What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-05-10 compared with 2022-11-14 · 487 added, 488 removed, 79 unchanged (93% of the section changed)

49 unchanged sentences

of new information, future events, changes in assumptions or otherwise.

of the Company

Company was incorporated in the State of Nevada on February 23, 2010 under the name Verve Ventures, Inc.

On December 7, 2011, the Company

changed its name to American Strategic Minerals Corporation and were engaged in exploration and potential development of uranium and

vanadium minerals business.

In June 2012, the Company discontinued the minerals business and began to invest in real estate properties

in Southern California.

In October 2012, the Company discontinued its real estate business and the Company commenced IP licensing operations,

at which time the Company’s name was changed to Marathon Patent Group, Inc.

The Company commenced mining bitcoin in 2018 and changed

its name to Marathon Digital Holdings, Inc.

The Company was incorporated in the State of Nevada

on February 23, 2010 under the name Verve Ventures, Inc.

In October 2012, the Company commenced IP licensing operations, at which time

the Company’s name was changed to Marathon Patent Group, Inc.

The Company commenced mining bitcoin in 2018 and changed its name

to Marathon Digital Holdings, Inc.

on March 1, 2021.

As of September 30, 2022, the Company is solely focused on the mining of bitcoin and ancillary opportunities within the bitcoin ecosystem under the name Marathon Digital

Holdings, Inc.

developments for the three-month period ended September 30, 2022

three-month period ended September 30, 2022, was particularly active from an operations and a financial standpoint, with noteworthy events

connection with a dispute concerning the settlement of certain restricted stock unit awards previously granted to Merrick D.

former Chief Executive Officer and Chairman of the Company, on October 12, 2022, the

Company entered into a settlement agreement with Mr.

Okamoto, pursuant to which the Company agreed to pay Mr.

Okamoto $24 million.

Okamoto agreed to a settlement and a broad release of known or unknown claims against the Company, which relate to the Company’s

Amended 2018 Equity Incentive Plan or related restricted stock unit award agreements.

The Company entered into related settlement agreements

in respect to certain restricted stock unit awards previously granted to five other individuals, including a director and our current

Chief Executive Officer and Chairman, which total approximately $1 million in the aggregate.

The expense associated with this settlement

totaled approximately $25 million is listed on the statement of operation as Legal reserves.

The portion of this settlement that remained

unpaid as of September 30, 2022 is listed on the balance sheet as Legal reserve payable and totaled $21.2 million.

All amounts due as

a result of this settlement have been paid as of October 15, 2022.

North Bankruptcy:

On September 22 ,

2022, Compute North filed for chapter 11 bankruptcy protection.

The Company has engaged creditor’s counsel and is vigorously defending

and protecting its various assets at CN facilities and to minimize its long-term financial exposure with regard to the CN Entities.

Company’s financial exposure to Compute North on the date of the Bankruptcy was approximately $81 million, including:

● Approximately

$10 million in convertible preferred stock of Compute North Holdings, Inc.

● Approximately

$21 million related to an unsecured senior promissory note with Compute North LLC.

totaled $30 million at June 30, 2022 but was amended in July with approximately $9 million

in principal being applied as a deposit for the Wolf Hollow site.

● Approximately

$50 million in operating deposits to Compute North entities, including the King Mountain

Joint Venture and the Wolf Hollow site.

Company assessed the impairment of these assets given the bankruptcy proceedings and estimated that the preferred stock, the unsecured

loan, and approximately $8 million in deposits were fully impaired.

As a result, the company recorded an impairment charge of $39 million

as of September 30, 2022, reducing the overall exposure to Compute North to approximately $42 million, primarily in deposits associated

with King Mountain and Wolf Hollow.

The full recoverability of these deposits remains a risk given the ongoing bankruptcy proceedings.

bulk of the Company’s current operations are hosted by a Compute North / NextEra Joint Venture in McCamey, TX (“King Mountain”)

which is not directly subject to the bankruptcy process but is impacted by the bankruptcy proceedings.

of the site started in August and as of November 9, the Company has approximately 64,000 bitcoin mining servers on site and operating.

early July 2022, the Company expanded certain

hosting arrangements with Compute North in Granbury, TX (“Wolf Hollow”).

of November 9, the Company has approximately 6,000 mining servers in operation.

The Company’s understanding is that plans for

additional deployments have been delayed due to uncertainties associated with the Compute North Bankruptcy.

Blockchain Hosting :

July 12, 2022, the Company entered into an agreement to secure approximately 200 megawatts of hosting capacity for the Company’s

previously purchased miners, including 90 megawatts of hosting capacity in Texas and at least 110 megawatts of hosting capacity in North

The Company expects to have 66,000 miners, representing approximately 9.2 EH/s, hosted across these facilities.

Based on current

construction schedules, installations of the Company’s miners are expected to begin at these facilities during the fourth quarter

of 2022 with all miners installed by approximately mid-year 2023.

As part of this agreement, the Company has an option to increase hosting

capabilities utilizing up to an additional 70 megawatts in North Dakota.

of the Hardin, MT exit

company completed its previously disclosed exit from the Hardin, MT facility (“Hardin”) in September.

The Company had

deployed approximately 30,000 mining servers at Hardin.

In conjunction with this exit, the Company sold approximately 22,000 bitcoin

mining servers for cash proceeds of $46.5 million, recording a gain on sale of $3.2 million.

The company also recorded additional

depreciation of $4.1 million in the period related to approximately 1,800 bitcoin mining servers that were previously deployed at

Hardin that are no longer in operating condition based on inspections of the assets at the facility and experience with the assets

formerly deployed at Hardin in the weeks following redeployment.

In addition to the depreciation expense recorded within the period,

the company determined that the useful lives of the remaining equipment formerly deployed at Hardin should be reduced from 36 months

to 24 months.

These assets had a book value of approximately $12 million at September 30, 2022.

As such, the annual depreciation on

this equipment will increase to approximately $6 million from approximately $4 million.

Critical Accounting Policies and Estimates

We believe that the following

accounting policies, which are included in the footnotes section of this report, are the most critical to aid you in fully understanding

and evaluating this management discussion and analysis:

● Digital currencies

● Revenue from contracts with customers

● Impairment of long-lived assets

Digital currencies

Digital currencies are included in current and

other assets in the consolidated balance sheets as intangible assets with indefinite useful life and 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.

determined that the price of Bitcoin declines to lower than the carrying value, the Company has determined that it is more likely

than not that an impairment exists.

The Company determines the amount of impairment to record based on the fair value of bitcoin

following the fair value measurement framework in ASC 820 – Fair Value Measurement.

