MARA Holdings, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. This report on Form 10-Q (“Report”) and other written and oral statements made from time to time by us may contain so-called “forward-looking statements,” all of which are subject to risks and uncertainties. Forward-looking statements can be identified by the use of words such as “expects,” “plans,” “will,” “forecasts,” “projects,” “intends,” “estimates,” and other words of similar meaning. One can identify them by the fact that they do not relate strictly to historical or current facts. These statements are likely to address our growth strategy, financial results and product and development programs. One must carefully consider any such statement and should understand that many factors could cause actual results to differ from our forward-looking statements. These factors may include inaccurate assumptions and a broad variety of other risks and uncertainties, including some that are known and some that are not. No forward-looking statement can be guaranteed and actual future results may vary materially. Information regarding market and industry statistics contained in this Report is included based on information available to us that we believe is accurate. It is generally based on 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 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. The following discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with our consolidated financial statements and the notes presented herein. In addition to historical information, the following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ significantly from those expressed, implied or anticipated in these forward-looking statements as a result of certain factors discussed herein and any other periodic reports filed and to be filed with the Securities and Exchange Commission. Cautionary Note Regarding Forward-Looking Statements This report and other documents that we file with the Securities and Exchange Commission contain forward-looking statements that are based on current expectations, estimates, forecasts and projections about our future performance, our business, our beliefs and our management’s assumptions. Statements that are not historical facts are forward-looking statements. Words such as “expect,” “outlook,” “forecast,” “would,” “could,” “should,” “project,” “intend,” “plan,” “continue,” “sustain”, “on track”, “believe,” “seek,” “estimate,” “anticipate,” “may,” “assume,” and variations of such words and similar expressions are often used to identify such forward-looking statements, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward- looking statements are not guarantees of future performance and involve risks, assumptions and uncertainties, including, but not limited to, those described in our reports that we file or furnish with the Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Accordingly, you are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. Except to the extent required by law, we undertake no obligation to update publicly any forward-looking statements after the date they are made, whether as a result of new information, future events, changes in assumptions or otherwise. 19 Business of the Company We were incorporated in the State of Nevada on February 23, 2010 under the name Verve Ventures, Inc. As of the date of this filing, our name has been changed to Marathon Digital Holdings, Inc. On December 7, 2011, we changed our name to American Strategic Minerals Corporation and were engaged in exploration and potential development of uranium and vanadium minerals business. In June 2012, we discontinued our minerals business and began to invest in real estate properties in Southern California. In October 2012, we discontinued our real estate business when our former CEO joined the firm and we commenced our IP licensing operations, at which time the Company’s name was changed to Marathon Patent Group, Inc. On November 1, 2017, we entered into a merger agreement with Global Bit Ventures, Inc. (“GBV”), which is focused on mining digital assets. We have since purchased our cryptocurrency mining machines and established a data center in Canada to mine digital assets. Following the merger, we intended to add GBV’s existing technical capabilities and digital asset miners and expand our activities in the mining of new digital assets, while at the same time harvesting the value of our remaining IP assets. On June 28, 2018, the board has determined that it is in the best interests of the Company and its shareholders to allow the Amended Merger Agreement to expire on its current termination date of June 28, 2018 without further negotiation or extension. The Board approved to issue 750,000 shares of our common stock to GBV as a termination fee for canceling the proposed merger between the two companies. The fair value of the common stocks was $2,850,000. The Company believes that bitcoin is attractive because it can serve as a store of value, supported by a robust and public open source architecture, that is untethered to sovereign monetary policy and can therefore serve as a hedge against inflation. Bitcoin exists entirely in electronic form, as virtually irreversible public transaction ledger entries on the blockchain, and transactions in bitcoin are recorded and