Item 1A. Risk Factors
Item
1A. Risk Factors.
There
are no updates or changes to the risk factors set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 except
as set forth below.
Further
significant disruptions in the crypto asset markets, such as those experienced in the second half of 2022, may cause further material
impairment of the value and use of the Company’s mining rigs.
During
the fourth quarter of 2022, the per coin price of bitcoin reached a low of approximately $15,500 from a high of almost $21,500 earlier
in the quarter. This decrease in the price of bitcoin, combined with the general market sentiment caused in large part by the FTX collapse
and various bitcoin company related bankruptcies and restructurings, led to a material decline in the fair value of the Company’s
mining rigs and deposits for future mining rig purchases. As a result, the Company recorded an impairment charge of $332,933 on these
assets during that period, although operations were unaffected and continued throughout the period in question. Furthermore, future decreases
in the value of bitcoin could cause the Company to record additional impairments in the value of these and future mining rig assets.
In
addition, if bitcoin prices dropped to levels below that experienced in 2022 and held at those levels for a significant period of time,
it could impact the Company’s profitability to the point that the Company would have to consider whether there would be less diminution
of value if the Company were to leave certain of its mining rigs to idle until the price of bitcoin recovered.
Theoretically,
there is a minimum bitcoin price that is so low that Marathon would want to turn off its mining rigs. However, this is a complex projection
involving multiple ever-changing, dynamic variables. Marathon has multiple mining sites and hosting partners, all with different hosting
prices, electricity prices, and contract structures. These costs, some fixed and some variable, would need to be compared to the current
revenue being produced by the mining rigs.
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