If the fair value of bitcoin is

lower than the carrying amount the Company will record an impairment and subsequent reversal of impairment losses is not

Revenues from contracts with customers

The Company recognizes revenue under ASC 606, Revenue

As of March 31, 2023, the Company is solely focused on the mining of bitcoin and

ancillary opportunities within the Bitcoin ecosystem under the name Marathon Digital Holdings, Inc.

and operates primarily in the United

States and with certain strategic joint ventures in the Middle East under development.

during the three months ended March 31, 2023

Company has continued its focus on expanding its operational capabilities during the period both domestically and internationally.

January 27, 2023, the Company and FS Innovation, LLC (“FSI”) entered into

a Shareholders’ Agreement (the “Agreement”) regarding formation of an Abu Dhabi Global Markets company (the “ADGM

Entity”), whose purpose shall be to jointly (a) establish and operate one or more mining facilities for digital assets;

mine digital assets (collectively, the “Business”).

The initial project by the ADGM Entity shall consist of two digital asset

mining sites comprising 250 MW in Abu Dhabi, and the initial equity ownership in the ADGM Entity shall be 80% FSI and 20% the Company,

and capital contributions will be made, subject to the satisfaction or waiver of certain conditions, during the 2023 development period

in those proportions, consisting of both cash and in kind, in amounts of approximately $406 million in aggregate.

FSI will appoint four

directors to the board of the ADGM Entity, and the Company will appoint one director.

otherwise not permitted by applicable law, the digital assets mined by the ADGM Entity will be distributed to the Company and FSI twice

a month in proportion to their respective equity interests in the ADGM Entity.

There are market provisions in the Agreement with respect

to financial and tax matters.

Agreement shall terminate at the earlier of the mutual written agreement of the parties, winding up of the ADGM Entity or the ownership

by a shareholder of all of the outstanding equity interests in the ADGM Entity.

The Agreement contains market terms on transfer of shares

by a shareholder, pre-emptive rights and certain tag along and drag along rights upon a sale of the ADGM Entity.

Furthermore, there are

five year restrictive covenants which, inter alia , prevent Marathon from competing in the UAE with the Business or with the business

of FSI or any of certain related parties and prevent FSI from competing in the U.S.

with the business of Marathon.

Company also made progress in installing and energizing its operations at various locations throughout the US, and in particular its

two North Dakota sites.

The Garden City, TX site is fully installed but is pending regulatory approval and was therefore not yet operational

at March 31, 2023.

Bitcoin production increased to 2,195 bitcoin during the three months ended March 31, 2023, an average of 24.4 bitcoin

During the three months ended March 31, 2022, we produced 1,259 bitcoin, an average of 14.0 bitcoin per day.

The 74% increase

in production was a result of increasing the scale of our operations, primarily from the commencement and ramp up of operations at our

North Dakota sites.

prices also rebounded significantly during the 2023 period, increasing from $16,548 per bitcoin at December 31, 2022 to $28,474 per bitcoin

at March 31, 2023.

This increase in the market value of bitcoin resulted in lower levels of impairment recorded during the period, and

a higher market value of our bitcoin holdings at March 31, 2023 compared with December 31, 2022.

Company also commenced a program to sell some of its bitcoin as a means of offsetting monthly cash operating costs.

We sold 2,900 bitcoin

for total proceeds of $62,646 thousand, realizing gains on sales of bitcoin of $17,615 thousand during the three months ended March 31,

There were no such sales in the prior-year period.

Company terminated its credit facilities with Silvergate Bank and responded to the closure of Signature Bank by diversifying its cash

management services among several institutions.

Key activities during the period related to these efforts included the following:

February 6, 2023, the Company provided Silvergate Bank with the required 30-day notice stating

the Company’s intent to prepay the outstanding balance on its term loan facility as

well as the Company’s intent to terminate the term loan facility.

The Company and Silvergate

Bank subsequently agreed to terminate the RLOC facility.

On March 8, 2023, the Company prepaid

the term loan and terminated the RLOC facility with Silvergate Bank.

March 12, 2023, Signature Bank was closed by the New York State Department of Financial Services.

On that same date the FDIC was appointed as receiver and transferred all the deposits and

substantially all of the assets of Signature Bank to Signature Bridge Bank, N.A., a full-service

bank that was being operated by the FDIC.

The Company held approximately $142,000 thousand

cash deposits at Signature Bridge Bank, N.A.

when normal banking activities resumed on March

The Company reduced its balances at Signature Bridge Bank and its successor institution

by transferring funds to other financial institutions and through other treasury management

The Company no longer has any deposits at Signature Bank or its successors.

Accounting Policies and Estimates

following accounting policies relate to the significant areas involving management’s judgments and estimates in the preparation

of our financial statements, and are those that we believe are the most critical to aid your understanding and evaluation of this management

discussion and analysis:

from contracts with customers

The core principle of the revenue standard is that a company should recognize revenue to depict the transfer

of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in

exchange for those goods or services.

Please refer to footnote 3 for a complete description of this policy.

Impairment of long-lived assets

Management reviews long-lived assets for impairment

whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets

to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted future cash flows expected to be generated

by the asset.

If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying

amount of the assets exceeds the fair value of the assets.

assets (bitcoin) are included in current and other assets in the accompanying consolidated condensed balance sheet.

Digital assets awarded

to the Company through its mining activities are accounted for in accordance with the Company’s revenue recognition policy below.

assets are accounted for as intangible assets with indefinite useful lives and are recorded at cost less impairment in accordance with

ASC 350 – “Intangibles-Goodwill and Other” (“ASC 350”).

An intangible asset with an indefinite useful life

is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating that

it is more likely than not that the indefinite-lived asset is impaired.

Whenever the exchange-traded price of digital assets declines

below its carrying value, the Company has determined that it is more likely than not that an impairment exists and records impairment

equal to the amount by which the carrying value exceeds the fair value at that point in time.

The Company has deemed the price of digital

assets to be a Level 1 input under the ASC 820 - “Fair Value Measurement” (“ASC 820”) hierarchy as these were

based on observable quoted prices in the Company’s principal market for identical assets.

Subsequent reversal of impairment losses

is not permitted.

of digital assets by the Company are included within investing activities in the accompanying consolidated condensed statements of cash

flows, while digital assets awarded to the Company through its mining activities are included as a reconciling item within operating

activities on the accompanying consolidated condensed statements of cash flows.

The sales of digital assets are included within investing

activities in the accompanying consolidated condensed statements of cash flows and any realized gains or losses from such sales are included

in operating expenses in the consolidated condensed statements of operations.

from contracts with customers

Company recognizes revenue in accordance with FASB ASC Topic 606 – “Revenue from Contracts with Customers” (“ASC

The core principle of the revenue standard is that an entity should recognize revenue to depict the transfer of promised

goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for

those goods or services.

