcoin price from $42,288 to $63,301 from December 31, 2023 to September 30, 2024, respectively and the underlying digital assets held at the respective dates. As of September 30,
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2024, the Company had 26,747 bitcoin, an increase of 95% compared to the prior year period. The Company views bitcoin on its Condensed Consolidated Balance Sheets as an important treasury reserve asset and expects to continue to invest in the future.

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

Research and development: Research and development expenses were $9.1 million for the nine months ended September 30, 2024 compared to $1.6 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, the Company entered into a termination and transition agreement (“Agreement”) with the operator, US Bitcoin Corp (“USBTC”), of the two sites from the January 12, 2024, acquisition of GC Data Center Equity Holdings, LLC. The Company and USBTC agreed to terminate the acquired operating agreement for a termination fee of $19.5 million, net of deposit refund. In addition, during the nine months ended September 30, 2024, the Company terminated the remaining hosting agreements with customers from the GC Data Center Equity Holdings, LLC acquisition, and recognized early termination expenses of $18.4 million, to expand self-mining capacity.

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

Gain on investments: During the nine months ended September 30, 2024, the Company 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 its investment. Additionally, during the nine months ended September 30, 2024 the Company wrote-down a previous SAFE investment for a loss of $1.0 million.

Net gain from extinguishment of debt: In March 2023, the Company prepaid the outstanding balance on its term loan facility with Silvergate Bank and terminated the term loan facility. The Company and Silvergate agreed to also terminate the Company’s revolving credit facilities. In connection with the termination of the credit facility, the Company recorded a loss in the amount of $0.3 million. Additionally, in September 2023, the Company entered into agreements with certain holders of 2026 Notes to exchange an aggregate $416.8 million principal amount of 2026 Notes for 31,722,417 shares of the Company's common stock and recorded a gain in the amount of $82.6 million.

Equity in net earnings of unconsolidated affiliate: During the nine months ended September 30, 2024, the Company recorded its share of net losses for its 20% interest in the ADGM Entity in the amount of $0.8 million, compared to $0.6 million in the prior year period. The Company’s share of the ADGM Entity’s operating results included earnings from the production of 313 bitcoin, a $4.1 million impairment of property, plant and equipment and approximately $9.2 million of depreciation and amortization during the nine months ended September 30, 2024, whereas in the prior year period, the Company’s share of ADGM Entity’s operating results included earnings from production of 23 bitcoin and approximately $0.5 million of depreciation and amortization.

Loss on hedge instruments: During the nine months ended September 30, 2024, the Company recorded a $2.3 million realized loss related to bitcoin hedging activities. The Company has significant bitcoin holdings on its balance sheet and from time to time will evaluate, as part of its risk management and treasury management process, short-term hedging or yield enhancing opportunities. The Company has an Investment Committee composed of cross functional members of its senior executive team that evaluates market conditions to set hedging, investments, and monetization of bitcoin strategies. There were no outstanding bitcoin hedging transactions as of the nine months ended September 30, 2024 and there were no such activities in the prior year period.

Interest income: Interest income was $8.7 million for the nine months ended September 30, 2024 compared to $1.4 million in the prior year period. The $7.3 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 $5.0 million for the nine months ended September 30, 2024 compared to $9.1 million in the prior year period. The $4.2 million or approximately 46% decrease was a result of the exchange of
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$416.8 million aggregate principal amount of the 2026 Notes for shares of the Company’s common stock in September 2023 and the issuance of the 2031 Notes during the quarter ended September 30, 2024.
 
Income tax benefit (expense): The Company recorded income tax benefit of $42.8 million for the nine months ended September 30, 2024 compared to an income tax expense of $0.4 million in the prior year period. The $42.8 million income tax benefit 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.

Net income: The Company recorded net income of $12.7 million for the nine months ended September 30, 2024 compared to net income of $109.3 million in the prior year period. The $96.6 million decrease in net income was primarily driven by a $70.8 million decrease in operating income (loss), the absence of an $82.3 million net gain from the extinguishment of debt, partially offset by a $7.3 million increase in interest income and a $43.1 million income tax benefit in the current period compared to the prior year period.
 
