What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-11-15 compared with 2021-08-13 · 184 added, 118 removed, 315 unchanged (49% of the section changed)

94 unchanged sentences

adoption of bitcoin as a treasury reserve alternative.

As of June 30, 2021

Existing Operations

As of September 30, 2021

Purchase Agreements

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Cisco Systems, Ericsson, Redback Networks, Wang Laboratories and Unisys Corporation.

January 25, 2021, the Company announced that it has purchased 4,812.66 BTC in an aggregate purchase price of $150 million.

On January 25, 2021, the Company entered into

a limited partnership agreement with NYDIG Digital Assets Fund III, LP (“fund”) whereas the fund purchased 4,812.66 BTC in

an aggregate purchase price of $150 million.

The Company owns 100% of the limited partnership interest.

The investment fund is included

in current assets in the consolidated balance sheets.

February 11, 2021, the Company issued 4,701,442 shares of common stock pursuant to the 2018 Equity Incentive Plan.

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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;

a monthly license fee with a sliding scale based on the MARAPool’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.

As of September 30, 2021, DMG has received shares equivalent to $500,000 in restricted common stock of the Company.

May 20, 2021, the Company appointed Georges Antoun and Jay Leupp to its board of directors, effective immediately, as Peter Benz transitions

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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.

As of September 30, 2021, the Company paid $8 million of the $14 million in expedite fees recorded as a deposit

on the balance sheet .

On September 3, 2021, the Company entered into a master agreement with Compute North, LLC whereas the Company

will pay an initial deposit of $14.6 million in aggregate over five installments.

As of September 30, 2021, the Company paid $9.1 million

of the $14.6 million initial deposit recorded as a deposit on the balance sheet.

July 30, 2021, Marathon Digital Holdings, Inc.

(the “Company”) entered into a fully executed contract with Bitmain to purchase

an additional 30,000 S-19j Pro ASIC Miners, with 5,000 units scheduled to be delivered in each of January 2022, February 2022, March

2022, April 2022, May 2022, and June 2022.

The purchase price is $126,000,000 with (i) 25% of

the purchase price due paid within one day of execution of the contract, (ii) 35% of the purchase price of each batch due in consecutive

months with 35% of the January 2022 batch due immediately, and then 35% of each of the remaining five batches due on the 15 th

of each consecutive month starting August 15, 2021, through December 15, 2021 and (iii) the remaining 40% of the purchase price of each

batch due on the 15 th of each consecutive month starting November 15, 2021 and then 40% of each of the remaining five batches

due on the 15 th of each consecutive month through April 2022.

August 9, 2021, the Company appointed Sarita James and Said Ouissal to its board of directors, effective immediately.

As a result, Marathon’s

board of directors now consists of seven directors, including five independent directors and two inside directors.

August 23, 2021 , the Company issued 2,722,435 shares of common stock pursuant to the 2018 Equity Incentive Plan.

August 27, 2021, Marathon Digital Holdings, Inc.

(the “Company”) entered into a Master Securities Loan Agreement (the “Agreement”)

with NYDIG Funding, LLC (“NYDIG”).

Pursuant to the Agreement, the Company will loan its bitcoin (“BTC”) to NYDIG

with an interest rate of three percent (3%) per annum.

Interest accrues daily and is payable on a monthly basis.

The Agreement provides

that the Company may recall its BTC at any time.

NYDIG shall, prior to or concurrently with the transfer of the BTC to NYDIG, but in

no case later than the close of business on the day of such transfer, transfer to the Company collateral with a market value at least

equal to 100% of the market value of the loaned BTC, and the Company is granted a first priority lien on such collateral.

27, 2021, the Company loaned 300 BTC to NYDIG.

previously disclosed in the Company’s monthly production updates, there have been multiple instances of the power generating station

in Hardin, MT operating below peak capacity and thus limiting the Company’s ability to mine bitcoin during 2021.

To mitigate these

issues in the future, system upgrades will be performed on the power generating station beginning in November 2021 and continuing into

Each phase of this maintenance will require the plant, and therefore the Company’s mining operations in Hardin, MT, to be

offline for approximately three to five days.

The upgrades are intended to improve the power generating station’s efficacy and

efficiency, increase safety, mitigate the potential for unexpected downtime in the future, and ultimately improve the Company’s

ability to effectively mine bitcoin.

The Company believes that the impact of these upgrades on its mining operations will minimize future

downtime and thus counterbalance any maintenance downtime experienced as a result of these repairs.

Accounting Policies and Estimates

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Subsequent reversal of impairment losses is not permitted.