The following five steps are applied to achieve that core principle:

Identify the contract with the customer

Identify the performance obligations in the contract

Determine the transaction price

Allocate the transaction price to the performance obligations in the contract

Recognize the revenue when the Company satisfies a performance obligation

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).

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.

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:

consideration

● Constraining

estimates of variable consideration

existence of a significant financing component in the contract

consideration

● Consideration

payable to a customer

consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of

cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

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

The transaction price

allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time,

as appropriate.

Company’s ongoing major or central operation is to provide bitcoin transaction verification services to the bitcoin network through

a Company-operated mining pool as the operator and a participant in a private pool (“Operator”) (such activity as Participant

and Operator, collectively, “mining”) and to provide computing power to collectives of third-party bitcoin miners (such collectives,

“mining pools”) as a participant (“Participant”).

The Company currently mines in a self-operated pool, which

was previously open to third-party pool participants from September 2021 until May 2022.

As Operator, the Company provides transaction verification services.

verification services are an output of the Company’s ordinary activities;

therefore, the Company views the transaction requestor

as a customer and accounts for the transaction fees it earns as revenue from a contract with a customer 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 it is appropriate to apply

ASC 606 by analogy to block rewards earned from the network.

A contract exists under ASC 606 at the point the Company successfully validates

a transaction to the distributed ledger.

At this point, the performance obligation to validate the requested transaction has been satisfied

and a contract is deemed to exist.

The Company engaged unrelated third-party mining enterprises (“pool

participants”) to contribute computing power, 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 computing power (“hash rate”).

determined that it controlled the service of providing transaction verification services to the network and requester as the Company’s

wallet as Operator was recorded on the distributed ledger as the transaction verifier of record, the pool participants entered into contracts

with the Company and not the network or requester, and the Company delegated mining work to pool participants.

Therefore, 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.

606-10-32-21 requires entities to measure the estimated fair value of noncash consideration at contract inception, which is the same

time the block reward and transaction fee is earned and the performance obligation to the requester and the network is fulfilled by successfully

validating the applicable block of transactions.

For reasons of operational practicality, the Company applies an accounting convention

to use the daily quoted closing U.S.

dollar spot rate of bitcoin each day to determine the fair value of bitcoin earned as transaction

fees and block rewards in the Company’s wallet during that day.

This accounting convention does not result in materially different

revenue recognition from using the fair value of the bitcoin earned at contract inception (i.e., the moment a block is solved) and has

been consistently applied in all periods presented.

the Company is a Participant in a third-party operated mining pool, the Company provides hash rate that is an output

of the Company’s ordinary activities in exchange for consideration.

The Company considers the third-party mining pool operators

its customers under Topic 606.

These contracts are period-to-period contracts because they are terminable at any time by either party

without compensation.

A new contract is determined to exist each period (i.e., second, minute, hour) that neither the Company, nor the

pool operator, terminates the arrangement.

consideration to which the Company is entitled is a fractional share of the block award and transaction fees;

the amount of which

is based on the proportion of the Company’s contributed hash rate to the total computing power contributed by all mining pool participants

in solving the current algorithm as calculated and determined by the pool operator, usually through usage of a mining software, net of

any pool fees due to the pool operator.

The Company receives the consideration in aggregate typically within 24 hours of winning the

block, and any disputes to the consideration to which the Company is entitled can be made by notifying and resolving the issues with

the pool operators.

However, there have not been any subsequent adjustments to the fees received, therefore the Company concludes that

it is probable that a significant reversal of revenue recognized will not occur upon settlement.

Providing computing power on rigs to solve complex cryptographic algorithms

in support of blockchain mining (in a process known as “solving a block”) is the primary output of the Company’s ordinary

The provision of computing power is the only performance obligation under our arrangements with third-party mining pool operators.

The transaction consideration the Company receives is non-cash (i.e., bitcoin) and entirely variable as it is unknown at each contract

inception whether the Company will earn any consideration during the period, and if it does become entitled to consideration, how much

consideration it will be entitled to.

accordance with FASB ASC 606-10-32-11 and 32-12, the Company constrains the variable consideration to which it is entitled and does not

recognize revenue for such amounts until it receives confirmation of the amount, usually via the settlement of the fractional share of

block reward and transaction fees in the Company’s digital wallet.

Since the Company does not have visibility on its contributed

computing power relative to the pool’s total computing power, which is one of the key inputs that determine the fractional block

reward and transaction fees share to which it is entitled to;

therefore, it only knows the amount of non-cash consideration to which

it is entitled upon settlement of the Company’s earned fractional share into its digital wallet.

Because of this and the fact that

the Company’s fractional share substantively varies from block to block, it is not probable that a significant reversal of revenue

will not occur until the uncertainty related to the Bitcoin to which the Company is entitled ultimately resolves at settlement.

At settlement,

the total block reward and transaction fees consideration earned by the pool operator are allocated and distributed (with no provision

for, or risk of, clawback) by the pool operator to each participant based on each participant’s contribution of computing power.

Consequently, at that point in time, the risk of significant revenue reversal abates such that consideration should be added to the transaction

price (and revenue recognized accordingly).

Settlement of consideration typically occurs within 24 hours of when a block is won unless

such block is won over a weekend or holiday, in which case settlement can take up to 72 hours.

Company uses its accounting convention to measure revenue based upon the daily quoted closing U.S.

dollar spot rate of bitcoin on the day

the transaction fees and block rewards are settled in the Company’s wallet.

This accounting convention does not result

in materially different revenue recognition from using the fair value of the bitcoin earned at contract inception and has been consistently

applied in all periods presented.

Company has long-lived assets that consist primarily of property and equipment stated at cost, net of accumulated depreciation and

impairment, as applicable.

The depreciation charge is calculated on a straight-line basis and depends on the estimated useful lives

of each type of asset and, in certain circumstances, estimates of fair values and residual values.

The Company’s property and

equipment is primarily composed of bitcoin miners, which are largely homogeneous and have approximately the same useful lives.

Accordingly, the Company utilizes the group method of depreciation for its bitcoin miners.

The Company updates the estimated useful

lives of its asset group of bitcoin mining rigs periodically as information on the operations of the mining rigs indicates changes

are required.

The Company assesses and adjusts the estimated useful lives of its mining rigs when there are indicators that the

productivity of the mining assets are higher or lower than the assigned estimated useful lives.

reviews the Company’s long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount

of an asset (asset group) may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of their carrying

amount to the undiscounted future cash flows expected to be generated thereby.

If such assets are not recoverable based on that test,

impairment is recorded in the amount by which the carrying amount of the assets exceeds their fair value as determined in accordance

with ASC 820.

