What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-08 compared with 2023-08-08 · 537 added, 415 removed, 258 unchanged (79% of the section changed)

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and its consolidated subsidiaries.

All dollar amounts referenced in this Item 2 are in thousands, except per share, bitcoin, and per bitcoin amounts.

All dollar amounts referenced in this Item 2 are in thousands, except per share,

bitcoin, and per bitcoin amounts.

report on Form 10-Q (“Report”) and other written and oral statements made from time to time by us may contain so-called “forward-looking

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capital strategy has fueled significant market share gains while also helping build one of the largest bitcoin positions on the balance

sheet among our North American publicly traded peers.

As of June 30, 2023, the Company had nearly 150,000 mining rigs in operation and owned

12,538 bitcoin.

With its strong balance sheet and significant scale, the Company’s strategy has recently evolved beyond “asset-light”

to include joint ventures with our landmark project located in Abu Dhabi.

sheet among its North American publicly traded peers.

As of September 30, 2023, the Company had nearly 180,000 mining rigs in operation

and owned 13,716 bitcoin.

With its strong balance sheet and significant scale, the Company’s strategy has recently evolved beyond

“asset-light” to include joint ventures with the Company’s landmark project located in Abu Dhabi.

October 24, 2023, the Company commenced a new At The Market offering program with H.C.

Wainwright & Co., LLC, acting as sales agent,

under which it may offer and sell shares of its Common Stock from time to time through the sales agent having an aggregate offering price

of up to $750,000.

As of November 8, 2023, the Company had sold no shares under this program.

September 2023, the Company entered into privately negotiated exchange agreements with certain holders of its 1.00% Convertible Senior

Notes due 2026 (the “Notes”).

In total, the Company exchanged $416,793 aggregate principal amount of Notes for an aggregate

31,722,417 shares of Company common stock.

The Company recorded a gain on the exchange of Notes for the Company’s common stock

in the amount of $82,600 to “Net gain from extinguishment of debt” on the Condensed Consolidated Statements of Operations.

Company issued 15,000 shares of Series A Preferred Stock for total gross proceeds of $14,286 before deducting the placement agent’s

fees and other estimated offering expenses on June 5, 2023.

During the third quarter ended September 30, 2023, all of the outstanding

Series A Preferred Stock were redeemed at 105% of the $1,000 stated value per share for $15,750.

July 27, 2023, the Company’s shareholders approved an amendment to the Company’s articles of incorporation that increased

the amount of common stock authorized for issuance to 500,000,000 with a par value of $0.0001 per share.

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

January 27, 2023, Marathon Digital Holdings, Inc.

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

a Shareholders’ Agreement (the “Agreement”) regarding the 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 $406,000 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 June 30, 2023.

Bitcoin production increased to 2,926 bitcoin during the three months ended June 30, 2023, an average of 32.2 bitcoin

During the three months ended June 30, 2022, the Company produced 1,259 bitcoin, an average of 14.0 bitcoin per day.

increase in production was primarily the result of increasing the scale of the Company’s operations.

prices also rebounded significantly during the 2023 period, increasing from $16,548 per bitcoin at December 31, 2022 to $30,467 per bitcoin

at June 30, 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 the Company’s bitcoin holdings at June 30, 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.

The Company sold

4,754 bitcoin for total proceeds of $113,928, realizing gains on sales of bitcoin of $40,120 during the six months ended June 30, 2023.

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

(the “Company”) and Zero Two

(formerly known as FS Innovation, LLC) entered into a Shareholders’ Agreement (the

“Agreement”) regarding the formation of an Abu Dhabi Global Markets company (the

“ADGM Entity”), whose purpose shall be to jointly (a) establish and operate one

or more mining facilities for digital assets;

and (b) mine digital assets (collectively,

the “Business”).

Company also made progress in installing and energizing its operations at various locations

throughout the US, and in particular its two North Dakota sites.

Additionally, the Garden

City, TX site was fully installed and began to come online during October 2023.

production increased to 3,490 bitcoin, including 23 bitcoin earned through the Company’s equity method investee, during the three

months ended September 30, 2023, an average of 37.9 bitcoin per day.

During the three months ended September 30, 2022, the Company produced

616 bitcoin, an average of 6.7 bitcoin per day.

The 467% increase in production was primarily the result of increasing the scale of the

Company’s operations.

prices also rebounded significantly during the 2023 period, increasing from $16,530 per bitcoin at December 31, 2022 to $26,961 per

bitcoin at September 30, 2023.

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

the nine month period ended September 30, 2023, and a higher market value of the Company’s bitcoin holdings at September 30, 2023, as compared to

December 31, 2022.

Company has continued to sell some of its bitcoin as a means of offsetting monthly cash operating costs.

The Company sold 7,054 bitcoin

for total proceeds of $179,509, realizing gains on sales of bitcoin of $70,686 during the nine months ended September 30, 2023.

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

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

June 5, 2023, the Company entered into a securities purchase agreement for the purchase of

15,000 shares of Series A redeemable convertible preferred stock.

On June 8, 2023, upon closing

of the offering, the Company issued 15,000 shares of Series A Preferred Stock for total gross

proceeds of $14,286 before deducting the placement agent’s fees and other estimated

offering expenses.

Each share of Series A Preferred Stock had a purchase price of $952.38,

representing an original issue discount of approximately 5% of the $1,000 stated value of

Each share of Series A Preferred Stock is convertible into shares of the Company’s

common stock at an initial conversion price of $14.52 per share, at the option of the holder,

at any time following the Company’s receipt of stockholder approval for an increase

in its authorized shares of common stock.

The Company will be permitted to compel conversion

of the Series A Preferred Stock after the fulfillment of certain conditions and subject to

certain limitations (see NOTE 11 – STOCKHOLDERS’ EQUITY, Series A Preferred

Stock to the condensed consolidated financial statements for additional information).

Accounting Policies and Estimates

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from contracts with customers

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

assets (bitcoin) are included in current and other assets in the accompanying condensed consolidated balance sheets due to the Company’s ability to sell bitcoin in a highly liquid marketplace and the selling of bitcoin to fund operating

expenses to support operations.

Digital assets awarded

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Subsequent reversal of impairment losses is not permitted.

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

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

activities on the accompanying condensed consolidated statements of cash flows.

The sales of digital assets are included within operating

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

in operating expenses in the condensed consolidated statements of operations.

assets awarded to the Company through its mining activities are included as a reconciling item within operating activities on the accompanying

condensed consolidated statements of cash flows.