authenticated not by a central repository, but by a decentralized peer-to-peer network. This decentralization avoids certain threats common to centralized computer networks, such as denial of service attacks, and reduces the dependency of the bitcoin network on any single system. While the bitcoin network as a whole is decentralized, the private keys used to access bitcoin balances are not widely distributed and are held on hardware (which can be physically controlled by the holder or by a third party such as a custodian) or via software programs on third-party servers and loss of such private keys results in an inability to access, and effective loss of, the corresponding bitcoin. Consequently, bitcoin holdings are susceptible to all of the risks inherent in holding any electronic data, such as power failure, data corruption, security breach, communication failure, and user error, among others. These risks, in turn, make bitcoin subject to theft, destruction, or loss of value from hackers, corruption, or technology-specific factors such as viruses that do not affect conventional fiat currency. In addition, the bitcoin network relies on open source developers to maintain and improve the bitcoin protocol. Accordingly, bitcoin may be subject to protocol design changes, governance disputes such as “forked” protocols, competing protocols, and other open source-specific risks that do not affect conventional proprietary software. The Company believes that in the context of the economic and public health crisis precipitated by COVID-19 and the unprecedented government financial stimulus measures adopted around the world, decreasing interest rates, as well as the breakdown of trust in and between political institutions and political parties in the United States and globally, bitcoin represents a more attractive store of value than fiat currency, and further that opportunity for appreciation in the value of bitcoin exists in the event that such factors lead to even more widespread adoption of bitcoin as a treasury reserve alternative. As of June 30, 2021 Existing Operations Purchase Agreements Cumulative Fleet Total miners ordered 2,620 100,500 103,120 Total miners shipped 2,620 18,702 21,322 Total miners installed 2,620 16,775 19,395 Total produced hashrate to date 243 PH/s 1,845 PH/s 2,088 PH/s Recent Developments On January 6, 2021, the Company issued 566,279 shares pursuant to the 2018 Equity Incentive Plan for shares that vested as of December 31, 2020. Subsequent to year end, the Company issued 170,904 and 23,500 shares of common stock pursuant to warrant and option exercises, respectively. On January 12, 2021, the Company also announced that it had successfully completed its previously announced $200 million shelf offering by utilizing its at-the-market (ATM) facility. Pursuant to the terms of the offering 12,500,000 shares of common stock were issued at a value of $20 per share. As a result, the Company ended the 2020 fiscal year with $141.3 million in cash and 81,974,619 shares outstanding. On January 12, 2021, the Company, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain purchasers named therein (the “Purchasers”), pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “Offering”), 12,500,000 shares of its common stock (the “Securities”) at an offering price of $20.00 per share. 20 The Purchase Agreement contains customary representations and warranties and agreements of the Company and the Purchasers and customary indemnification rights and obligations of the parties. The closing of the Offering occurred on January 15, 2021. The Company received gross proceeds of $250,000,000 in connection with the Offering, before deducting placement agent fees and related offering expenses. Pursuant to a letter agreement, dated August 2020 (the “Engagement Letter”), the Company engaged H.C. Wainwright & Co., LLC (the “Placement Agent”) as placement agent in connection with the Offering. The Placement Agent agreed to use its reasonable best efforts to arrange for the sale of the Securities. The Company agreed to pay to the Placement Agent a cash fee of 5.0% of the aggregate gross proceeds raised in the Offering. The Company also issued to designees of the Placement Agent warrants to purchase up to 3.0% of the aggregate number of shares of Common Stock sold in the transactions, or warrants to purchase up to 375,000 shares of Common Stock (the “Placement Agent Warrants”). The Placement Agent Warrants have an exercise price equal to 125% of the offering price per share (or $25.00 per share). The Company also agreed to pay the Placement Agent $50,000 for accountable expenses, to reimburse an investor’s legal fees in an amount up to $7,500 and to pay $12,900 for the Placement Agent’s clearing fees. Pursuant to the terms of the Engagement Letter, the Placement Agent has the right, for a period of twelve months following the closing of the Offerings, to act (i) as financial advisor in connection with any merger, consolidation or similar business combination by the Company and (ii) as sole book-running manager, sole underwriter or sole placement agent in connection with certain debt and equity financing transactions by the Company. Effective January 19, 2021, David Lieberman resigned as a director of the Company. On the same date, the Company’s Board appointed Kevin