The primary objectives of accounting for income taxes

are (i) to recognize the amount of income taxes payable or refundable for the current year, and (ii) to recognize deferred tax liabilities

and assets for the future tax consequences of events that have been recognized in our financial statements or tax returns.

accounts for income taxes in accordance with ASC 740 - “Income Taxes” (“ASC 740”), using the asset and liability

Under this method, deferred tax assets and liabilities are calculated based on enacted tax rates and are recognized for the expected

future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities and for operating

losses and tax credit carryforwards.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations

in the period that includes the enactment date.

Management must make assumptions, judgments and estimates to determine our income tax

benefit or expense and our deferred tax assets and liabilities.

We recognize tax positions when they are more likely than not of being

Recognized tax positions are measured at the largest amount of benefit greater than 50% likely of being realized.

the Company evaluates tax positions and adjust related tax assets and liabilities in light of changing facts and circumstances.

The Company records a valuation allowance to reduce

our deferred tax assets to the net amount that we believe is more likely than not to be realized.

Accordingly, the need to establish such

allowance is assessed periodically by considering matters such as future reversals of existing taxable temporary differences, projected

future taxable income, tax planning strategies and results of recent operations.

Issued Accounting Standards

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES to our consolidated condensed financial statements for a discussion

of recent accounting standards and pronouncements.

Financial Measures

1 unchanged sentence

Discussion and Analysis.

For each period in question, we define “Adjusted EBITDA” as (a) GAAP net income (or loss) plus (b)

adjustments to add back the impacts of (1) depreciation and amortization, (2) interest expense, (3) income tax expense and (4) adjustments

for non-cash and non-recurring items which currently include (i) stock compensation expense, net of withholding taxes, (ii) impairments

of patents and (iii) impairment losses related to the Compute North Bankruptcy.

For each period in question, we define adjusted EBITDA as (a) GAAP net income (loss) plus (b) adjustments to

add back the impacts of (1) depreciation and amortization, (2) interest expense, (3) income tax expense (benefit) and (4) adjustments

for non-cash and non-recurring items which currently include (i) stock compensation expense, (ii) impairments of patents and (iii) losses

on extinguishment of debt.

EBITDA is not a measurement of financial performance under GAAP and, as a result, this measure may not be comparable to similarly titled

3 unchanged sentences

Adjusted EBITDA is not meant to be considered in isolation and should

be read only in conjunction with our Quarterly Reports on Form 10-Q and our Annual Reports on Form 10-K as filed with the Securities

and Exchange Commission.

be read only in conjunction with our Interim Reports on Form 10-Q and our Annual Reports on Form 10-K as filed with the Securities and

Exchange Commission.

Management uses both adjusted EBITDA and the supplemental information provided herein as a means of understanding,

2 unchanged sentences

financial statements to understand, manage, and evaluate our financial performance and use the non-GAAP financial measures only supplementally.

Issued Accounting Standards

Note 2 to our Consolidated Condensed Financial Statements for a discussion of recent accounting standards and pronouncements.

of Operations

the three months ended September 30, 2022 and 2021

Months Ended September 30,

of Operations – Three months ended March 31, 2023 compared to the three months ended March 31, 2022

Summary Table:

Months Ended March 31,

(in thousands)

(Unfavorable)

$ (39,017,031 )

of revenues - energy, hosting and other

(13,772,555 )

Total revenues

Costs and expenses

Cost of revenues

Cost of revenues - energy,

hosting and other

of revenues - depreciation and amortization

(26,294,842 )

(21,954,644 )

(27,376,945 )

(68,821,419 )

and administrative expenses

(12,352,008 )

(99,235,984 )

on sale of equipment, net of disposals

(24,960,000 )

Impairment of deposits due to vendor bankruptcy filing

Realized and unrealized gains (losses) on digital currencies held in fund

(42,086,907 )

of digital currencies

change in carrying value of digital currencies

(41,258,908 )

Impairment of loan and investment due to vendor bankruptcy filing

Other non-operating

$ (75,422,407 )

$ (22,172,567 )

$ (53,249,840 )

(“BTC”) production during the period, in BTC

Reconciliation

to Adjusted EBITDA

$ (75,422,407 )

$ (22,172,567 )

$ (53,249,840 )

Total cost of revenues

General and administrative expenses

Impairment of digital assets

Impairment of patents

Realized gains on digital assets and unrealized

gains (losses) on digital assets loan receivable

Realized and unrealized

gains (losses) on digital assets held within Investment Fund

operating expenses

Operating loss

Other non-operating income

Loss from extinguishment of debt

Interest expense

Income tax benefit

(77,420,378 )

(22,175,220 )

(55,245,158 )

Depreciation and amortization

(51,125,536 )

(17,835,022 )

(33,290,514 )

Stock compensation expense, net of withholding tax

(93,194,001 )

Impairment of deposits due to vendor bankruptcy filing

Impairment of loan and investment due to vendor bankruptcy filing

$ (8,702,212 )

$ (87,484,515 )

and Costs of Revenues :

We generated revenues of $12.7 million during the three months ended September 30, 2022 compared with

$51.7 million during the three months ended September 30, 2021.

The $39.0 million decrease in revenue was primarily driven by a $26.3

million decrease in revenue resulting from lower bitcoin production.

This decrease in production resulted from downtime at Hardin in

July and delays in energization at King Mountain in July and August.

Lower market prices for bitcoin in the current-year period contributed

an additional $12.7 million decline in revenue vs the prior-year period.

Cost of revenues – energy, hosting and other during the

three months ended September 30, 2022, totaled $13.8 million compared with $5.9 million in the prior-year period.

The $7.9 million increase

was driven by accelerated cost recognition associated with the early exit from Hardin ($5.7 million) and higher production costs per

bitcoin mined ($5.1 million) partially offset by the impacts of decreased production on costs ($3.2 million).

Cost of revenues - depreciation

and amortization was $26.3 million in the current-year period compared with $4.3 million in the prior-year period, an increase of $22

This increase in expense was primarily due to the acceleration of depreciation related to our exit of the Hardin, MT facility

($11 million in infrastructure depreciation and $4.1 million in mining server depreciation) and, to a lesser extent increased depreciation

costs associated with a higher number of mining servers in operation.

Total margin was a loss of ($27.4) million in the current-year period compared with income of $41.4 million in the

prior-year period, a decline of ($68.8) million.

This decline was driven by the factors discussed above, which are summarized in the

table below (in millions):

of lower production

of lower bitcoin market prices

of revenue – energy, hosting and other:

of lower bitcoin production

of accelerated cost recognition from Hardin exit

of revenue – depreciation and amortization:

of accelerated cost recognition from Hardin exit

primarily increased mining servers in operation

on sales of equipment, net :

On December 2, 2021, we entered into an agreement with DCRBN Ventures Development and

Acquisition LLC (“DCRBN”) in which the Company agreed to sell certain equipment to DCRBN starting in April 2022, in

conjunction with the development of commercial activities at the King Mountain wind farm in McCamey, TX.