The sales of digital assets are included within investing activities in the accompanying

condensed consolidated statements of cash flows and any gains or losses from such sales are included in operating expenses in the condensed

consolidated statements of operations.

from contracts with customers

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a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:

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);

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).

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

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

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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.

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

of cumulative revenue recognized under the accounting contract will not occur when the uncertainty associated with the variable

consideration is subsequently resolved.

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

selling price basis.

The transaction price allocated to each performance obligation is recognized when that performance obligation

is satisfied, at a point in time or over time, as appropriate.

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 (“Operator”) (such activity, “mining”) and to provide

computing power to perform hash calculations to pool operators alongside 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.

Operator, the Company provides transaction verification services.

Transaction verification services are an output of the Company’s

ordinary activities;

therefore, the Company views the transaction requestor as a customer and accounts for the transaction fees it earns

as revenue from 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.

Transaction verification services are an output of the

Company’s ordinary activities;

therefore, the Company views the transaction requestor as a customer and accounts for the

transaction fees it earns as revenue from 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.

The Company is currently entitled to the block reward of 6.25 bitcoin from the bitcoin

network for each successful block.

The Company is also entitled to the transaction fee paid by the transaction requester payable in

bitcoin for each successful block.

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.

Company engaged unrelated third-party mining enterprises (“pool participants”) to contribute computing power, and in exchange,

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participants as cost of revenues.

During the three months ended June 30, 2023, the Company changed its operator

accounting policy from measuring the block reward and transaction fees using the end of day spot rate for bitcoin to the quoted spot rate

at the time the block reward and transaction fees are earned.

accordance with ASC 606-10-32-21, the Company measures 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

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

by successfully validating the applicable block of transactions.

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the Company’s primary trading platform for bitcoin at the time the block reward and transaction fee is earned to measure revenues.

Company participates in multiple third-party operated mining pools only when our Company-operated mining pool is not available.

methodologies differ depending on the payout third-party operated mining pool.

Pay-Per-Share (PPS) and Full-Pay-Per-Share (FPPS) pools

pay rewards based on a contractual formula, which primarily calculates the hash rate provided by the Company to the mining pool as a

percentage of total network hash rate, and other inputs.

For PPS and FPPS pools, the Company is entitled to consideration even if a block

is not successfully placed by the mining pool operator.

The Company also participates in third-party mining pools that pay rewards only

when the pool successfully mines a block.

For these pools, the Company only earns a reward when the third-party pool successfully mines

a block and its reward is the fractional share of the successfully mined block and transaction fee based on the proportion of computing

power the Company contributed to the mining pool operator to the total computing power contributed by all mining pool participants in

solving the algorithm.

Company participates in multiple third-party operated mining pools only when the Company-operated mining pool is not available.

methodologies differ depending on the type of third-party operated mining pool.

Pay-Per-Share (“PPS”) and Full-Pay-Per-Share

(“FPPS”) pools pay rewards based on a contractual formula, which primarily calculates the hash rate provided by the Company

to the mining pool as a percentage of total network hash rate, and other inputs.

For PPS and FPPS pools, the Company is entitled to consideration

even if a block is not successfully placed by the mining pool operator.

The Company also participates in third-party mining pools that

pay rewards only when the pool successfully mines a block.

For these pools, the Company only earns a reward when the third-party pool

successfully mines a block and its reward is the fractional share of the successfully mined block and transaction fees based on the proportion

of computing power the Company contributed to the mining pool operator to the total computing power contributed by all mining pool participants

in solving the algorithm.

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

The Company considers the third-party mining pool operators to be its customers under

These contracts are period-to-period contracts because they are terminable at any time by either party without compensation.

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

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.

the Company participates in PPS and FPPS pools, which pay rewards based on a contractual formula, the Company recognizes revenue based

on the daily contributed hash rate and other inputs measured at the average daily spot rate of bitcoin determined using the Company’s

primary trading platform for bitcoin.

The Company participates in third-party operated pools only when our Company-operated mining pool

is not available, therefore, the duration of contributed hash rate will fluctuate during any given day.

Accordingly, we measure the reward

for PPS and FPPS pools based on the daily average spot rate to match the contribution of hash rate which can occur throughout the day.

Such implied renewal option is not a material right because the pricing in the renewal periods is the same as the

initial contract and there are no upfront or incremental fees in the initial contract or the terms, conditions, and compensation amounts

for the renewal options are at the then market rates.

the Company participates in PPS and FPPS pools, which pay rewards based on a contractual formula, the Company recognizes revenue

based on the Company’s daily contributed hash rate and other network-driven inputs, such as the total hash rate contributed by all pool participants.

The variable consideration (reward) the Company

will be entitled to for its contribution of hash rate can be reasonably estimated based on the contribution of hash rate and other network

inputs such as total contributed hash rate.

The Company measures revenue earned based on the average daily spot rate of

bitcoin determined using the Company’s primary trading platform for bitcoin.

the Company participates in third-party pools that pay rewards only when the pool successfully mines a block, the Company recognizes

its fractional share of the block and transaction fees using the spot rate of bitcoin at the time that the block is successfully mined.

computing power on mining rigs to solve complex cryptographic algorithms in support of blockchain mining (in a process known as

“solving a block”) is the primary output of the Company’s ordinary activities.

The provision of computing power is

the only performance obligation under the Company’s 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.

computing power on mining rigs to solve complex cryptographic algorithms in support of blockchain mining (in a process known as “solving

a block”) is the primary output of the Company’s ordinary activities.

The provision of computing power is the only performance

obligation under the Company’s arrangements with third-party mining pool operators.

The transaction consideration the Company receives

is non-cash (i.e., bitcoin) and variable.

For third-party pools that pay rewards only when the pool successfully mines a block, the consideration

to which the Company will be entitled to for its efforts remain variable and is not estimable until the pool successfully solves a block,

at which point in time the Company can then estimate its fractional share of the bitcoin to which it is entitled to for its contribution

to the pool’s successful efforts.

For PPS and FPPS pools, which pay rewards based on a contractual formula that does not depend

on the pool successfully mining any blocks during the period in which the Company contributes computing power, the Company can reasonably

estimate the variable consideration to which it will be entitled to for providing computing power as such power is being provided based

on the contributed hash rate and other inputs.

Company satisfies its performance obligation to provide computing power to the pool operator over time as described in FASB ASC 606-10-25-27(a)

as the pool operator simultaneously consumes and receives benefits from the Company’s provision of computing power, which it uses

continuously as an input to the pool’s efforts to solve a block.

associated with providing computing power services to third-party operated mining pools, such as hosting fees, electricity costs, and

related fees are recorded as cost of revenues.

