MARAMARA Holdings

Consistent with your response in the letter dated July 2, 2019, please clarify your business model as to your patent licensing business and assets.

We have determined that the likelihood of any success on the merits of the litigation is more remote as time elapses and thus did not include disclosure regarding the patent licensing business and assets. The value of these patents was less than $1 million as of December 31,

2021 and thus not material to our current business. Management completed its final review of these patents during the first quarter of

2022 and determined that there is no longer any value to these patents and thus has written off these patents as of March 31, 2022.

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In order to satisfy your comment, we will provide this explanation in our Quarterly Report on Form 10-Q for the quarter ended March 31,

2022 (“First Quarter 10-Q”).

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Please ensure that all of your disclosures are updated. For example, you state that you have no long-term debt, but we note the convertible notes payable on your balance sheet as of December 31, 2021. You also state on page 21 that you do not currently own, and do not have any current plans to seek, any patents in connection with your existing and planned blockchain and cryptocurrency related operations, but we note

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from your disclosure on page F-14 that your intangible assets include the Crypto Currency Patent. In addition, on page 26, you indicate that the current fixed reward on the bitcoin network is 12.5 bitcoins per block, but the reward has decreased by half to become 6.25 bitcoins around May 10, 2020.

Prospectively, we will clarify that there is debt unrelated to the satisfied Bi-Coastal Note. We will revise the referenced sentence as follows (new language underlined): On May 20, 2020, the Company amended its note, originally dated August 31, 2017, with Bi-Coastal Consulting Defined

Benefit Plan to reduce the conversion price to $0.60 per share. The current principal balance of the Note was $999,105.60 and accrued interest was $215,411.30. The Company agreed to the reduction in the conversion price from $0.80 to $0.60 to incentivize the Note holder to convert the Note to common stock.

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As the Note has been fully converted to common stock, the Company has no Long-Term debt arising from this Bi-Coastal note. However, as of December 31, 2021 and March 31, 2022, the Company had long term debt arising from its November

2021 bond offering in the amount of $728,405,922 and $729,376,808 respectively.

As to your comment on page 21, we will revise the referenced sentence in the First Quarter 10-Q as follows (new language underlined): We do not currently own, and do not have any current plans to seek, any patents in connection with our existing and planned blockchain and cryptocurrency related operations. The Company had one legacy asset on its books as of December 31, 2021, and upon subsequent review by management, it has been determined that this asset has no carrying value and has been written off as of March 31, 2022.

to your comment on page 26, we will revise the referenced sentence in the First Quarter 10-Q as follows (new language underlined): For example, the current fixed reward on the bitcoin network for solving a new block is six and one quarter (6.25) bitcoins per block, which decreased from twelve and a half (12.5) bitcoins per block in May 2020. It is estimated that the number of bitcoins per block will halve again in about four (4) years.

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We believe that adjusting for impairment of mined cryptocurrency does not provide useful information to investors in light of your strategy to hold bitcoin as a long term investment and sell bitcoin in future periods as needed to generate cash for treasury management and other general corporate purposes, in addition to the recurring nature of this charge.

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Please revise to remove this adjustment from your computation of non-GAAP measures. Refer to Rule 100 of Regulation G.

appreciate the Commission’s comments, and we will change the information provided in the tables on pages 43 and 44 in all future filings, starting with the First Quarter 10-Q, to address this comment as well as comments #4 and #5 set forth below. Specifically, on a prospective basis, we are going to change the reconciliation of GAAP net income to adjusted net income to exclude any “add-back” of cryptocurrency impairment and any amounts related to depreciation and amortization.

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We are also going to add in the income tax effects of any adjustments to that reconciliation, a draft copy of which (as of December 31, 2021) is enclosed as Exhibit 1. We also intend to replace the table on page 43 (Reconciliation of non-GAAP income from operations) with a reconciliation of GAAP net income to a Non-GAAP measure of “Adjusted EBITDA”. This specific metric is widely used by investors to evaluate business operations before interest expense, taxes and depreciation and amortization.

digital holdings, Inc.

Tele 703.232.1701 believe that this combination of reconciliations from GAAP net income to Non-GAAP measures is important when taken together with the

GAAP financial results in that they provide a meaningful view of earnings performance for management and investors. We believe that these

Non-GAAP measures provide meaningful information to investors about the Company’s performance because they eliminate certain items not associated with current-period transactions and other significant discrete items that might impact the comparison of period-to-period results.

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Please tell us the nature of the non-GAAP adjustment for server maintenance contract amortization. Explain why you believe that adjusting for this item is useful information to investors as it appears to represent a normal, recurring, operating expense. Refer to Item 10(e)(1)(i)(C) of Regulation S-K and Question 100.01 of the Compliance and Disclosure Interpretations on Non-GAAP Financial Measures.

Please refer to the response for Comment 3 set forth hereinabove which is incorporated by reference herein in its entirety as if fully set forth as part of this response. Read in the reply ↗

Please tell us what consideration you gave to providing for the income tax effects related to the adjustments to arrive at non-GAAP net income and non-GAAP diluted earnings per share. Refer to Question 102.11 of the Compliance and Disclosure Interpretations on Non-GAAP Financial Measures.

refer to the response for Comment 3 set forth hereinabove which is incorporated by reference herein in its entirety as if fully set forth Read in the reply ↗

Please revise to describe and quantify the significant factors affecting the changes in cost of revenues in each of the periods presented. Refer to Item 303(b) of Regulation S-K.

Cost of revenues were $33.7 million in 2021, an increase of $26.7 million from the prior year. This increase was largely attributable to our placing over 30,000 Antminer S19 mining servers into service during 2021 and resulting increases in depreciation expense ($14.8 million) and increased operating costs (primarily power costs and hosting fees) related to the significant increase in the Company’s bitcoin mining activities. Cost of revenues were $7.0 million in 2020, an increase of $4.5 million from the prior year.

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This increase was largely attributable to the Company placing into service over 2,000 mining servers during 2020 and related increase in depreciation expense ($3.0 million) and operating costs.

propose to provide this level of detail prospectively starting with the First Quarter 10-Q.

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Please revise to provide quantitative and qualitative analysis of the underlying reasons for the material changes in operating, investing, and financing cash flows. Your discussion should focus on the primary drivers and other material factors necessary to understand your cash flows in addition to the indicative value of your historical cash flows.

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Refer to Item 303(b) of Regulation S-K and Section IV.B.1 of SEC Release No. 33-8350.

The revised disclosure is as follows for the year ended December 31, 2021, although as stated below, we would propose to include this disclosure prospectively.

Cash and cash equivalents increased to $268.5 at December 31, 2021 from $141.3 million at December 31, 2020. The increase in cash and cash equivalents was primarily driven by significant increases in capital markets activities as the Company expanded its bitcoin mining operations.

The sources of the increases in cash included proceeds from the issuance of convertible debt ($728.8 million) and proceeds from the issuance of common

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stock, net of issuance costs ($312.2. million). These sources of cash were partially offset by increases in cash used for investing activities associated with the scaling of our operations, including deposits for the purchase of bitcoin mining servers ($435.1 million), purchase of property and equipment, primarily bitcoin mining servers ($273.9 million). In addition, we purchased investment securities

($150 million), and experienced an increase in loans receivable ($30 million). Cash flow from operations during 2021 was a use of cash of $18.2 million.

and cash equivalents totaled $141.3 at December 31, 2020, an increase of $140.6 million from December 31, 2019. The increase in cash and cash equivalents was primarily driven by proceeds from the issuances of common stock, net of issuance costs ($229.2 million), partially offset by increases in cash used for investing activities associated with the scaling of our operations, including deposits for the purchase of bitcoin mining servers ($65.6 million) and purchase of property and equipment, primarily bitcoin mining servers ($17.7 million). Cash flow from operations during 2020 was a use of cash of $7.8 million intend to provide disclosure similar to this information prospectively, starting with our First Quarter 2022 10-Q.

Notes to Consolidated Financial Statements - Note 1 - Organization and Description of Business Organization, page F-8

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Please provide us with your detailed accounting analysis of whether the series of agreements entered into in October 2020 related to the Hardin Station are or contain leases under ASC 842. Also address the power purchase and data facility services agreements as part of your analysis. In addition, tell us and disclose how the build out costs are being paid for.

In

February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), and has since issued amendments thereto, related to the accounting for leases (collectively referred to as “ASC 842”). ASC 842 establishes a right-of-use, or ROU, model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. Effective January

1, 2019, the Company adopted ASU 842.

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The Company determines if an arrangement contains a lease at inception based on whether or not the Company has the right to control the asset during the contract period and other facts and circumstances.

On

October 6, 2020, the Company entered into the following agreements associated with the Hardin, Montana facility: (1) A ground lease agreement with Rocky Mountain Power, LLC (“Rocky Mountain”). This agreement required the Company to enter into a power purchase agreement with Big Country Datalec, LLC, (“Big Country”) in lieu of lease payment to Rocky Mountain. In addition, the Company entered into a data facility services agreement with Liefern, LLC. (Liefern). Liefern, Big Country and Rocky Mountain are affiliated companies.

The goal of these agreements was to establish a bitcoin mining facility on the 11-acre site, known as the Hardin Generating Station, whereby Marathon would purchase the power generated from the coal plant at a fixed price to run the deployed mining servers, which the

Company owns outright, from Big Country in conjunction with having data facility services provided by Liefern, as on-site technical service providers.

Pursuant to the power purchase agreement, the Company, at the Company’s sole cost and expense, designed, developed, constructed, owns, operates and maintains the power distribution equipment and any interconnection equipment (the “build-out”) located at the Hardin

Generating Station on the land leased from Rocky Mountain to receive the contracted energy detailed in the power purchase agreement (up to 100 MW). The build-out was comprised of forty-four (44) containers (capable of operating approximately 17,400 mining servers or approximately

396 mining servers per container) and a data building (capable of operating approximately 13,100 mining servers). All build-out costs incurred were accounted for as construction in progress on the balance sheet until the mining servers were energized and placed into service. The Company paid for the build-out utilizing proceeds raised from debt and equity issuances during 2020 and 2021.

to the ground lease, the Company has the ability to operate its mining servers on approximately 11 acres of land owned by Rocky Mountain.

However, there are no lease payments associated with the ground lease. In determining the impact of the lease, the Company reviewed various comparable ground leases in the Big Horn County / Hardin, Montana area and identified cash lease rates range from $5 to $100 per acre depending on level of development of the land. As a result, Management concluded that although the ground lease qualifies as a lease pursuant to ASC 842, the ground lease, on a stand alone basis, was immaterial and as a result it did not record an ROU asset or liability for the ground lease.

Subsequent to December 31, 2021, the Company has negotiated to terminate the three agreements effective third quarter of 2022, so it does not believe that any accounting disclosure updates are material or mandated for this ground lease.

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Please provide us with your detailed accounting analysis of whether the agreement with Compute North, LLC entered into on May 21, 2021 is or contains a lease under ASC 842. Also provide your evaluation under ASC 842 of the hosting agreements with Compute North, LLC.

Management has determined the cohosting agreements with Compute North are not leases. Compute North provides colocation, management and other services

(the “Services”) for the Company’s cryptocurrency mining hardware (the “Mining Equipment”) identified in the agreements. Compute North provides Services consistent with its customer handbook (available at www.computenorth.com/handbook-sla.pdf).

Compute North provides colocation services for the Company’s mining equipment at a facility provided with electricity and network connectivity as well as managed services.

According to the Financial

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Accounting Standards Board (FASB), a lease is a contract that “conveys the right to use an identified asset for a period of time in exchange for consideration.” documented in the Compute North agreements, there is no specific space / location defined, but a set amount of power for our mining equipment to consume. Compute North may regularly add or delete servers they host and move customers as needed. In addition, all of the mining equipment assets are owned by the Company. As such, the Company determined that the cohosting agreements are not leases and as such the accounting treatment of expensing the costs associated with consumption of energy as a normal operating cost of revenue is appropriate.

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We note that you own 82% of the equity in the Marathon Compute North 1 LLC joint venture (the "LLC") with Compute North and the LLC has entered into a hosting agreement with Compute North to host bitcoin miners. Explain and disclose how you are accounting for the income from this hosting arrangement.

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Tell us whether you own these bitcoin miners and if they are subject to the hosting agreement between the Company and Compute North.

hosting arrangement was not in effect in 2021, and we anticipate that this arrangement will not go into effect until mid-2022. The Company owns the bitcoin miners which are subject to the hosting agreement between the Company and Compute North. The LLC intends to recognize revenue in accordance with ASC 606 in the same fashion that the Company is currently recognizing revenue. Please note that this arrangement, once fully operational, is expected to account for a relatively small percentage (approximately three percent) of the Company’s current fleet of miners. Read in the reply ↗

Please tell why you believe pricing of BTC on a nightly basis is the proper time to use in the quantitative impairment test of the mined BTC balances as well as for the recordation of daily revenues. Cite the literature that supports your accounting. Refer to ASC 35030-35-20.

mining of Bitcoin (“BTC”) is a continuous process, with computers running calculations 24 hours per day, 7 days per week in support of the bitcoin blockchain, verifying transactions and adding verified “blocks” of transactions to the blockchain.

When the mining pool in which the Company participates solves the equation to verify a block, that block is added to the Bitcoin blockchain and the pool is rewarded BTC in return. Blocks are added to the bitcoin blockchain on average every 10 minutes. The Company uses daily pricing for the proper recordation of revenues.

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The Company aggregates all BTC rewarded in any given day and records revenue in USD at the prevailing market price at the end of the day. Management utilizes various pricing sources, including those readily available to the general public (including Messari.io, Yahoo Finance and Blockchain.com) to ensure the reasonableness of its position.

has examined various factors surrounding the substance of the Company’s operations and the available guidance published for public company accounting practices in Accounting Standards Codification in arriving at its accounting treatment. Pursuant to ASC 350, the Company accounts for the BTC received from its mining operations as indefinite-lived intangible assets on its balance sheet. An intangible asset with an indefinite useful life is not amortized, but rather is assessed for impairment annually, or more frequently, when events or changes in circumstances occur which indicate that it is more likely than not that the indefinite lived asset is impaired. Impairment exists when the carrying amount exceeds its fair value.

performing the quantitative impairment test of the mined BTC balances, the Company utilizes the daily price of BTC from the same indices utilized for daily revenue recognition. Management believes that this method, which is consistently applied on a daily basis over applicable reporting periods, complies with ASC 350 in that would not result in a material difference from valuations used earlier in the day. The company also believes that this method provides a fundamental consistency in applying GAAP to this continuous process.

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We note that you changed the estimate of the expected life of transaction verification servers from two years to five years subsequent to December 31, 2020. Please revise to disclose the effect of this change in accounting estimate. Refer to ASC 250-10-50-4.

Company decided to change the depreciable life of our transaction verification servers in January 2021 primarily as a result of its decision to discontinue the use of older vintage “S-9” miners (which operated at speed of 13.5 terahash/second) with newer generation

“S-19” miners (which operate at 100 terahash/second). The older miners were removed from service and subsequently sold. Given the significant change in the makeup of our fleet and the enhanced speed of the new servers, Management concluded that it was appropriate to extend estimated the useful life of these new servers.

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The effect of this change in accounting was to reduce depreciation expense by approximately $12.7 million and to therefore increase book value by a like amount as of December 31, 2021. The Company will prospectively revise its filings to include a discussion of the effect of this change.

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Please explain how you are accounting for your limited partnership agreement with NYDIG Digital Assets Fund III, LP and cite the authoritative accounting guidance relied upon. Also explain how the Fund was established and describe the general terms of the agreement. We note that you own 100% of the limited partnership interest.

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Address whether the general partner or any other parties also hold any interests in the Fund. Explain the rights and responsibilities of the general partner and investment manager in more detail. Please also address whether the agreement provides you with substantive kick-out or participating rights. In addition, please provide us with your detailed accounting analysis of how the Fund qualifies as an investment company for accounting purposes under ASC 946. Refer to ASC 946-10-15.

ASC 810, as the Company invests in an entity, identified as an investment company as defined under GAAP (i.e., NYDIG Digital Assets Fund

III, LP, “DAF III,” or “the Fund”), the Company must determine whether DAF III is a variable interest entity

(“VIE”) and if so, whether the Company should consolidate DAF III as its primary beneficiary.

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Our evaluation is as follows:

○

Is the Fund being evaluated a legal entity (ASC 810-10-15-4)?

YES

Does a scope exception from consolidation guidance (ASC 810-10-15-12) apply?

NO a VIE scope exception apply (ASC 810-15-17)?

the reporting entity have a variable interest in the Fund (ASC 810-10-15-16 through 55-41))?

– the Company has an equity interest in DAF III the Fund a VIE under ASC 810-10-55-14? YES – power to direct activities of DAF III that most significantly impact the Fund’s economic performance lie with the General Partner and not with the Company;

Company does not have kick-out rights over the General Partner.

MARA the primary beneficiary (i.e., does MARA have both power and benefits (ASC 810-10-25-38A through 25-38J))?

– the Company is a Limited Partner with no kick out rights over the General Partner.

there a single decision maker or is power shared (ASC 810-10-25-42)?

General Partner is the single decision maker for DAF III.

the General Partner have benefits (considering both direct and indirect interests) (ASC 810-10-25-42)?

the GP’s (as decision maker) related party group collectively have the characteristics of the primary beneficiary (ASC 810-10-25-43 through 25-44B)?

CONCLUSION:

No party consolidates DAF III.

part of the analysis, the Company acknowledges that ASC 946 requires investment companies to report their investment assets at fair value in accordance with the principles of ASC 820. ASC 820-10-35-59 states “a reporting entity is permitted, as a practical expedient, to estimate the fair value of an investment using the net asset value per share of the investment, if the net asset value per share of the investment is calculated in a manner consistent with the measurement principles of ASC 946 as of the reporting entity’s measurement date”. Thus, we have adopted this accounting treatment for these assets. The Company also wants to ensure that the Staff distinguishes treatment of DAF III as an investment company from any legal analysis of whether the Company is an investment company under the Investment

Company Act of 1940. The Company confirms that based on the facts and strategy, that it is not an investment company under the legal analysis under the ’40 Act.

Also explain how the Fund was established and describe the general terms of the agreement.

Fund is a limited partnership formed under the laws of the State of Delaware on January 21, 2021. Shortly thereafter, the Fund commenced operations with an initial capital contribution of $200 million from Marathon Digital Holdings, Inc. (the “Limited Partner”).

The capital contribution was made in cash and sourced from the proceeds of a recent debt issuance by the Limited Partner, not from its mining activity. The Limited Partner subsequently redeemed $50 million in cash. The Fund is governed by a limited partnership agreement

(as amended from time to time, the “Partnership Agreement”) between the Limited Partner and the Fund’s general partner

(the “General Partner”). The Partnership Agreement sets forth, among other things: (i) the various rights and obligations of the Limited Partner and the General Partner; (ii) capital accounts, including initial and additional capital contributions thereto and withdrawals therefrom; (iii) fees and expenses borne by the Fund or other parties, such as the General Partner; (iv) management of the Fund; and (v) certain matters relating to reporting and governance.

note that you own 100% of the limited partnership interest. Address whether the general partner or any other parties also hold any interests in the Fund.

Correct, the Limited Partner owns 100% of the limited partnership interest. The General Partner’s interest is non-economic (i.e., the General

Partner is not entitled to the Fund’s profits or losses or distributions of the Fund’s assets upon liquidation). No other parties have an interest in the Fund; however, other parties may invest in the Fund in the future, in accordance with the terms of the

Partnership Agreement.

Explain the rights and responsibilities of the general partner and investment manager in more detail.

General Partner has overall responsibility for the management, operation and administration of the Fund and is responsible for its investment activities, and it has the authority to delegate its responsibilities in whole or in part. For example, the General Partner has delegated day-to-day management and investment decision-making responsibilities to the Fund’s investment manager (the “Investment Manager”).

Among other things, the Investment Manager is responsible for carrying out an investment program in furtherance of the Fund’s investment objective, which is (i) primarily to invest in bitcoin, a digital asset, and (ii) secondarily, if and as applicable, to reasonably capture the value of any other digital assets that may be granted to the Fund as a result of forks or airdrops that have material value and are accessible to the Fund. The Limited Partner has no right or power to take part in the management of the Fund, and it entrusts all aspects of the management of the Fund to the General Partner and the Investment Manager.

also address whether the agreement provides you with substantive kick-out or participating rights.

o

Kick-out

Rights.

ASC

810-10-20 (VIE) defines kick-out rights as “the ability to remove the entity with the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance or to dissolve (liquidate) the VIE without cause.”. The Partnership

Agreement does not provide the Limited Partner with the ability to unilaterally remove the General Partner, either directly or indirectly

(e.g., by unilaterally amending the Partnership Agreement). Although the Limited Partner may effectively liquidate the Fund by withdrawing in whole, such a withdrawal would not necessitate dissolution of the Fund. We would not expect the Limited Partner and/or its advisors to conclude that the Limited Partner has substantive kick-out rights with respect to the Fund.