During the three months

ended September 30, 2022, the Company sold equipment for cash proceeds totaling $43.6 million and realized a pre-tax gain on the

sale of such assets of $28.7 million.

The Company also completed its previously disclosed exit from the Hardin, MT facility during

the current-year period.

In conjunction with this exit, the Company sold approximately 22,000 bitcoin mining servers for cash

proceeds of $46.5 million and recorded a gain on sale, net of disposal losses of $3.2 million.

There were no such sales in the

prior-year period.

and administrative expenses :

General and administrative expenses were $12.4 million for the three months ended September

30, 2022, compared with expenses of $99.2 million in the prior-year period.

Our general and administrative expenses included stock-based

(non-cash) compensation expense of $3.4 million in the current-year period and $96.6 million in the prior-year period.

General and administrative

expenses excluding stock-based compensation was $8.9 million in the current-year period compared with $2.6 million in the prior-year

The $6.3 million increase was primarily due to higher payroll and benefits costs ($3.8 million) and increased insurance expense

($1 million).

Professional fees, travel costs and other expenses also increased due to the increased scope of our operations in the current-year period.

In connection with a dispute concerning the settlement of certain restricted stock unit awards previously granted

to the Company’s former Chief Executive Officer and Chairman, on October 12, 2022, the Company entered into a settlement agreement

pursuant to which the Company agreed to pay $24 million.

Given the outcome of this settlement, the Company entered into related settlement

agreements in respect to five other recipients of the same restricted stock unit awards, including a director and our current Chief Executive

Officer and Chairman.

These related settlements totaled approximately $1 million in the aggregate.

of assets related to vendor bankruptcy filing :

On September 22, 2022, Compute North filed for restructuring under Chapter 11 of the U.S.

Bankruptcy Code.

During the three months ended September 30, 2022, the Company assessed the impairment of assets associated with Compute North given their bankruptcy proceedings.

As a result, the company recorded an impairment charge of approximately $8.0 million (related to deposits) as an

operating expense and an additional impairment charge of approximately $31 million (related to a loan and preferred stock investment)

as non-operating expenses.

in carrying value of digital assets:

of digital currencies :

We incurred impairment of digital assets during the three months ended September 30, 2022 of $5.9 million

compared with an impairment of $6.7 million in the prior-year period.

in fair value of digital currencies held in fund :

On June 10, 2022, the company withdrew 4,769 bitcoin from its investment fund.

As a result, there was no change in the fair value of the digital assets held in the fund during the three months ended September

During the prior-year quarter, the change in fair value of the bitcoin held in the investment fund was a gain of $42.1

Other non-operating

Other non-operating income declined by $23 thousand from the prior-year period.

Interest expense increased $3.7 million from the prior year as a result interest related to the convertible notes

issued in November 2021 ($2.8 million) and interest on borrowings outstanding under the Company’s Term loan and revolving credit

(“RLOC”) facilities ($0.9 million).

tax benefit :

The Company recorded an income tax benefit of $5.8 million for the three-month period ended September 30, 2022

compared with an income tax benefit of $3 thousand in the prior-year period.

We recorded a net loss of ($75.4) million in the current-year period compared with net loss of ($22.2) million in the

prior period.

The $53.2 million decline was primarily driven by lower total margin ($68.8 million), the impairment related to the Compute

North bankruptcy ($39 million), legal reserves ($25 million), declines in the carrying value of our digital assets ($41.3 million), and

increased interest expense ($3.7 million).

Partially offsetting these unfavorable variances was a significant reduction in general and

administrative expenses primarily associated with lower stock-based compensation ($86.9 million), gain on sale of equipment of $31.9

million and the net increase in the income tax benefit.

Adjusted EBITDA was a loss of ($8.3) million compared with a positive Adjusted EBITDA of $78.8 million in the

prior-year period.

The $87.1 million decline was primarily driven by lower total margin excluding the impact of depreciation and

amortization ($46.9 million), declines in the carrying value of our digital assets ($41.3 million), legal reserve ($25 million), and

higher general and administrative expenses excluding non-cash stock based compensation costs ($6.3 million).

Partially offsetting

these unfavorable variances were gain on the sale of equipment of $31.9 million.

the nine months ended September 30, 2022 and 2021

Months Ended September 30,

(Unfavorable)

of revenues - energy, hosting and other

(42,974,265 )

(11,647,457 )

(31,326,808 )

of revenues - depreciation and amortization

(64,881,323 )

(56,865,522 )

(18,525,602 )

(89,044,499 )

and administrative expenses

(39,187,098 )

(159,411,404 )

on sale of equipment, net of disposals

(24,960,000 )

Impairment of deposits due to vendor bankruptcy filing

Realized and unrealized gains (losses) on digital currencies held in fund

(85,016,208 )

(144,426,236 )

of digital currencies

(153,045,376 )

(18,472,750 )

(134,572,626 )

change in carrying value of digital currencies

(238,061,584 )

(278,998,862 )

Impairment of loan and investment due to vendor bankruptcy

non-operating income

$ (280,027,638 )

$ (47,700,445 )

$ (232,327,193 )

(“BTC”) production during the period, in BTC

Loss before income taxes

Income tax benefit (expense)

Bitcoin (“BTC”) production during

the period, in whole BTC

Average BTC per day, in whole BTC

Total margin (total revenues less total cost

Total margin excluding depreciation and amortization

General and administrative expenses excluding

stock-based compensation

Installed Hash Rate (Exahashes per second)

- at end of period (1)

Energized Hash Rate (Exahashes per second)

- at end of period (1)

Reconciliation

to Adjusted EBITDA:

$ (280,027,638 )

$ (47,700,445 )

$ (232,327,193 )

Interest expense

Income tax benefit

(269,905,691 )

(47,701,205 )

(222,204,486 )

Income tax expense (benefit)

Depreciation and amortization

(205,024,368 )

(39,685,404 )

(165,338,964 )

Stock compensation expense, net of withholding tax

(133,460,088 )

Impairment of deposits due to vendor bankruptcy filing

Impairment of loan and investment due to vendor bankruptcy filing

Stock compensation expense

Loss from extinguishment

Impairment of patents

$ (146,230,207 )

$ 112,649,482

$ (258,879,689 )

and Costs of revenue :

We generated revenues of $89.3 million during the nine months ended September 30, 2022 compared with

$90.2 million during the prior-year period.

The $0.9 million decrease is primarily attributable to the impact of lower market prices

for bitcoin in the current-year ($21.6 million) mostly offset by the impact of increased production when compared to the prior-year period

($20.7 million).

Cost of revenues – energy, hosting and other during the three months ended September 30, 2022 totaled $43 million

compared with $11.6 million in the prior-year period.

The $31.3 million increase was driven by accelerated cost recognition associated

with the early exit from Hardin ($18.2 million) and higher production costs per bitcoin mined ($10.4 million) and to a lesser extent

the impact of the higher costs associated with increased production ($2.7 million).

Cost of revenues – Depreciation and amortization

was $64.9 million in the current-year period compared with $8.0 million in the prior-year period, an increase of $56.8 million .

increase in expense was primarily due to the acceleration of depreciation related to our exit of the Hardin, MT facility ($31.9 million

in infrastructure depreciation and $4.1 million in mining server depreciation) and increased depreciation costs associated with a higher

number of mining servers in operation in the current-year period.

Total margin was a loss of ($18.5) million in the current-year period compared with income of $70.5 million in the

prior-year period, a decline of ($89.0) million.

This decline was driven by the factors discussed above, which are summarized in the

table below (in millions):

of higher production

The Company defines Energized

Hash Rate as the total hash rate that could theoretically be generated if all mining rigs that have been operational / energized are

currently in operation and running at 100% of the manufacturers’ specifications (includes mining servers that are offline for

maintenance or similar reasons).

The Company uses this metric as an indicator of progress in bringing rigs on-line.

The Company defines

Installed Hash Rate as the sum of Energized Hash Rate and hash rate that has been installed but is not yet operational (e.g.

rigs that have been installed, but are not yet energized and in operation).

The Company uses this metric as an indicator of progress

in deploying mining rigs at its production sites.

Hash rates are estimates based on the manufacturers’ specifications.

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 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 significant impact on

the Company’s ability to generate bitcoin in any given period.

We generated revenues of $51,132 thousand for the three months ended March 31, 2023 compared with $51,723 thousand in the prior-year

The $591 thousand decrease in revenue was primarily driven by a $39,044 thousand decrease in revenue resulting from lower bitcoin

prices in the current year period, partially offset by increased revenues of $38,453 thousand related to a 74% increase in production

year-over-year.

Average daily bitcoin production was 24.4 bitcoin in the current year period compared with 14.0 in the prior-year

period, reflecting the increasing scale of our operations.

of revenues :

Cost of revenues – energy, hosting and other during the three months ended March 31, 2023, totaled

$33,377 thousand compared with $12,522 thousand in the prior-year period.

The $20,855 thousand increase was driven by higher production

costs of $17,022 thousand, and the impact of increased bitcoin production of $6,974 thousand partially offset by the absence of accelerated

costs associated with the exit of the Hardin facility in the prior-year period of $3,141 thousand.

Cost of revenues – depreciation

and amortization during the three months ended March 31, 2023, totaled $17,733 thousand compared with $13,877 thousand in the prior-year

The increase in depreciation was primarily related to an increase in mining rigs in operation related to the increased scale

of the business partially offset by the absence of accelerated depreciation of $4,629 thousand recorded in the prior-year period related

to the exit from Hardin.

Total margin was a loss of $22 thousand in the current three months ended March 31, 2023 compared with income of $25,324

thousand in the prior-year period, a decline of $25,302 thousand.

This decline was driven by the factors discussed above, which are summarized

in the table below:

(in thousands)

of higher production activity

of lower bitcoin market prices

of revenue – energy, hosting and other:

of higher bitcoin production

Cost of revenues – energy, hosting

of higher unit costs

of accelerated cost recognition from Hardin exit

of revenue – depreciation and amortization:

of higher production activity

Cost of revenues – depreciation

and amortization:

of accelerated cost recognition from Hardin exit

primarily increased mining servers in operation

on sales of equipment, net :

On December 2, 2021, we entered into an agreement with DCRBN Ventures Development and

Acquisition LLC (“DCRBN”) in which the Company agreed to sell certain equipment to DCRBN starting in April 2022, in

conjunction with the development of commercial activities at the King Mountain wind farm in McCamey, TX.

During the nine months

ended September 30, 2022, the Company sold equipment for cash proceeds totaling $130.9 million and realized a pre-tax gain on the

sale of such assets of $86.9 million.

The Company also completed its previously disclosed exit from the Hardin, MT facility during

the current-year period.

In conjunction with this exit, the Company sold approximately 22,000 bitcoin mining servers for cash

proceeds of $46.5 million and recorded a gain on sale, net of disposal losses of $3.2 million.

There were no such sales in the

prior-year period.

primarily increased mining rigs in operation

and administrative expenses :

General and administrative expenses were $39.2 million for the nine months ended September 30,

2022 compared with expenses of $159.4 million in the prior-year period, a decrease of $120.2 million.

Our general and administrative

expenses included stock-based (non-cash) compensation expense of $18.9 million in the current-year period and $152.3 million in the prior-year period.

General and administrative expenses excluding stock-based compensation increased to $20.3 million in the current year period

compared with $7.1 million in the prior-year period.

The $13.2 million increase was primarily due to higher payroll and benefits costs

($5.4 million), increased insurance expense ($2.2 million) and higher professional fees ($1.6 million).

Other expenses also increased

due to the increased scope of our operations in the current-year period.

In connection with a dispute concerning the settlement of certain restricted stock unit awards previously granted

to the Company’s former Chief Executive Officer and Chairman, on October 12, 2022, the Company entered into a settlement agreement

pursuant to which the Company agreed to pay $24 million.

Given the outcome of this settlement, the Company entered into related settlement

agreements in respect to five other recipients of the same restricted stock unit awards, including a director and our current Chief Executive

Officer and Chairman.

These related settlements totaled approximately $1 million in the aggregate.

of assets related to vendor bankruptcy filing :

On September 22 ,

2022, Compute North filed for restructuring under Chapter 11 of the U.S.

Bankruptcy Code.

During the period ended September 30, 2022,

the Company assessed the impairment of its assets associated with Compute North given their bankruptcy proceedings.

As a result, the

company recorded an impairment charge of approximately $8.0 million (related to deposits) as an operating expense and an additional impairment

charge of approximately $31 million (related to a loan and preferred stock investment) as non-operating expenses.

Impairment of patents :

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

in carrying value of digital assets:

of digital currencies :

We incurred impairment of digital assets during the nine months ended September 30, 2022, of $153 million

compared with an impairment of $18.2 million in the prior-year period, reflecting the overall decline in value of bitcoin in the

current-year period.

in fair value of digital currencies held in fund :

On June 10, 2022, the Company withdrew 4,769 bitcoin from its investment fund.

Total changes in the fair value of investment fund from April 1 through the June 10 withdrawal date resulted in a loss of ($85.0)

million in the current year period.

During the prior-year period, the change in fair value of the bitcoin held in the investment

fund was a gain of $59.4 million.

Other non-operating

Other non-operating income increased $378 thousand from the prior-year period.