DeNuccio as a director to fill the vacancy created by Mr. Lieberman’s resignation. Mr. DeNuccio is the Founder and General Partner of Wild West Capital LLC since 2012 where he focused on angel investments, primarily in SAAS software start-ups. He brings to Marathon more than 25 years of experience as a chief executive, global sales leader, public and private board member, and more than a dozen angel investments, managing and growing leading technology businesses. He served in senior executive positions with Verizon, Cisco Systems, Ericsson, Redback Networks, Wang Laboratories and Unisys Corporation. On January 25, 2021, the Company announced that it has purchased 4,812.66 BTC in an aggregate purchase price of $150 million. On February 11, 2021, the Company issued 4,701,442 shares of common stock pursuant to the 2018 Equity Incentive Plan. Effective March 1, 2021, the Company changed its name to Marathon Digital Holdings, Inc. On March 7, 2021, the Company entered into a termination agreement with the 9349-0001 Quebec Inc., to agree to terminate the outstanding lease. As of that date, the Company was fully released and discharged from any and all obligations under the Lease Agreement. In November 2017, the Company assumed a lease in connection with the mining operations in Quebec, Canada. On April 26, 2021, the Company appointed Fred Thiel as its new chief executive officer. Mr. Thiel has succeeded Merrick Okamoto, who has served as the Company’s chief executive officer since 2018, and who will serve as executive chairman of the board of directors following the transition. On March 25, 2021, Marathon Digital Holdings, Inc. (the “Company”) entered into a licensing agreement with DMG Blockchain Solutions, Inc. to license DMG’s proprietary Blockseer pool technology for use in its new Marathon OFAC Pool . Pursuant to the terms and conditions of the Agreement, the Company will be granted an exclusive and irrevocable license to use the technology in the U.S., and DMG will receive: $500,000 in restricted common stock of the Company (stock to be issued in a transaction exempt from registration under Section 4(a)(2) under the Securities Act of 1933, as amended); a monthly license fee with a sliding scale based on the DCMNA’s block rewards and transaction fees received by the pool; and technical support services to be provided on an as-needed basis with payment in US dollars. On May 20, 2021, the Company appointed Georges Antoun and Jay Leupp to its board of directors, effective immediately, as Peter Benz transitions to become the company’s vice president of corporate development and Michael Berg steps down from his position of director to pursue other projects. As a result, Marathon’s board of directors now consists of five directors, including three independent directors and two inside directors. 21 On May 21, 2021, Marathon Digital Holdings, Inc. (the “Company”) entered into a binding letter of intent with Compute North, LLC to host 73,000 Bitcoin Miners over a staged in implementation between October 2021 and March 2022. The hosting cost is $0.50 per machine per month and the hosting rate will be $0.044 per kWh. In order to build out the infrastructure without paying for the capital expenditure, the Company will provide an 18 month bridge loan to Compute North of up to $67 million dollars, in tranches, based upon specified requirements being met. The terms of the contract are limited to three years with increases thereafter capped at three percent per year thereafter. The Company has also agreed to pay up to $14 million in expedite fees for construction/electrical and supply chain expediting activities. As of June 30, 2021, the Company paid $8 million of the $14 million in expedite fees recorded as a deposit on the balance sheet. Critical Accounting Policies and Estimates We believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this management discussion and analysis: Digital Currencies Digital currencies are included in current assets in the consolidated balance sheets as intangible assets with indefinite useful lives. Digital currencies are recorded at cost less impairment. An intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value, which is measured using the quoted price of the digital currency at the time its fair value is being measured. In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists. If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary. If the Company concludes otherwise, it is required to perform a quantitative impairment test. To the extent an impairment loss is recognized, the loss establishes the new cost basis of the asset. Subsequent reversal of impairment losses is not permitted. At June 30, 2021, we carried $195.9 million of digital assets on our balance sheet, which include cumulative impairments of $11.7 million, consisting of the approximately 5,784 bitcoins, and held $170.6 million in cash and cash equivalents, compared to $2.3 million of digital assets and $141.3 million in cash and cash equivalents at December 31, 2020, reflecting the shift in our liquid assets. As of August 13, 2021, we held approximately 6,378 bitcoins, of which, 4,812.66 bitcoins were acquired at an aggregate purchase price of $150 million at an average purchase price of approximately $31,137 per bitcoin, inclusive of fees and expenses. These