June 30, 2021, we carried $195.9 million of digital assets on our balance sheet, which include cumulative impairments of $11.7 million,

September 30, 2021, we carried $282.7 million of digital assets on our balance sheet, which include cumulative impairments of $18.5 million,

consisting of the approximately 7,035 bitcoins, and held $32.9 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 November

15, 2021, we held approximately 7,562 bitcoins, of which, 4,812.66 bitcoins were acquired at an aggregate purchase price

of $150 million at an average purchase price of approximately $31,168 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.

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 NYDIG Digital Assets Fund III, LP, 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.

Financial Measures

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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.

compensation expense, net of withholding taxes.

These supplemental financial measures are not measurements of financial performance

under generally accepted accounting principles in the United States (“GAAP”) and, as a result, these supplemental financial

measures may not be comparable to similarly titled measures of other companies.

Management uses these non-GAAP financial measures internally

to help understand, manage, and evaluate our business performance and to help make operating decisions.

believe that these non-GAAP financial measures are also useful to investors and analysts in comparing our performance across reporting

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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.

losses on mined cryptocurrency, (iii) server maintenance contract amortization and (iv) stock compensation expense, net of withholding

taxes that could vary significantly in comparison to other companies.

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.

and (v) stock compensation expense, net of withholding taxes.

We believe the use of these non-GAAP financial measures can also

facilitate comparison of our operating results to those of our competitors.

financial measures are subject to material limitations as they are not in accordance with, or a substitute for, measurements prepared

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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:

expense, net of withholding taxes, to its most directly comparable GAAP measures for the periods indicated:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Reconciliation of non-GAAP income from operations:

Operating income (loss)

Operating loss

$ (64,283,755 )

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$ (106,717,049 )

$ (4,877,232 )

Depreciation and Amortization of Fixed Assets

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Server maintenance contract amortization

Stock Compensation Expense

Stock Compensation Expense, net of withholding taxes

Non-GAAP income (loss) from operations

$ (1,993,692 )

$ (1,200,778 )

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:

liability (iv) server maintenance contract amortization and (v) stock compensation expense, net of withholding taxes, to its most

directly comparable GAAP measures for the periods indicated:

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

Reconciliation of non-GAAP net income:

Net (loss) income

$ (22,172,567 )

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Server maintenance contract amortization

Stock Compensation Expense

Stock Compensation Expense, net of withholding taxes

Total Non-cash adjustments to Net Income (Loss)

Non-GAAP net (loss) income

$ 107,592,412

$ 176,434,344

Non-GAAP net (loss) income

$ 128,733,899

$ (2,311,353 )

Reconciliation of non-GAAP diluted earnings (loss) per share:

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Server maintenance contract amortization (per diluted share)

Stock Compensation Expense (per diluted share)

Stock Compensation Expense, net of withholding taxes

(per diluted share)

Non-GAAP diluted earnings (loss) per share

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of Operations

the Three and Six Months Ended June 30, 2021 and 2020

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.

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.

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.

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 Three and Nine Months Ended September 30, 2021 and 2020

generated revenues of $51.7 million and $90.2 million during the three and nine months ended September 30, 2021 as compared to $835,184

and $1.7 million during the three and nine months ended September 30, 2020.

For the three and nine months ended September 30, 2021, this

represented an increase of $50.9 million or 6,091% and $88.5 million or 5,162% over the same period in 2020.

Revenue for the three and

nine months ended September 30, 2021 and 2020 were derived primarily from cryptocurrency mining.

The increase in revenue is due to the

deployment of approximately 22,652 miners, increasing the Company’s hash rate by 1,381% for the nine month period

ending September 30, 2021.

cost of revenues during the three and nine months ended September 30, 2021 amounted to $10.3 million and $19.7 million and for the three

and nine months ended September 30, 2020, the direct cost of revenues amounted to $1.6 million and $3.5 million.

For the three and nine

months ended September 30, 2021, this represented an increase of $8.6 million or 527% and $16.1 million or 457% over the same period

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.

incurred other operating expenses of $105.7 million and $177.2 million for the three and nine months ended September 30, 2021 and $1.2

million and $3.1 million for the three and nine months ended September 30, 2020.

For the three and nine months ended September 30, 2021,

this represented an increase of $104.5 million or 8,760% and $174.2 million or 5,690% 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.

operating expenses consisted of the following:

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For the Three Months Ended

For the Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

For the Nine Months Ended

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Compensation and related taxes (1)

$ 153,670,098

Consulting fees (2)

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Impairment of cryptocurrencies (5)

$ 105,728,229

$ 177,235,946

Non-Cash Other Operating Expenses

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For the Three Months Ended

For the Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

For the Nine Months Ended

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Compensation and related taxes (1)

$ 147,647,288

Impairment of cryptocurrencies (5)

$ 102,471,600

$ 166,120,038

Compensation expense and related taxes:

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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.