Interest expense increased $10.3 million from the prior year as a result interest related to the convertible notes

issued in November 2021 and interest on borrowings outstanding under the Company’s Term loan and revolving credit (“RLOC”)

tax benefit :

The company recorded a modest income tax benefit of $193 thousand in the current-year period compared with a benefit

of $3 thousand in the prior-year period.

We recorded a net loss of $(280) million in the current-year period compared with a net loss of $(47.7) million in

the prior period.

The $232.3 million decline was primarily driven by the $279 million decrease in the carrying value of our digital assets,

the $89 million decrease in total margin, the impairment of assets related the Compute North bankruptcy ($39 million), the legal reserve

($25 million), and higher interest expense ($10.3 million).

Partially offsetting these unfavorable variances was a significant decrease

in general and administrative expenses ($120.2 million) associated with lower stock-based compensation and gain on sales of equipment

($90.1 million).

Adjusted EBITDA was a loss of $(145.8) million compared with a positive Adjusted EBITDA of $112.6 million in the

General and administrative expenses were $15,344 thousand for the three

months ended March 31, 2023, compared with expenses of $15,515 thousand in the prior-year period.

Our general and administrative expenses

included stock-based (non-cash) compensation expense of $3,945 thousand in the current period and $9,275 thousand in the prior-year period.

The decrease in stock-based compensation is primarily related to generally lower value of the Company’s stock when compared to the

prior year partially offset by additional restricted stock unit issuances associated with increases in headcount.

General and administrative

expenses excluding stock-based compensation was $11,399 thousand in the current period compared with $6,240 thousand in the prior-year

This $5,159 thousand increase in expense was primarily due to the increases associated with the larger scale of the business,

including higher cash compensation and benefits costs of $2,080 thousand (resulting primarily from an increase in headcount from 13 employees

in the prior-year period to over 30 employees in 2023), increased professional fees of $2,358 thousand and increased insurance costs of

$1,158 thousand.

of digital assets:

We incurred impairments of digital assets during the three months ended

March 31, 2023 of $6,151 thousand compared with impairments of $17,647 thousand in the prior-year period.

This decrease in impairment

is primarily related to bitcoin prices that have generally been increasing during the current year period compared with prices that were

generally decreasing during the prior-year period.

The Company recorded an impairment of $919 thousand in the prior-year period related to certain patents no longer

utilized in its business operations.

Realized gains on digital assets and unrealized

gains (losses) digital assets loan receivable:

The Company recognized realized gains of $17,615 thousand on the sale of approximately

2,900 bitcoin during the three months ended March 31, 2023.

There were no such sales in the prior-year period.

We incurred a loss of $461 thousand during the three

months ended March 31, 2022 primarily a result of the decline in fair value of digital asset loan receivable prior to the repayment of

the loan in June, 2022.

and unrealized gains (losses) on digital assets held within Investment Fund:

The Company exited the fund in June 2022 and as

such, there were no such gains or losses in the current year period.

Total changes in the fair value of the Company’s

investment fund during the three months ended March 31, 2022 resulted in an unrealized loss of $5,328 thousand.

non-operating income (loss) :

Other non-operating income was $791 thousand during the three months ended March 31, 2023 compared

with $247 thousand in the prior-year period.

The $544 favorable variance was primarily due to increased interest income.

on extinguishment of debt :

On March 8, 2023 the Company paid $50,000 thousand to Silvergate Bank and terminated its term loan

On that same date, the Company and Silvergate Bank also agreed to terminate the Company’s revolving credit facility (“RLOC”).

Although there were no prepayment penalties associated with these actions, the Company incurred a loss on extinguishment of debt of $333

thousand related to the write-off of the unamortized balance of debt issuance costs associated with the facilities.

Interest expense increased $946 thousand from the prior-year period as a result of higher interest costs associated

with the company’s term loan facility.

The Company incurred interest costs on the $50,000 thousand outstanding balance on the term

loan facility from January 1 through March 8, 2023.

There were no borrowings on the term loan facility in the prior-year period.

tax (expense) benefit :

The Company recorded income tax expense of $75 thousand for the three months ended March 31, 2023 compared

with an income tax benefit of $4,262 thousand in the prior-year period.

The unfavorable tax variance of $4,337 thousand was primarily

due to the establishment of a valuation allowance in the year ended December 31, 2022, as the Company determined it was more likely than

not that they would not have sufficient future taxable income to realize the Company’s federal and state deferred tax assets.

income (loss) :

The Company recorded a net loss of $7,235 thousand for the three months ended March 31, 2023 compared with net

loss of $12,851 thousand in the prior-year period.

This $5,616 thousand improvement in net loss was primarily driven by the impact of

the realized gain on sale of digital assets and favorable variances related to the impairment of digital assets and realized gains and

losses on digital assets held within the investment fund partially offset by lower total margin.

Adjusted EBITDA was $18,611 thousand in the three months ended March 31, 2023 compared with $9,772 thousand in the

prior-year period.

The $258.9 million decline was primarily driven by the $279 million decrease in the carrying value of our digital

assets, lower total margin excluding the impact of depreciation and amortization $(32.2 million), legal reserves ($25 million), and higher

operating expenses excluding non-cash stock compensation costs ($13.2 million).

The gain on the sales of equipment partially offset these

unfavorable variances.

The $8,839 thousand increase in adjusted EBITDA was primarily driven by positive impacts of realized gains on

digital assets sold of $17,615 thousand and lower impairment of digital assets of $11,496 thousand.

Adjusted EBITDA also benefited

from the absence of several expenses recorded in the prior-year period, including realized and unrealized losses on digital

assets held within the investment fund of $5,328 thousand and realized gains on digital assets and unrealized gains (losses) on

digital assets loan receivable of $461 thousand.

These favorable variances were partially offset by lower total margin excluding

depreciation and amortization of $21,446 thousand and higher general and administrative expenses excluding stock-based compensation

of $5,159 thousand.

Condition and Liquidity

Cash, cash equivalents and restricted cash totaled $64.1 million at September 30, 2022, a decrease

of $204.4 million from December 31, 2021.

The decrease in cash, cash equivalents and restricted cash was primarily driven by a $368.1

million use of cash from investing activities resulting from significant levels of advances to vendors ($482.1 million) and, to a lesser

extent, equity investments ($44.0 million) and purchases of property and equipment ($19.8 million).

These uses of cash were partially

offset by the proceeds from assets sales of $177.4 million.

flows from operating activities resulted in a use of funds of ($84.2) million.

Cash flows from operating activities before the impact

of changes in operating assets and liabilities (a $18.1 million source of funds) were more than offset by a ($102.3) million use of funds

from changes in operating assets and liabilities, primarily due to changes in digital currencies (an $89.3 million use of funds) prepaid

expenses (a $30.6 million use of funds) and deposits (a $13.6 million use of fund) partially offset by the impact of higher accounts

payable, including a payable related to the legal reserve (a $21.2 million source of funds).