Adjusted EBITDA: Adjusted EBITDA was $437.7 million for the nine months ended September 30, 2024 compared to adjusted EBITDA of $158.1 million in the prior year period. The $279.6 million increase was primarily impacted by the increase in earnings before interest, taxes, depreciation and amortization; adjusted for the increase in stock compensation expense and early termination expenses during the current period, and the absence of the net gain from extinguishment of debt from the prior year period.
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FINANCIAL CONDITION AND LIQUIDITY
 
The following table presents a summary of the Company’s cash flow activity for the nine months ended September 30, 2024 and 2023:

For the Nine Months Ended September 30,
(in thousands)20242023
Net cash used in operating activities
$(363,596)$(224,487)
Net cash used in investing activities
(1,232,255)(373)
Net cash provided by financing activities
1,414,794 213,565 
Net decrease in cash, cash equivalents and restricted cash
(181,057)(11,295)
Cash, cash equivalents and restricted cash — beginning of period357,313 112,505 
Cash, cash equivalents and restricted cash — end of period$176,256 $101,210 
 
Cash flows for the nine months ended September 30, 2024: Cash, cash equivalents and restricted cash totaled $176.3 million at September 30, 2024, a decrease of $181.1 million from December 31, 2023.
 
Cash flows from operating activities resulted in a use of funds of $363.6 million, as net income, adjusted for non-cash and non-operating items, in the amount of $62.3 million was more than offset by the use of cash of $425.9 million from changes in operating assets and liabilities. When the Company produces and holds bitcoin on its Condensed Consolidated Balance Sheets, it excludes such produced and held bitcoin from its operating cash flows. If 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 $412.0 million due to the non-cash adjustment for bitcoin mining revenues and deposits of $15.7 million resulting from increased deposits associated with hosting agreements.
 
Cash flows from investing activities resulted in a use of funds of $1,232.3 million, primarily resulting from the use of funds for advances to vendors of $584.8 million, purchase of digital assets of $395.6 million, payment for the acquisition of businesses of $275.8 million, capital expenditures of $64.3 million, and an investment in an equity method investee of $22.1 million, partially offset by proceeds from the sale of digital assets of $118.4 million.
 
Cash flows from financing activities resulted in a source of cash of $1,414.8 million, primarily from the periodic issuance of common stock under the Company’s 2024 ATM of $1,155.0 million, the issuance of the 2031 Notes of $291.6 million, net of issuance costs, partially offset by $29.0 million for the repurchase of shares in settlement of employee taxes upon restricted stock vesting.
  
Bitcoin holdings as of September 30, 2024: At September 30, 2024, the Company held approximately 26,747 bitcoin on its Condensed Consolidated Balance Sheets with a fair value of $1,693.1 million. The Company’s holdings as of September 30, 2024 excluded 95 bitcoins owned by the Company’s equity method investee, the ADGM Entity, but allocable to the Company, and pending distribution to the Company. At September 30, 2024, the fair value of a single bitcoin was approximately $63,301. The Company expects that its future bitcoin holdings will generally increase but will fluctuate from time to time, both in number of bitcoin held and fair value in U.S. dollars, depending upon operating and market conditions. The Company intends to add to its bitcoin holdings primarily through its production activities and from time to time purchases. The Company historically sold bitcoin as a means of generating cash to fund monthly operating costs and for general corporate purposes. During the nine months ended September 30, 2024, the Company purchased 6,481 bitcoin for $392.6 million. During the quarter end September 30, 2024, the Company acquired $100.0 million bitcoin using cash on hand and 4,144 bitcoin, or approximately $249.0 million, using the net proceeds from the issuance of the 2031 Notes as part of its strategy to hold bitcoin and not sell for the foreseeable future. As a result of the Company’s adoption of the aforementioned strategy, the Company anticipates funding its operations and investing activities principally from available cash and cash equivalents and from its financing activities.