Depreciation on digital asset mining equipment is also recorded as a component of cost

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

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composed of bitcoin mining rigs, which are largely homogeneous and have approximately the same useful lives.

Accordingly, the Company utilizes

the group method of depreciation for its bitcoin mining rigs.

The Company updates the estimated useful lives of its asset group of bitcoin

mining rigs periodically as information on the operations of the mining rigs indicates changes are required.

The Company assesses and

adjusts the estimated useful lives of its mining rigs when there are indicators that the productivity of the mining assets are higher

Accordingly, the Company

utilizes the group method of depreciation for its bitcoin mining rigs.

The Company updates the estimated useful lives of its asset group

of bitcoin mining rigs periodically as information on the operations of the mining rigs indicates changes are required.

The Company assesses

and adjusts the estimated useful lives of its mining rigs when there are indicators that the productivity of the mining assets are higher

or lower than the assigned estimated useful lives.

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year, and (ii) to recognize deferred tax liabilities and assets for the future tax consequences of events that have been recognized in

that financial statements or tax returns.

the financial statements or tax returns.

The Company accounts for income taxes in accordance with ASC 740 - Income Taxes , using

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light of changing facts and circumstances.

Company records a valuation allowance to reduce deferred tax assets to the net amount that the Company believes is more likely than not

to be realized.

Accordingly, the need to establish such allowance is assessed periodically by considering matters such as future reversals

of existing taxable temporary differences, projected future taxable income, tax planning strategies and results of recent operations.

Company recorded a valuation allowance to reduce deferred tax assets to the net amount that the Company believes is more likely than

not to be realized.

Accordingly, the need to establish such allowance is assessed periodically by considering matters such as future

reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and results of recent operations.

Issued Accounting Standards

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Financial Measures

addition to our results determined in accordance with GAAP, the Company also provides adjusted EBITDA and total margin excluding depreciation

addition to the Company’s results determined in accordance with GAAP, the Company also provides adjusted EBITDA and total margin excluding depreciation

and amortization, which are non-GAAP measures.

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(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.

The Company defines total margin

excluding depreciation and amortization as (a) GAAP total margin less (b) depreciation and amortization.

(i) stock compensation expense, (ii) impairments of patents and (iii) gains and losses on extinguishment of debt.

The Company defines

total margin excluding depreciation and amortization as (a) GAAP total margin less (b) depreciation and amortization.

EBITDA and total margin excluding depreciation and amortization are not financial measures of performance under GAAP and, as a result,

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These non-GAAP measures

are not meant to be considered in isolation and should be read only in conjunction with our Interim Reports on Form 10-Q and our Annual

Reports on Form 10-K as filed with the Securities and Exchange Commission.

Management uses adjusted EBITDA, total margin excluding depreciation

and amortization, and the supplemental information provided herein as a means of understanding, managing, and evaluating business performance

and to help inform operating decision making.

The Company relies primarily on our condensed consolidated financial statements to understand,

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

of Operations – Three months ended June 30, 2023 compared to the three months ended June 30, 2022

are not meant to be considered in isolation and should be read only in conjunction with the Company’s Interim Reports on Form 10-Q

and its Annual Reports on Form 10-K as filed with the Securities and Exchange Commission.

Management uses adjusted EBITDA, total margin

excluding depreciation and amortization, and the supplemental information provided herein as a means of understanding, managing, and

evaluating business performance and to help inform operating decision making.

The Company relies primarily on its condensed consolidated

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

supplementally.

of Operations – Three months ended September 30, 2023 compared to the three months ended September 30, 2022

Summary Table:

Three Months Ended June 30,

Ended September 30,

(Unfavorable)

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Cost of revenues

Cost of revenues - energy, hosting and other

Cost of revenues - depreciation and amortization

Cost of revenues - energy,

hosting and other

of revenues - depreciation and amortization

Total cost of revenues

Operating expenses

General and administrative expenses

Impairment of digital assets

Gains on digital assets and losses on digital assets loan receivable

Gains on digital assets and gains (losses)

on digital assets loan receivable

Gain on sale of equipment, net of disposals

Losses on digital assets held within investment fund

Total operating expenses

Legal reserves

Impairment of deposits

due to vendor bankruptcy filing

operating expenses

Operating loss

Other non-operating income

Net gain from extinguishment of debt

Equity in net earnings of unconsolidated affiliate

Impairment of loan and investment due to vendor

bankruptcy filing

Interest expense

Loss before income taxes

Income tax expense

Supplemental information:

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

Other non-operating

Income (loss) before income

Income tax benefit (expense)

income (loss)

bitcoin (“BTC”) production during

the period, in whole BTC (1)

Average BTC per day, in whole BTC

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)

Average operational Hash Rate (Exahashes per second) (2)

Reconciliation to Total margin excluding depreciation and amortization:

General and administrative expenses excluding

stock-based compensation

Installed Hash Rate (Exahashes per second)

- at end of period (2)

Energized Hash Rate (Exahashes per second)

- at end of period (2)

Average operational Hash Rate (Exahashes per

(1) Includes 23 bitcoin produced by the Company’s equity method investee

for the three months ended September 30, 2023.

Company defines Energized Hash Rate as the total hash rate that could be generated if all

installed and energized machines were running at 100% of manufacturers specifications.

Company uses this metric only as an indicator of progress in bringing mining rigs online.

The Company defines Installed Hash Rate as the total hash rate that could be generated if

all installed machines were running at 100% of manufacturers specifications.

uses this metric only as an indicator of progress in deploying mining rigs at its production

The Company believes that these metrics are useful as an indicator of potential bitcoin

However, these metrics cannot be tied directly to any production level expected

to be actually achieved as (a) there may be delays in the energization of Installed Hash

Rate (b) the Company cannot predict when installed and energized mining rigs may be offline

for any reason, including curtailment or machine failure and (c) the Company cannot predict

Global Hash Rate (and therefore the Company’s share of the Global Hash Rate), which

has a significant impact on the Company’s ability to generate bitcoin in any given

as the daily Average Operational Hash Rate online during the period.

Data not available for

prior periods.