This legal reserve payable was settled in

cash in October 2022.

flows from financing activities resulted in a source of cash of $247.9 million, primarily from proceeds from the issuance of common stock

($198.7 million) and proceeds from borrowings outstanding under the Company’s Term loan agreement ($49.3 million).

borrowed the initial $50 million under our Term Loan facility during the three months ended September 30, 2022.

There were no borrowings

outstanding under our revolving credit facility at September 30, 2022.

The maximum borrowings outstanding under the Company’s revolving

credit facility during the three and nine months ended September 30, 2022, was $35 million and $70 million, respectively.

Company expects to have sufficient liquidity, including cash on hand and available borrowing capacity to support ongoing operations.

We will continue to seek to fund our business activities through the capital markets, primarily through periodic equity

issuances using our At-The-Market facility.

At September 30, 2022, we held approximately 10,670 bitcoin with a total carrying value of $197.2 million on the

balance sheet.

Approximately 3,828 bitcoin were being utilized as collateral for credit facilities and were classified as “digital

currencies, restricted”.

The remaining bitcoin were classified as “Digital currencies” on the balance sheet.

market value of our bitcoin holdings at September 30, 2022 was approximately $207.3 million and the value of a single bitcoin was approximately

During the month of October 2022, the Company borrowed an additional $50 million under its RLOC facility for general corporate

purposes and provided an additional 3,993 bitcoin as collateral for this borrowing.

This increased the Company’s collateral balance

to 7,821 bitcoin.

On November 9, 2022, bitcoin prices declined to a new yearly low on concerns

of financial instability in the crypto industry.

As a result, the Company was required to provide an additional 1,669 bitcoin

(valued at $16,212.50 per bitcoin) as collateral for its $50 million RLOC and $50 million term loan borrowings, bringing its total

collateral balance to 9,490 bitcoin (approximately $153.9 million).

The Company’s total bitcoin holdings as of November 9, 2022,

are approximately 11,440 bitcoin, of which 1,950 (approximately $31.6 million) are unrestricted.

Given the uncertainty around bitcoin

prices in the near-term, the Company has decided to delay previously announced plans to refinance the RLOC with a term loan during the

month of November.

This enables the Company to retain the optionality to repay the RLOC borrowings in the near-term versus committing

to a two-year term loan borrowing which would carry prepayment penalties.

The Company retains an option to draw an additional $50 million

on the term loan through April of 2023.

September 30, 2021 we held a total of 7,035 bitcoin with a total carrying value of $282.7 million on the balance sheet.

The fair market

value of our bitcoin holdings at September 30, 2021 was approximately $308.1 million and the value of a single bitcoin was approximately

expect to increase our bitcoin holdings over time primarily through mining activities.

As our mining activities increase, we will likely

begin selling a portion of bitcoin produced in future periods to fund monthly operating costs, for treasury management purposes or for

general corporate purposes.

Months Ended March 31,

(in thousands)

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing

Net (decrease) increase in cash, cash equivalents

and restricted cash

Cash, cash equivalents

and restricted cash — beginning of period

Cash, cash equivalents

and restricted cash — end of period

Cash and cash equivalents totaled $124,882 thousand at March 31, 2023, an increase of $12,377 thousand from December 31,

Restricted cash was zero at March 31, 2023, a decrease of $8,800 thousand as the Company replaced cash-collateralized letters of

credit with cash deposits during the quarter as a result of the closure of Signature Bank.

flows from operating activities resulted in a use of funds of $28,812 thousand, as cash provided from operating activities before

changes in operating assets and liabilities of $5,648 thousand was more than offset by a use of cash of $34,460 thousand from

changes in operating assets and liabilities.

Changes in cash flow from operating assets and liabilities were driven by uses of funds

associated with bitcoin production revenues of $50,941 thousand and increases in deposits of $23,124 thousand resulting from

deposits associated with hosting agreements and deposits made as replacements for letters of credit.

Prepaid expenses also increased, resulting in a use of cash of $20,738 thousand as the Company prepaid certain expenses due in early

April as a means of ensuring a smooth transition from Signature Bank in March 2023.

These uses of funds were partially offset by

proceeds from the sale of bitcoin of $62,646 thousand.

flows from investing activities resulted in a use of funds of $72,029 thousand, primarily resulting from investments made as part of the

establishment of the ADGM Entity (a $43,194 thousand use of funds), advances to vendors of $11,565 thousand, and capital expenditures

of $17,270 thousand.

flows from financing activities resulted in a source of cash of $113,218 thousand, primarily from proceeds from the issuance of

common stock under the Company’s At-The-Market facility of $163,295 thousand partially offset by the repayment of the

Company’s term loan facility of $50,000 thousand.

There were no borrowings outstanding under the Company’s revolving

credit facility during the three months ended March 31, 2023.

On March 8, 2023, the Company terminated both its term loan and its

RLOC facilities with Silvergate Bank.

holdings as of March 31, 2023:

At March 31, 2023, the Company held approximately 11,466 bitcoin on its balance sheet with a carrying

value of $189,087 thousand.

The fair value of a single bitcoin was approximately $28,474.

As a result, the fair market value of our bitcoin

holdings at March 31, 2023 was approximately $326,487 thousand.

We expect that our future bitcoin holdings will generally increase but

will fluctuate from time-to-time, both in number of bitcoin held and fair value in US dollars, depending upon operating and market conditions.

We intend to add to our bitcoin holdings primarily through our production activities and we also will continue to sell bitcoin as a means

of generating cash to fund monthly operating costs and for general corporate purposes.

We do not intend to make any significant purchases

of bitcoin on the open market as means of increasing our bitcoin holdings, although we may buy and sell bitcoin from time-to-time (separately

from what is outlined above) for treasury management purposes.

Cash and cash equivalents totaled $124,882 thousand at March 31, 2023.

The Company expects to have sufficient liquidity,

including cash on hand, cash received from sales of our bitcoin holdings, and access to public capital markets, to support ongoing operations.

We will continue to seek to fund our business activities, and especially our growth opportunities, through the public capital markets,

primarily through periodic equity issuances using our At-The-Market facility.

risks to our liquidity outlook would include events that materially diminish our access to capital markets and/or the value of our bitcoin

holdings and production capabilities, including:

to effectively execute our growth strategies.

in the bitcoin mining space and/or additional contagion events (like the FTX collapse) that

would damage the credibility of, and therefore investor confidence in, companies engaged

in the digital assets space.

in bitcoin prices and/or production, which would impact both the value of our bitcoin holdings

and our 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.

● Deteriorating

macroeconomic conditions (for example a recession in 2023 that is deeper or longer than current

expectations).

Sheet Arrangements

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.

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