Participating

810-10-20 (VIE) defines participating rights as “the ability to block or participate in the actions through which an entity exercises the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance. Participating rights do not require the holders of such rights to have the ability to initiate actions.” The Partnership Agreement does not allow the

Limited Partner to either block or participate in significant financial and operating decisions of the Fund that are made in the ordinary course of business. Therefore, we would not expect the Limited Partner and/or its advisors to conclude that the Limited Partner has substantive participation rights with respect to the Fund addition, please provide us with your detailed accounting analysis of how the Fund qualifies as an investment company for accounting purposes under ASC 946. Refer to ASC 946-10-15.

946-10-15-6 states than an entity must have the following fundamental characteristics to be an investment company:

It is an entity that does both of the following:

a.

Obtain funds from one or more investors and provide the investors with investment management services.

b.

Commits to its investors that its business purpose and only substantive activities are investing in funds solely for returns from capital appreciation, investment income, or both.

Fund obtained funds from and provides investment management services to one or more investors and the Fund’s investment objective is to invest in bitcoin, a digital asset, solely for returns from capital appreciation, investment income, or both.

entity or its affiliates do not obtain or have the objective of obtaining returns or benefits from an investee or its affiliates that are normally attributable to ownership interests or that are other capital appreciation or investment income.

ASU

2013-08 states that if an entity obtains returns or benefits from an investee that are disproportionate or not attributable to ownership interests, then the entity holds that investment for operating or strategic benefits that are not consistent with the business purpose and activities of an investment company. The Fund’s private placement memorandum indicates that income and appreciation/depreciation of investments will be shared by all investors in proportion to their capital account balances.

946-10-15-7 further states that in addition to the above, an entity should assess whether it has the following typical characteristics of an investment company:

More than one investor - The Fund has one investor and could have additional investors in accordance with the terms of the Partnership

Agreement.

than one investment - The Fund could have more than one investment in the event of a hard fork or airdrop.

Investors that are not related parties of the parent entity (if there is a parent) or the investment manager - Yes, the Fund has an investor that is not a related party of the General Partner or the investment manager.

Ownership interests in the form of equity or partnership interests - Yes, the Limited Partnership interests represent equity ownership of the Fund.

Substantially all investments are managed on a fair value basis - Yes, all investments within the Fund are managed on a fair value basis.

946-10-15-8 further states that “to be an investment company, an entity shall possess the fundamental characteristics in paragraph

946-10-15-6. Typically, an investment company also has all of the characteristics in paragraph 946-10-15-7. However, the absence of one or more of those typical characteristics does not necessarily preclude an entity from being an investment company. If an entity does not possess one or more of the typical characteristics, it shall apply judgment and determine, considering all facts and circumstances, how its activities continue to be consistent (or are not consistent) with those of an investment company.”

Other

Considerations:

accordance with ASC 946-10-55-4, the Fund does not have material substantive activities other than its investing activities and does not have significant assets or liabilities other than those relating to the investing activities.

Fund’s private placement memorandum clearly articulates its business purpose and substantive activities, categorized as investment company activities.

Fund’s purchase of approximately $150M of bitcoin with an objective of selling the bitcoin in the future for capital appreciation is considered investing activities consistent with those of an investment company.

A purchase of $150M of bitcoin is large relative to liquidity in the market and requires expertise that is unrelated to mining activity conducted by the Limited Partner, and the Investment Manager exercised meaningful discretion in determining the manner in which to execute the purchase.

Limited Partner’s 2021 Form 10-K discloses that “We expect to purchase additional bitcoin held by the investment fund in future periods, though we may also sell bitcoin in future periods as needed to generate cash for treasury management purposes.” consideration of Q&A #11 of the AICPA Practice Aid - Accounting for and Auditing of Digital Assets, that discusses whether participation in digital asset activities (e.g., mining activities) disqualify an entity from classification as an investment company within the scope of ASC 946, the Limited Partner’s business activities which involve devoting resources to mining in order to obtain digital assets in return for providing computing resources to the blockchain, are inconsistent with those of an investment company, and are separate and distinct from the Fund’s operations and business purpose.

distinction is substantiated by the fact that the initial subscription was made in cash, not mined bitcoin, subsequent to a registered debt offering whereby the Limited Partner raised $250M in January 2021.

Additionally, the bitcoin mined by the Limited Partner is directed to wallets unrelated to the Fund.

c.

Also, there is no pattern of contribution of mined bitcoin to the Fund.

d.

Lastly, the Limited Partner views the investment in the Fund as connected primarily to corporate treasury management, not to mining activity.

Limited Partner’s management and shareholders value the fact that (i) the General Partner, the Investment Manager and their respective affiliates have sophisticated capabilities and, with the Limited Partner’s consent, could amend the investment strategy in the future to include additional investment strategies; (ii) the bitcoin held as a treasury asset is custodied by a third-party, selected by the Investment Manager, with a SOC 1 Type 2 report from a Big 4 accounting firm; (iii) the Fund is independently administered by a third party; and (iv) the Fund is independently audited by a Big 4 accounting firm.

Fund has no income generated through non-investment activities and only income/loss generated from capital appreciation, investment income, or both.

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Please clarify when you recognize revenue. Your disclosure states that you recognize revenue at the date you receive confirmation of the consideration you will receive; however, you also state that you measure the non-cash consideration at fair value on the date received. Tell us the time frame between confirmation of the consideration and the receipt of the consideration.

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Explain how you recognize revenue before you have determined the fair value. Also tell us how you comply with ASC 606-10-32-21 to 32-24. That is, please provide us with your analysis of how you comply with the requirement to recognize the estimated fair value of the non-cash consideration at contract inception.

Company recognizes revenue under ASC 606, Revenue from Contracts with Customers. The core principle of this 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.

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The mining of Bitcoin (“BTC”) is a continuous process, with computers running calculations 24 hours per day, 7 days per week in support of the bitcoin blockchain, verifying transactions and adding verified “blocks” of transactions to the blockchain. When the mining pool in which the Company participates solves the equation to verify a block, that block is added to the Bitcoin blockchain and the pool is rewarded BTC in return. Blocks are added to the bitcoin blockchain on average every 10 minutes, and each new block is a new contract / performance obligation. The time between contract inception and receipt of consideration, as it relates to a mining pool, is therefore not materially different.

Company utilizes custodian services, provided by NYDIG, related to allocating and disbursing the pool rewards after they are earned by the pool. The mining rewards (in the form of BTC) are allocated to pool participants based on the proportion of hashrate contributed to the pool per participant at the time of the reward. NYDIG confirms this allocation among pool participants within 24 hours of a block reward. As bitcoin’s blockchain operates 24 hours a day, 365 days a year, in the case where the pool receives mining rewards when there is a federal holiday or over the weekend (Saturday/Sunday), NYDIG sends the respective earnings report on the next available business day. Once participants confirm the NYDIG calculations, the mining rewards are sent to each participants digital wallet, at that time upon constructive receipt, the Company will then effectively recognize revenue using the closing price during that respective day multiplied by the bitcoin rewards received. The Company aggregates all BTC rewards confirmed in any given day and records revenue in USD at the prevailing market price at the end of the day. Management utilizes various pricing sources, including sources readily available to the general public (Messari.io, Yahoo Finance and Blockchain.com) to ensure the reasonableness of our assessment of valuation and we periodically review or back check this assumption for reasonableness.

will prospectively change our disclosure as necessary to eliminate any ambiguity as to our revenue recognition process.

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Please clarify whether some or all of your mining activity is conducted with other third party pool participants and collectively provides transaction verification services to the blockchain network through a pool operator. If so, clearly disclose the reward sharing mechanism you select when participating in mining pools. Explain how you are accounting for any fees retained by the pool operator.

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In addition, tell us and disclose the amount of rewards earned from mining separately from fees earned for transaction verification.

Company began operating its own mining pool in May 2021. Prior to participating in the Company’s own mining pool, the Company’s miners contributed hashrate to F2Pool. BTC earned by the pool are allocated to pool participants based on the proportion of hashrate contributed to the pool per participant at the time of the reward. From May 2021 to December 2021, the Company’s miners contributed approximately 94% of the pool’s total hashrate, with 3rd party operators contributing approximately 6%.

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This allocation is calculated daily, with NYDIG providing the Company and any pool participants reporting of the amount of contributed hashrate generated by their respective mining servers along with proposed payout ratios. In addition to mining within the pool, the Company, as pool operator, recognizes approximately 0.5% of any block reward as pool fee revenue. This fee is subtracted from BTC rewarded prior to the allocation of the BTC reward among the pool participants based on contributed hashrate. Using the data above and allocating it to a single block reward, an example follows:

Pool

Operator fees

0.03

BTC

(0.5% of 6.25 BTC)

Company allocation

5.85

(94% of 6.22 BTC)

3rd

Party Miners

0.37

(6% a result, mining revenues are recorded net of any pool fee, not gross, with an offsetting cost of revenue.

addition to the block rewards and pool operator fees, transaction verification fees are awarded per block reward and vary in amount.

Per ycharts.com (https://ycharts.com/indicators/bitcoin_average_transaction_fee), the average transaction fee as of April 20,

2022 is approximately $1.292 USD per transaction processed. For the eight-month period the Company operated its pool, transaction fees earned by the mining pool was approximately 2.55% of all bitcoin revenue recognized by the mining pool prior to distribution of mining rewards (including transaction fees) to pool participants.

will prospectively disclose the sharing mechanisms and sources of revenue in our MD&A disclosure.

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We note from disclosures elsewhere in your filing that you operate your own bitcoin mining pools. Explain to us and disclose how you recognize revenue as a pool operator. Ensure your disclosure addresses the nature, amount, timing, and uncertainty of revenue and cash flows arising from these arrangements.

see the response to question 15 above. Revenue recognized as a pool operator was less than $1 million in 2021. It is also worth noting for future disclosure that the Company is in the process of eliminating all 3rd party miners from its pool and we expect this transition to be completed during the second quarter of 2022.

connection with responding to the Staff’s comments, the Company acknowledges that (i) it is responsible for the adequacy and accuracy of the disclosure in its filing; (ii) staff comments or changes to disclosure in response to staff comments do not foreclose the Commission

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from taking any action with respect to the filing; and (iii) it may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

hope you find that this response answers the staff’s questions, but please contact the undersigned at 725-210-5114 or at hugh@marathondh.com if you have any further questions or would like to discuss our response.

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Please explain the basis for classifying the realized gain on the sale of digital currencies outside of loss from operations within other income/expenses. Cite the authoritative accounting literature that supports your accounting.

2021, the Company entered into an agreement (analogous to a sponsorship agreement) to pay a developer, who worked on the bitcoin blockchain, for which work the Company did not receive any economic benefit, $8,000 per month in bitcoin (which payment occurred

10 times). The term of the agreement was less than one year, and the work done was not related to the Company’s core business of bitcoin mining.

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Due to the timing of the transactions and the volatility in the price for bitcoin, the Company had a realized gain on the disposition of the bitcoin of approximately $14,000 during the twelve months ended December 31, 2021. Due to the nature of the services not being related to the Company’s core business, the immaterial amount of the gain and the short timeframe of the arrangement, management concluded that these payments were non-operating expenses.

States Securities and

Exchange Commission

Page

The

Company considers any business expense that is not related to the company’s core business operations a non-operating expense. The treatment of this type of expense would fall under FASB 220-10-S99-2(9) – Regulation S-X Rule 5-03, income statements, which states:

“State separately in the income statement or in a note thereto amounts of (a) losses on securities (net of profits) and (b) miscellaneous income deductions. Material amounts included under miscellaneous income deductions shall be separately stated in the income statement or in a note thereto, indicating clearly the nature of the transactions out of which the items arose.”

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We note that you loaned bitcoin to NYDIG under the Master Securities Loan Agreements and the balance is classified as digital currencies, restricted on the balance sheet. Please describe the material rights and obligations of both parties to the borrowings. Explain how you are accounting for the borrowed bitcoin and the collateral.

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In addition, please provide the basis for your classification of the interest received on the bitcoin loans in your statement of cash flow. Cite the authoritative accounting literature that supports your accounting.

Each of the loans is documented under a standard Securities Industry and Financial Markets Association form of Master Securities Loan Agreement

(“MSLA”) with modifications made to accommodate digital assets and cross-default and set-off provisions. Per the MSLA, the parties have agreed that, until the loaned digital assets are required to be redelivered to the lender upon termination of a loan, the borrower has all of the incidents of ownership of the loaned digital assets, including the right to transfer the loaned digital assets to others.

Rest of the answer

For each loan, (i) loan fees are paid monthly on the monthly anniversary of the trade date; (ii) the loan is uncollateralized;

and (iii) either party may terminate the loan at any time with no early termination fee, penalty or make-whole.

believe that bitcoin should accounted for by the Company as a non-financial asset under ASC 350-10-40-1 and therefore subject to the derecognition guidance in ASC 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets. In this case, the

Company does not meet the derecognition criteria, as control has not transferred to the borrower. There is no collateral and thus no accounting treatment for collateral. Interest income earned on the non-financial asset is subject to treatment under ASC 835-10 and ASC 835-30.

Please also note that the Company has determined that it will no longer engage in these transactions with NYDIG and is preparing to terminate the MSLA.

Read in the reply ↗

We note that, on December 21, 2021 and December 30, 2021, you entered into two separate Simple Agreement for Future Equity (“SAFE”) agreements. Please describe the material rights and obligations of these agreements. Also provide us with your comprehensive analysis to support your accounting for these agreements with reference to the authoritative literature applied.

Rest of the question

Ensure that your response includes, but is not limited to, an analysis of why you reference the guidance in ASC 323, what consideration was given to the application of ASC 815, and how you assess impairment.

SAFEs are contractual rights to receive equity securities if certain criteria are met and thus regulated by the SEC under federal securities law. The FASB has not issued any authoritative guidance related to SAFEs. Management has determined the investment in a SAFE to be treated under ASC 323 as SAFEs behave more like equity than debt (i.e.:

there are no repayment obligations, accrued interest or fixed maturity).

Pursuant to ASC 323, Equity Method of Accounting for Investments, the initial investment in another company is recorded as an asset on the balance sheet at cost.

Rest of the answer

An equity method investment is valued as of a specific reporting date with any activity related to the investment recorded through the income statement. Investments are typically current assets if the Company intends to sell them within a year, however as SAFEs have no expiration date, the Company classifies these types of investments as a noncurrent asset due to the indefinite life of the conversion.

to ASC 815-40, entities must consider if SAFE investments classify as contracts that may be settled in its own stock; however, the Company is not the issuer in these scenarios, and is merely an investor, so it is not issuing its own stock.

Company evaluated these investments under guidance provided by ASC 815 and concluded that these investments are not derivatives, nor do they contain embedded derivatives.

SAFEs currently entered into are contractual agreements between unrelated third party entities and the Company, whereby the Company is granted the right to receive equity shares in the future if certain triggering events occur. As the investments made by the Company do not meet the above mentioned requirements to qualify as a derivative, they are not classified as derivatives under ASC 815.

Company confers, on a quarterly basis, with each of the unrelated third party entities in which it has invested as to whether any impairment of the fair value of the investment has taken place. The Company will also utilize an outside valuation specialist if it is deemed necessary.

Read in the reply ↗

We note your response to prior comment 11. Further explain how your policy of testing for impairment on a nightly basis complies with ASC 350. In this regard, consistent with ASC 350-30-35-19, you indicate that impairment exists when fair value is below carrying value, and ASC 350-30-35-18 indicates intangible assets should be tested for impairment at any time events or changes in circumstances indicate that it is

Rest of the question

more likely than not that the asset is impaired.

An indefinite-lived intangible asset is initially carried at the value determined in accordance with FASB ASC 350-30-30-1 and should be tested for impairment annually or more frequently if events or changes in circumstances indicate it is more likely than not that the asset is impaired. Paragraphs 18B and 18C in FASB ASC 350-30-35 provide examples of relevant facts and circumstances that should be assessed to determine if it is more likely than not that an indefinite-lived intangible asset is impaired.

Rest of the answer

For instance, a decline below cost in a quoted price on an exchange may be an event indicating that it is more likely than not that a cryptocurrency is impaired. If an impairment indicator exists and it is determined that the carrying amount of an intangible asset exceeds its fair value, an entity should recognize an impairment loss in an amount equal to that excess. After the impairment loss is recognized, the adjusted carrying amount becomes the new accounting basis of the intangible asset. Management referred to paragraphs 15–20 in FASB ASC 35030-35 for details on the subsequent accounting. In determining the fair value, management referred to ASC 820-10-35-6 which states: “If there is a principal market for the asset or liability, the fair value measurement shall represent the price in that market (whether that price is directly observable or estimated using another valuation technique), even if the price in a different market is potentially more advantageous at the measurement date”. Bitcoin is highly volatile and continuously traded 24 hours a day, 7 days a week with no specific closing price on any day. Since there is no recognizable cut off and bitcoin is constantly traded, the Company has concluded utilizing a standardized time on a daily basis to determine the closing price provides for consistency in evaluating impairment and eliminates any subjectivity as to when the impairment has occurred.

Read in the reply ↗

We note your disposition of digital currencies of $80,000. Tell us how this is reflected on the statement of cash flows. Provide an accounting analysis that supports your presentation, and explain the basis for any differences in the presentation from prior periods. Also, please tell us whether you lend your cryptocurrency or otherwise purchase forward contracts related to cryptocurrency.

Rest of the question

Tell us and disclose your accounting policy for such transactions, and cite the supportive accounting literature.

Disposition of digital currencies of $80,000 was related to transferring $8,000 worth of bitcoin each month for 10 months to the blockchain developer referenced above in Response #1, which cites the accounting analysis as well. Due to the lack of materiality and the unusual nature and subject matter of the transaction, we have included this item in “Changes in operating assets and liabilities: Digital

Currencies” on the cash flow statement, including the change in presentation from prior periods.

Rest of the answer

The Company relied on guidance provided by ASC 820-10-35-5 through 35-6A to determine the fair market value of the bitcoin transferred at the time the transfer occurred utilizing the public exchanges.

are currently loaning 600 bitcoin to NYDIG, which is the subject of Response #2 with appropriate accounting analysis contained therein.

Company is not currently purchasing forward contracts related to cryptocurrency.

Investment

Fund, page F-15

Introductory

Note to the responses with respect to the Investment Fund: The Company has recently determined to “collapse” this fund and hold all of its bitcoin directly in order to create a single combined source of collateral in anticipation of potential commercial debt financing in the future. The bitcoin formerly held in the fund is in the process of being transferred back to the Company and will be held directly on the Company’s balance sheet. We are in the process of terminating the fund (which we expect to be completed in the third quarter of this year), with the only assets remaining in the fund being approximately $500,000 in cash to be used to pay any invoices and fees as we unwind the fund. Our answers to the fund-related questions follow (anticipating this unwinding of the fund), and we wanted to make the Commission aware of this recent development.

Read in the reply ↗

You indicate in response to prior comment 13 that your capital contribution to the investment fund was made in cash. Please reconcile this to your disclosures on page F-11 indicating that you purchased BTC through an investment fund and on page 48 that the bitcoin was purchased and placed into the investment fund.

Rest of the question

In addition, please explain the disclosures throughout your filing indicating that you hold bitcoin in an investment fund, expect to purchase additional bitcoin held by the investment fund, and may sell this bitcoin in future periods to generate cash. Also address your press release on January 25, 2021 stating that you purchased $150 million in bitcoin. In this regard, you have represented that you own 100% of a limited partnership interest in an investment fund and that entity invests in and holds bitcoin.

to prior comment 13, the Company funded a $200 million capital contribution into the fund, and the fund purchased $150 million of bitcoin (with $50 million being refunded to the Company). As the Company owns 100% of the limited partnership interests in the fund, and the fund can be collapsed at any time, with the Company retaking direct ownership of the bitcoin in question, the Company, for all practical purposes, does own the bitcoin, even if technically indirectly through the fund of one.

Rest of the answer

Thus, the Company’s position is that it effectively purchased and owns the bitcoin and thus believes its disclosures are correct. This point is further manifested by the fact that the Company is currently in the process of “collapsing” the fund and re-taking direct ownership of the bitcoin in question.

Read in the reply ↗

We note your response to prior comment 13. Please provide us with your proposed revised accounting policy for your investment in the investment fund. That is, as previously requested, please address how you are accounting for your limited partnership interest in NYDIG Digital Assets Fund III, LP.