Months Ended September 30,

(Unfavorable)

(As Restated)

Reconciliation

to Total margin excluding depreciation and amortization:

Total revenues

Total cost of revenues

Total margin (total revenues less total cost of revenues)

Total margin (total revenues

less total cost of revenues)

Depreciation and amortization

Total margin excluding depreciation and amortization

Reconciliation to Adjusted EBITDA:

margin excluding depreciation and amortization

Reconciliation

to Adjusted EBITDA:

Net income (loss)

Interest expense

Income tax expense

Income tax expense (benefit)

Depreciation and amortization (1)

Stock compensation expense

Adjusted EBITDA

Company defines Energized Hash Rate as the total hash rate that could be generated if all

installed and energized machines were running at 100% of manufacturers specifications.

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

defines Installed Hash Rate as the total hash rate that could be generated if all installed

machines were running at 100% of manufacturers specifications.

The Company uses this metric

only as an indicator of progress in deploying mining rigs at its production sites.

believes that these metrics are useful as an indicator of potential bitcoin production.

these metrics cannot be tied directly to any production level expected to be actually achieved

as (a) there may be delays in the energization of Installed Hash Rate (b) the Company cannot

predict when installed and energized mining rigs may be offline for any reason, including curtailment

or machine failure and (c) the Company cannot predict Global Hash Rate (and therefore the

Company’s share of the Global Hash Rate), which has a significant impact on the Company’s

ability to generate bitcoin in any given period.

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

Data not available for prior periods.

The Company generated revenues of $81,759 for the three months ended June 30, 2023 as compared with $24,923 in the prior-year period.

The $56,836 or approximately 228% increase in revenue was primarily driven by an increase in production year-over-year of $78,224, partially

offset by a $21,388 decrease resulting from lower bitcoin prices in the current year period.

Average daily bitcoin production was 32.2

bitcoin in the current year period compared with 7.8 in the prior-year period, reflecting the increasing scale of the Company’s

Stock compensation

Net gain from extinguishment

Impairment of

deposits due to vendor bankruptcy filing

Impairment of loan and investment due to vendor bankruptcy filing

approximately $484 of depreciation and amortization as the Company’s share in the results of its equity method investee reported in

Equity in net earnings of unconsolidated affiliate for the three months ended September 30, 2023.

The Company generated revenues of $97,849 for the three months ended September 30, 2023 as compared with $12,690 in the prior-year period.

The $85,159 or approximately 671% increase in revenue was primarily driven by an increase in production year-over-year of $59,186 and

$25,973 from the increase in bitcoin prices in the current year period.

Average daily bitcoin production was 37.9 bitcoin in the current

year period compared with 6.7 in the prior-year period, reflecting the increasing scale of the Company’s operations.

of revenues :

Cost of revenues – energy, hosting and other during the three months ended June 30, 2023 totaled $55,222

Cost of revenues – energy, hosting and other during the three months ended September 30, 2023 totaled

$59,628 as compared with $13,773 in the prior-year period.

The $38,536 or approximately 231% increase was driven by the impact of increased bitcoin

production of $51,229, partially offset by lower production costs of $3,343 and the absence of accelerated costs associated with the

exit of the Hardin, Montana facility in the prior-year period of $9,350.

Cost of revenues – depreciation and amortization during the

three months ended June 30, 2023, totaled $37,275 as compared with $24,710 in the prior-year period.

The $45,855 or approximately 333% increase was driven by the impact of increased

bitcoin production of $54,800, partially offset by lower production costs of $3,245 and the absence of accelerated costs associated with

the exit of the Hardin, Montana facility in the prior-year period of $5,700.

Cost of revenues – depreciation and amortization during

the three months ended September 30, 2023, totaled $53,548 as compared with $26,295 in the prior-year period.

The $27,253 or approximately

2 unchanged sentences

Montana facility.

Total margin was a loss of $10,738 in the current three months ended June 30, 2023 as compared with a loss of $16,473

in the prior-year period, a decline of $5,735 or approximately 35%.

The following table summarizes the factors that impacted the decline

in total margin for the three months ended June 30, 2023 compared to the prior-year period:

Higher production activity

Lower bitcoin market prices

Cost of revenue – energy, hosting and other:

Total margin was a loss of $15,327 in the current three months ended September 30, 2023 as compared with a loss of $27,378

in the prior-year period, an improvement of $12,051 or approximately 44%.

The following table summarizes the factors that impacted the

increase in total margin for the three months ended September 30, 2023 compared to the prior-year period:

production activity

● Higher bitcoin

market prices

Cost of revenue

– energy, hosting and other:

● Lower unit costs

Accelerated cost recognition from Hardin exit

Higher production activity

Cost of revenue – depreciation and amortization:

Accelerated cost recognition from Hardin exit

● Accelerated cost

recognition from Hardin exit

● Higher production

Cost of revenue

– depreciation and amortization:

● Accelerated cost

recognition from Hardin exit

Other, primarily increased mining rigs in operation

and administrative expenses :

General and administrative expenses were $20,491 for the three months ended June 30, 2023 as compared

with expenses of $10,469 in the prior-year period, an increase of $10,022 or approximately 96%.

Our general and administrative expenses

included stock-based (non-cash) compensation expense of $4,451 in the current period and $6,176 in the prior-year period.

in stock-based compensation is primarily related to lower average restricted stock unit grant date fair value, partially offset by additional

restricted stock unit issuances associated with increases in headcount.

General and administrative expenses excluding stock-based compensation

was $16,040 in the current period as compared with $4,293 in the prior-year period.

This $11,747 or approximately 274% increase in expense

was primarily due to payroll, professional fees, higher property taxes, other third party costs related to the increasing scale of business and contributions in support of the Bitcoin

Payroll increased primarily due to performance incentives and headcount, which increased from 17 employees in the prior-year period to over 40 employees in 2023.

General and administrative expenses were $20,141 for the three months ended September 30, 2023

as compared with expenses of $12,144 in the prior-year period, an increase of $7,997 or approximately 66%.

administrative expenses included stock-based (non-cash) compensation expense of $5,511 in the current period and $3,423 in the

prior-year period.

The increase in stock-based compensation is primarily related to additional restricted stock unit issuances

associated with increases in headcount.

General and administrative expenses excluding stock-based compensation was $14,630 in the

current period as compared with $8,721 in the prior-year period.

This $5,909 or approximately 68% increase in expense was primarily

due to the increasing scale of business, including payroll and benefits, professional fees, and other costs.

The Company’s

headcount increased from 20 employees in the prior-year period to 48 employees in 2023.

of digital assets:

The Company incurred impairments of digital assets during the three months ended June 30, 2023 of $8,363 as

compared with impairments of $131,581 in the prior-year period, a decrease of $123,218 or approximately 94%.

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.

Gains on digital assets and losses on digital assets loan receivable:

The Company recognized gains of $23,354

on the sale of approximately 1,854 bitcoin during the three months ended June 30, 2023.

The Company incurred impairments of digital assets during the three months ended September 30, 2023 of $11,885

as compared with impairments of $1,375 in the prior-year period, an increase of $10,510 or approximately 764%.

This increase in impairment

is primarily related to the increased holdings of bitcoin compared to the prior-year period.

on digital assets and gains on digital assets loan receivable:

The Company recognized gains of $29,717 on the sale of approximately

2,300 bitcoin during the three months ended September 30, 2023.

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

The Company recognized a loss of $13,999 in the prior-year period as a result of a decline in fair value of digital assets loan receivable

that was repaid in June, 2022.

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 June 30, 2022 resulted in a loss of $79,689.

The Company also recognized

a gain of $2,003 during the three months ended September 30, 2023 as a result of an increase in fair value of digital assets that were

derecognized as collateral and was repaid in September 2023.

gain on extinguishment of debt :

On September 7, 2023, the Company entered into agreements with certain holders of Convertible

Notes due 2026 (the “Notes”) to exchange an aggregate $416,793 principal amount of Notes for 31,722,417 shares of the Company’s

common stock and recorded a gain in the amount of $82,600.

in net earnings of unconsolidated affiliate :

During the three months ended September 30, 2023, the Company recorded its

share of net losses for its 20% interest in the ADGM Entity in the amount of $647, which began mining operations during the quarter.

The Company’s share of the ADGM Entity’s results included earnings of 23 bitcoin and approximately $484 of depreciation

and amortization during the three months ended September 30, 2023.

Interest expense decreased $1,216 or 32% from the prior-year period as a result of lower interest costs primarily as

a result of the exchange of $416,793 aggregate principal amount of Notes during the three months ended September 30, 2023 as compared

with the prior-year period.

Additionally, the Company terminated its revolving line of credit and term loan facilities during the three months ended

March 31, 2023.

non-operating income :

Other non-operating income was $148 during the three months ended June 30, 2023 as compared with $135 in

the prior-year period.

The $13 or approximately 10% favorable variance was primarily due to increased interest income.

Interest expense decreased $908 or approximately 24% from the prior-year period as a result of lower interest costs

primarily as a result of the absence of the line of credit facility during the three months ended June 30, 2023 as compared with the

prior-year period.

The Company terminated the line of credit facility during the three months ended March 31, 2023.

tax expense :

The Company recorded income tax expense of $203 for the three months ended June 30, 2023 as compared with an income

tax expense of $10,862 in the prior-year period.

The favorable tax variance of $10,659 or approximately 98% 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.

The Company recorded a net loss of $19,133 for the three months ended June 30, 2023 as compared with a net loss of $212,626

in the prior-year period.

This $193,493 or approximately 91% improvement in net loss was primarily driven by the impact of the gain on sale of digital assets and favorable variances related to the impairment of digital assets and losses on digital assets

held within the investment fund partially offset by lower total margin.

Adjusted EBITDA was $25,636 in the three months ended June 30, 2023 as compared with an adjusted EBITDA loss of $167,130

Other non-operating income was $426 during the three months ended September 30, 2023 as compared with $238

in the prior-year period.

The $192,766 or approximately 115% increase in adjusted EBITDA was primarily driven by positive impacts of gains on digital assets sold of $23,354 and lower impairment of digital assets of $123,218.

Adjusted EBITDA also benefited from

the absence of several expenses recorded in the prior-year period, including losses on digital assets held within

the investment fund of $79,689 and gains on digital assets and losses on digital assets loan receivable of $13,999.

These favorable variances were partially offset by lower total margin excluding depreciation and amortization of $18,300 and higher general

and administrative expenses excluding stock-based compensation of $11,747.

of Operations – Six months ended June 30, 2023 compared to the six months ended June 30, 2022

The $188 favorable variance was primarily due to increased interest income.

tax benefit (expense) :

The Company recorded an income tax expense of $73 for the three months ended September 30, 2023 as compared

with an income tax benefit of $6,090 in the prior-year period.

The tax variance of $6,163 or approximately 101% 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 net income of $64,137 for the three months ended September 30, 2023 as compared with a

net loss of $72,462 in the prior-year period.

This $136,599 or approximately 189% improvement was primarily driven by the impact of

the gain on extinguishment of debt, gain on sale of digital assets, and the lack, during the

current year, of impairments due to vendor bankruptcy filing, legal reserves, partially offset by net gain on sale of equipment in

the prior-year period.

Adjusted EBITDA was $43,689 in the three months ended September 30, 2023

as compared with an adjusted EBITDA loss of $6,082 in the prior-year period.

The $49,771 or approximately 818% increase in adjusted EBITDA

was primarily driven by higher revenues of $85,159 and positive impact of gains on digital assets of $31,720.

of Operations – Nine months ended September 30, 2023 compared to the nine months ended September 30, 2022

Summary Table:

Six Months Ended June 30,

Months Ended September 30,

(Unfavorable)

(As Restated)

Total revenues

Costs and expenses

Cost of revenues

Cost of revenues - energy, hosting and other

Cost of revenues - depreciation and amortization

Cost of revenues - energy,

hosting and other

of revenues - depreciation and amortization

Total cost of revenues

Operating expenses

General and administrative expenses

Impairment of digital assets

Impairment of patents

Gains on digital assets and losses on digital assets loan receivable

Gains on digital assets and gains (losses)

on digital assets loan receivable

Losses on digital assets held within investment

Gain on sale of equipment, net of disposals

Losses on digital assets held within investment fund

Total operating expenses

Legal reserves

Impairment of deposits due to vendor bankruptcy

Impairment of patents

operating expenses

Operating loss

Other non-operating income

Loss from extinguishment of debt

Net gain from extinguishment of debt

Equity in net earnings of unconsolidated affiliate

Impairment of loan and investment due to vendor

bankruptcy filing

Interest expense

Loss before income taxes

Income tax expense

Supplemental information:

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

Other non-operating

Income (loss) before income

Income tax benefit (expense)

income (loss)

bitcoin (“BTC”) production during

the period, in whole BTC (1)

Average BTC per day, in whole BTC

General and administrative expenses excluding stock-based compensation

Installed Hash Rate (Exahashes per second) - at end of period

Energized Hash Rate (Exahashes per second) - at end of period

Average operational Hash Rate (Exahashes per second)

Reconciliation to Total margin excluding depreciation and amortization:

General and administrative expenses excluding

stock-based compensation

Installed Hash Rate (Exahashes per second)

- at end of period

Energized Hash Rate (Exahashes per second)

- at end of period

Average operational Hash Rate (Exahashes per

(1) Includes 23 bitcoin produced by the Company’s equity method

investee for the nine months ended September 30, 2023.