purchased bitcoins are held in an investment fund of one where the Company is the sole limited partner. We expect to purchase additional bitcoin held by the investment fund in future periods, though we may also sell bitcoin in future periods as needed to generate Cash Assets for treasury management purposes. Non-GAAP Financial Measures We are providing supplemental financial measures for (i) non-GAAP income from operations that excludes the impact of depreciation and amortization of fixed assets, impairment losses on mined cryptocurrency, server maintenance contract amortization and stock compensation expense and (ii) non-GAAP net income and non-GAAP diluted earnings per share that exclude the impact of depreciation and amortization of fixed assets, impairment losses on mined cryptocurrency, change in fair value of warrant liability, server maintenance contract amortization and stock compensation expense. These supplemental financial measures are not measurements of financial performance under generally accepted accounting principles in the United States (“GAAP”) and, as a result, these supplemental financial measures may not be comparable to similarly titled measures of other companies. Management uses these non-GAAP financial measures internally to help understand, manage, and evaluate our business performance and to help make operating decisions. We believe that these non-GAAP financial measures are also useful to investors and analysts in comparing our performance across reporting periods on a consistent basis. The first supplemental financial measure excludes non-cash operational expenses that we believe are not reflective of our general business performance such as (i) depreciation and amortization of fixed assets, (ii) significant impairment losses on mined cryptocurrency, (iii) server maintenance contract amortization and (iv) stock compensation expense that could vary significantly in comparison to other companies. The second set of supplemental financial measures excludes the impact of (i) depreciation and amortization of fixed assets, (ii) significant impairment losses on mined cryptocurrency, (iii) change in fair value of warrant liability (iv) server maintenance contract amortization and (v) stock compensation expense. We believe the use of these non-GAAP financial measures can also facilitate comparison of our operating results to those of our competitors. Non-GAAP financial measures are subject to material limitations as they are not in accordance with, or a substitute for, measurements prepared in accordance with GAAP. For example, we expect that share-based compensation expense, which is excluded from the first two non-GAAP financial measures, will continue to be a significant recurring expense over the coming years and is an important part of the compensation provided to certain employees, officers, and directors. Similarly, we expect that depreciation and amortization of fixed assets will continue to be a recurring expense over the term of the useful life of the assets. We have also excluded impairment losses on mined cryptocurrency from the first two non-GAAP financial measures, which may occur in future periods as a result of our continued holdings of significant amounts of bitcoin. Our non-GAAP financial measures are not meant to be considered in isolation and should be read only in conjunction with our Consolidated Condensed Financial Statements, which have been prepared in accordance with GAAP. We rely primarily on such Consolidated Condensed Financial Statements to understand, manage, and evaluate our business performance and use the non-GAAP financial measures only supplementally. 22 The following is a reconciliation of our non-GAAP income from operations, which excludes the impact of (i) depreciation and amortization of fixed assets (ii) impairment losses on mined cryptocurrency (iii) server maintenance contract amortization and (iv) stock compensation expense, to its most directly comparable GAAP measures for the periods indicated: For the Three Months Ended For the Six Months Ended June 30, June 30, 2021 2020 2021 2020 Reconciliation of non-GAAP income from operations: Operating income (loss) $ 4,621,606 $ (1,791,233 ) $ (42,433,807 ) $ (2,883,035 ) Depreciation and Amortization of Fixed Assets 2,919,872 499,489 3,640,014 1,010,270 Impairment of mined cryptocurrency 11,078,660 - 11,740,859 - Server maintenance contract amortization 561,000 - 1,122,000 - Stock Compensation Expense 875,972 23,238 51,907,115 671,987 Non-GAAP income (loss) from operations $ 20,057,110 $ (1,268,506 ) $ 25,976,181 $ (1,200,778 ) The following are reconciliations of our non-GAAP net income and non-GAAP diluted earnings per share, in each case excluding the impact of (i) depreciation and amortization of fixed assets (ii) impairment losses on mined cryptocurrency (iii) change in fair value of warrant liability (iv) server maintenance contract amortization and (v) stock compensation expense, to its most directly comparable GAAP measures for the periods indicated: For the Three Months Ended For the Six Months Ended June 30, June 30, 2021 2020 2021 2020 Reconciliation of non-GAAP net income: Net (loss) income $ (108,884,620 ) $ (2,161,196 ) $ (25,527,878 ) $ (3,219,127 ) Non-cash adjustments to Net Income (loss) Depreciation and Amortization of Fixed