Company is not intending to revise its accounting policy for the investment in the investment fund. In addition, as discussed in more detail below the Company is actively collapsing the investment fund and anticipates the limited partnership interest in NYDIG

Digital Assets Fund III, LP to be dissolved by the end of the third quarter of 2022. Read in the reply ↗

You refer to ASC 810-10-25-38A through 25-38J in response to prior comment 13. Please further describe to us the design and purpose of NYDIG Digital Assets Fund III, LP (“DAF III”). Include in your response: (1) the basis for why you would fund 100% of the capital of DAF III, yet not retain any control over how that capital is deployed; (2) why the General Partner does not receive any economics in performance of its

Rest of the question

duties; (3) whether DAF III is designed to take on other investors; and (4) whether DAF III is designed to hold investments other than bitcoin.

fund’s purpose is to invest in bitcoin and to reasonably capture the economic value of any other digital assets that may be granted to the Fund as a result of forks or airdrops and that have material value and are accessible to the fund.

(1)

As previously noted, a purchase of $150 million of bitcoin is large relative to liquidity in the market and requires expertise that is unrelated to mining activity conducted by the sole Limited Partner (and the fund may not take on additional limited partners without the consent of its original limited partner, which is the Company), and the Investment

Rest of the answer

Manager exercised meaningful discretion in determining the manner in which to execute the purchase.

(2)

The General Partner is wholly owned by the Investment Manager, which receives compensation in the form of a management fee, thus the

General Partner is indirectly compensated through the Investment Manager.

(3)

As previously noted, the Fund is designed to, and the General Partner may, admit additional Limited Partners to the Fund, with the consent of the Limited Partner.

(4)

The Fund’s principal investment is in bitcoin; however, the Fund may have more than one investment in the event of a fork or airdrop (i.e., the Investment Manager has discretion over whether to access forks or airdrops that the Fund could potentially be eligible to receive). With notice to the Limited Partner and an opportunity for the Limited Partner to withdraw, the General Partner could amend the Fund’s investment strategy in the future to include additional investments and/or investment strategies.

Read in the reply ↗

Refer to your response to prior comment 13. Please identify for us the General Partner and Investment Manager and describe to us any related party relationships. In addition, provide us with your analysis of de facto agents pursuant to ASC 810-10-25-43. Further, and where applicable, explain what consideration was given to the remaining guidance in ASC 810-10-25-42 through 25-44B.

General Partner is NYDIG Digital Assets Fund III (GP) LLC, and the Investment Manager (“IM”) is NYDIG Asset Management LLC.

Neither the General Partner nor the Investment Manager is an affiliate of Marathon Digital Holdings, Inc. The Company does not view either of the GP or the IM as a related party or de facto agent under ASC 810. We reviewed the remaining guidance in ASC 810—25-42 through

25-44B and made a determination that such guidance was not relevant to our set of facts. Read in the reply ↗

In order to help us further evaluate your response to prior comment 13, please clarify which entity is the limited partner of the Fund and whether the limited partner is a consolidated subsidiary of the Company for all periods; clarify to whom the Other Considerations #5 in your response refers and how its expectation “to purchase additional bitcoin held by the investment fund in future periods” is consistent with

Rest of the question

your accounting conclusion; and identify the various parties invested in or involved with the Fund and their relationships as well as the source of the Fund’s bitcoin.

Company is itself the limited partner of the fund and is the sole limited partner. The other parties involved are the General Partner and Investment Manager identified above in our response to Comment # 9. The party to whom the Other Considerations # 5 refers to the

Company and the expectation is moot as disclosed above, the Company is to liquidate the fund in the near future. Read in the reply ↗

We note your response to prior comment 13 and continue to evaluate your analysis. Please provide us with a copy of the DAF III partnership agreement, the agreement with the Investment Manager, and any other pertinent agreements concerning the governance of DAF III.

Company has attached a copy of the DAF III partnership agreement (attached LPA and IMA). Read in the reply ↗

You indicate in response to prior comment 14 and in your disclosure on page 16 of your Form 10-Q for the quarterly period ended March 31, 2022 that you recognize revenue based on the closing price of BTC on the day of constructive receipt of the mining reward. We note that constructive receipt of the mining reward can be at least two days from contract inception.

Rest of the question

As previously requested, please tell us how you comply with ASC 606-10-32-21 to 32-24. That is, please provide us with your analysis of how you comply with the requirement to recognize the estimated fair value of the non-cash consideration at contract inception. In addition, please clarify the statement in your disclosure, “The value of the BTC rewards, utilizing the prevailing market prices at constructive receipt, is not materially different than the value recognized.” That is, how is there a difference in the value recognized if revenue is recognized based on the closing price of BTC on the day of constructive receipt.

Regarding the statement that the constructive receipt of the mining reward can be at least two days from contract inception, that statement is in reference to the actual transfer from the pool wallet to the customer wallets by the custodian, NYDIG of any bitcoin earned outside of normal business hours (i.e., on weekends). The bitcoin rewards that are earned during non-business hours are immediately deposited into the pool wallet and as such, recorded at the pool level as revenue on the same day a block is solved.

Rest of the answer

There is only a delay in the transfer from the pool wallet to the respective customers wallet (including the Company) when bitcoin is earned outside of normal business hours.

Per

ASC 606-10-32-21, to determine the transaction price for contracts in which a customer promises consideration in a form other than cash, an entity shall measure the noncash consideration (or promise of noncash consideration) at fair value. The 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 service provided by the Company is computing power in crypto asset transaction verification services to the network. The

Company complies with ASC 606-10-32-21 as the Company utilizes the fair value of the block rewards received during each respective day using the closing spot price at 00:00 UTC.

ASC 606-10-32-22, if an entity cannot reasonably estimate the fair value of the noncash consideration, the entity shall measure the consideration indirectly by reference to the standalone selling price of the goods or services promised to the customer (or class of customer) in exchange for the consideration. The Company can identify the fair value of the noncash consideration therefore ASC

606-10-32-22 is not applicable.

ASC 606-10-32-23, the fair value of the noncash consideration may vary because of the form of the consideration. If the fair value of the noncash consideration promised by a customer varies for reasons other than only the form of the consideration (for example, the fair value could vary because of the entity’s performance), an entity shall apply the guidance in paragraphs 606-10-32-11 through 32-13.

The Company can identify the fair value of the noncash consideration utilizing a consistent methodology each day consideration is received;

therefore, ASC 606-10-32-23 is not applicable.

ASC 606-10-32-24, if a customer contributes goods or services (for example, materials, equipment, or labor) to facilitate an entity’s fulfilment of the contract, the entity shall assess whether it obtains control of those contributed goods or services. The Company has determined that it maintains complete control of the bitcoin rewarded to the pool for the services provided. Given the function of the bitcoin blockchain, it is not probable that a significant reversal of cumulative revenue will occur at the time the Company receives confirmation of the consideration it will receive.

Clarification of the statement “the value of the bitcoin rewards, utilizing the prevailing market prices at constructive receipt, is not materially different than the value recognized” follows. The recognition of revenue in bitcoin is currently 6.25 bitcoin per block.

This never changes absent a “halving” event. However, the value of that reward in dollars (“USD”) is constantly fluctuating based on the price of bitcoin, which trades 24/7/365. Therefore, the price of bitcoin (in USD) on the exact moment the company earns a block will vary from the price of bitcoin (again in USD) when the company recognizes the revenue in USD at the end of the day. As outlined in our response to prior comment 11, we have a process in place to monitor this revenue recognition to ensure there are no material differences (in USD).

Read in the reply ↗

We note your responses to prior comments 15 and 16 and disclosure on page 16 of your Form 10-Q for the quarterly period ended March 31, 2022. Please distinguish between how you recognized revenue as a pool participant and how revenue is recognized as the pool operator. We may have further comment.

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Also address the following: • As the pool operator, explain how account for the block reward earned and how you present the allocation of the block reward to the 3rd party miners. Provide us with your comprehensive principal versus agent accounting analysis. Refer to ASC 60610-55-36 through 55-40; and • You indicate that “mining revenues are recorded net of any pool fee, not gross, with an offsetting cost of revenue.” Please clarify this statement and differentiate your accounting for any pool fees earned as the pool operator with third party miners, as the pool operator and participant in your own pool, and when you participated in third party pools. Explain the nature of the amounts that are included in the offsetting cost of revenue. Tell us what consideration was given to whether the pool fee you retain relates to activities you must undertake to fulfill your contract as the pool operator. Also tell us whether the BTC rewarded among pool participants, net of the pool fee, represents the transaction price; and • Provide us with your proposed revised revenue recognition policy disclosure in response to our comments.

As the pool operator, when the transaction verification service yields rewards, which occurs when the block is solved by one of the mining servers contributing hashrate to the pool, the pool receives the block reward (currently 6.25 bitcoin) plus transaction fees associated with the transactions in the block. The Company measures and records the gross amount of bitcoin received at the pool level in USD as revenue pursuant to ASC 606, mentioned above.

Rest of the answer

For each block that is solved, the respective hashrate utilized in solving the block is calculated by the pool software and distributed to the customers of the pool by NYDIG, as custodian of the Company’s digital assets for verification and confirmation. Upon receiving confirmation from the customers of the pool, NYDIG will then distribute the confirmed amount of bitcoin to the customer’s respective wallet. When the bitcoin rewards are distributed to the customer’s wallets, the Company records a reduction in revenue of the pool wallet (utilizing the same fair market value when the bitcoin was constructively earned).

606-10-55-36, when another party is involved in providing goods or services to a customer, the entity should determine whether the nature of its promise is a performance obligation to provide the specified goods or services itself (that is, the entity is a principal) or to arrange for those goods or services to be provided by the other party (that is, the entity is an agent). An entity determines whether it is a principal or an agent for each specified good or service promised to the customer. A specified good or service is a distinct good or service (or a distinct bundle of goods or services) to be provided to the customer (see paragraphs 606-10-25-19 through 25-22).

If a contract with a customer includes more than one specified good or service, an entity could be a principal for some specified goods or services and an agent for others.

ASC

606 states that “[a]n entity is a principal if it controls the specified good or service before that good or service is transferred to a customer” (ASC 606-10-55-37). A principal obtains control over any one of the following (ASC 606-10-55-37A):

a. A good or another asset from the other party which the entity then transfers to the customer.

Note that momentary control before transfer to the customer may not qualify.

b. A right to a service to be performed by the other party, which gives the entity the ability to direct that party to provide the service to the customer on the entity’s behalf.

For example, an entity purchases airline tickets, planning to resell them.

c. A good or service from the other party that it then combines with other goods or services in providing the specified good or service to the customer. For example, a furniture manufacturer purchases goods from multiple vendors to build its products.

Company has concluded that it is a principal under ASC 606. The pool, operated by the Company, aggregates all computing power of the mining devices, which are connected to the bitcoin network, and utilizes the combined hashrate, which is the speed of solving mathematical problems involved in the production of new blocks running the proof-of-work algorithm. The transaction verification service is provided to the blockchain network by the pool. The transaction consideration, if any, is noncash consideration that is measured at fair value on the date it is earned at the pool level.

606-10-55-38, an entity is an agent if the entity’s performance obligation is to arrange for the provision of the specified good or service by another party. An entity that is an agent does not control the specified good or service provided by another party before that good or service is transferred to the customer.

In accordance with 606-10-55-37 and 38, the Company is in full control of the goods (bitcoin rewards) to be transferred to the customer

(pool participants). The bitcoin rewards are subject to the pool fees charged as discussed in this response letter.

Furthermore, pursuant to ASC 606-10-55-39:

a. The entity is primarily responsible for fulfilling the promise to provide the specified good or service. For example, the entity is responsible for the good or service meeting customer expectations.

b. The entity has inventory risk before or after (i.e., customer has a right of return) the specified good or service has been transferred to a customer. Inventory risk indicates that the entity controls the good or service even before it obtained a contract with the customer.

c. The entity has discretion in setting the price for the specified good or service. This may indicate that the entity has the ability to use or direct the use of the good or service. Note that agents sometimes have flexibility in setting prices too, so this indicator is not always helpful.

All of the above factors were taken into consideration in determining revenue recognition under ASC 606.

● You indicate that “mining revenues are recorded net of any pool fee, not gross, with an offsetting cost of revenue.” Please clarify this statement and differentiate your accounting for any pool fees earned as the pool operator with third party miners, as the pool operator and participant in your own pool, and when you participated in third party pools. Explain the nature of the amounts that are included in the offsetting cost of revenue. Tell us what consideration was given to whether the pool fee you retain relates to activities you must undertake to fulfill your contract as the pool operator. Also tell us whether the bitcoin rewarded among pool participants, net of the pool fee, represents the transaction price; and the previous sentence “mining revenues are recorded net of any pool fee, not gross, with an offsetting cost of revenue”, please see additional language above related to transactions when the pool contained third-party customers. The pool charged all pool participants, including the Company, a pool fee of 0.5% on all blocks earned by the pool. These amounts were immaterial and disclosed in our most recent Quarterly Report on Form 10-Q.

Effective

April 30, 2022, third party miners are no longer permitted to participate in the Company’s mining pool, and prospectively, the

Company will be the only participant and contribute 100% of the pool’s hashrate. As such, the Company will no longer incur pool fees for operating its own mining pool as the sole customer of the pool.

the nature of offsetting cost of revenue, the Company pays a monthly license fee to a third party vendor for access and utilization of the pool software. The pool fees retained relate directly to the Company’s responsibilities as pool operator. Without utilizing the pool software, the mining servers would not be able to properly perform the calculations essential to solving the transaction verification service equation and in turn, would not generate any revenue / bitcoin rewards.

bitcoin rewarded to pool participants, net of the pool fee, represents the transaction price for the amounts distributed.

● Provide us with your proposed revised revenue recognition policy disclosure in response to our comments.

Company is not proposing a revised revenue recognition policy. Pursuant to ASC 606-10-25-1, the Company uses the fair value of the digital assets measured at the time of receipt as the transaction price.

Read in the reply ↗

We note the terms of the collateral for your revolving line of credit. Please provide us with your analysis of the accounting for any bitcoin stored in a custody account for the benefit of the Bank pledged as collateral. Cite the authoritative accounting literature relied upon.

Company relies on the guidance in FASB ASC 805, whereas the Company needs to evaluate whether any potential loss events, such as theft, impact the measurement of the asset on a monthly basis. The amount of required collateral (in USD) that is transferred to the custody account is confirmed on the date of transfer by the Lender in conjunction with the custody provider. That amount is reclassified into a restricted digital currency account on the Company’s balance sheet pursuant to ASC 820. Read in the reply ↗

Please clarify that the line item of total other (expenses) income excludes interest expense.

Management confirms that the caption “total other (expenses) income” excludes the impact of interest expense. In response to previous comments, we determined to completely update our disclosures during the first quarter. As part of this effort, we updated our income statement presentation to show interest expense separately. Read in the reply ↗

We note from your disclosure here and in response to prior comment 8 that, on March 31, 2022, you negotiated to terminate the three agreements associated with the Hardin, Montana facility effective in the third quarter of 2022. Please tell us what consideration was given to the impairment of the assets related to the build-out of the Hardin Station.

to ASC 360, the Company has given consideration to impairment and determined that the value of the asset is not impaired. However, the useful life wherein the company is obtaining economic benefit has been reduced from the original term in the service agreement. As such, the Company has accelerated the depreciation expense on a monthly basis through the remainder of the term pursuant to ASC 360-10. We expect to continue our operations at Hardin through August 2022. The carrying costs of the assets remain at the original cost paid as reflected in the Company’s balance sheet. Read in the reply ↗

We note your revised presentation of non-GAAP measures in response to prior comments 3 and 4. Please address the following: • Revise to remove the adjustment for changes in the fair market value of your investment fund from your computation of non-GAAP measures.

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In this regard, we note your explanation that the adjustment is due to the fundamentally different accounting for your self-mined bitcoin and because the amount can vary significantly from period-to-period. Refer to Question 100.04 of the Compliance and Disclosure Interpretations on Non-GAAP Financial Measures. • Revise to remove the adjustment for impairment of digital currencies from your computation of adjusted EBITDA. As previously noted in prior comment 3, we believe that adjusting for impairment of mined cryptocurrency does not provide useful information to investors in light of your strategy to hold bitcoin as a long term investment and sell bitcoin in future periods as needed to generate cash for treasury management and other general corporate purposes, in addition to the recurring nature of this charge. • As previously requested in prior comment 4, explain the nature of the non-GAAP adjustment to adjusted EBITDA for amortization of prepaid service contracts. Explain why you believe that adjusting for this item is useful information to investors as it appears to represent a normal, recurring, operating expense. Refer to Item 10(e)(1)(i)(C) of Regulation S-K and Question 100.01 of the Compliance and Disclosure Interpretations on Non-GAAP Financial Measures. • Revise to present the most directly comparable GAAP financial measures to basic and diluted adjusted net income per share. Refer to Item 10(e)(1)(i)(A) and (ii)(E) of Regulation S-K and Question 102.10 of the Compliance and Disclosure Interpretation of Non-GAAP Financial Measures.

made significant changes to MD&A, including non-GAAP disclosures, in its March 31, 2022 10-Q filing. These changes were driven by our desire to be responsive to previous comments and to provide investors with meaningful information related to our current operations.

Specifically, we defined Adjusted Net Income as GAAP net income (or loss) for the period with adjustments to add back the impacts of

(1) stock compensation expense, net of withholding taxes (2) changes in the fair market value of our investment fund and (3) the tax effects of the aforementioned adjustments.

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Since this is the non-GAAP measure used internally by management to evaluate earnings performance for the period, our position is that this non-GAAP measure, when taken as additional information in conjunction with the GAAP income statement, enables investors to evaluate the earnings of current operations exclusive of these two non-cash items. I wish to emphasize that the changes we made in our March 31, 2022 10-Q were undertaken as a means of being responsive to the Commission’s original comments while also providing investors with a certain level of transparency and insight into how Management evaluates performance.

That being said, given the Commission’s initial comment and further comment on this matter, and absent any additional comment from the Commission on this matter we will, on a prospective basis exclude the change in fair value of the fund from the calculation of Adjusted Net Income.

to remove the adjustment for impairment of digital currencies from your computation of adjusted

EBITDA. As previously noted in prior comment 3, we believe that adjusting for impairment of mined cryptocurrency does not provide useful information to investors in light of your strategy to hold bitcoin as a long term investment and sell bitcoin in future periods as needed to generate cash for treasury management and other general corporate purposes, in addition to the recurring nature of this charge.

also added a reconciliation from GAAP Net Income to Adjusted EBITDA to its March 31, 2022 10-Q filing. This was the first time we used this non-GAAP measure and we received positive feedback from investors for adding this non-GAAP measure. We define Adjusted EBITDA as:

● GAAP net income (or loss) for the period with adjustments to add back the impacts of

○ interest expense

○ income tax expense and

○ depreciation and amortization

● This enables the investor to arrive at an EBITDA subtotal, which is then further adjusted for specific non-cash items which currently include:

○ stock compensation expense, net of withholding taxes

○ changes in the fair market value of our investment fund in fair value of warrant liability

○ impairment of digital currencies and

○ other impairments of long-lived assets, reconciliation results in what we define as “Adjusted EBITDA”. We stated that

Adjusted EBITDA is used by management in evaluating operating performance and we believe it to be a meaningful non-GAAP measure used by investors to compare the Company’s operating performance with that of other companies within the industry.

believe that this presentation complies with Item 10(e)(1)(ii)(A) in that we present a clear reconciliation from the GAAP measure (Net

Income) to a non-GAAP measure (EBITDA) and then a clear reconciliation from EBITDA to Adjusted EBITDA. It is important to note that none of the adjustments from EBITDA to Adjusted EBITDA represent normal, recurring cash operating expenses necessary to operate the company’s business.

preparing our March 31, 2022 10-Q, we also attempted to take a completely fresh approach to the MD&A by creating a step-by-step “walk” for the investor through the components of the GAAP Net Income, including a comprehensive discussion as to the key drivers of each item.

Upon completion of the GAAP portion of the MD&A, we discussed Adjusted Net Income (which we plan to modify or drop) and Adjusted

EBITDA. Our discussion of Adjusted EBITDA, coming after GAAP Net Income, helps highlight the differences between the GAAP measure and the non-GAAP measure by building off of the MD&A discussion that precedes the Adjusted EBITDA section of the MD&A. We believe that this presentation supports the consideration of non-GAAP measures in conjunction with (and after giving consideration to) GAAP measures.

also updated the description of our non-GAAP disclosures to emphasize that these disclosures need to be taken in conjunction with, and not as a replacement to, our GAAP disclosures:

“These supplemental financial measures are not measurements of financial performance under generally accepted accounting principles in the United

States (“GAAP”) and, as a result, these measures may not be comparable to similarly titled measures of other companies. Management uses these non-GAAP financial measures internally to help understand, manage, and evaluate our business performance and to help make operating decisions. We believe that this combination of reconciliations from GAAP net income to non-GAAP measures is important when taken together with the GAAP financial results in that they provide a meaningful view of earnings performance for management and investors.