Months Ended September 30,

(Unfavorable)

(As Restated)

Reconciliation

to Total margin excluding depreciation and amortization:

Total revenues

Total cost of revenues

Total margin (total revenues less total cost of revenues)

Total margin (total revenues

less total cost of revenues)

Depreciation and amortization

Total margin excluding depreciation and amortization

Reconciliation to Adjusted EBITDA:

margin excluding depreciation and amortization

Reconciliation

to Adjusted EBITDA:

Net income (loss)

Interest expense

Income tax expense

Income tax expense (benefit)

Depreciation and amortization (1)

Stock compensation expense

Loss from extinguishment of debt

Stock compensation

Net gain from extinguishment

Impairment of

deposits due to vendor bankruptcy filing

Impairment of

loan and investment due to vendor bankruptcy filing

Impairment of patents

Adjusted EBITDA

The Company generated revenues of $132,891 for the six months ended June 30, 2023 as compared with $76,646 in the prior-year period.

The $56,245 or approximately 73% increase in revenue was primarily driven by an increase in production year-over-year of $122,961, partially

offset by a $66,716 decrease in revenue resulting from lower bitcoin prices in the current year period.

Average daily bitcoin production

was 28.3 bitcoin in the current year period compared with 10.9 in the prior-year period, reflecting the increasing scale of the Company’s

approximately $484 of depreciation and amortization as the Company’s share in the results of its equity method investee reported in

Equity in net earnings of unconsolidated affiliate for the nine months ended September 30, 2023.

The Company generated revenues of $230,740 for the nine months ended September 30, 2023 as compared with $89,336 in the prior-year period.

The $141,404 or approximately 158% increase in revenue was primarily driven by an increase in production year-over-year of $208,566,

partially offset by a $67,162 decrease in revenue resulting from lower bitcoin prices in the current year period.

Average daily bitcoin

production was 31.5 bitcoin in the current year period compared with 9.5 in the prior-year period, reflecting the increasing scale of

the Company’s operations.

of revenues :

Cost of revenues – energy, hosting and other during the six months ended June 30, 2023 totaled $88,599

Cost of revenues – energy, hosting and other during the nine months ended September 30, 2023 totaled

$148,227 as compared with $42,981 in the prior-year period.

The $59,391 or approximately 203% increase was driven by the impact of increased bitcoin

production of $67,069 and higher production costs of $4,813, partially offset by the absence of accelerated costs associated with the

exit of the Hardin, Montana facility in the prior-year period of $12,491.

Cost of revenues – depreciation and amortization during the

six months ended June 30, 2023, totaled $55,008 as compared with $38,587 in the prior-year period.

The $16,421 or approximately 43% increase

was primarily due 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 $19,935 recorded in the prior-year period related to the exit of the Hardin, Montana facility.

Total margin was a loss of $10,716 in the current six months ended June 30, 2023 as compared with income of $8,851 in

the prior-year period, a decline of $19,567 or approximately 221%.

The $105,246 or approximately 245% increase was driven by the impact of increased

bitcoin production of $121,967 and higher production costs of $1,470, partially offset by the absence of accelerated costs associated

with the exit of the Hardin, Montana facility in the prior-year period of $18,191.

Cost of revenues – depreciation and amortization

during the nine months ended September 30, 2023, totaled $108,556 as compared with $64,882 in the prior-year period.

The $43,674 or approximately

67% increase was primarily due 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 $35,035 recorded in the prior-year period related to the exit of the Hardin, Montana facility.

Total margin was a loss of $26,043 in the current nine months ended September 30, 2023 as compared with a loss of $18,527

in the prior-year period, a decrease of $7,516 or approximately 41%.

The following table summarizes the factors that impacted the decline

in total margin for the six months ended June 30, 2023 as compared to the prior-year period:

Higher production activity

Lower bitcoin market prices

Cost of revenue – energy, hosting and other:

in total margin for the nine months ended September 30, 2023 as compared to the prior-year period:

production activity

● Lower bitcoin market

Cost of revenue

– energy, hosting and other:

● Higher unit costs

Accelerated cost recognition from Hardin exit

Higher production activity

Cost of revenue – depreciation and amortization:

Accelerated cost recognition from Hardin exit

● Accelerated cost

recognition from Hardin exit

● Higher production

Cost of revenue

– depreciation and amortization:

● Accelerated cost

recognition from Hardin exit

Other, primarily increased mining rigs in operation

and administrative expenses :

General and administrative expenses were $35,836 for the six months ended June 30, 2023 as compared

with expenses of $25,983 in the prior-year period, an increase of $9,853 or approximately 38%.

Our general and administrative expenses

included stock-based (non-cash) compensation expense of $8,396 in the current period and $15,451 in the prior-year period.

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 $27,440 in the current period as compared with $10,532 in the prior-year period.

or approximately 161% increase in expense was primarily due to payroll, professional fees, higher property taxes, and other third party costs related to the increasing scale of business.

Payroll increased primarily due to performance incentives and headcount, which increased from 17 employees in the prior-year period to over 40 employees

General and administrative expenses were $55,977 for the nine months ended September 30, 2023

as compared with expenses of $38,127 in the prior-year period, an increase of $17,850 or approximately 47%.

administrative expenses included stock-based (non-cash) compensation expense of $13,907 in the current period and $18,876 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

General and administrative expenses excluding stock-based compensation was $42,070 in the current period as compared with

$19,251 in the prior-year period.

This $22,819 or approximately 119% increase in expense was primarily due to the increasing scale

of business, including payroll and benefits, professional fees, higher property taxes, and other third party costs.

Company’s headcount increased from 20 employees in the prior-year period to 48 employees in 2023.

of digital assets:

The Company incurred impairments of digital assets during the six months ended June 30, 2023 of $14,514 as

compared with $154,898 in the prior-year period.

This $140,384 or approximately 91% 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 incurred impairments of digital assets during the nine months ended September 30, 2023 of $26,399

as compared with $156,500 in the prior-year period.

This $130,101 or approximately 83% 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.

on digital assets and losses on digital assets loan receivable:

The Company recognized gains of $70,686 on the sale of approximately

7,054 bitcoin during the nine months ended September 30, 2023.

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

The Company recognized

a loss of $14,460 in the prior-year period as a result of a decrease in fair value of digital asset loan receivable that was repaid in

September, 2022.