Kaspa holdings as of September 30, 2024: In 2023, the Company began evaluating Kaspa as a potential way to diversify its revenue while continuing to utilize its current infrastructure and expertise in digital asset compute. After successfully deploying its first Kaspa ASICs in September 2023, the Company began scaling its operations. At September 30, 2024, the Company held approximately 107,891,919 Kaspa coins on its Condensed Consolidated Balance Sheets with a fair value of $17.1 million. At September 30, 2024, the fair value of a single Kaspa coin was approximately $0.1585. The Company intends to add to its Kaspa holdings primarily through its production activities. As of now we incur significantly less cost to produce Kaspa in U.S. dollar terms, which helps pay for our expenses and allows us to hold a larger amount of bitcoin on our Condensed Consolidated Balance Sheets.
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At-the-Market Offering Programs and Proceeds: As of September 30, 2024, the Company has sold 34,785,661 shares of common stock for an aggregate purchase price of $665.7 million, net of offering costs, pursuant to the 2024 ATM.

Liquidity and Capital Resources: Cash and cash equivalents, excluding restricted cash, totaled $164.3 million and the fair value of digital asset holdings was $1,710.2 million at September 30, 2024. The combined value of cash and cash equivalents, excluding restricted cash, and digital assets, as of September 30, 2024, was $1,874.5 million.

The Company expects 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. The Company will continue to seek to fund its business activities, and especially its growth opportunities, through the public capital markets, primarily through periodic equity issuances using its at-the-market facilities.
 
The risks to the Company’s liquidity outlook would include events that materially diminish its access to capital markets and/or the value of its bitcoin holdings and production capabilities, including:

Failure to effectively execute the Company’s growth strategies;

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

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

Significant increases in electricity costs if these cost increases were not accompanied by increases in the price of bitcoin, as this would also reduce profitability; and

Deteriorating macroeconomic conditions, including the impacts of inflation and increased interest rates, as well as instability in the banking system.
  
CONTRACTUAL OBLIGATIONS AND COMMITMENTS

The Company contracts with service providers for hosting its equipment and operational support in data centers where the Company’s equipment is deployed. Under these arrangements, the Company expects to pay at a minimum approximately (i) $48.2 million during the remainder of calendar year 2024, (ii) $350.8 million in total payments during the calendar years 2025 through 2027, and (iii) $5.7 million in total payments during the calendar year 2028. Under certain of these arrangements, the Company is required to pay variable pass-through power and service fees in addition to these estimated minimum amounts.

The Company has purchase agreements to purchase miners and other mining equipment for a total purchase price of $880.8 million. As of September 30, 2024, we have made installment payments totaling $557.1 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 2026 Notes are not converted into common stock, repurchased or redeemed prior to maturity, (i) remaining interest payments relating to the 2026 Notes will approximate $0.8 million through the remainder of the calendar year 2024, (ii) annual interest payments of approximately $3.3 million in each calendar year from 2025 through 2026, and (iii) principal in the amount of $330.7 million upon the maturity in November 2026, will be payable under the 2026 Notes. For the recently issued 2031 Notes, assuming the 2031 Notes are not converted into common stock repurchased or redeemed prior to maturity, (i) remaining interest payments related to the 2031 Notes will approximate $1.6 million through the remainder of the calendar year 2024, (ii) annual interest payments of approximately $6.4 million in each calendar year from 2025 to 2031, and (iii) principal in the amount of $300.0 million upon maturity in September 2031, will be payable under the 2031 Notes. Refer to Note 14 Debt, for further information.

On October 15, 2024, the Company announced securing a $200.0 million line of credit, collateralized by a portion of the Company’s bitcoin holdings. The Company plan to use the funds to capitalize on strategic opportunities and for other general corporate purposes. As of October 17, 2024, the facility was fully utilized.

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On October 16, 2024, the Company filed a renewed motion for judgement as a matter of law (or in the alternative for a new trial and remittitur), which, based on applicable law, seeks to overturn, or at minimum significantly reduce, the damage award. Also on October 16, 2024, the Company filed and a motion to correct the judgement’s interest rate. Accordingly, the Company acquired a surety bond for the amount owing. Refer to Note 16Legal Proceedings in the notes to the Company’s Condensed Consolidated Financial Statements included in this Quarterly Report, for further information.

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

Long-lived assets

Income taxes

Assets acquired and liabilities assumed in a business combination

Goodwill impairment

Loss contingencies

Long-Lived Assets

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

Management reviews the Company’s long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (asset group) may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of their carrying amount to the undiscounted future cash flows expected to be generated thereby. If such assets are not recoverable based on that test, impairment is recorded in the amount by which the carrying amount of the assets exceeds their fair value as determined in accordance with Accounting Standard Codification (“ASC”) 820.
 