We also believe that these non-GAAP measures provide additional information to investors about the Company’s performance because they eliminate certain items not associated with current-period transactions and other significant discrete items that might impact the comparison of period-to-period results financial measures are subject to material limitations as they are not in accordance with, or a substitute for, measurements prepared in accordance with GAAP. Our non-GAAP financial measures are not meant to be considered in isolation and should be read only in conjunction with our Consolidated Condensed Financial Statements, which have been prepared in accordance with GAAP. We rely primarily on such Consolidated

Condensed Financial Statements to understand, manage, and evaluate our business performance and use the non-GAAP financial measures only supplementally.” previously requested in prior comment 4, explain the nature of the non-GAAP adjustment to adjusted EBITDA for amortization of prepaid service contracts. Explain why you believe that adjusting for this item is useful information to investors as it appears to represent a normal, recurring, operating expense. Refer to Item 10(e)(1)(i)(C) of Regulation S-K and Question

100.01 of the Compliance and Disclosure Interpretations on Non-GAAP Financial Measures.

Amortization of prepaid service contracts constitute a non-cash expense and are included in cost of revenues on the income statement. Management’s position is that it is appropriate to exclude these amounts from the calculation of Adjusted EBITDA since they are (1) part of depreciation and amortization (within cost of revenues) and (2) are non-cash. As a result, the Company is not “excluding a normal, recurring cash operating expense necessary to operate a registrant’s business” from the non-GAAP measure of Adjusted EBITDA.

• Revise to present the most directly comparable GAAP financial measures to basic and diluted adjusted net income per share. Refer to Item 10(e)(1)(i)(A) and (ii)(E) of Regulation S-K and Question

102.10 of the Compliance and Disclosure Interpretation of Non-GAAP Financial Measures.

will provide the required reconciliation on a prospective basis.

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We note your disclosure here as well as the proposed prospective disclosure in response to prior comment 7. Further revise to provide quantitative and qualitative analysis of the underlying reasons for the material changes in net cash used by operating activities, as previously requested.

mentioned earlier, we undertook a complete revision of our MD&A in preparing the first quarter 10-Q and this comment resulted from oversight on my part in preparing the new version of our MD&A. We will address this prospectively by providing additional commentary on operating cash flows in all future filings.

connection with responding to the staff’s comments, the Company acknowledges that (i) it is responsible for the adequacy and accuracy of the disclosure in its filing; (ii) staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking

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any action with respect to the filing; and (iii) it may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

hope you find that this response answers the staff’s questions, but please contact the undersigned at hugh@marathondh.com or our counsel, Jolie Kahn, Esq., at joliekahnlaw@sbcglobal.net, if you have any further questions or would like to discuss our response.

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Your response to prior comment 1 addresses your classification during 2021. Please also explain the basis for classifying the realized gain on the sale of digital currencies outside of loss from operations within other income/expenses for all periods presented. Cite the authoritative accounting literature that supports your accounting.

For the years ended December 31, 2021 and 2020, the Company recorded realized gains related to the sale of digital currencies of $14 thousand and $15 thousand, respectively. The Company acknowledges that the authoritative guidance does indeed require an entity to report gain on sales of non-financial assets as a component of income from operations, while it classified the gains in non-operating income.

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However, based on our SAB 99 analysis and the materiality thresholds therein, the Company concluded that the amounts involved were considered to be immaterial from both a quantitative and qualitative perspective. On a prospective basis, the Company will present similar gains or losses as a component of income or loss from operations with prior comparative periods reclassified to conform to the current classification.

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We note your response to prior comment 2 regarding the bitcoin loaned to NYDIG under the Master Securities Loan Agreements. Our comment was meant to solicit a comprehensive accounting analysis on how you are accounting for the borrowed bitcoin and the collateral and your classification of the interest received on the bitcoin loans in your statement of cash flows with reference to the specific authoritative

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literature that supports your accounting. Please provide such a response. Ensure that your response includes, but is not limited to, how you determined that you did not meet the derecognition criteria and control was not transferred to the borrower. Also, tell us how the interest received on the bitcoin loans is classified in your statement of cash flows and the basis for such classification. In addition, please explain why your response indicates that there was no collateral, while your disclosure on page F-12 states that NYDIG is to transfer collateral to you with a market value at least equal to 100% of the market value of the loaned BTC.

Comprehensive accounting analysis on loaned BTC:

During the period in question, the Company loaned 600 BTC to NYDIG under Master Securities Loan Agreements (“MSLA”). This included a physical transfer of BTC from the Company’s wallet to a separate wallet at NYDIG. The MSLA states that either party may terminate the loan by providing notice to the other party.

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Upon termination pursuant to paragraph 6.2 of the MSLA, the borrower is required to immediately return borrowed BTC to the Company; this is, in effect, a call option for the Company on its loaned BTC.

The

Company accounts for its BTC as an intangible asset, and therefore the loan thereof is outside the scope of ASC 842, and is derecognized pursuant to ASC 350-10-40-1, which in turn refers to ASC 610-20. ASC 610-20 refers to control indicators in ASC 606-10-25-25 and 25-30 to determine whether control of the lent units have been transferred to the borrower upon transfer. This includes the repurchase agreements guidance in ASC 606-10-55-66 through 55-73 (note: Example 2 Case B in Subtopic 610-20 illustrates that this implementation guidance applies equally to transfers of nonfinancial assets subject to ASC 610-20 as it does to those under ASC 606). The Company concluded that the loan did not meet this derecognition criterion (i.e., control transfer) in ASC 606 because the Company held a repurchase right in the form of a call option under ASC 606 10-55-67(b) and therefore retained control per ASC 606-10-55-68. The Company further concluded that the call option was substantive per ASU 2014-09 BC426 which states that “However, the Boards observed that if the call option is non-substantive, that option should be ignored in assessing whether and when the customer obtains control of a good or service (to be consistent with the general requirement for any non-substantive term in a contract).” The call option is substantive because the

Company may call the digital assets back at its market value without having to expend additional resources. The Company exercised this call option on June 13, 2022 and terminated the loan as part of its treasury management process. The BTC loaned has been returned by to the Company by NYDIG.

Given the similarity of the Company’s MSLA arrangement to the fact pattern outlined in Q&A #25 of the AICPA Digital Assets Accounting

Guide dated June 2022, the Company considered the outlined accounting pattern therein in concluding that the loaning of the BTC would not be derecognized (since the Company retains control pursuant to the existence of a substantive purchase right under ASC 606-10-55-67(b) as discussed above), and no gain/loss should be recognized upon transfer of the BTC under ASC 610-20. Loaned BTC were accordingly classified as “Digital currencies, restricted” on the December 31, 2021 balance sheet, providing useful information about the restrictions on them versus our BTC not loaned. In addition, as outlined in question 25 of the AICPA Digital Assets Accounting Guide, we noted that the loaned fees earned should not be accounted for under ASC 835, but rather, is a fee received in exchange for the service of permitting the borrower to use the Company’s BTC, consistent with Q&A #25 in the AICPA Digital Assets Accounting Guide.

are aware that there are further developments and considerations around the conclusions in Q&A #25 in the AICPA Digital Assets Accounting

Guide that have arisen in the last month (July 2022), whose details we are not privy to. However, in developing our accounting and disclosure for our most recent Annual Report on form 10-K, we believe that we followed the appropriate authoritative and interpretive guidance available at the time and that our accounting and disclosure were consistent therewith.

Interest received on loaned BTC:

Amounts comprising interest received on the loan were $129 thousand for the year ended December 31, 2021. There were no such BTC loans in 2020 or 2019. Such amounts were received in cash, but remained in a digital asset account at NYDIG. We included this as a source of cash in the caption “Changes in operating assets and liabilities – digital currencies” in the Statements of Cash Flows. Regarding the line item “Interest received from digital currencies, restricted” - this line item should not have been included in Statements of Cash Flows with zero for the year ending December 31, 2021. This was a classification mistake that we concluded was immaterial. Nonetheless, we will reclassify such amounts prospectively to conform any comparable prior period amounts with current period classification.

Collateral for loaned BTC:

Staff further inquired as to why the Company disclosed that no collateral was transferred although the MLSA calls for the transfer of collateral. As stated in Section 2.2 of the MLSA, collateral is to be transferred to the Company by NYDIG unless otherwise agreed upon by the parties. In this particular case, the parties specifically agreed that no collateral was to be transferred. We will revise disclosure prospectively to clarify that collateral is required unless the parties agree otherwise and that the parties, in this specific case, agreed that collateral was not required.

A draft of the proposed disclosure follows, with additional disclosure underlined and deleted disclosure stricken-though:

On

August 27, 2021, Marathon Digital Holdings, Inc. (the “Company”) entered into a Master Securities Loan Agreement (the “Agreement”) with NYDIG Funding, LLC (“NYDIG”). Pursuant to the Agreement, the Company will loan its bitcoin (“BTC”) to NYDIG with an interest rate of three percent (3%) per annum. Interest accrues daily and is payable monthly. The Agreement provides that the

Company may recall its BTC at any time. The parties have the option, but not the obligation, to require the loan to be collateralized by BTC. If the parties agree that collateral is to be utilized, NYDIG shall, prior to or concurrently with the transfer of the of the

BTC to NYDIG, but in no case later than the close of business on the day of such transfer, transfer to the Company collateral with a market value at least equal to 100% of the market value of the loaned BTC, and the Company is granted a first priority lien on such collateral.

As of December 31, 2021, the Company loaned 300 BTC to NYDIG. The parties agreed that collateral was not required for this loan. The caption describing the loan balance for prior periods has been renamed as “loans of digital currencies” on the balance sheet.

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We note your response to prior comment 3 regarding the Simple Agreement for Future Equity (“SAFE”) agreements. As previously requested, please address the following: • Provide us with a complete description of the material rights and obligations of these agreements. • Explain why the SAFEs are considered equity method investments under ASC 323. Refer to ASC 323-10-15-3.

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• Provide us with your comprehensive analysis to support your accounting for these agreements with contextual references to the authoritative literature applied.

Company’s response to this comment is under final internal review. Our full response will be provided by Friday, August 5, 2022. Read in the reply ↗

We note your response to prior comment 4. Your policy of utilizing a standardized time on a daily basis to assess for impairment does not appear to comply with ASC 350-30-3518 that indicates intangible assets should be tested for impairment at any time events or changes in circumstances indicate that it is more likely than not that the asset is impaired. Please revise your accounting to comply with ASC 350.

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We note from your response to prior comment 11 in your letter dated April 22, 2022 that compliance with ASC 350 would not result in a material difference from your valuation on a nightly basis. For each of the periods presented, please provide us with your materiality analysis of the difference between the results of an impairment evaluation based on the pricing of BTC on a nightly basis and the price of BTC at any time it is below the cost.

Company considers its digital currencies to be indefinite lived intangible assets as the digital currencies do not meet the definitions under US GAAP to be considered financial instruments or cash. As such, the Company is accounting for its digital currencies pursuant to ASC 350 “Intangible Goodwill and Other”.

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Pursuant to ASC 350-30-35-18 an intangible asset that is not subject to amortization shall be tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired.

note in your comment the italicized “at any time” and wish to specifically address the comment with this phrase in mind. BTC prices update continually on public exchanges 24 hours per day, 365 days per year. Given the continuous nature of BTC pricing there are numerous points during any day that could be an indication that it is more likely than not that an asset is impaired, including declines in value measured using daily lows, daily averages, or daily closing prices. However, it is impossible to make a determination of impairment in real time since the markets are always moving. Given these circumstances, the company reviews its BTC for impairment daily, looking back on these indicators and recording an impairment based on the daily closing price of BTC as defined by Yahoo Finance (https://finance.yahoo.com/quote/BTC-USD) and published daily at 23:59 GMT. Note that this is the same price utilized for revenue recognition purposes as outlined in our response to comment 11 which follows. The

Company applies this methodology as a practical expedient in applying ASC 350-30-35-18 in that it enables us to look back on the various data points of the day (i.e., the “events or circumstances”) as we are making the determination whether it is more likely than not that the asset has become impaired. The Company believes that this method of measuring impairment is consistent with predominant industry practice.

Our

BTC holdings subject to impairment and classified as “Digital Currencies and Digital Currencies – restricted” at December

31, 2021 and December 31, 2020 totaled $123.2 million and $2.3 million, respectively using the methodology described above. Based on the Staff’s comments, we looked back at the intra-day low price as the basis for evaluating impairment. Had we used this basis, the reported balances would have been $120.4 million and $2.2 million, respectively.

Company believes that our methodology enables us to accurately determine if it is more likely than not that an asset has been impaired, is aligned with industry standards as a practical expedient, and results in a materially accurate calculation of the carrying value of digital currencies and any resulting impairment. However, if the Staff advises that in its view it is more appropriate to use the daily low price in determining impairment, we are certainly amenable to changing our methodology on a prospective basis.

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We note your response to prior comment 5. As previously requested, please explain the basis for any differences from prior periods in the presentation of cash flows from the disposition of digital currencies on the statement of cash flows.

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In this regard, explain the basis for your classification as investing activities in 2019 and 2020, and provide the contextual reference to the authoritative accounting literature relied upon.

Company followed ASC 230-10 in its classification of cash flows. Regarding the sale of digital currencies on the statement of cash flows in 2019 and 2020, these amounts relate to the actual sale of BTC to raise cash (USD) to fund operational expenditures. These sales of

BTC for USD are included in investing activities in the statement of cash flows. The cash payments (in USD) that were made to satisfy the obligations for goods and services are included within operating activities in the statement of cash flows.

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The disposition in 2021 relates to a payment to a third party blockchain developer in BTC for services rendered. This amount is included in “Changes in

Operating Assets and Liabilities – Digital Currencies” within operating activities in the statement of cash flows as it represents payments directly to suppliers for goods and services.

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You indicate in response to prior comment 5 that you are currently loaning 600 bitcoin to NYDIG and are not currently purchasing forward contracts related to cryptocurrency. Please tell us the type of contracts you do enter into involving your cryptocurrency holdings and, for those other than the arrangements addressed in other comments, please explain how you are accounting for such arrangements.

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In this regard, please explain the arrangements referred to by your CEO in the May 2, 2022 Bloomberg News article

Miners Turn to Options Market for Cash Infusion.”

As previously discussed, we have terminated the BTC MLSA as of June 13, 2022 and are not otherwise loaning BTC at this time. We have not entered any other contracts involving our BTC other than the now-terminated MLSA. Regarding the May 2, 2022 article, the Company’s

CEO was asked a question about the Company generating yield on its BTC. To that end, the CEO discussed a potential future strategy of yield generation through the purchase and sale of BTC call options.

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To be clear, this was a forward-looking statement, and the Company has not implemented this or any other hedging strategy.

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In response to prior comment 6, you state, “As the Company owns 100% of the limited partnership interests in the fund, and the fund can be collapsed at any time, with the Company retaking direct ownership of the bitcoin in question, the Company, for all practical purposes, does own the bitcoin, even if technically indirectly through the fund of one.” Please explain how this assertion is consistent with your

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accounting treatment for your investment in NYDIG Digital Assets Fund III, LP.

Company has re-evaluated its accounting for its limited partnership interest in the NYDIG Digital Assets Fund III, LP, as follows:

ASC

810 Consolidation Scope Exceptions:

NYDIG Digital Assets Fund III LP (“Fund”) is a legal entity. However, as none of the consolidation or variable interest entities

(“VIE”) scope exceptions in ASC 810-10-15-12 or 15-17 apply, the Company evaluated whether the Fund is considered a VIE.

Variable

Interest Entity Determination:

Fund’s equity at risk is comprised of its limited partnership (“LP”) interest held by the Company as the sole LP.

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Such

LP interest is equity at-risk per ASC 810-10-15-14(a) given it:

Is

GAAP equity;

Participates significantly in profits and losses as it absorbs 100% of all profits and losses of the Fund via 100% allocation to its capital account;

Was issued in exchange for cash, and was not issued in exchange for subordinated interests in other VIEs;

Does not include amounts provided by the Fund to the Company by the Fund itself or any other parties involved with the Fund; and not include amounts financed by the Fund itself or any other parties involved with the Fund.

$150 million equity at risk is sufficient to allow the Fund to finance its activities of investing in and paying the management fee for the investment of digital assets and digital assets-related financial instruments. Therefore, the Fund does not meet the first criterion to be a VIE under ASC 810-10-15-14(a).

general partner of the Fund (the “GP”), who is an unrelated party who holds no ownership interest in the Fund, manages and makes decisions over all the activities undertaken by the Fund. The Company, as sole LP and 100% partnership interest holder of the Fund, has the ability to withdraw or redeem up to all its LP interests at any time without a substantive barrier to exercise such withdrawal or redemption right. The Company previously stated in the response to comment 13 dated April 22, 2022 that withdrawing its sole LP investment in the Fund would not necessitate dissolution of the Fund and that such withdrawal right is not a substantive lock-out right. The Company has since reconsidered the substance of this withdrawal right in light of the actual outcome of our recent withdrawal of BTC from the fund and our additional review of interpretive guidance from Questions 4.4.160 (consideration of withdrawal rights as lock-out rights under the VIE definition), 5.2.160 (consideration of withdrawal rights as lock-out rights in a limited partnership under the voting interest model), and specifically, 6.4.90 of KPMG’s Consolidation Handbook dated May 2022 that states:

“…withdrawal rights may implicitly require liquidation of a legal entity. These may function similarly to substantive lock-out rights given their ability to force a liquidation. For example, consider the following withdrawal right: […] one investor holds a substantial portion of the investment interests in the fund; the investor has the right to withdraw its entire investment upon notifying the fund; a withdrawal by the investor would compel the fund to liquidate all its investments to satisfy the withdrawal right. If there were no significant barriers to exercise, this withdrawal right would be similar to a substantive liquidation right, and therefore equivalent to a substantive lock-out right.”

Accordingly, while the Fund has the ability to continue existing as a legal entity after such withdrawal, the Company has revised its views and believes that the withdrawal of 100% of the equity at risk of the Fund as akin to a liquidation right which is in turn, viewed as a unilaterally exercisable substantive kickout right over the general partner of the Fund. The Company’s in-substance kickout right over the GP who is the decision maker over all activities of the Fund indicates that the Company has the power over the activities that most significantly impact the economics of the Fund As such, the Fund does not meet the second criterion to be a VIE under ASC 810-10-15-14(b)(1).

Company has the rights to receive 100% return of its at-risk LP interest in addition to all the capital appreciation or net capital depreciation and expenses attributable to such interests upon withdrawal from the Fund. Accordingly, the Company, as the sole LP and equity-at risk holder of the Fund does not lack the obligation to absorb the expected losses or right to receive the expected residual returns of the

Fund. Therefore, the Fund does not meet the third and fourth criteria to be a VIE under ASC 810-10-15-14(b)(2) and 15-14(b)(3).

Company as the sole LP and 100% equity-at risk holder of the Fund also possesses 100% voting rights over the Fund through its substantive unilateral kickout right and the activities of the Fund are conducted primarily for the benefit of the Company. Therefore, the Fund does not meet the fifth criterion to be a VIE under ASC 810-10-15-14(c).

Consolidation of a voting interest entity:

the Fund does not meet any of the criteria of a VIE under ASC 810-10-15-14 and has 100% voting interest over the Fund through its unilaterally exercisable substantive kickout right, the Company has reconsidered its accounting conclusions and determined that it has a controlling financial interest in the Fund and therefore consolidates the Fund under the voting interest model. This revised accounting conclusion differs primarily due to the reconsideration of the Company’s withdrawal right as sole LP with that withdrawal right representing, in-substance, a lock-out right. Such substantive lock-out right gives the Company majority controlling financial interests as limited partners owning the majority of a partnership’s kickout rights is presumed to have the controlling financial interest when the only other party in the Fund (the general partner) does not have substantive participating rights to prevent the Company’s withdrawal as LP.

Evaluation of the Fund as an Investment Company:

Company further evaluated whether the Fund meets the definition of an investment company per ASC 946-10-15-6 to determine whether it should retain the industry-specific fair-value accounting principles of an investment company in consolidation as provided for in ASC

810-10-25-15.

our April 22, 2022 response to comment 13 in the letter from the Staff dated April 8, 2022, the Company analyzed and concluded that the fundamental characteristics of an investment company as described in ASC 946-10-15-6 are met and that three of the five typical characteristics of an investment company as described in ASC 946-10-15-7 are also met. Therefore, the Company determined that the Fund possesses the characteristics of an investment company and, given the Company holds a controlling financial interest with 100% of the voting interest through its LP interest, the Company will consolidate the Fund and account for its investments as prescribed by ASC 946 at fair value in accordance with the principles in ASC 820.

Company previously accounted for its investment in the Fund at fair value, which was determined based on the fair value of the underlying assets in the Fund. In consideration of the revised conclusion above that the Company will consolidate the Fund under the voting interest model, the Company will now account for the investments within the Fund at fair value, which results in no measurement difference in the Company’s balance sheet or income statement. The Company acknowledges that its disclosures are unclear as to whether it is presenting its investment in the Fund or the underlying assets in the Fund and therefore will prospectively clarify its revised accounting policy that it will consolidate the Fund and its basis of accounting for assets within the Fund in Note 2 – Summary of Significant

Accounting Policies, Investment Fund as follows with underlined text representing proposed added disclosure, and stricken text representing proposed deleted disclosure:

“…On

January 25, 2021, the Company entered into a limited partnership agreement with NYDIG Digital Assets Fund III, LP (“Fund”) whereas the Fund purchased 4,812.66 BTC in an aggregate purchase price of $150 million. The Company owns 100% of the limited partnership interest and consolidates the Fund under a voting interest model. The consolidated assets in the investment fund are included in current assets in the consolidated balance sheets under the caption “Digital currencies held in investment fund”.