For the three and nine months ended September 30, 2021, compensation expense and related payroll taxes

were $97.2 million and $153.7 million, an increase of $96.6 million or 15,712% and $151.8 million or 7,951% over the comparable periods

During the three and nine months ended September 30, 2021, we recognized non-cash employee and board equity-based compensation

of $95.7 million and $147.6 million, respectively, and $360,211 and $1,032,199 for the three and nine months ended September

30, 2020, respectively.

Consulting fees:

For the three and six months ended June 30, 2021, we incurred consulting fees of $105,355 and $218,960, an increase

For the three and nine months ended September 30, 2021, we incurred consulting fees of $159,300 and $378,260, a decrease

of $100,263 or 39% and an increase of $52,572 or 16% over the comparable periods in 2020.

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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.

For the three and nine months ended September 30, 2021 professional fees were $857,921 and $3.3 million, an increase

of $651,553 or 316% and $2.8 million or 546% over the comparable periods in 2020.

Professional fees primarily reflect the costs of professional

outside accounting fees, legal fees and audit fees.

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.

For the three and nine months ended September 30, 2021, other general and administrative expenses

were $797,574 and $1.4 million, an increase of $684,774 or 607% and $1.1 million or 344% over the comparable periods in 2020.

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.

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.

For the three and nine months ended September 30, 2021, impairment of cryptocurrencies were $6.7 million

and $18.5 million, an increase of $6.7 million or 100% and $18.5 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 .

Income (loss) from Operations

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.

from Operations

reported a loss from operations of $64.3 million and $106.7 million for the three and nine months ended September 30, 2021, respectively.

We reported an operating loss of $2.0 million and $4.9 million for the three and nine months ended September 30, 2020, respectively.

(Expenses) Income

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.

other income was $42.1 million and $59.0 million for the three and nine months ended September 30, 2021 and total other expenses were

$220 and $336,312 for the three and nine months ended September 30, 2020, respectively.

The increase in other income is due to the

change in fair value of the investment fund that holds the purchased 4,812.66 bitcoin subject to mark-to-market valuation.

qualifies and operates as an investment company for accounting purposes pursuant to the accounting and reporting guidance under ASC 946,

Financial Services – Investment Companies, which requires fair value measurement of the Fund’s investments in digital assets.

The bitcoin held in the investment fund was purchased for approximately $31,168 per bitcoin.

As of September 30, 2021, the fair market

value of bitcoin was approximately $43,529 per bitcoin.

Loss Available to Common Shareholders

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.

reported a net loss of $22.2 million and $47.7 million for the three and nine months ended September 30, 2021 and a net loss of $2.0

million and $5.2 million for the three and nine months ended September 30, 2020.

and Capital Resources

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reflected in the condensed consolidated financial statements, the Company had an accumulated deficit of approximately $163.8 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.

is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate

at September 30, 2021, net loss of approximately $47.7 million and $43.9 million net cash used by operating activities for the nine months

ended September 30, 2021.

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

At September 30, 2021, the Company’s cash and cash equivalents balances totaled $32.9 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.

During the nine month period ending September 30, 2021 and September 30, 2020, the Company mined

approximately 2,099 and 181 bitcoin, respectively.

An increase of 1,918 bitcoin or 1,060%.

The average price of a bitcoin during the first six months of 2020

The average price of a bitcoin during the first six months of 2021 was $45,897, an increase of $37,412 or 441%.

June 30, 2021, we carried $195.9 million of digital assets on our balance sheet, which include cumulative impairments of $11.7 million,

The average price

of a bitcoin during the first nine months of 2020 was $9,220.

The average price of a bitcoin during the first nine months of 2021

was $44,555, an increase of $35,335 or 383%.

September 30, 2021, we carried $282.7 million of digital assets on our balance sheet, which include cumulative impairments of $18.5 million,

consisting of the approximately 7,035 bitcoins, and held $32.9 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 November

15, 2021, we held approximately 7,562 bitcoins, of which, 4,812.66 bitcoins were acquired at an aggregate purchase price

of $150 million at an average purchase price of approximately $31,168 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.

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.

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.

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.

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.

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 NYDIG Digital Assets Fund III, LP, 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.

working capital increased by $265.6 million, to working capital of $550.6 million at September 30, 2021 from working capital of $285.0

million at December 31, 2020.

used in operating activities was $43.9 million during the nine months ended September 30, 2021 compared to cash used in operating activities

of $3.4 million during the nine months ended September 30, 2020.

used in investing activities was $372.2 million during the nine months ended September 30, 2021 compared to cash used in investing activities

of $15.1 million for the nine months ended September 30, 2020.

provided by financing activities was $307.7 million during the nine months ended September 30, 2021 compared to cash provided by financing

activities of $35.1 million for the nine months ended September 30, 2020.

on our current revenue and profit projections, we believe that our existing cash will be sufficient to fund our operations through at

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis