Quarterly report pursuant to Section 13 or 15(d)

DEPOSIT, PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

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DEPOSIT, PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS
9 Months Ended
Sep. 30, 2021
Deposit Property And Equipment And Intangible Assets  
DEPOSIT, PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

NOTE 3 – DEPOSIT, PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

 

On May 11, 2020, the Company signed a Contract Addendum with Compute North, to pause and suspend services under its Colocation Agreement. This suspended all production of Bitcoin using our S-9 miners.

 

Halving – The bitcoin blockchain and the cryptocurrency reward for solving a block is subject to periodic incremental halving. Halving is a process designed to control the overall supply and reduce the risk of inflation in cryptocurrencies using a Proof-of-Work consensus algorithm. At a predetermined block, the mining reward is cut in half, hence the term “Halving”. The last halving for bitcoin occurred on May 12, 2020.

 

On May 11, 2020, the Company purchased 700 new generation M305+ASIC Miners from MicroBT for approximately $1.3 million. The 700 miners produce 80/Th and will generate 56 PH/s (petahash) of hashing power, compared to the Company’s current S-9 production of 46 PH/s. These next generation MicroBT ASIC miners are markedly more energy efficient than our existing Bitmain models. These miners were delivered to the Company’s Hosting Facility in June 2020 and are producing Bitcoins.

 

The Company purchased 660 latest generation Bitmain S19 Pro Miners on May 12, 2020, 500 units on May 18, 2020 and an additional 500 units on June 11, 2020. These miners produce 110 TH/s and will generate 73 PH/s (petahash) of hashing power, compared to the Company’s S-9 production of 46 PH/s. The Company made the payments of approximately $4.2 million in the second quarter of 2020 and received 660 of the 1,660 units at its Hosting Facility in August, and its hosting partner, Compute North, had installed them upon their arrival. Of the 1,000 remaining S-19 Pro Miners due to arrive in the 4th quarter of 2020, 500 were received in November and installed in the Company’s Hosting Facility in Montana, while 500 were anticipated to be received and installed during the remainder of the 4th quarter. These miners will produce an additional 110 PH/s increasing the Company to an aggregate Hashpower of 294 PH/s. As of September 30, 2021, these miners were received and installed.

 

On July 29, 2020, the Company announced the purchase of 700 next generation M31S+ASIC Miners from MicroBT. The miners arrived mid-August.

 

On August 13, 2020, the Company entered into a Long Term Purchase Contract with Bitmaintech PTE., LTD (“Bitmain”) for the purchase of 10,500 next generation Antminer S-19 Pro ASIC Miners.

 

The purchase price per unit is $2,362 ($2,206 with a 6.62% discount) for a total purchase price of $24,801,000 (with a 6.62% discount for a discounted price of $23,159,174). The parties confirm that the total hashrate of the Antminers under this agreement shall not be less than 1,155,000 TH/s.

 

Subject to the timely payment of the purchase price, Bitmain is and has been scheduled deliver products according to the following schedule: 1,500 Units on or before January 31, 2021; and 1,800 units on or before each of February 28, 2021; September 30, 2021; April 30, 2021, May 31, 2021 and September 30, 2021. As of September 30, 2021, the Company has paid the entire purchase price under this agreement and has received 10,500  units from Bitmain.

 

On October 23, 2020, the Company executed a contract with Bitmain to purchase an additional 10,000 next generation Antminer S-19 Pro ASIC Miners. The 2021 delivery schedule was for 2,500 units to be delivered in January, 4,500 units to be delivered in February and the final 3,000 units to be delivered in March 2021.The gross purchase price was $23,620,000 with 30% due upon the execution of the contract and the balance paid over the next 4 months. Subsequent to executing this agreement, due to the additional executed contracts, Bitmain applied a discount of 8.63% to the purchase price adjusting the amount due to $21,581,594. As of September 30, 2021, the Company has paid the entire purchase price under this agreement and has received 10,000 units from Bitmain.