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

ASC 946, Financial Services – Investment Companies, which requires fair value measurement of the Fund’s investments in digital assets. The digital assets held by the Fund are traded on a number of active markets globally, including the over the counter (“OTC”) market and digital asset exchanges. A fair value measurement under ASC 820 for an asset assumes that the asset is exchanged in an orderly transaction between market participants either in the principal market for the asset or, in the absence of a principal market, the most advantageous market for the asset (ASC 820-10-35-5). The fair value of the assets within the Fund are determined at the end of each reporting period based on pricing obtained from CoinDesk Bitcoin Price Index at approximately 4pm New York time. Any changes in the fair value of the assets are recorded in the Consolidated Statement of Operations under the caption “Change in fair value of investment in NYDIG fund.” An entity must have access to the principal (or most advantageous) market at the measurement date (ASC

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We note your response to prior comment 7. Notwithstanding that you anticipate the investment fund to be dissolved by the end of the third quarter of 2022, your historical financial statements will include your investment. Please provide us with your proposed revised accounting policy for your investment in the investment fund.

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That is, as previously requested, please address how you are accounting for your limited partnership interest in NYDIG Digital Assets Fund III, LP. As part of your response, also clarify for us where you provide the disclosures required by ASC 820-10-50-6A.

described in the response to comment 7 above, the Company has determined the Fund should be consolidated under the voting interest model.

As the Fund meets the definition of an investment company per ASC 946, the Company initially and subsequently measures the assets held within the Fund at fair value on the Company’s consolidated balance sheet as described by ASC 946-325-35-1.

of December 31, 2021, the only investment in the Fund was approximately 4,794 BTC.

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Management considered whether bitcoin held in the

Fund meets the criteria in ASC 820-10-15-4 and notes that notwithstanding that the Fund is an investment company within the scope of

Topic 946, the bitcoin held as investment in the Fund has a readily determinable fair value given its sales prices are published on the

CoinDesk Bitcoin Price Index.

the fair value of the assets held in Fund is disclosed in accordance with ASC 820-10-50-2 for all classes of assets and liabilities as disclosed in Note 2 – Significant Accounting Policies – Fair Value of Financial Instruments under the caption “Investment

Fund” and Note 2 – Significant Accounting Policies – Digital Currencies. Further disclosures required by ASC 820-10-50-6A for investments in the scope of ASC 820-10-15-4 are not applicable given the Company is not applying the net asset value practicability exception as described in ASC 820-10-15-4 through 15-5.

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We note your response to prior comment 8 indicating that the purchase of that amount of bitcoin requires expertise unrelated to your business. Tell us whether the management fee is meant to compensate for this expertise and how you considered ASC 810-10-25-38H. Further explain the basis for why you would fund 100% of the capital of DAF III, yet not retain any control over how that capital is deployed.

Rest of the question

Address how you considered whether you had the opportunity and the incentive to establish arrangements that result in you being the variable interest holder with that power to direct the activities that most significantly impact the economic performance of the VIE. Also explain how it was considered that your economic interest is proportionately greater than your stated power to direct the activities of DAF III. Refer to ASC 810-10-25-38F through 25-38G.

described in the response to comment 7 above, the Company has revised its accounting for the Fund and consolidates the Fund under the voting interest model. Therefore, the Company respectfully acknowledges the Staff’s comment and has determined that the requested explanations are no longer applicable. Read in the reply ↗

We note your response to prior comment 9. As previously requested, please provide us with your comprehensive analysis of de facto agents pursuant to ASC 810-10-25-43. As part of your analysis, tell us how you considered your BTC loans to NYDIG and that you rely on NYDig for custodian services.

described in the response to comment 7 above, the Company has revised its accounting for the Fund and consolidates the Fund under the voting interest model. Therefore, the Company respectfully acknowledges the Staff’s comment and has determined that the requested analysis over de facto agency is no longer applicable. Read in the reply ↗

In response to prior comment 12, you indicate that there is only a delay in the transfer from the pool wallet to the respective customer's wallet (including the Company) when bitcoin is earned outside of normal business hours.

Rest of the question

We noted in the prior comment that the constructive receipt of the mining reward can be at least two days from contract inception based on your response to prior comment 14 in your letter dated April 22, 2022 indicating that NYDIG confirms the allocation among pool participants within 24 hours of a block reward and, once the NYDIG calculations are confirmed, you aggregate all the BTC rewards at the end of that day. As previously requested, please provide us with your analysis of how you comply with the requirement to recognize the estimated fair value of the non-cash consideration at contract inception. In this regard, your analysis of ASC 606-10-32-21 does not appear to address the concept that noncash consideration should be measured at contract inception. In addition, please address the concept in ASC 606-1032-23 that changes in the fair value of noncash consideration after contract inception that are due to the form of the consideration should not be included in the transaction price. Your disclosure should address any difference between the fair value of the BTC when you recognize revenue at the end of the day upon constructive receipt and the fair value of the noncash consideration at contract inception.

Company’s response to this comment is under final internal review. Our full response will be provided by Friday, August 5, 2022. Read in the reply ↗

We note your response to prior comment 13. Please further clarify the statement in the context of the operation of your own mining pool that “revenues associated directly with bitcoin mining activities are recorded net of any pool fee with an offsetting cost of revenue.” Explain why the pool fee revenue you earn as the pool operator would be a reduction to revenue.

Rest of the question

In this regard, we note your conclusion that, as the pool operator, you are the principal and you have full control of the bitcoin rewards to be transferred to the pool participant. You indicate that you provide transaction verification service to the blockchain network by the pool. It is our understanding that the pool participants provide you with computing power in exchange for the bitcoin reward. As the pool operator, tell us what consideration you gave to the gross presentation of the reward from your bitcoin mining activities as revenue with the net bitcoin reward distributed to your customer’s wallets, which you indicate is the transaction price, presented as your cost of revenue. Your revenue recognition accounting policy should be revised, accordingly.

Company’s response to this comment is under final internal review. Our full response will be provided by Friday, August 5, 2022 Read in the reply ↗

You indicate that you are not proposing a revised revenue recognition policy. However, we note the accounting policy disclosed in Critical Accounting Matters in your Form 10-Q for the quarterly period ended March 31, 2022 was revised and does not address certain aspects of revenue recognition that are disclosed in your revenue recognition policy in your Form 10-K for the year ended December 31, 2021, such as how you

Rest of the question

account for variable consideration. As such, and in light of the nature of our comments, as previously requested, and to facilitate our review, please provide us with your proposed revised revenue recognition policy disclosure.

Company’s response to this comment is under final internal review. Our full response will be provided by Friday, August 5, 2022. Read in the reply ↗

We note your response to prior comment 14. Our comment was meant to solicit a comprehensive analysis of your accounting for bitcoin stored in a custody account for the benefit of the Bank pledged as collateral. In this regard, please explain why it is appropriate to classify the required collateral as restricted digital currency on your balance sheet pursuant to ASC 820.

Rest of the question

Provide the contextual reference to the authoritative accounting literature that supports your accounting for the transfer of the bitcoin. Your response should address, but not be limited to, what consideration was given to terms of the collateral under the revolving line of credit as disclosed on page F-27. In addition, please explain the reference to ASC 805 and the impact on measurement from the risk of loss due to theft.

facts and circumstances of this comment are similar to those discussed in response to comment 2 above with two exceptions:

this case the Company is the borrower and not the lender this case the Company is utilizing BTC as collateral for revolving credit advances (the “RLOC”) that are made in USD.

Note that in our response to comment 2 above, both sides of the transaction (lender and borrower) were utilizing BTC.

lending process includes a physical transfer of BTC from the Company’s wallet to a separate collateral wallet at a Custodian.

Rest of the answer

The

BTC collateral required to support any RLOC borrowings are required, by agreement among the parties, to be valued in excess of the amount of the advances (in USD) received by the Company. Once in the collateral account, this BTC is restricted from use by the Company.

Company referenced ASC 610-20 which refers to control indicators in ASC 606-10-25-25 and 25-30 in determining whether control of the

BTC had been transferred to the lender. Despite the transfer of physical control of the BTC into a collateral account, the Company concluded that it retains the rights and risks of ownership of this collateralized BTC given the following fact pattern:

Company bears the risk of loss due to market value declines of the BTC in the collateral account. Should the collateral decline in value beyond a certain point, the Company is required to add BTC to the collateral account to restore a minimum “loan to value” ratio.

Company may also access the collateral in whole or in part under certain circumstances, including:

○ should

BTC appreciate to the point that outstanding advances are overcollateralized beyond the point required by the loan agreement. In this case the Company may request a return of a portion of the BTC from the collateral account.

the Company repay the loan in whole or in part. In this case all of the collateral would be returned to the Company lender has exclusive control over the collateral account, including liquidation of the collateral only in the event of a default under the RLOC. As a result, the lender in this case does not possess a call option on the BTC collateralized and may only access the BTC in the collateral under certain circumstances.

These facts and circumstances support that the Company maintains contractual control over the BTC in the collateral account and that said

BTC is restricted from use by the Company. Note that there were no borrowings outstanding or collateral posted as of December 31,

2021.

Finally, the reference to ASC 805 in our previous response was a scrivener’s error.

Read in the reply ↗

We note your response to prior comment 15. As previously requested, please clarify that the line item of total other (expenses) income excludes interest expense. In this regard, you should revise the line item description, accordingly.

line item of total other (expenses) income excludes interest expense. We are revising our statements of operations on a prospective basis to address this comment. Read in the reply ↗

You indicate in response to prior comment 16 that, “Pursuant to ASC 360, the Company has given consideration to impairment and determined that the value of the asset is not impaired.” Please provide us with your accounting analysis that supports this conclusion. Address the change in the cash flows expected to result from the use and eventual disposition of the asset as compared to the carrying amount.

Rest of the question

Refer to ASC 360-10-35-17. In addition, please tell us what consideration was given to the impact of the intent to transition the Hardin operations on the carrying amount of the prepaid service contract and any other assets related to the Hardin Station.

addressing this question, we both respond to your specific question and also address this issue in terms of the disclosure we intend to provide in our Form10-Q for the quarter ended June 30, 2022, related to Hardin.

assets at Hardin are long-lived assets and as such are evaluated for impairment under ASC 360-35-21, which calls for a trigger-based assessment of recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.

Rest of the answer

Management concluded that the agreement to exit Hardin by August 15, 2022 constituted such a trigger event in that it created an expectation that it was more likely than not that significant components of this long-lived asset group would be disposed of before the end of their previously estimated useful life.

Company first identified the asset group as (1) the Hardin data center infrastructure, (2) the prepaid service contract created pursuant to the Data Facility Services Agreement, and (3) BTC mining servers located within the data center. The Company determined that the primary asset (per ASC 360-10-35-31) in this asset grouping was the BTC mining servers, which make up the most significant component asset from which the asset group derives its cash flow generating capacity.

Company evaluated the asset group for impairment using the recoverability method using the remaining life of the the primary asset (the

BTC mining servers) as the period in which it evaluated the undiscounted cash flows. Unlike the data center infrastructure, the BTC mining servers can be relocated such that the anticipated exit from Hardin did not impact their estimated useful life. The undiscounted cash flow forecast was therefore not significantly impacted by the decision to exit Hardin. As a result of this analysis, we concluded at

March 31, 2022 that the asset group was not impaired. However, given our impending exit from the facility we revised the estimated useful life of the data center infrastructure and the prepaid service contract to the remaining 4 ½ month term of our operating agreement at Hardin. This resulted in a significant increase in depreciation and amortization expense in the second quarter of 2022. The estimated useful life of the BTC mining servers remained unchanged.

June 11, 2022, a severe storm passed through Hardin damaging the power generating facility that supplies the data center with power.

As a result, the Company’s bitcoin production at the plant was significantly reduced. Anticipated repairs to the plant were persistently delayed until July 14, at which point the plant resumed operations at reduced power levels and operating capacity. The

Company again evaluated the asset group for impairment using the recoverability method given this triggering event. The revised undiscounted cash flow forecast in this analysis were again relatively unchanged, given that the useful life of the primary asset was not impacted by this event and had, in fact only been reduced by about 2 ½ months given the passage of time from the March 31 evaluation. As a result, we again concluded that despite the outage at Hardin, the asset group still passed the recoverability test given the expected cash flow over the useful life of the primary asset.

Additional outages occurred at the plant throughout July and the Company decided to accelerate its exit from Hardin. On July 28, 2022 we executed agreements with the facility operator to essentially abandon the data center infrastructure and the prepaid service contract and remove all BTC mining servers from the site. As a result, the Company shortened the estimated useful life of the data center infrastructure and the prepaid service contract again (this time reducing it from August 15 to July 28) and recorded all the remaining depreciation and amortization related to these assets during the month of July.

of July 31, 2022 the data center infrastructure assets have been fully depreciated and the prepaid service contract has been fully amortized.

The BTC mining servers are currently being inventoried and removed from the facility and will be redeployed or sold. This information will be disclosed as a subsequent event in the upcoming report on form 10-Q for June 30, 2022.

Read in the reply ↗

We note your response to prior comment 17 regarding your non-GAAP measures. Please address the following: • You indicate in your response that you will exclude the change in fair value of the fund from the calculation of Adjusted Net Income. Also revise your computation of Adjusted EBITDA to remove this adjustment, as it appears to result in an individually tailored accounting principal.

Rest of the question

Refer to Question 100.04 of the Compliance and Disclosure Interpretations on Non-GAAP Financial Measures. • We continue to object to your adjustment for impairment of digital currencies, as we believe that adjusting for this item does not provide useful information to investors. Accepting and holding bitcoin and using cryptocurrency for treasury management appear to be core business functions and inconsistent with the purpose of including the measure of Adjusted EBITDA in your filing. In this regard, you state the purpose of the measure is to “provide a meaningful view of earnings performance.” We further acknowledge that bitcoin’s price volatility will continue to result in recurring impairment charges that will continue to impact earnings performance in future periods. Please revise your presentation of Adjusted EBITDA to remove this adjustment, consistent with the removal of the adjustment from your non-GAAP measure of Adjusted Net Income as noted in your response to prior comment 3 in your letter dated April 22, 2022. Refer to Rule 100(b) of Regulation G and CD&I Question 100.04. • As previously requested, explain the nature of amortization of prepaid service contracts included in the non-GAAP adjustment to Adjusted EBITDA for depreciation and amortization. Tell us if it relates to the operation and maintenance services for the Hardin Facility pursuant to the Data Facility Services Agreement as noted from your disclosure on page F-10 of your Form 10-K for the year ended December 31, 2021. Explain how adjusting for the cost of services complies with Rule 100(b) of Regulation G, Item 10(e)(1)(i)(C) of Regulation S-K, and Question 100.01 of the Compliance and Disclosure Interpretations on Non-GAAP Financial Measures.

thank the staff for your consideration of our perspective as outlined in our previous responses; nonetheless, in order to comply with your position, we will remove the adjustment related to changes in market value of the NYDIG Fund from the calculation of Adjusted EBITDA in all future filings and amounts for prior comparative periods will be reclassified to conform to current period classification.

Rest of the answer

Management also intends to eliminate “Adjusted Net Income” as a non-GAAP measure on a prospective basis as a means of streamlining our non-GAAP disclosure.

b.

continue to object to your adjustment for impairment of digital currencies, as we believe that adjusting for this item does not provide useful information to investors. Accepting and holding BTC and using cryptocurrency for treasury management appear to be core business functions and inconsistent with the purpose of including the measure of Adjusted EBITDA in your filing. In this regard, you state the purpose of the measure is to “provide a meaningful view of earnings performance.” We further acknowledge that BTC’s price volatility will continue to result in recurring impairment charges that will continue to impact earnings performance in future periods. Please revise your presentation of Adjusted EBITDA to remove this adjustment, consistent with the removal of the adjustment from your non-GAAP measure of Adjusted Net Income as noted in your response to prior comment 3 in your letter dated April 22, 2022.

Refer to Rule 100(b) of Regulation G and CD&I Question 100.04.

thank the staff for your engagement on this issue and for considering our perspective as outlined in our previous responses. In order to comply with your position, we will remove the adjustment related to the impairment of digital currencies from our calculation of Adjusted

EBITDA in all future filings and amounts for prior comparative periods will be reclassified to conform to current period classification.

c.

previously requested, explain the nature of amortization of prepaid service contracts included in the non-GAAP adjustment to Adjusted

EBITDA for depreciation and amortization. Tell us if it relates to the operation and maintenance services for the Hardin Facility pursuant to the Data Facility Services Agreement as noted from your disclosure on page F-10 of your Form 10-K for the year ended

December 31, 2021. Explain how adjusting for the cost of services complies with Rule 100(b) of Regulation G, Item 10(e)(1)(i)(C) of Regulation S-K, and Question 100.01 of the Compliance and Disclosure Interpretations on Non-GAAP Financial Measures.

thank the staff for your engagement on this issue and for considering our perspective as outlined in our previous responses. This consideration consisted of 6 million shares of stock valued at $11.2 million and it does relate to the operation of the Hardin Facility pursuant to the Data Facility Services Agreement. Amortization of this prepaid contract was classified as cost of revenues in prior periods. In our upcoming report on form 10-Q, we are planning to segregate cost of revenues into two components, including (1) “cost of revenues

– energy, hosting & other” and (2) “cost of revenues – depreciation and amortization”. Given your additional comments, we will include this expense as a component of “cost of revenues – energy, hosting & other” in our statements of operations in all future filings and we will remove the adjustment related to this item from the calculation of Adjusted EBITDA. All amounts for comparable prior periods will be reclassified to conform to current period classification.

Rule

100(b) of Regulation G prohibits the use of a non-GAAP financial measure that is misleading when viewed in context with the information accompanying that measure and any other accompanying discussion of that measure. We believe that the non-GAAP measure of Adjusted EBITDA, as described above, coupled with our proposed disclosure language outlined below, complies with Rule 100(b) because this measure is a logical and simple adjustment to the numbers which we have fully disclosed in a straightforward and easily comprehensible manner.

proposed revised disclosure for our non-GAAP measure “Adjusted EBITDA” follows:

provide investors with a reconciliation from net income to the non-GAAP measure Adjusted EBITDA as a component of Management’s

Discussion and Analysis. We define Adjusted EBITDA as GAAP net income (or loss) for the period with 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 and (ii) impairments of patents (if applicable for the period presented).

Adjusted

EBITDA is not a measurement of financial performance under generally accepted accounting principles in the United States (“GAAP”) and, as a result, this measure may not be comparable to similarly titled measures of other companies. Non-GAAP financial measures are subject to material limitations as they are not in accordance with, or a substitute for, measurements prepared in accordance with GAAP.

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. Management uses both Adjusted EBITDA and the supplemental information provided herein as a means of understanding, managing, and evaluating business performance and to help inform operating decision making. We rely primarily on our Consolidated Condensed Financial Statements to understand, manage, and evaluate our financial performance and use the non-GAAP financial measures only supplementally.

connection with responding to the staff’s comments, the Company acknowledges that (i) it is responsible for the adequacy and accuracy of the disclosure in its filing; (ii) staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and (iii) it may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

hope you find that these responses adequately address the staff’s questions, but please contact the undersigned at hugh@marathondh.com or our counsel, Jolie Kahn, Esq., at joliekahnlaw@sbcglobal.net, if you have any further questions or would like to discuss our responses.

Read in the reply ↗

You indicate in response to prior comment 2 that you determined that the loan did not meet the derecognition criteria in ASC 606 because the Company held a repurchase right in the form of a call option under ASC 606-10-55-67(b) and therefore retained control per ASC 606-10-55-68. Please elaborate on the material rights and obligations of both parties to the borrowings.

Rest of the question

As part of your response, explain the rights of the borrower with respect to the digital assets and whether there are any restrictions on what the borrower can do with the borrowed digital assets. Further explain to us why you believe the customer does not obtain control of the asset. That is, explain whether the borrower has the ability to direct the use of, and obtain substantially all of the remaining benefits from, the digital assets. Please also clarify whether, and if so how, your accounting policy captures counterparty non-performance related to their obligation to return the borrowed digital assets to you.

Pursuant to the Master Services Loan Agreement (“MSLA”) with NYDIG (“Borrower”), the material rights and obligations of

Company and the Borrower (collectively, the “Parties”) were as follows:

i.

Borrower or Lender will agree on the terms of each loan (“Loan”) which shall include designation of the amount and type of digital assets to be lent (i.e., Bitcoin), the trade date, loan date, scheduled termination date, estimated nominal value of loaned security, type of collateral, amount of collateral, margin percentage, and loan fee rate;

ii.

shall transfer to the Company collateral with a

Rest of the answer

market value equal to 100% of the loaned digital assets (“Loaned Securities”) concurrently with the transfer of Loaned Securities to the Borrower. To the extent the collateral is comprised of cash, Company will pay the Borrower a cash collateral rebate on such collateral computed daily based on the amount of cash held by the Company as collateral.

MARATHON

DIGITAL

HOLDINGS,

INC.

1180 North Town Center Drive Suite 100 Las Vegas, NV 89144

TELE

725.202.6780 iii.

agrees to pay the Company a loan fee computed daily on each Loan based on the aggregate market value of loaned securities on the respective day such loan fees are computed.

iv.

Unless otherwise agreed, either Party may terminate a Loan at any time by giving notice to the other party. Otherwise, Borrower shall transfer the Loaned Securities back to the Company before cutoff time on the termination date of each Loan;

v.

Until

Loaned Securities are required to be redelivered to the Company upon termination of the Loan, Borrower shall have all incidents of ownership of the Loaned Securities including the right to transfer the Loaned Securities to others.

vi.

The

Company is entitled to receive all distributions made on or in respect of Loaned Securities to the extent to which it would be entitled to if the Loaned Securities were not lent to the Borrower;

vii.

To the extent the market value of collateral for Loans is less than the market value of the Loans, the Borrower shall transfer additional collateral to the Company such that the market value of the collateral equals or exceeds 100% of the Loaned Securities. To the extent the market value of the collateral for the Loans is greater than the market value of the Loans, Borrower may demand that the Company transfer back such excess of collateral to Borrower;

viii.

All

Loans may be terminated immediately upon an event of default which includes non-performance, failure to transfer collateral, either party becomes insolvent, or any representation made is incorrect (each event, a “Default”) at the option of the non-defaulting party; and ix.

Upon an occurrence of Default, the Company may, as a remedy, sell collateral to replace Loaned Securities, or the Borrower may purchase replacement collateral or sell an amount of Loaned Securities to set off any amounts due to the Company. Only in such event of Default may the Borrower treat the Loaned Securities as its own, and the Company’s obligation to return the collateral shall terminate.

Management has determined that the Company retained control (i.e., as defined in ASC 606-10-25-25, the ability to direct the use of and obtain substantially all of the remaining benefits from) over the loaned digital assets on the basis of ASC 606-10-55-68, which states expressly (i.e., without any caveat – e.g. “except for” or “unless” type language – or other observable consideration) that

“If an entity has an obligation or a right to repurchase the asset (a forward or a call option), a customer does not obtain control of the asset because the customer is limited in its ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset…”. The Basis for Conclusions to ASU 2014-09, which is codified in ASC 606, affirms this in paragraph

BC424, which similarly states, without caveat or exception, “If an entity has an obligation or a right to repurchase an asset (that is, a forward or a call option, respectively), the Boards decided that a customer does not obtain control of the asset…This is because the customer is constrained in its ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset.” While we are now aware that lenders’ accounting for digital asset loans is currently being debated in practice, we believe our application of ASC 606 in determining whether we or the Borrower controlled the loaned digital assets in our arrangement was appropriate based on the explicit wording in ASC 606 and ASU 2014-09 and the ‘at any time’ nature of our option to terminate the loan (and retake possession of the loaned digital assets).

In reaching our conclusion, we also considered Question 25 in the AICPA Digital Assets Practice Aid (“AICPA Digital Guide”).

Similar to the fact pattern in Question 25 of the AICPA Digital Guide, the Borrower in our MSLA had the same rights as the borrower in

Question 25 to transfer, encumber or pledge the crypto asset borrowed in any way it chooses. The AICPA Digital Guide concludes that the borrower in that fact pattern does not obtain control of the lent digital asset because, pursuant to ASC 606-10-55-68, the customer is limited in its ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset. We considered the

Response to Question 25 confirmatory to our conclusion outlined in the preceding paragraph. We note that, also consistent with the Response to Question 25, we clearly and separately presented and designated our loaned digital assets on our balance sheet as “Digital Assets,

Loaned”.

Looking past ASC 606-10-55-68, we observe that until the loaned digital assets were required to be returned to the Company upon termination of the loan, the Borrower had the ability to direct the use of the loaned digital assets, including the right to transfer the loaned digital assets to others. However, we believe it is at least debatable whether the Borrower had the ability to obtain substantially all the remaining benefits of the loaned digital assets when we had a call option on those assets at any time. We believe this call option, exercisable at any time under the MSLA, means that we, instead of the Borrower, retained all of the residual value of the loaned digital assets;

and therefore, the Borrower did not have the ability to obtain substantially all of the remaining benefits from those assets.

For example, if a loaned digital asset appreciates in value (e.g., from $10,000 to $12,000) during the loan period, the Borrower was not entitled to the benefits of that appreciation because we could call the loaned digital asset at any time in order to sell it and realize the value appreciation ourselves. Even if the Borrower sold the asset before we could exercise our call right, the Borrower would have to expend its proceeds from the appreciation to purchase an equivalent digital asset to return to us, meaning we would, instead of the Borrower, realize the benefit of that appreciation.

With respect to the Staff’s request for clarification on consideration of counterparty non-performance, the Company evaluated counterparty non-performance risk and determined that NYDIG is a reputable entity that is backed by Stone Ridge Asset Management LLC, a national advisory firm and is a well-known digital asset custodian. Therefore, the Company concluded that the lifetime expected credit loss associated with the digital assets Loan was de minimis while the Loan was outstanding. In addition, the Company notes that the Loan was terminated as of June 13, 2022 and the loaned BTC has been returned to the Company by Borrower. The Company does not plan loan BTC in the future.

Read in the reply ↗

We note your response to prior comment 2 indicating that you will reclassify the cash interest received on the BTC loans prospectively to conform any comparable prior period amounts to the current period classification. Please clarify the category of the statements of cash flow within which this line item will be presented. Refer to ASC 230-10-4516(b).

For the year ended December 31, 2021, the Company received cash interest of $129 thousand on the Loan of BTC to NYDIG under the MSLA. Per

ASC 230-10-45-16(b), cash receipts from returns on loans (i.e., interest) are classified as cash inflows from operating activities. However, the interest received was erroneously included in the reconciliation between net income and operating cash flows in the statement of cash flows under the line item, “Changes in operating assets and liabilities – digital currencies” as this interest was paid in cash and not BTC.

Rest of the answer

The Company passed on the error as of December 31, 2021 due to the de minimis balance of the error. In addition, as the Company has terminated its MSLA to loan BTC as of June 13, 2022, there is no prospective impact on the Company’s financial statements.

Read in the reply ↗

We note and continue to consider your response to prior comment 3 in your letter dated August 5, 2022.

Company acknowledges the Staff’s continued consideration of its response to prior comment 3. Read in the reply ↗

Please reconcile for us your discussion in response to prior comment 4 indicating that a decline in fair value below carrying value “could be an indication” of impairment with your stated policy that an impairment exists when carrying value exceeds fair value and with ASC 350-30-35-19.

Company has determined that its digital currencies (BTC) are indefinite lived intangible assets within the scope of FASB ASC 350 –

Intangible Assets Goodwill and Other (“ASC 350”) and as such, are subject to impairment testing on an annual basis or more frequently if events or changes in circumstances indicate it is more likely than not that the asset is impaired in accordance with ASC 350-30-35-18.

Rest of the answer

The Company also considered Response 5 in the AICPA Digital Guide that states when an identical digital asset is bought and sold at a price below the entity’s current carrying value, this will often serve as an indicator that impairment is more likely than not. As such, the Company monitors on a daily basis, whether there is a point in time during each day where BTC is bought or sold at a price lower than the BTC carrying value on the Company’s financial statements. The Company views this event

(i.e., BTC bought or sold at a price lower than the BTC carrying value on the Company’s financial statements) as an indicator that impairment is more likely than not, and proceeds to the quantitative impairment test outlined in ASC 350-30-35-19 which compares the fair value of the asset (BTC) with its carrying amount to determine the amount of impairment.

determining the fair value of BTC, the Company notes that Response 5 in the AICPA Digital Guide further states that the fair value should be determined following the fair value framework in FASB ASC 820, Fair Value Measurement. ASC 820-10-35-2 defines fair value as

“the price that would be received to sell an asset…in an orderly transaction between market participants at the measurement date.” In order to determine the fair value at the measurement date, the Company looked to Response 20 in the AICPA Digital Guide which indicates that given there is no traditional close for the crypto market, an accounting convention may establish a cut-off time for determining the fair value of the crypto asset based on prices at the close of the business day of the entity, a fixed coordinated universal time, or other timing as deemed reasonable, such as traditional close time based on local market jurisdictions. Response 20 in the AICPA Digital Guide also indicates that entities should consider transactions that take place after the cut-off time but before the end of the reporting period, similar to the guidance in FASB ASC 820-10-35-41C. The Company has considered that given there is no traditional close for the crypto market, determination of the fair value of BTC on the date an impairment indicator exists should be based on the fair value of BTC at 23:59 GMT on that respective measurement date. Any difference between such fair value of BTC at 23:59

GMT and BTC carrying value on the day an indicator of impairment exists is recorded as an impairment charge to the income statement by the amount by which the carrying value exceeds the fair value of BTC.

Read in the reply ↗

In order to help us evaluate your response to prior comment 14: • You state, “The lender has exclusive control over the collateral account, including liquidation of the collateral only in the event of a default under the RLOC.” Clarify to what the phrase “in the event of a default” refers and what you mean by “exclusive control” and how that is differentiated from control.

Rest of the question

For example, are you representing that the lender cannot direct the use of, and obtain substantially all of the benefits from, each distinct nonfinancial asset you transfer as collateral unless and until an event of default occurs? • Tell us whether the lender has the right to pledge, rehypothecate, assign, commingle, or otherwise use the assets posted as collateral absent an event of default. • Provide a more fulsome analysis of what you identify as the control indicators in ASC 606-10-25-25 and 25-30.

response to the Staff’s inquiry on the definition of “exclusive control” over pledged collateral, the Company clarifies that Silvergate Bank (“Lender”) has the right to “take control of the collateral in whatever manner stored” per section 4.6 of the Revolving Line of Credit (“RLOC”), and to “take any steps as Lender deems necessary to protect Lender’s interest in and to preserve the collateral, may purchase or lease cold storage vaults to preserve the Collateral…and may acquire one or more hardware wallets where Lender may store the private keys associated with all or part of the collateral”

Rest of the answer

per section

4.3 of the RLOCupon an event of default. An “Event of Default,” includes nonpayment of scheduled contractual payments under the RLOC, breach of representation, failure by the Company to file financial reports or provide Lender with requested information, judicial actions against a material portion of the Company’s property, noncompliance with the RLOC, judgments rendered against the Company in excess of $500,000, bankruptcy, the occurrence of any event that could have a material adverse effect on the Company, cross default, change of control, invalidity of any material term under the RLOC, or seizure of collateral.

When no Event of Default has occurred, the Lender does not have the right to pledge, rehypothecate, assign, commingle, or use the assets that have been posted as collateral as such collateral is held in a custodial intermediary account that only perfects the Lender’s security interest. The Company has also determined that when there is no Event of Default, it maintains control over the pledged collateral as it has the ability to obtain substantially all of the remaining benefits from such pledged collateral by fulfilling its obligations under the RLOC, thereby exercising its right to the return of such collateral. Specifically, the Company believes that in addition to the fact that the pledged collateral is held in a custodial account that Lender does not have access to until an Event of Default, the Lender does not have the ability to obtain substantially all the remaining benefits of the loaned digital assets when the Company has the ability to have the collateral returned at any time upon fulfillment of its obligations under the RLOC. For the same reasons stated in our response to comment 1 above, the Company believes the ability to fulfill its obligations under the RLOC and therefore exercise its call right on the collateral at any time, means the Company (and not the Lender), retain all of the residual value of the pledged digital assets;

and therefore, the Lender does not have the ability to obtain substantially all of the remaining benefits from those assets.

Company further considered the control indicators in ASC 606-10-25-30 and determined that legal transfer of the collateral has not transferred to the Lender, and, while the Company does not have physical possession of the asset, the Lender also does not have physical possession of the asset as such collateral is maintained with a custodial intermediary in the form of a separate trust wallet. The Company also determined that it maintains the significant risks and rewards of the ownership of the collateral as the Company bears the risks of loss due to market value declines of the BTC in the collateral account. Specifically, if the collateral value declines such that any outstanding loans under the RLOC are under-collateralized, the Company is required to pledge additional BTC to the collateral account to restore a minimum loan to value ratio. The Company may also request return of the collateral if BTC appreciates to a price where the outstanding loans under the RLOC becomes overcollateralized. Therefore, the Company is the one who bears the risks and rewards of ownership – and therefore price fluctuations – of the collateral. The Company considered the factors ASC 606-10-25-30(a) and 25-30(e) and determined that whether the Company has present right to payment for the collateral or whether the Lender has accepted the collateral, are not relevant to this RLOC arrangement. Accordingly, the Company concludes that when it is not in an Event of Default under the RLOC, the Company maintains control over the pledged BTC (collateral) and therefore will not derecognize such pledged BTC.

Read in the reply ↗

We note that you reclassified the change in fair value of digital currencies held in fund from other income (expenses) to operating income (loss) in all prior periods presented. Tell us what consideration was given to identifying this material change as a restatement and amending prior filings.

Rest of the question

In this regard, changing the classification of an account balance from an incorrect presentation to the correct presentation is considered a correction of an error, not a reclassification. Refer to ASC 250-10. In addition, please explain the impact on your assessments of disclosure controls and procedures and internal controls over financial reporting as a result of the revision to your accounting for and presentation of your limited partnership interest in the NYDIG Digital Assets Fund III, LP.

Prior to the Company’s Q2 2022 10-Q, the Company did not consolidate the NYDIG Digital Assets Fund III, LP (“Fund”). Given the Company previously considered its investment and amounts earned from such investment in a non-consolidated Fund to be non-operating income and expense as provided for in SEC Regulation S-X Rules 5-03.7 5-03.9.

Rest of the answer

This classification is because prior to the change in the consolidation conclusion, the Company’s investment in the Fund were not considered part of the normal course of business operations and rather were determined to be unrealized and realized gains/(losses) on the Company’s investment in the Fund (i.e., return on investments in securities).

As noted within our August 1, 2022, response to your SEC letter dated June 24, 2022, the Company re-evaluated its accounting for its limited partnership interest in the Fund and concluded that it should have consolidated the Fund (which qualifies as an investment company under

ASC 946). The disclosures in the Company’s Q2 2022 10-Q reflected this change in accounting conclusion. As consolidation of the

Fund results in the underlying assets in the Fund constituting the Company’s own assets, any realized or unrealized gains/losses on the Fund assets (bitcoin) were reclassified to operating income (loss) as the Fund’s consolidated activities as an investment company are considered part of the consolidated Company’s normal operations and therefore should be part of operating income (loss) in accordance with SEC Regulation S-X Rule 5-03.3.

the Company’s Form 10-Q dated September 30, 2022, specifically NOTE 12 – REVISION OF CERTAIN PRIOR PERIOD AMOUNTS, the Company revised its presentation of its investment in the Fund to reflect the consolidated financial results of the Fund as of and for the nine months ended September 30, 2022 and any comparative periods. The Company evaluated the aggregate effects of the errors to our previously issued financial statements in accordance with SEC Staff Accounting Bulletins No. 99 and No. 108 and, based upon quantitative and qualitative factors, and determined that the errors, along with other identified errors in accounting for the Company’s investment in Simple

Agreements for Future Equity (“SAFE”s), its use of non-GAAP measurement conventions of non-cash consideration received for revenue, and disclosure omissions were not material to the previously issued financial statements and disclosures included in the Company’s

Annual Reports on Form 10-K for the year ended December 31, 2021, for any quarterly periods included therein, or through our Quarterly

Reports on Form 10-Q for the quarterly periods ended March 31, 2022 and June 30, 2022.

Specifically, the Company has determined that, based on the dual method (rollover and iron curtain method), the errors in the aggregate are quantitatively and qualitatively immaterial to the Company’s financial statements as a whole for the year ended 2021, as well as the interim periods, and over the quarterly periods Q1 2022 and Q2 2022. The Company considered the following factors in making its assessment:

quantitative percentage impact to each affected financial statements caption is de minimis, and the dollar amount of the error to the financial statement caption is below the materiality based on 0.5% of total revenue for each respective period. When assessing interim periods, ASC 250-10-45-27 refers to the need to assess the impact to the estimated full fiscal year and the effect on the trend of earnings. For example, when assessing Q1 2021, Management considered the impact to Q1 2021 in combination with its contributed impact to the full fiscal year and associated materiality amount.

impact of the errors on the trend of 1) revenue growth; 2) gross margin; 3) operating margin; and 4) pre-tax income are not quantitatively or qualitatively material to the 2021 and 2022 financial statements when considering the magnitude of the errors that occurred.

errors in the aggregate do not materially change net income (loss).

Company further assessed its disclosure controls and procedures and internal controls over financial reporting as a result of the revision and determined that two entity level controls as listed below, were deficient:

1)

Control

Reference EL-23 key accounting policies are documented in 10-K,10-Q and/or technical memos. The Controller and the CFO, identify adoption of new or changes to existing accounting policies and procedures. Updates to accounting policies and procedures are documented by the Controller and they are reviewed and approved by the CFO.

2)

Reference EL-24

There is a process for management to identify changes to relevant GAAP, SEC or Tax rules (e.g., subscription service). Management notifies relevant accounting personnel of said changes and consults with third parties, if necessary, when assistance is needed (e.g., tax experts). Further, management prepares technical accounting memos (i.e., Whitepapers) as applicable to document the application of

GAAP, SEC or Tax rules.

References EL-23 and EL-24 are preventative controls intended to mitigate the risk of accounting errors. While the accounting issues were identified by the Controller and CAO, the revised conclusions resulted in the accounting policy/conclusion errors. As a result of the errors, the two entity level controls are considered deficient, and the Company did not have any compensating control(s) to mitigate the risk of a material misstatement.

two control deficiencies affect the same significant disclosure regarding the Fund error. Taking into consideration the COSO framework and the Company’s internal control over financial reporting, the two additional deficiencies listed above result in a significant deficiency within the Annual Reports on Form 10-K for the year ended December 31, 2021, as the collective deficiencies could not result in materially misstated financial statements.

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Please explain the basis for your classification of operating expenses separately from other operating income (expenses). In this regard, explain why impairments of digital currencies and patents are considered operating expenses and the change in fair value of digital currencies held in fund and gain on sale of equipment are considered other operating income (expenses).

change in classification of operating expenses separately from other operating income is to distinguish the differences between core operations (i.e., the mining of digital currencies and, formerly, patents) and non-core operations that are within normal business activities, specifically the sale of equipment as well as the change in fair value of assets in the NYDIG Digital Assets Fund III, LP (“Fund”).

The segregation increases the relevance and usefulness of the financial statements though grouping a homogenous class of items (i.e., non-core and core) under each sub-caption.

Rest of the answer

The Company believes this breakout provides greater insight to its investors and financial statement users while conforming to SEC Regulation S-X Rule 5-03. However, we acknowledge the Staff’s inquiry and removed the differentiation between operating expenses from other operating income (expenses) in the Form 10-Q dated September 30, 2022 such that operating expenses and other operating income sub-captions are consolidated into operating expenses.

Read in the reply ↗

Please tell us the nature of the $14.0 million purchase of equity investments in the six months ended June 30, 2022. Tell us where the relevant disclosures are provided in your notes to consolidated condensed financial statements.

Company respectfully acknowledges the Staff’s comment 8 and has, accordingly, expanded its disclosures in the “Investments” section under Note 2 to clarify the nature of the purchases of equity investments made during the nine months ended September 30, 2022 in line with the disclosure requirements under ASC Topic 321, Investments – Equity Securities in the September 30, 2022

10-Q filing (Q3 2022 10-Q Pg.

Rest of the answer

9-10) as follows:

Investments, which may be made from time to time for strategic reasons (and not to engage in the business of investments) are included in non-current assets in the consolidated balance sheets. Investments are recorded at cost and the Company analyzes the value of investments on a quarterly basis. As part of the Company’s policy to maximize return on strategic investment opportunities, while preserving capital and limiting downside risk, the Company may at times enter into equity investments or Simple Agreements for Future Equity (“SAFE”) agreements.

The nature and timing of the Company’s investments will depend on available capital at any particular time and the investment opportunities identified and available to the Company.

On

December 21, 2021 and December 30, 2021, the Company entered into two separate SAFE agreements classified on the balance sheet as non-current assets. SAFE agreements are accounted for as equity securities without readily determinable fair value at cost minus impairment, as adjusted for observable price changes in orderly transactions for identical or similar investment of the same issuer pursuant to Topic 321 Investments

– Equity Securities (“ASC 321”).