Income Taxes
 
The primary objectives of accounting for income taxes are to recognize the amount of income taxes payable or refundable for the current year, and to recognize deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the Company’s financial statements or tax returns. The Company accounts for income taxes in accordance with ASC 740 - Income Taxes, using the asset and liability method. Under this method, deferred tax assets and liabilities are calculated based on enacted tax rates and are recognized for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities and for operating losses and tax credit carryforwards. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. Management must make assumptions, judgments and estimates to determine the Company’s income tax benefit or expense and deferred tax assets and liabilities. The Company recognizes tax positions when they are more likely than not of being sustained. Recognized tax positions are measured at the largest amount of benefit greater than 50% likely of being realized. Each period, the Company evaluates tax positions and adjusts related tax assets and liabilities in light of changing facts and circumstances.
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Assets Acquired and Liabilities Assumed in a Business Combination

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

Goodwill Impairment

Goodwill is not subject to amortization, and instead, assessed for impairment annually, or more frequently when events or changes in circumstances indicate 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, the Company may be involved in legal proceedings, claims and governmental and/or regulatory reviews. Management periodically reviews estimates of potential costs to be incurred by the Company in connection with the adjudication or settlement, if any, of these matters. These estimates are developed, as applicable in consultation with outside counsel, and are based on an analysis of potential outcomes. In accordance with ASC 450, Contingencies, loss contingencies are accrued if, in the opinion of management, an adverse outcome is probable and such financial outcome can be reasonably estimated. The accruals may change in the future due to new developments in each matter or changes in our litigation strategy. It is possible that future results for any particular quarter or annual period may be materially affected by changes in our estimates or outcomes relating to these matters.

Given the uncertain nature of litigation generally, we are not able in all cases to estimate the amount or range of loss that could result from an unfavorable outcome of the litigation to which we are a party. In view of these uncertainties, we could incur charges in excess of any currently established accruals and, to the extent available, liability insurance. In the opinion of management, any such future charges, individually or in the aggregate, could have a material adverse effect on our consolidated results of operations, financial condition and/or consolidated cash flows. 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.
 
RECENT ACCOUNTING PRONOUNCEMENTS
 
See Note 2Summary of Significant Accounting Policies to the Company’s Condensed Consolidated Financial Statements for a discussion of recent accounting standards and pronouncements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
The following discussion about our market risk exposures involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements.
 
Market Price Risk of Bitcoin. We hold a significant amount of bitcoin, and as such, we are exposed to the impact of market price changes in bitcoin on its bitcoin holdings. This exposure would generally manifest itself in the following areas:

Declines in the fair market value of bitcoin will impact the cash value that would be realized if we were to sell our bitcoin for cash, therefore having a negative impact on our liquidity.

We occasionally enter into derivative financial instruments to manage our exposure resulting from fluctuations in the price of bitcoin.
 
At September 30, 2024, we held approximately 26,747 bitcoin and the fair value of a single bitcoin was approximately $63,301, meaning that the fair value of our bitcoin holdings on that date was approximately $1,693.1 million.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of its principal executive officer and principal financial officer, has evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this Quarterly Report to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in the reports the Company files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive officer and principal financial officer, to allow timely decisions regarding required disclosures. Based on this evaluation, the Company’s principal executive officer and principal financial officer concluded that its disclosure controls and procedures were not effective at the reasonable assurance level as of September 30, 2024 due to a material weakness in internal control over financial reporting as described below.

Material Weaknesses in Internal Control and Plan for Remediation

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

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

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

Remediation

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

Continue to utilize external third-party audit and implementation firms under Section 404 of the Sarbanes-Oxley Act of 2002 (“SOX”) to enable the Company to improve the Company’s controls related to its material weaknesses; and

Continue to evaluate existing processes and implement new processes and controls where necessary in connection with remediating the Company’s material weaknesses, such that these controls are designed, implemented, and operating effectively.

Continue to work and guide our vendors in the industry that are not accustomed to the requirements of SOX to enhance and progress the industry forward to be fully compliant with SOX.