Assets 2,919,872 499,489 3,640,014 1,010,270 Impairment of mined cryptocurrency 11,078,660 - 11,740,859 - Change in fair value of warrant liability (1,196,004 ) 6,563 395,892 (3,224 ) Server maintenance contract amortization 561,000 - 1,122,000 - Stock Compensation Expense 875,972 23,238 51,907,115 671,987 Total Non-cash adjustments to Net Income (Loss) $ 14,239,500 $ 529,290 $ 68,805,880 $ 1,679,033 Non-GAAP net (loss) income $ (94,645,120 ) $ (1,631,907 ) $ 43,278,002 $ (1,540,094 ) Reconciliation of non-GAAP diluted earnings (loss) per share: Diluted (loss) earnings per share $ (1.08 ) $ (0.13 ) $ (0.26 ) $ (0.26 ) Depreciation and Amortization of Fixed Assets (per diluted share) 0.03 0.03 0.04 0.08 Impairment of mined cryptocurrency (per diluted share) 0.11 - 0.12 - Change in fair value of warrant liability (per diluted share) (0.01 ) 0.00 0.00 - Server maintenance contract amortization (per diluted share) 0.01 - 0.01 - Stock Compensation Expense (per diluted share) 0.01 0.00 0.53 0.05 Non-GAAP diluted earnings (loss) per share $ (0.93 ) $ (0.10 ) $ 0.44 $ (0.13 ) 23 Recent Issued Accounting Standards See Note 2 to our consolidated financial statements for a discussion of recent accounting standards and pronouncements. Results of Operations For the Three and Six Months Ended June 30, 2021 and 2020 We generated revenues of $29.3 million and $38.5 million during the three and six months ended June 30, 2021 as compared to $286,161 and $878,648 during the three and six months ended June 30, 2020. For the three and six months ended June 30, 2021, this represented an increase of $29.0 million or 10,147% and $37.6 million or 4,279% over the same period in 2020. Revenue for the three and six months ended June 30, 2021 and 2020 were derived primarily from cryptocurrency mining. The increase in revenue is due to the deployment of approximately 15,595 miners, increasing the Company’s hash rate by 1,031% for the six month period ending June 30, 2021. Direct cost of revenues during the three and six months ended June 30, 2021 amounted to $7.0 million and $9.4 million and for the three and six months ended June 30, 2020, the direct cost of revenues amounted to $740,483 and $1.9 million. For the three and six months ended June 30, 2021, this represented an increase of $6.3 million or 844% and $7.5 million or 396% over the same period in 2020. Direct costs of revenue include depreciation and amortization expenses of the cryptocurrency mining machines and patents, contingent payments to patent enforcement legal costs, patent enforcement advisors and inventors as well as various non-contingent costs associated with enforcing the Company’s patent rights and otherwise in developing and entering into settlement and licensing agreements that generate the Company’s revenue. We incurred other operating expenses of $17.7 million and $71.5 million for the three and six months ended June 30, 2021 and $1.3 million and $1.9 million for the three and six months ended June 30, 2020. For the three and six months ended June 30, 2021, this represented an increase of $16.4 million or 1,224% and $69.6 million or 3,728% over 2020. These expenses primarily consisted of stock-based compensation, compensation to our officers, directors and employees, impairment of cryptocurrencies, professional fees and consulting incurred in connection with the day-to-day operation of our business. The operating expenses consisted of the following: Total Other Operating Expenses Total Other Operating Expenses For the Three Months Ended For the Six Months Ended June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Compensation and related taxes (1) $ 4,082,767 $ 1,060,480 $ 56,488,554 $ 1,294,137 Consulting fees (2) 105,355 24,313 218,960 66,125 Professional fees (3) 2,160,775 162,552 2,473,807 309,194 Other general and administrative (4) 278,860 89,566 586,050 198,503 Impairment of cryptocurrencies (5) 11,078,660 - 11,740,859 - Total $ 17,706,417 $ 1,336,911 $ 71,508,230 $ 1,867,959 Non-Cash Other Operating Expenses Non-Cash Other Operating Expenses For the Three Months Ended For the Six Months Ended June 30, 2021 June 30, 2020 June 30, 2021 June 30, 2020 Compensation and related taxes (1) $ 875,972 $ 23,238 $ 51,907,115 $ 671,987 Impairment of cryptocurrencies (5) 11,078,660 - 11,740,859 - Total $ 11,954,632 $ 23,238 $ 63,647,974 $ 671,987 (1) Compensation expense and related taxes: Compensation expense includes cash compensation and related payroll taxes and benefits, and non-cash equity compensation expenses. For the three and six months ended June 30, 2021, compensation expense and related payroll taxes were $4,082,767 and $56,488,554, an increase of $3.0 million or 285% and $55.2 million or 4,265% over the comparable periods in 2020. During the three and six months ended June 30, 2021, we recognized non-cash employee and board equity-based compensation of $875,972 and $51.9 million, respectively, and $23,238 and $671,987 for the three and six months ended June 30, 2020, respectively. (2) Consulting fees: For the three and six months ended June 30, 2021, we incurred consulting fees of $105,355 and $218,960, an increase of $81,042 or 333% and an increase of $152,835 or 231% over the comparable periods in 2020. Consulting fees include both cash and non-cash related consulting fees primarily for