February 3, 2022, the Company invested approximately $10 million in convertible preferred stock of Compute North Holdings, Inc. The acquisition of convertible preferred stock was accounted for as investments in equity securities without readily determinable fair value at cost minus impairment, as adjusted for observable price changes in orderly transactions for identical or similar investment of the same issue pursuant to ASC 321. This investment was subject to an impairment of $10.0 million following Compute North’s Chapter 11 Bankruptcy filing in September 2022 (See Note 6).

May 3, 2022, the Company converted $2.0 million from a SAFE investment into preferred stock while purchasing an additional $3.5 million of preferred stock in Auradine, Inc. along with entering into a commitment to acquire $30.0 million of additional shares of preferred stock. This forward contract was accounted for under ASC 321 as an equity security. On September 27, 2022, pursuant to the forward contract, the Company increased its investment in the preferred stock of Auradine, Inc. by $30.0 million, bringing its total carrying amount of investment in Auradine, Inc. preferred stock to $35.5 million with no noted impairments or other adjustments (See Note 11).

of September 30, 2022, the Company has one remaining SAFE investment with a carrying value of $1.0 million, with no noted impairments or other adjustments.

Read in the reply ↗

We note from your disclosure on page 8 that you transferred all of your bitcoin holdings from NYDIG Digital Assets Fund III, LP to your own account on June 10, 2022. Tell us what consideration you gave to disclosing this non-cash activity in your supplemental schedule of non-cash investing and financing activities.

Company respectfully acknowledges the Staff’s comments, and notes that the Company disclosed the transfer of all bitcoin holdings from the NYDIG Digital Assets Fund III, LP (“Fund”) in Note 2 under ‘Digital Currencies Held in Fund’ in the

Q2 2022 10-Q (Q2 2022 10-Q Pg. 8). The Company re-evaluated its Statement of Cash Flows for the six months ended June 30, 2022 and determined that the supplemental schedule of non-cash investing and financing activities should have included the transfer of digital currencies out of the Fund when considering the relevant authoritative guidance under Topic

Rest of the answer

ASC 230 – Statement of Cash Flows. Accordingly, the Company included a disclosure in its Statement of Cash Flows for the nine months ended September 30, 2022 for the transfer of Bitcoin holdings from the Fund to the Company’s own digital wallet on June 10, 2022, in accordance with ASC 230-10-50-3. The Company included the additional disclosure as follows on page 8 of the Q3 2022 10-Q with underlined text representing the added disclosure as compared to the Statement of Cash Flows in the Company’s Q2 2022 10-Q:

Nine Months Ended September 30

Supplemental schedule of non-cash investing and financing activities:

2022

2021

Transfer of digital currencies out of fund

137,843,761

-

Read in the reply ↗

We note your revised disclosure in response to prior comment 7 indicating that you consolidate the Fund under a voting interest model. Tell us why your disclosure continues to reference ASC 825-10.

noted within our August 1, 2022, response to your SEC letter dated June 24, 2022, the Company re-evaluated its accounting for its limited partnership interest in the NYDIG Assets Fund III, LP (“NYDIG Fund”) and concluded that it should have consolidated the NYDIG

Fund as an investment company under the voting interest model in accordance with ASC 810 until it met the requirements for deconsolidation on June 10, 2022. The disclosures in the Company’s Q2 2022 10-Q reflected this change in accounting conclusion, with the impact of this change being analyzed in the response to comment 6 above.

Rest of the answer

The reference to ASC 825-10 was a scrivener’s error and should have been removed in the notes to our financial statements on Form 10-Q for the quarter ended June 30, 2022 and was removed in the Form

10-Q for the quarter ended September 30, 2022. Any reference to ASC 825-10 will be removed in all future filings regarding our disclosure of the Company’s accounting for the NYDIG Fund.

Read in the reply ↗

In order to help us continue to evaluate your investment company conclusion, please provide a more robust and fulsome ASC 946 accounting analysis, including your evaluation of the ASC 946 implementation guidance to the Fund.

Rest of the question

Address in your analysis, but do not limit it to, the following: • Whether your ability to take the assets of the Fund at any time is a benefit normally attributable to ownership interests and the reasons why or why not; • Your consideration of the combination of you being the sole investor, the fund having a single investment, your ability to take assets of the Fund at any time, management’s statements in your January 25, 2021 press release of its strategy of holding bitcoin, and your June 2022 transfer of digital assets out of the Fund in evaluating ASC 94610-15-6(b) and the related implementation guidance, including, but not limited to, ASC 946-10-55-8 and 55-16; • The economic substance of the Fund and how you concluded that substance is consistent with the characteristics of an investment company. For example, how does the economic substance of the Fund differ from direct holding of bitcoin given your stated ability to take the Fund’s bitcoin?; • Whether the General Partner interest represents an ownership interest in the Fund, including the reasons why or why not and your analysis of the ASC 946 implementation guidance related to ownership interests. If you believe it does not, clarify what that interest represents; and • Whether you directed the Fund to actively identify other investors and if so, a description of when and how those activities occurred. See e.g., ASC 946-10-55-17.

We respectfully acknowledge the Staff’s request for a more robust and fulsome FASB ASC 946, Financial Services – Investment

Companies (“ASC 946”) accounting analysis and have provided the analysis below in further and incremental detail over that previously provided in the August 1, 2022, response to your SEC letter dated June 24, 2022.

Company first invested in the NYDIG Digital Assets Fund III, LP (“Fund”) on January 21, 2021 as the sole limited partner.

On June 10, 2022, the Company elected to redeem 100% of its partnership interest in the Fund which was settled in 4,768.5 bitcoin.

Rest of the answer

The

Company’s decision to redeem its partnership interests in the Fund was made for treasury management purposes as the Company needed to have bitcoin on hand to be able to pledge as collateral under a term loan and revolving line of credit arrangement. The General Partner of the Fund (“GP”) adopted a plan of liquidation and dissolution on June 15, 2022. The Fund commenced the liquidation of the Fund’s operation on the same date and the Fund was dissolved in September 2022.

ASC

946 - Investment Company Analysis:

Per

ASC 946-10-15-4, “An entity regulated under the Investment Company Act of 1940 is an investment company under this topic.”

Given the Fund is not registered under the Investment Company Act of 1940, the Company proceeded to consider the characteristics of an investment company in ASC 946-10-15-6 through 15-7 to determine whether the Fund is an investment Company. ASC 946-10-15-6 through 15-7 state:

15-6 An investment company has the following fundamental characteristics:

a.

It is an entity that does both of the following:

Obtains funds from one or more investors and provides the investor(s) with investment management services

Commits to its investor(s) that its business purpose and only substantive activities are investing the funds solely for returns from capital appreciation, investment income, or both.

b.

entity or its affiliates do not obtain or have the objective of obtaining returns or benefits from an investee or its affiliates that are not normally attributable to ownership interests or that are other than capital appreciation or investment income.

15-7

An investment company also has the following typical characteristics:

has more than one investment.

has more than one investor c.

has investors that are not related parties of the parent (if there is a parent) or the investment manager.

d.

has ownership interests in the form of equity or partnership interests.

e.

manages substantially all of its investments on a fair value basis.

936-10-15-6(a)(1) Obtains funds from one or more investors and provides the investor(s) with investment management services the NYDIG Fund’s Private Placement Memorandum (“PPM”), the General Partner provides investment management services to the Company that include the ability to direct the formulation of investment policies and strategies, and acquire, purchase, sell, hold and generally trade authorized investments on behalf of the NYDIG Digital Assets Fund III, LP (“Fund”). As such, the fundamental characteristic of an investment company outlined in ASC 946-10-15-6(a)(1) is met.

936-10-15-6(a)(2) Commits to its investor(s) that its business purpose and only substantive activities are investing the funds solely for returns from capital appreciation, investment income, or both.

Further, the PPM states that the entity’s investment objective is to invest in bitcoin, a digital asset, and to reasonably capture the economic value of any other digital assets that may be granted to the investment fund with an emphasis that an investment in the NYDIG Fund will constitute an investment only in bitcoin. Accordingly, the Fund’s business purpose and substantive activity is to function as an investment company by investing contributions into purchases of digital assets to hold for capital appreciation. Thus, the fundamental characteristic of an investment company outlined in ASC 946-10-15-6(a)(2) is met.

936-10-15-6(b)) Commits to its investor(s) that its business purpose and only substantive activities are investing the funds solely for returns from capital appreciation, investment income, or both.

order to consider whether the Fund obtains or has the objective of obtaining returns or benefits that are not normally attributable to ownership interests or that are other than capital appreciation or investment income, the Company considered examples in ASC 946-10-55-8 that give illustrations of relationships and activities that would be inconsistent with the characteristics of an investment company described in ASC 946-10-15-6(b) and determined that none apply to the Fund. Specifically, the Fund does not acquire, use, exchange or process the assets or technology of an investee, there are no other arrangements between the Fund or its affiliates to jointly develop, produce, market, or provide products or services, there are no investees in the Fund whose sole purposes is to provide financing guarantees or assets to serve as collateral, there are no options to purchase ownership interests in the Fund at any amount other than fair value, and there are no transactions between the Fund and an investee that are not at arms-length, that are on terms unavailable to third party investees, or that represent a substantive portion of the investee or Fund’s business activities. The Fund’s only objective is to acquire bitcoin and hold it for capital appreciation/depreciation and investment income/losses through such investment. Such objective is consistent with that of attaining capital appreciation on an investment and therefore, the fundamental characteristic of an investment company outlined in ASC 946-10-15-6 (b) is met.

Company next considered the five typical characteristics of an investment company as listed in ASC 946-10-15-7, noting that the Fund possesses three of such characteristics.

936-10-15-7(a) It has more than one investment / ASC 936-10-15-7(b) It has more than one investor

Fund contains only has one investment, specifically in bitcoin, and has one investor –the Company. Therefore, the typical characteristics in ASC 946-10-15-7(a) and 15-7(b) do not exist. However, notwithstanding that the Fund only invests in bitcoin, the design of the entity allows the Fund to invest in other assets, but the decision to purchase assets is at the sole direction of the GP (NYDIG). Additionally,

ASC 946-10-55-17 states that a single investor does not preclude an entity from being an investment company. and, while the Company did not specifically direct the Fund to identify other potential investors, the PPM indicates that the Fund is designed to allow multiple investors whose admission is at the sole discretion of the GP.

936-10-15-7(c) It has investors that are not related parties of the parent (if there is a parent) or the investment manager.

considering the characteristic in ASC 946-10-15-7(c), the Company notes that it is not a related party to the GP and therefore, the Fund possesses the characteristic in 15-7(c).

936-10-15-7(d) It has ownership interests in the form of equity or partnership interests.

Fund’s ownership interest is solely in the form of partnership interests as defined in ASC 946-10-55-23. The Company contributed a net $150 million for 100% ownership in the partnership, which represents 100% of the Fund’s assets. The value of this interest is dependent on the fair value of Fund’s assets at a given point in time and the Company is exposed to variable returns from the changes in fair value of underlying investments of the Fund as the value of bitcoin fluctuates. Conversely, the GP has no ownership interest in the Fund given that the GP has not made a capital contribution to the Fund and thus, has a $0 balance in its capital account. However, the GP receives benefit from its involvement with the Fund as it receives a monthly fee for its investment management services calculated as 0.5%. which was reduced to 0.3%, per annum of net asset value in each partner’s account. Given that the NYDIG Fund’s ownerships interest are in the form of partnership interests, the Fund possesses the characteristic in ASC 946-10-15-7(d).

936-10-15-7(e) It manages substantially all of its investments on a fair value basis

Fund manages its investments on a fair value basis and therefore possesses the characteristic in ASC 946-10-15-7 (e). Management considered the guidance in ASC 946-10-55-27 that further elaborates that in order to determine whether the investments are managed on a fair value basis, an evaluation must be made of whether fair value is a key component of how the entity evaluates the performance of its investments, how the entity transacts with investors, and how asset-based fees are calculated. The fair value of the underlying bitcoin assets is the primary metric to evaluate the investment fund’s performance. The Fund’s interactions with its investors are that of receipt of funding in exchange for partnership interests allocation of income/expense based on such partnership interests, and payout of capital withdrawals (redemptions). In addition, the management fee payable to the GP is based on a fixed percentage of the Fund’s net asset fair value at the end of each month. Accordingly, the monthly management fee for the GP’s investment management services will fluctuate based on the fair value of the Fund. This demonstrates that fair value is the primary measurement attribute and a key component of how the Fund evaluates and manages its investments, transacts with its investors, and determines its management fees as noted in ASC 946-10-55-27.

946-10-15-8 indicates that to be an investment company, the entity must have all fundamental characteristics as listed within ASC 946-10-15-6.

However, the absence of one or more typical characteristic in ASC 946-10-15-7 does not preclude the entity from being an investment company.

Notwithstanding this, and in response to the Staff’s inquiries, the Company further considered other facts and circumstances to determine whether the Fund’s activities are consistent with those of an investment company in the absence of two of the five typical characteristics in accordance with ASC 946-10-55-11.

946-10-55-16 notes that an investment company typically pools funds from multiple investors and provides them with access to investment opportunities unobtainable by individual investors. Even though the Company is the sole investor in the Fund, the purpose for the Company’s investment in the Fund rather than directly investing in bitcoin itself was to gain access to external investment expertise and opportunities from Stone Ridge Asset Management LLC, an affiliate of the GP and an SEC-registered investment advisor, given the material nature of a net $150 million investment. Stone Ridge Asset Management LLC is a national financial advisory firm that has approximately $16 billion under management. The GP is able to leverage an affiliate to provide services as well as advise on investment strategies and provide industry specific knowledge that the Company does not have given that investing in digital assets is not the Company’s primary business objective. The Company would not have been able to invest a net $150 million in bitcoin without the Fund given the management services and advice that allows the Company access to investment opportunities unobtainable on its own.

address the Staff’s inquiry regarding the Company’s ability to take assets out of the Fund at any time, the PPM states that a limited partner that acquires partnership interests may withdraw all or any portion of its contribution to the investment fund, together with any income and profits attributable to such contribution, from its capital account, subject to certain restrictions as well as the

GP’s judgment for what is best for the Fund. Accordingly, the Company has the right to withdraw any of its ownership interest to be settleable in bitcoin but is not able to withdraw the underlying assets (bitcoin) out of the Fund at any time without redeeming its ownership interests in the Fund. The Company believes that an investors’ right to redeem its ownership interests in an entity is a benefit that is attributable to ownership interests.

detailed within the Form 10-Q dated June 30, 2022, and as further elaborated on within the Form 10-Q dated September 30, 2022, on June

10, 2022, the Company redeemed 100% of its ownership in the Fund, which was settled in 4,768.5 bitcoin and deconsolidated the entity due to it no longer having an interest in the Fund. The Company does not believe this action is contradictory to the Fund’s objective to realize capital appreciation as the investment was held for approximately a year and a half while leveraging Stone Ridge Asset Management

LLC’s expertise. Accordingly, the Company believes this redemption of ownership interest paid out in bitcoin is consistent with the general activities of an investment company and its investor.

we acknowledge the Company’s CEO’s comments on January 25, 2021 indicating that the Company believes holding bitcoin for treasury reserves is a better long-term strategy than holding reserves in cash. While the Company still believes that holding bitcoin for treasury reserve is still the appropriate strategy, the Company’s decision to redeem/withdraw its investment in the Fund was due to evolving business needs for additional funding (and the collateral requirements that accompany such funding) and does not negate the original purpose for entering into investment in the Fund to gain access to the GP’s management expertise and for capital appreciation.

considering the above factors in totality, including the fundamental and typical characteristics held by the Fund, as well as the Fund’s interactions, relations, and the Company’s intention of leveraging the expertise of the General Partner, the Company concludes that the Fund and activities undertaken by the fund are consistent with that of an investment company as defined by ASC 946.

Read in the reply ↗

Please provide your ASC 820 accounting analysis that supports the use of the “CoinDesk Bitcoin Price Index” to determine fair value for the Fund’s investments. As part of your analysis, clarify for us what this index is, how it relates to the Fund’s principal market, and how your analysis contemplates the presumption in ASC 820-10-35-5A.

discussed in the response to comment 11 above, the Company has determined that the Fund has the characteristics of an investment company per ASC 946. Further, the Company notes that as it consolidates the Fund, ASC 810-10-25-15 indicates that an entity shall retain the industry-specific guidance applied by that subsidiary.

Rest of the answer

The Company therefore determined that, while it consolidated the Fund, it initially measured its investments (bitcoin) at their transaction price, and subsequently at fair value as required for other investments in accordance with ASC 946-325-30-1 and ASC 946-325-35-1.

820, Fair Value Measurement (“ASC 820”) is the standard that defines the fair value framework when another Topic requires fair value measurements or disclosures about fair value measurement. A fair value measurement under ASC 820 for an asset assumes that the asset is exchanged in an orderly transaction between market participants either in the principal market for the asset or, in the absence of a principal market, the most advantageous market for the asset in accordance with ASC 820-10-35-5. Further, as noted under

ASC 820-10-35-5A, “a reporting entity does not need undertake an exhaustive search of all possible markets to identify the principal market... but it shall take into account all information that is reasonably available”.

digital assets held by the Fund (i.e., bitcoin) are traded on a number of active markets globally, including over the counter (“OTC”) markets and digital asset exchanges. The Company therefore considered response 16 in the AICPA Digital Guide which states that the reliability and sufficiency of the information produced could vary market by market, and to overcome the presumption that the market in which an entity transacts for the crypto asset is presumed to be the principal market, an entity must obtain evidence that the market it normally transacts in is not the market with the greatest volume and level of activity for the crypto asset. Response 16 further states that “if an entity normally buys and sells crypto assets through an intermediary or a broker, it would generally identify that market as the principal market”

Company invested in the Fund with the purpose of leveraging the GP’s Fund management and investment expertise (as discussed in the response to comment 11 above) and therefore considers the GP its intermediary or broker. However, as a broker is not a market, the

Company looks to the principal markets in which the GP trades on behalf of the Fund. The GP provides quarterly reports that the Company uses to determine the fair value of the investments in Fund. Such reports show the fair value of bitcoin held for investment determined using the OTC market which the GP determines, on a quarterly basis, is the principal market due to there being relevant and reliable price and volume information because of the venues (“Eligible Venues”) supporting such markets (all of which are licensed by the New York Department of Financial Services). The GP typically identifies the principal market as the OTC Eligible Venue in which it transacts unless it has sufficient evidence that another eligible exchange has the highest trading volume and level of activity for such digital asset. The Company obtains the relevant market quotations on the principal market identified by the Fund based on the Fund valuation policies which are made in accordance with ASC 820. The Company therefore determines the fair value of investments in the Fund using appropriate market quotation for a firm bid from an eligible OTC venue or the average of bids from two or more eligible OTC venues

(i.e., the Fund’s principal market) at 4:00 pm EST for net asset value purposes, or 11:59 pm EST for financial reporting purposes.

The Company’s previous disclosure that the fair value of assets within the Fund were measured daily based on pricing obtained from

CoinDesk Bitcoin Price Index at approximately 4pm New York time is inaccurate and the Company will therefore revise disclosures going forward as follows using the Q3 2022 10-Q as the basis with additional disclosure underlined and deleted disclosure stricken through:

Currencies Held in Fund

January 25, 2021, the Company entered into a limited partnership agreement with NYDIG Digital Assets Fund III, LP (“Fund”) wherein the Fund purchased 4,812.66 bitcoin in an aggregate purchase price of $150 million. The Company owned 100% of the limited partnership interests and consolidated the Fund under a voting interest model. The consolidated assets in the investment fund are included in current assets in the consolidated balance sheets under the caption “Digital currencies held in fund.”

Fund qualified and operated as an investment company for accounting purposes pursuant to the accounting and reporting guidance under

ASC 946, Financial Services – Investment Companies, which requires fair value measurement of the Fund’s investments in digital assets. The digital assets held by the Fund were traded on a number of active markets globally, including the over-the-counter market and digital asset exchanges. A fair value measurement under ASC 820 for an asset assumes that the asset is exchanged in an orderly transaction between market participants either in the principal market for the asset or, in the absence of a principal market, the most advantageous market for the asset (ASC 820-10-35-5). The fair value of the assets within the Fund were measured daily based on pricing obtained from CoinDesk Bitcoin Price Index at approximately 4pm New York time determined using the price of bitcoin provided by the OTC market, the Fund’s principal market for bitcoin as of 11:59:59 p.m. in New York for financial reporting purposes. For purposes of continuous (daily) fair value measurement, such assets within the Fund were measured using the daily price of bitcoin provided by the OTC market at 4:00 p.m. in New York. Any changes in the fair value of the assets were recorded in the

Consolidated Statement of Operations under the caption “Realized and unrealized gains (losses) of digital currencies held in fund.”