The Company also recognized a gain of $2,003 during the three months ended September 30, 2023 as a result of an increase

in fair value of digital assets that were derecognized as collateral and was repaid in September 2023.

on digital assets held within Investment Fund:

The Company exited the investment 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 nine

months ended September 30, 2022 resulted in a loss of $85,017.

on sale of equipment, net of disposals:

The Company recorded a net gain on the sale of equipment of $83,879 in the prior-year

The Company recorded an reserve for a dispute in the amount of $24,960 in the prior-year period that has been paid.

of deposits due to vendor bankruptcy filing:

The Company recorded an impairment charge related to the Compute North vendor bankruptcy

filing in the amount of $7,987 in the prior year period.

of loan and investment due to vendor bankruptcy filing:

The Company recorded an impairment charge related to the Compute North

vendor bankruptcy filing in the amount of $31,013 in the prior year period.

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

in its business operations.

Gains on digital assets and losses on digital assets loan receivable:

The Company recognized gains of $40,969

on the sale of approximately 4,754 bitcoin during the six months ended June 30, 2023.

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

The Company recognized a loss of $14,460 in the prior-year period as a result of the decline in fair value of digital asset loan receivable

that was repaid in June, 2022.

Losses on digital assets held within Investment Fund:

The Company exited the investment 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 six months ended June 30, 2023 resulted in a loss of $85,017.

non-operating income :

Other non-operating income was $940 during the six months ended June 30, 2023 as compared with $382 in

the prior-year period.

The $558 or approximately 146% favorable variance was primarily due to increased interest income.

on extinguishment of debt :

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

On that same date, the Company and Silvergate Bank also agreed to terminate the Company’s RLOC.

Although there were no prepayment

penalties associated with these actions, the Company incurred a loss on extinguishment of debt of $333 related to the write-off of the

unamortized balance of debt issuance costs associated with the facilities.

Interest expense remained relatively flat for the six months ended June 30, 2023 as compared with the prior year period.

tax expense :

The Company recorded income tax expense of $278 for the six months ended June 30, 2023 as compared with $5,190 in

the prior-year period.

The favorable tax variance of $4,912 or approximately 95% 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.

The Company recorded a net loss of $26,368 for the six months ended June 30, 2023 as compared with net loss of $229,735

in the prior-year period.

This $203,367 or approximately 89% favorable variance in net loss was primarily driven by the impact of the gain on sale of digital assets and favorable variances related to the impairment of digital assets and losses on digital

assets held within the investment fund and gain on digital assets and losses on digital assets loan receivable, partially

offset by lower total margin.

Adjusted EBITDA was $44,247 in the six months ended June 30, 2023 as compared with an adjusted EBITDA loss of $163,027

Other non-operating income was $1,366 during the nine months ended September 30, 2023 as compared with

$620 in the prior-year period.

The $207,274 increase in adjusted EBITDA was primarily driven by positive impacts of gains on digital

assets sold of $40,969 and lower impairment of digital assets of $140,384.

Adjusted EBITDA also benefited from the absence of several

expenses recorded in the prior-year period, including losses on digital assets held within the investment fund of $85,017, gain

on the sale of equipment, net of disposals of $54,060 and gains on digital assets and losses on digital assets loan

receivable of $13,999.

These favorable variances were partially offset by the absence of gain on sale of equipment, net of disposals

and $16,908 higher general and administrative expenses excluding stock-based compensation during the six months ended June 30, 2023 as

compared with the prior year period.

The $746 favorable variance was primarily due to increased interest income.

gain on extinguishment of debt :

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

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

the term loan facility.

The Company and Silvergate subsequently agreed to also terminate the revolving line of credit (“RLOC”)

On March 8, 2023, the term loan prepayment was completed, and the Company’s term loan and RLOC facilities with Silvergate

Bank were terminated and the Company recorded a loss in the amount of $333 to “Net gain from extinguishment of debt” on the

Condensed Consolidated Statements of Operations.

On September 7, 2023, the Company entered into agreements with certain holders of Convertible

Notes due 2026 (the “Notes”) to exchange an aggregate $416,793 principal amount of Notes for 31,722,417 shares of the Company’s

common stock and recorded a gain in the amount of $82,600.

Interest expense was $9,136 for the nine months ended September 30, 2023 as compared to $10,314 in the prior year

period as a result of lower interest costs primarily as a result of the exchange of $416,793 aggregate principal amount

of Notes during the nine months ended September 30, 2023 as compared with the prior-year period.

Additionally, the Company terminated

its revolving line of credit and term loan facilities during the three months ended March 31, 2023.

tax benefit (expense ) :

The Company recorded income tax expense of $351 for the nine months ended September 30, 2023 as compared with income

tax benefit of $901 in the prior-year period.

The tax variance of 1,252 or approximately 139% 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 net income of $37,769 for the nine months ended September 30, 2023 as compared with net

loss of $302,424 in the prior-year period.

This $340,193 or approximately 112% favorable variance was primarily driven by the impact

of the gain on sale of digital assets, net gain on extinguishment of debt, favorable variances related to lower impairment of digital assets and the

absence of losses on digital assets held within the investment fund, losses on digital assets loan

receivable, partially offset by net gain on sales of equipment in the prior year period.

Adjusted EBITDA was $87,936 in the nine months ended September 30, 2023

as compared with an adjusted EBITDA loss of $169,334 in the prior-year period.

The $257,270 increase in adjusted EBITDA was primarily

driven by positive impacts of gains on digital assets of $72,689 and lower impairment of digital assets of $130,101.

Adjusted EBITDA also

benefited from the absence of several expenses recorded in the prior-year period, including losses on digital assets held within the investment

fund of $85,017, legal reserves of $24,960 and losses on digital assets loan receivable of $14,460, partially

offset by the net gain on sale of equipment of $83,879.

Condition and Liquidity

following table presents a summary of our cash flow activity for the six months ended June 30, 2023 and 2022.

Six Months Ended June 30,

following table presents a summary of the Company’s cash flow activity for the nine months ended September 30, 2023 and 2022.

Months Ended September 30,

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net increase (decrease) 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 $127,961 at June 30, 2023, an increase of $15,456 from December 31, 2022.

cash was $14,286 at June 30, 2023, representing the net proceeds held in escrow related to the issuance of Series A Preferred Stock during

The Company replaced cash-collateralized letters of credit with cash deposits which released restrictions on $8,800 of restricted

cash during the quarter ended March 31, 2023, as a result of the closure of Signature Bank.

flows from operating activities resulted in a use of funds of $142,868, as cash provided from operating activities before changes in operating

assets and liabilities of $14,265 was more than offset by a use of cash of $43,205 from changes in operating assets and liabilities.