 

On December 8, 2020, the Company executed a contract with Bitmain to purchase an additional 10,000 next generation Antminer S-19j Pro ASIC Miners, with 6,000 units to be delivered in August 2021, and the remaining 4,000 units to be delivered in September 2021. The gross purchase price is $23,770,000 with 10% of the purchase price due within 48 hours of execution of the contract, 30% due on January 14, 2021, 10% due on February 15, 2021, 30% due on June 15, 2021 and 20% due on July 15, 2021. Subsequent to executing this agreement, due to the additional executed contracts, Bitmain applied a discount of 8.63% to the purchase price adjusting the amount due to $21,718,649. As of September 30, 2021, the Company has paid the entire purchase price under this agreement. Subsequent to September 30, 2021, the Company has received 10,000  units from Bitmain.

 

 

MARATHON DIGITAL HOLDINGS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

 

On December 23, 2020, the Company executed a contract with Bitmain to purchase an additional 70,000 next generation Antminer S-19 ASIC Miners, with 7,000 units to be delivered by August 2021, 2,100 units to be delivered by September 2021, 6,500 units to be delivered by October 31, 2021, 14,700 units to be delivered by November 30, 2021, 24,500 units to be delivered by December 31, 2021 and 15,200 units to be delivered by January 31, 2022. The purchase price is $167,763,451. The purchase price for the miners shall be paid as follows: 20% within 48 hours of signing of contract; 30% on or before March 1, 2021; 4.75% on June 15, 2021; 1.76% on July 15, 2021; 4.58% on August 15, 2021; 10.19% on September 15, 2021; 17.63% on October 15, 2021 and 11.55% on November 15, 2021. As of September 30, 2021, the Company has paid $118,799,091 of the total balance of $167,763,451 and has received 6,460 units from Bitmain.

 

On February 1, 2021, Marathon announced that Bitmain had shipped approximately 4,000 S-19 Pro ASIC miners to the Company’s mining facility in Hardin, MT, all of which were delivered as scheduled.

 

In addition to the initial 4,000 miners delivered to the Hardin facility in February, Bitmain has shipped another 22,960  miners to Hardin. Marathon has received over 26,900  miners as of September 30, 2021 and subsequent to quarter end increased its active mining fleet to approximately 25,272  miners, generating approximately 2.74  EH/s.

 

As of September 30, 2021, approximately $185.6 million cash paid for Miners was recorded as a deposit on the balance sheet.

 

On May 21, 2021, the Company entered into a binding letter of intent with Compute North, LLC to host 73,000 Bitcoin Miners over a staged in implementation between October 2021 and March 2022. The hosting cost is $0.50 per machine per month and the hosting rate will be $0.044 per kWh. In order to build out the infrastructure without paying for the capital expenditure, the Company will provide an 18 month bridge loan to Compute North of up to $67 million dollars, in tranches, based upon specified requirements being met. The terms of the contract are limited to three years with increases thereafter capped at three percent per year thereafter. The Company has also agreed to pay up to $14 million in expedite fees for construction/electrical and supply chain expediting activities. As of September 30, 2021, the Company paid $8 million of the $14 million in expedite fees recorded as a deposit on the balance sheet. On September 3, 2021, the Company entered into a master agreement with Compute North, LLC pursuant to which the Company is paying an initial deposit of $14.6 million in the aggregate over five installments. As of September 30, 2021, the Company paid $9.1 million of the $14.6 million initial deposit recorded as a deposit on the balance sheet.

 

The components of property, equipment and intangible assets as of September 30, 2021 and December 31, 2020 are:

    Useful life
(Years)
    September 30, 2021     December 31, 2020  
Website     7       121,787     $ 121,787  
Mining equipment     5       98,863,798       12,989,318  
Construction in Progress     N/A       9,389,419       10,593,575  
Mining patent     17       1,210,000       1,210,000  
Gross property, equipment and intangible assets             109,585,004       24,914,680  
Less: Accumulated depreciation and amortization             (14,703,757 )     (6,687,957 )
Property, equipment and intangible assets, net           $ 94,881,247     $ 18,226,723  

 

The Company’s depreciation expense for the three months ended September 30, 2021 and 2020 were $4.3 million and $787,689, and amortization expense were $18,483 and $17,794 for the three months ended September 30, 2021 and 2020, respectively. The Company’s depreciation expense for the nine months ended September 30, 2021 and 2020 were $8.0 million and $1.8 million, and amortization expense were $54,071 and $53,382 for the nine months ended September 30, 2021 and 2020, respectively.