investor relations and public relations services as well as other consulting services. (3) Professional fees: For the three and six months ended June 30, 2021 professional fees were $2.2 million and $2.5 million, an increase of $2.0 million or 1,229% and $2.2 million or 700% over the comparable periods in 2020. Professional fees primarily reflect the costs of professional outside accounting fees, legal fees and audit fees. (4) Other general and administrative expenses: For the three and six months ended June 30, 2021, other general and administrative expenses were $278,860 and $586,050, an increase of $189,294 or 211% and $387,547 or 195% over the comparable periods in 2020. General and administrative expenses reflect the other non-categorized operating costs of the Company and include expenses related to being a public company, rent, insurance, technology and other expenses incurred to support the operations of the Company. (5) Impairment of cryptocurrencies: For the three and six months ended June 30, 2021, impairment of cryptocurrencies were $11.1 million and $11.7 million, an increase of $11.1 million or 100% and $11.7 million or 100% over the comparable periods in 2020. Impairment of cryptocurrencies reflect the impairment of the bitcoin earned by the Company subject to FASB ASC 350 Intangibles – Goodwill and Other . 24 Income (loss) from Operations We reported income from operations of $4.6 million and an operating loss of $42.4 million for the three and six months ended June 30, 2021, respectively. We reported an operating loss of $1.8 million and $2.9 million for the three and six months ended June 30, 2020, respectively. Other (Expenses) Income Total other expenses were $113.5 million and total other income was $16.9 million for the three and six months ended June 30, 2021 and total other expenses were $369,963 and $336,092 for the three and six months ended June 30, 2020, respectively. Net Loss Available to Common Shareholders We reported a net loss of $108.9 million and $25.5 million for the three and six months ended June 30, 2021 and a net loss of $2.2 million and $3.2 million for the three and six months ended June 30, 2020. Liquidity and Capital Resources The Company’s condensed consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. As reflected in the condensed consolidated financial statements, the Company had an accumulated deficit of approximately $141.6 million at June 30, 2021, net loss of approximately $25.5 million and $6.8 million net cash used by operating activities for the six months ended June 30, 2021. Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. At June 30, 2021, the Company’s cash and cash equivalents balances totaled $170.6 million compared to $141.3 million at December 31, 2020. During the six month period ending June 30, 2021 and June 30, 2020, the Company mined approximately 846 and 104 bitcoin, respectively. An increase of 742 bitcoin or 713%. The average price of a bitcoin during the first six months of 2020 was $8,485. The average price of a bitcoin during the first six months of 2021 was $45,897, an increase of $37,412 or 441%. At June 30, 2021, we carried $195.9 million of digital assets on our balance sheet, which include cumulative impairments of $11.7 million, consisting of the approximately 5,784 bitcoins, and held $170.6 million in cash and cash equivalents, compared to $2.3 million of digital assets and $141.3 million in cash and cash equivalents at December 31, 2020, reflecting the shift in our liquid assets. As of August 13, 2021, we held approximately 6,378 bitcoins, of which, 4,812.66 bitcoins were acquired at an aggregate purchase price of $150 million at an average purchase price of approximately $31,137 per bitcoin, inclusive of fees and expenses. These purchased bitcoins are held in an investment fund of one where the Company is the sole limited partner. We expect to purchase additional bitcoin held by the investment fund in future periods, though we may also sell bitcoin in future periods as needed to generate Cash Assets for treasury management purposes. Net working capital increased by $203.3 million, to working capital of $488.3 million at June 30, 2021 from working capital of $285.0 million at December 31, 2020. Cash used in operating activities was $6.8 million during the six months ended June 30, 2021 compared to cash used in operating activities of $2.1 million during the six months ended June 30, 2020. Cash used in investing activities was $272.5 million during the six months ended June 30, 2021 compared to cash used in investing activities of $4.7 million for the six months ended June 30, 2020. Cash provided by financing activities was $308.5 million during the six months ended June 30, 2021 compared to cash provided by financing activities of $6.9 million for the six months ended June 30, 2020. Based on our current revenue and profit projections, we believe that our existing cash will be sufficient to fund our operations through at least the next twelve months. Off-balance Sheet Arrangements We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholder’s equity or that are not reflected in our consolidated condensed financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. 25 Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not required for smaller reporting companies.