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

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

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

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

Call: 1-877-647-3335

Click: http://www.RedFlagReporting.com

Change in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the three months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting other than the ongoing remediation efforts undertaken by management.
 
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PART II

ITEM 1. LEGAL PROCEEDINGS

Other than as disclosed in Note 16 - Legal Proceedings in the notes to the Company’s Condensed Consolidated Financial Statements included in this Quarterly Report, we are presently not a party to any material litigation or regulatory proceeding and are not aware of any pending or threatened litigation or regulatory proceeding against us which, individually or in the aggregate, could have a material adverse effect on our business, operating results, financial condition or cash flows.
 
ITEM 1A. RISK FACTORS

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

We may experience liquidity constraints and need to raise additional capital. We may be unable to raise the additional capital needed to fund our operations and growth initiatives in a timely manner or at all.

Liquidity risk is the risk that we will not be able to meet our financial obligations as they fall due. We have a planning and budgeting process to help determine the funds required to support our normal spending requirements on an ongoing basis and our growth plans. We currently settle our financial obligations out of cash and cash equivalents, including net proceeds from sales of common stock under the 2024 ATM. On October 15, 2024, we entered into master lending agreements with a consortium of lenders, securing an aggregate $200.0 million line of credit, which we may draw on upon posting digital asset collateral. However, the master lending agreements are uncommitted, and there is no certainty that market conditions will allow us to access the master lending agreements on commercially reasonable terms or at all. Further, 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.

If the price of bitcoin declines, and as we expect to need to raise additional capital to expand our operations and pursue our growth strategy, and to respond to competitive pressures or unanticipated working capital requirements, we may seek but fail to obtain additional debt or equity financing on favorable terms, if at all, which could impair our growth and adversely affect our existing operations. If we were to obtain additional equity financing, our stockholders may experience significant dilution of their ownership interest, and the value of their investment could decline. Furthermore, if we were to obtain additional debt financing, our debtors likely would have priority over holders of equity with respect to order of payment preference. We may be required to accept terms that restrict our ability to incur additional indebtedness or take other actions, including terms that require us to maintain a specified level of liquidity or other balance sheet ratios that may not be in the interests of our stockholders.

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

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

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

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

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

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

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

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

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

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

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

PeriodTotal Number of Shares Repurchased
Average Price Paid Per Share (1)
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
July 1, 2024 through July 31, 202454,661 $22.56 — — 
August 1, 2024 through August 31, 2024193,467 19.19 — — 
September 1, 2024 through September 30, 202458,216 15.56 — — 
Total306,344 $19.10 — $— 

(1) The average price paid for shares in connection with vesting of restricted stock units are averages of the closing stock price at the vesting date, which is used to calculate the number of shares withheld.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

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ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.
 
ITEM 5. OTHER INFORMATION

Director and Officer Trading Plans and Arrangements

During the three months ended September 30, 2024, none of the Company’s directors or Section 16 officers adopted, modified, or terminated any contract, instruction or written plan for the purchase or sale of securities of the Company intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or any “non-Rule 10b5-1 trading arrangement,” as defined in Item 408(c) of Regulation S-K.

ITEM 6. EXHIBITS
 
The following exhibits are filed as part of this Quarterly Report.

Exhibit Number
Exhibit Description
Form
Date of First Filing
Exhibit Number
Provided Herewith
3.1



X
4.1
Form 8-K
8/14/24
4.1
31.1
 X
31.2
 X
32.1*
 X
101.INS
Inline XBRL Instance DocumentX
101.SCH
Inline XBRL Taxonomy Extension Schema DocumentX
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase DocumentX
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase DocumentX
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase DocumentX
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase DocumentX
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)X
*This certification is not deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
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SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
Date:November 12, 2024 
  
 MARA HOLDINGS, INC.
   
 By:/s/ Fred Thiel
 Name:Fred Thiel
 Title:
Chief Executive Officer and Chairman of the Board
  (Principal Executive Officer)
   
 By:/s/ Salman Khan
 Name:Salman Khan
 Title:
Chief Financial Officer
  
(Principal Financial and Accounting Officer)
 
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