Changes in cash flow from operating assets and liabilities were driven by a use of funds associated with changes in digital assets ($132,557

due to the non-cash adjustment for bitcoin mining revenues), deposits

($19,325 resulting from increased 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 $6,963 as the Company prepaid certain expenses due in early

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

Net cash provided by

financing activities

Net decrease 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, cash equivalents and restricted cash totaled $101,210 at September 30, 2023, a decrease of $11,295 from

December 31, 2022.

Restricted cash was $0 at September 30, 2023 as the Company replaced cash-collateralized letters of credit with

cash deposits which removed restrictions on $8,800 of restricted cash during the quarter ended March 31, 2023, as a result of the

closure of Signature Bank.

Cash flows from operating activities resulted in a use of funds of $224,487,

as cash provided from operating activities before changes in operating assets and liabilities of $36,062 was more than offset by a use

of cash of $260,549 from changes in operating assets and liabilities.

Changes in cash flow from operating assets and liabilities were driven

by a use of funds associated with changes in digital assets ($230,740 due to the non-cash adjustment for bitcoin mining revenues), deposits

($21,671 resulting from increased deposits associated with hosting agreements), prepaid expenses of $11,588 and accounts payable of $3,359.

flows from investing activities resulted in a use of funds of $373, primarily resulting from investments made as part of the establishment

of the ADGM Entity (a $62,918 use of funds), advances to vendors of $61,834, and capital expenditures of $23,316, partially offset by proceeds from the sale of bitcoin of $113,928.

flows from financing activities resulted in a source of cash of $192,275, primarily from proceeds from the issuance of common stock under

the Company’s At-The-Market facility of $228,833 partially offset by the repayment of the Company’s term loan facility of

There were no borrowings outstanding under the Company’s revolving credit facility during the six months ended June 30,

On March 8, 2023, the Company terminated both its term loan and its RLOC facilities with Silvergate Bank.

holdings as of June 30, 2023:

At June 30, 2023, the Company held approximately 12,538 bitcoin on its balance sheet with a carrying

value of $234,412.

of the ADGM Entity (a $66,754 use of funds), advances to vendors of $87,315, and capital expenditures of $25,813, partially offset by

proceeds from the sale of bitcoin of $179,509.

Cash flows from financing activities resulted in a source of cash of $213,565,

primarily from proceeds from the issuance of common stock under the Company’s At-The-Market facility of $265,786 was partially offset

by the repayment of the Company’s term loan facility of $50,000.

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

its RLOC facilities with Silvergate Bank.

holdings as of September 30, 2023:

At September 30, 2023, the Company held approximately 13,716 bitcoin

on its balance sheet with a carrying value of $286,801.

The Company’s holdings as of September 30, 2023 excluded 10 bitcoins earned

and pending distribution from the Company’s equity method investee, the ADGM Entity.

The fair value of a single bitcoin was approximately

As a result, the fair market value of our bitcoin holdings

at June 30, 2023 was approximately $381,992.

The Company expects that its future bitcoin holdings will generally increase but will fluctuate

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

intends to add to its bitcoin holdings primarily through its production activities and will also continue to sell bitcoin as a means

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

The Company does not intend to make any significant

purchases of bitcoin on the open market as means of increasing its bitcoin holdings, although it may buy and sell bitcoin from time-to-time

(separately from what is outlined above) for treasury management purposes.

Cash and cash equivalents totaled $127,961 and bitcoin was $381,992 at June 30, 2023.

The combined value of cash

and cash equivalents and bitcoin was $509,953.

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.

The Company will

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

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

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

As a result, the fair market value of the Company’s bitcoin holdings at September 30, 2023 was approximately $369,797.

expects that its future bitcoin holdings will generally increase but will fluctuate from time-to-time, both in number of bitcoin held

and fair value in US dollars, depending upon operating and market conditions.

The Company intends to add to its bitcoin holdings primarily

through its production activities and will also continue to sell bitcoin as a means of generating cash to fund monthly operating costs

and for general corporate purposes.

The Company does not intend to make any significant purchases of bitcoin on the open market as means

of increasing its bitcoin holdings, although it may buy and sell bitcoin from time-to-time (separately from what is outlined above) for

treasury management purposes.

the quarter ended September 30, 2023, the Company hedged a portion of its bitcoin holdings to mitigate near-term volatility while

maintaining a long-term strategy of maximizing the size and value of the Company’s treasury.

Gains and losses on hedging activity will

impact earnings;

however, the Company believe the strategy provides resiliency to the organization and downside risk during volatile

market conditions due to the upcoming halving while maximizing the Company’s bitcoin valuation potential.

At The Market Offering Programs and Proceeds:

In February 2022, the Company commenced an At The Market offering program with

Wainwright & Co., LLC, as sales agent, which allowed it to sell and issue shares of up to approximately $750,000 of its Common

Stock from time-to-time.

During the first three quarters of 2023, the Company issued 32,305,554 shares of Common Stock under the 2022

At The Market offering program for total proceeds of $265,786, net of commissions and other offering related expenses.

During October 2023, the Company completed its 2022 At The Market Offering

Program, and on October 24, 2023, the Company filed a new registration statement for a new At The Market Program for up to $750,000, with

Wainwright & Co., LLC.

This facility provides the Company with additional access to capital, as needed, subject to market conditions.

As of October 23, 2023, the Company issued 12,374,713 shares of Common Stock under its original At The Market offering program

for total proceeds of $100,656, net of commissions and other offering related expenses, completing its 2022 At The Market Offering Program.

As of November 8, 2023, the Company had not sold shares under the new program.

Cash and cash equivalents totaled $101,210 and fair value of bitcoin holdings

was $369,797 at September 30, 2023.

The combined value of cash and cash equivalents and bitcoin was $471,007.

The Company expects

to have sufficient liquidity, including cash on hand, cash received from sales of its bitcoin holdings, and access to public capital markets,

to support ongoing operations.

The Company will continue to seek to fund its business activities, and especially its growth opportunities,

through the public capital markets, primarily through periodic equity issuances using its At The Market facility.

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

holdings and production capabilities, including:

to effectively execute our growth strategies.

to effectively execute the Company’s growth strategies.

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

1 unchanged sentence

in the digital assets space.

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

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

and its ongoing profitability.

7 unchanged sentences

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What changed 10-Q

Item 2. Management’s Discussion and Analysis