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Please provide supporting accounting analysis with appropriate citations to authoritative literature for your accounting policy of determining fair value at the 4pm New York time on the end of each reporting period, which implies you only measure the Fund’s investments at four points in time each year.

Company notes that it previously implied that the fair value of assets in the Fund’s investments was only measured at each fiscal quarter end, which is not the case. The Company has since clarified in its updated disclosure on page 8 of the Q3 2022 10-Q that the fair value of investments in the Fund are measured on a daily basis using the price of bitcoin provided by the OTC market

(via the Fund GP) at 4:00 p.m.

Rest of the answer

EST and that the final measurement of fair value for financial reporting purposes (i.e., at each fiscal quarter end) occurs using the price of bitcoin as provided by the OTC market (via the Fund GP) at 11:59:59 p.m. EST. The

Company respectfully refers the Staff to the updated disclosure with proposed clarifications in the response to comment 12 above.

response to the Staff’s request to provide supporting accounting analysis for the Company’s accounting policy on determining fair value of investments in the Fund, the Company respectfully directs the Staff to the Company’s response to comment 12 above.

The Company also considered response #20 in the AICPA Digital Guide which states that an accounting convention may establish a cut-off time for determining the fair value of the crypto assets as the crypto asset markets often operate continuously, without traditional market close. Further, the cut-off time may be at a specific time of day, fixed time zone, or other time as deemed reasonable and any convention should be reasonable and consistently applied. The Company determined that the Fund GP’s policy of using the daily OTC market price at 4:00 p.m. EST to determine fair value is a reasonable accounting convention that has been consistently applied since inception of the Fund. In consideration of ASC 820-10-35-41C that requires entities to consider transactions that take place after the cut-off time but before the end of the reporting period, the Company uses the OTC price at 11:59:59 p.m. EST at financial reporting period end to minimize the probability that a significant event takes place after the typical daily 4:00 p.m. EST measurement time that could cause the quoted price at the daily cutoff time not to represent fair value. The financial reporting cutoff convention has also been applied consistently since inception of the Fund.

the Company redeemed its interests in the Fund on June 10, 2022 and received settlement of such redemption in bitcoin, such bitcoin became subject to the same accounting policy as the Company’s other bitcoin holdings earned through mining activities. Accordingly, the bitcoin was no longer accounted for as intangible asset investments at fair value in the scope of ASC 946, but as intangible assets in the scope of ASC 350 and subject to impairment guidance therein.

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Please clarify for us and consider the need for revised disclosure to clarify how sales of digital assets by the Fund are depicted in your statements of operations, which includes the line items “Change in fair value of investment in NYDIG fund” and “Realized gain (loss) on sale of digital currencies,” and whether such presentation differentiates between realized and unrealized.

Rest of the question

To the extent helpful to understand your policy, cite applicable authoritative literature in your reply.

caption “Change in fair value of investment in NYDIG fund” represents the unrealized change in fair value of investment in the NYDIG Digital Assets Fund III, LP (“Fund”). The “Realized gain (loss) on sale of digital currencies” line item represents the realized gain/loss on the sale of digital currencies held by the Fund primarily to pay off the Fund’s management fees due to GP.

Rest of the answer

In consideration of the Staff’s request for revised disclosure, and in light of de minimis realized gain(loss) on sale of digital currencies, the Company combined and clarified the financial statement line item into “Realized and unrealized gains (losses) on digital currencies held in fund” in the Form 10-Q dated September 30, 2022 and added additional disclosure as shown below:

[…]

Any changes in the fair value of the assets were recorded in the Consolidated Statement of Operations under the caption “Realized and unrealized gains (losses)of digital currencies held in fund.” indicated in the response to comment 12 above, upon redemption of the Company’s interests in the Fund for bitcoin on June 10,

2022, such bitcoin was no longer held through an investment company and were no longer accounted for as intangible asset investments at fair value in the scope of ASC 946, but as intangible assets in the scope of ASC 350 and subject to impairment guidance therein. Therefore, the “realized and unrealized gains (losses) of digital currencies held in fund” line item is no longer applicable.

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In your proposed revised revenue recognition policy in response to prior comment 13 in your letter dated August 26, 2022, you indicate that the fees are transferred to the Company as part of closing the successful block so collection is probable. Please reconcile this statement in light of your prior responses indicating that the fees may not be transferred to you at the point that a block is successfully mined.

Rest of the question

Specifically, your response to prior comment 14 in your letter dated April 22, 2022 indicates that constructive receipt of the mining reward can be up to two days from contract inception, considering that NYDIG confirms the allocation among pool participants within 24 hours of a block reward and, once the NYDIG calculations are confirmed, you aggregate all the BTC rewards at the end of that day. In addition, your response to prior comment 11 indicates that the day the reward is earned is not the date it is received upon settlement and there may be a delay between confirmation from NYDIG and the back-end settlement into the pool wallet. To help us understand your accounting, please address this comment separately for when you operate a mining pool as the sole participant, when you operated a mining pool with third party participants, and when you participated in another mining pool.

Company acknowledges the Staff’s comments regarding the timing of when the fees are transferred to the Company as part of closing the successful block and would like to clarify that contract inception differs when the Company is a participant in a third-party operated mining pool (“Participant”), a participant in a privately operated mining pool (“Private Pool Participant”) such as the Company’s Marapool and as the operator (“Operator”) of Marapool.

Rest of the answer

Our response to prior comment 13 in our letter dated August 26, 2022 and response to prior comment 14 in our letter dated April 22 is with respect to its role as Private Pool Participant both when the Company is the sole participant in the private pool, and when there were other third-party participants in the private pool, and is further discussed below under the heading Private Pool Participant.

Participant discussed in our response to comment 20 below, the Company evaluated when a contract exists when the Company is Participant in a third party-operated pool. Due to the fact that pool participation agreements can be terminated at any time by either the Company as Participant or the third-party operator, each increment (i.e., minute or second) of time at which computing power is provided by the Company constitutes a new contract as that is also the same time at which all other criteria in ASC 606-10-25-1 are met. There is therefore a corresponding new contract inception at each increment of time that computing power is provided by the Company.

further discussed in response to comment 20 below, the block reward and transaction fee (noncash consideration) to which the Company is entitled to as a Participant is variable consideration that is fully constrained until such fees are received from the pool operator despite the contract inception being the same point in time at which a block is won, the Company has provided computing power, and the

Company earns its pro rata share of the block reward and transaction fee from the successful closing of a block. Revenue from the consideration earned is only recognized at the point in time all contingencies giving rise to variability constraints are resolved via the settlement of the block rewards and transaction fees in the Company’s digital wallet. Therefore, the Company measures the non-cash consideration at the fair value on the date the Company’s pro rata share of the block reward and transaction fee is settled in the Company’s digital wallet using the closing price in USD as of 23:59 GMT in accordance with the Company’s policy. Use of this fair value is not materially different than the fair value at contract inception of the contract governing the increment of time where the Company provided computing power and a block was solved.

Private

Pool Participant the Company is a Private Pool Participant, contract inception is the point in time when it successfully validates a customer’s transaction to the distributed ledger and a block is closed. The Company recognizes revenue under its accounting convention of using the USD price of bitcoin (“BTC”) at 23:59 GMT on the contract inception date, which the Company has determined is not materially different than using the fair value of BTC (in USD) at contract inception per ASC 606-10-32-21. Collection of the block reward and transaction fees are probable because the reward and fees are transferred to Marapool’s wallet as part of closing the successful block and is simultaneous with contract inception. Notwithstanding that the back-end settlement of such block rewards and transaction fees from

Marapool’s wallet to the Company’s individual wallet may not be the same point as contract inception, the collectability of the block rewards and transaction fees is still probable as the Company’s contract is viewed to be directly with the network and transaction requestors as customer, and any subsequent allocation after the block rewards and transaction fees are won are merely a settlement mechanism based on revenue recognized at the date of contract inception.

difference between the Company’s accounting convention and the revenue that would have been recognized using the BTC fair value at contract inception per ASC 606-10-32-21 is immaterial as follows:

the year ended December 31, 2021, the total revenue earned would have been $150.51 million, indicating the Company would have realized additional revenues of $0.04 million (0.03%) for the year ended December 31, 2021.

the three months ended March 31, 2022, the total revenue earned would have been $51.8 million, indicating the Company would have realized additional revenues of $0.04 million (0.08%) for the quarter ended March 31, 2022.

the three months ended June 30, 2022 and 2021, the total revenue earned would have been $25 million and $29.4 million, respectively indicating that the Company would have realized additional revenues of $0.2 million (0.81%) and $0.1 million (0.36%) for the quarter ended June 30, 2022 and 2021, respectively.

Operator discussed in response to comment 18 below, the Company was an agent in connecting third party mining enterprises (“miners”, or “pool participants”) to the blockchain network and in tracking hash rate generated by each pool participant. The Company has determined that all the criteria in ASC 606-10-25-1 are met at each minute a pool participant provides computing power and the Company connects a pool participant to the network while tracking each participant’s generated hash rate. Specifically, at each minute this occurs, both the Company as operator and pool participant (collectively, “parties”) have approved the pool participant contract. Both parties can identify rights regarding services as well as payment terms for services to be transferred, the contract has commercial substance, and it is probable the Company will collect all of its pool fees (variable consideration) as such amounts to which the Company is entitled are withheld from being remitted to pool participants and there is no counterparty credit risk to be considered given block rewards and transaction fees are automatically and simultaneously transmitted to Marapool’s wallet at the moment the block is closed. Accordingly, contract inception is at each minute when a pool participant is providing computing power simultaneously to the Company providing agency services when a block is closed (i.e., won).

Even though back-end settlement of such pool fees from Marapool’s wallet into the Company’s individual wallet may not be at the same point as contract inception, the Company recognizes revenue under its accounting convention of using the USD price of BTC at 23:59

GMT on the contract inception date, which the Company has determined is not materially different than using the fair value of BTC (in

USD) at contract inception per ASC 606-10-32-21.

Total pool fees recognized under the Company’s accounting convention are immaterial at approximately zero and $50 thousand, respectively for the three months ended September 30, 2022 and September 30, 2021 and approximately $300 thousand and $50 thousand, respectively for the nine months ended September 30, 2022 and September 30, 2021. Given the contract inception when the Company is pool Operator is the same contract inception as when the Company is a Private Pool Participant, and the revenue difference between using the Company’s accounting convention to measure BTC in USD at 23.59 GMT on the day the reward was earned vs. at contract inception for revenue when

Company is a Private Pool Participant is immaterial, we believe that any revenue difference between the Company’s accounting convention vs. at inception for pool fees (when Company is Operator) will also be immaterial as pool fees are typically a small fraction (i.e. 0.5%) of total block rewards and transaction fees earned by each pool participant. As of May 2022, third party miners were no longer participating in the Company’s mining pool. As such, the Company ceased recognizing pool fees.

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In your proposed revised revenue recognition policy disclosure in response to prior comment 13 in your letter dated August 26, 2022, you state that “contract inception coincides with the time at which the transaction fees and block rewards are earned...” Please revise to clarify when it is considered to be “earned” in accordance with the guidance in ASC 606.

response to the Staff’s request for clarification of when transaction fees and block rewards are earned, the Company would like to clarify that consideration (block rewards and transaction fees) is earned at closing of a successful block. However, the timing of revenue recognition could differ from the point in time such consideration is earned depending on the Company’s role as Participant,

Private Pool Participant, or Operator (as defined in response 15 above).

the Company is a Private Pool Participant or Operator, the consideration is earned and revenue is recognized at the same time.

Rest of the answer

That is, revenue is recognized at contract inception date fair value of BTC at 23:59 GMT, which is not materially different from revenue recognized at contract inception.

the Company is a Participant, consideration is earned at the closing of a successful block, but revenue is not recognized until consideration is transferred into the Company’s wallet by the third-party pool operators for the reasons discussed in response 20 below. Specifically, all consideration under contracts between Company and third-part pool operators is variable, and there is risk of significant revenue reversal if the Company recognizes any revenue prior to such amounts being remitted to the Company’s wallet.

Company acknowledges the Staff’s request to revise its disclosure of the timing when noncash consideration is earned in its various roles as participant, private pool participant, and operator and will therefore revise disclosures going forward as follows using the

Q3 2022 10-Q as the basis with additional disclosure underlined and deleted disclosure stricken through:

NOTE

3 – REVENUES FROM CONTRACTS WITH CUSTOMERS

Company has entered into contracts with third-party mining pool operators, whom the Company considers its customer under FASB ASC606.

The Company provides a service of computing power (i.e., generated hash rate) that is an output of the Company’s ordinary activities in exchange for consideration. These contracts are terminable at any time by either party and the Company’s enforceable right to compensation only begins when the Company provides computing power to the mining pool operator. In exchange for providing computing power, the Company is entitled to consideration equal to a fractional share of the BTC reward (non-cash consideration, less any pool fees paid to the mining pool operator which are recorded as contra-revenues), for successfully adding a block to the blockchain. The Company’s fractional share of the block reward 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, net of any pool fees.

provision of computing power is the only performance obligation under our arrangements with the third-party mining pool operators. The transaction consideration the Company receives is non-cash and variable in that the amount that it receives is dependent on the success of the mining pool regardless of whether any hash rate is contributed by the Company (the pool being the first to solve an algorithm).

The non-cash consideration is measured at the estimated fair value of the contract inception which is when computing power is contributed and the block is successfully closed and the block rewards and transaction fees are earned. However, because it is not probable that a significant reversal of revenue will not occur, as the Company does not have visibility to exactly when a block is won and the pro rata share to which itis entitled (as it does when the Company is a participant in a privately operated pool where the Company is also the pool operator) all consideration is constrained and revenue is not recognized until the Company receives confirmation of the consideration it earned, usually via the settlement of the block reward in the Company’s digital wallet, at which time revenue is recognized.

pool participant

Company operates as a participant in its privately operated pool (“Marapool”). From September 2021 until May 2022, the Company operated as a participant in Marapool alongside third-party pool participants. The Company views the transaction requestor and the blockchain network as its customers under FASB ASC 606. The Company provides a service (successful mining) that is an output of the Company’s ordinary activities in exchange for consideration from the requester and the blockchain network (transaction fee and block reward, respectively).

A contract with a customer exists at the point when the miner successfully validates a requesting customer’s transaction to the distributed ledger which is also the point in time when block rewards and transaction fees are earned. At this point, the performance obligation has been satisfied (i.e., earned) in accordance with FASB ASC 606-10-25-30. Specifically, the inception of the contract and the point in time at which the consideration in that same contract is earned occurs simultaneously. Because of this, the additional criteria in FASB ASC 606-10-25-1 would be met as follows:

Both the requester (a customer) and the miner have approved the contract and are committed to the transaction at the point of successfully validating and adding the transaction to the distributed ledger.

Each party’s rights, the consideration to be transferred, and the payment terms are clear.

transaction has commercial substance (that is, the risk, timing, or amount of the miner’s future cash flows is expected to change as a result of the contract).

Collection occurs in conjunction with the inception of the contract and the fulfillment of the performance obligation (i.e., successfully solving a block) and therefore, there is no risk of collectability.

By successfully mining a block, the miner satisfies its performance obligation to the requester and network, thus, should recognize revenue at that point in time, which is the same point in time as contract inception and when the block rewards and transaction fees are earned.

The transaction consideration the Company receives, is non-cash consideration paid in BTC, and is comprised of transaction fees and block rewards. The transaction consideration is variable in that the amount of block reward and transaction fees earned is based on the pro rata share of the computing power the Company contributes in relation to the total computing power contributed by the pool unknown until the block is solved.

From

September 2021 until May 2022, the Company entered into pool service contracts with third-party mining pool participants, whom the Company considered to be a customer under FASB ASC 606. In these contracts, the Company provided a facilitator service to connect miners to the blockchain network and to track hash rate generated by each pool participant in exchange for non-cash consideration equal to a percentage of the block reward and transaction fee earned by the individual pool participants as pool fees. These contracts were terminable at any time by either party and the Company’s enforceable right to compensation only began when the Company provided the facilitator services and access to the pool’s software licenses to the pool participants.

Company’s performance obligations under the arrangement with third-party pool participants were to provide access to the pool’s software license and track the hash rate generated by each pool participant to enable calculation of the pro rata block reward and transaction fee payment to each pool participant. Such block rewards and transaction fees (and therefore pool fees) are earned when a block is successfully closed. The transaction consideration the Company received is non-cash and variable in that the pool fees earned are based on the block reward and transaction fees earned by pool participants. The non-cash consideration is measured at the estimated fair value of the contract inception, which occurs simultaneously to when the Company has earned the pool fees (i.e., upon successful mining of a block). The Company is able to estimate variable consideration at the point in time it has earned the fees without risk of significant revenue reversal as the Company has visibility to the exact timing of when the pool successfully solves for a block as pool operator

(as compared to when the Company is a participant in a third-party operated pool) and the block rewards and transaction fees each pool participant is entitled to base on contributed hash rate.

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In your capacity as a mining pool operator, you indicate in response to prior comment 12 in your letter dated August 26, 2022 that you used third party computing power to verify a block of transactions for the network. Describe the rights and obligations of the parties in your agreements with pool participants and with the blockchain network.

Rest of the question

Clarify what you considered to be the specified service provided to the customer in the arrangements with the pool participant and with the blockchain network. In this regard, it appears that the pool participants were providing you with computing power and you were providing transaction verification services to the network. While computing power is an input to the combined output of transaction verification services, computing power alone does not appear sufficient to verify a transaction and earn a mining reward. In this regard, you indicate in your June 13, 2022 response to comment 13 that the pool aggregates all computing power of the mining devices, which are connected to the bitcoin network, and utilizes the combined hashrate to provide transaction verification services to the blockchain.

Company clarifies that the statement made in response to prior comment 12 in our letter dated August 26, 2022 that the Company, as mining pool operator, uses third party computing power to verify a block of transactions for the network was made in error. The Company’s

June 13, 2022 response to comment 13 that the pool aggregates all computing power of the mining devices was also made in error.

Rest of the answer

The Company respectfully refers the Staff to response 18 below for further discussion as to why such statements were erroneous and inconsistent to the Company’s articulated role as agent (when in an Operator capacity) of each pool participant.

response to the Staff’s inquiry on the rights and obligations of the parties in the Company’s agreements with the pool participants and with the blockchain network, the Company first clarifies that the specified service being provided in all instances with network and transaction requestors as customer, is transaction verification services (i.e., solving a block).

this regard, when Company is Operator, its contract is with the private pool participants who in turn are the ones providing transaction verification services to their customer – the blockchain network and transaction requestors. The Company’s obligations in arrangements with pool participants are to provide participants access to Marapool’s software that connects the miner to the blockchain network, to track the hash rate generated by each participant in the pool, and to calculate the pro rata block reward and transaction fee to be remitted to each participant. In exchange for the provision of the aforementioned services, the Company is entitled to earn pool fees (non-cash consideration) from the participants equal to a percentage of the block reward and transaction fee earned by the individual pool participants. While the Marapool (i.e., Operator) wallet is the entity recognized by the blockchain network as the wallet of record, the Company does not believe that it has obligations as Operator to the blockchain network (i.e., it does not have a contract with the network); rather, the Company’s relationship to the network to serve as the wallet of record is part of its obligation to its pool participants to connect participants to the network.

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We note your response to prior comment 12 in your letter dated August 26, 2022. Please provide us with a revised analysis of whether you, in your capacity as the pool operator, controlled the transaction verification services before being provided to the blockchain network. Refer to ASC 606-10-55-37.

Rest of the question

Ensure that your assessment focuses on which party had the ability to control the transaction verification services when it was being provided (i.e., when the contract existed according to ASC 606-10-25-1), regardless of it being an at-will contract pursuant to which the third-party miners’ had the ability to join or leave for another pool and you having no ability to control or curtail the third-party miners providing computing power. In this regard, it is unclear why you believe not having control over any third party contributing hashrate to your pool is relevant to who controls the transaction verification services before being transferred to the blockchain. As part of your response, please also address the following, at the time a contract existed: • Tell us who was primarily responsible for fulfillment from the blockchain’s perspective and which party was the miner of record. Tell us whether the blockchain network had any record of the pool participant’s involvement in the arrangement. • Tell us whether, as the pool operator, you had the discretion to determine which transactions to validate within a mined block. • Explain why inventory risk and pricing risk are relevant to your conclusion, given the nature of BTC transaction verification services and the transaction fees and block rewards are pre-determined by the bitcoin blockchain network. • Explain how you compensated pool participants for the provision of their computing power to your mining pool. Tell us whether the pool participant’s reward was contingent on successfully solving transactions.

response to the Staff’s request for a revised analysis under ASC 606-10-55-37 specifically focusing on whether the Company, in its capacity as the pool operator, controlled the transaction verification services before they were provided to the blockchain network, we first need to establish that, as stated in our response to comment 15, the Company views the contract to provide transaction verification services as one that is entered into between each individual mining enterprise (“pool participants” or “miners”) and the blockchain network.

Company notes, however, that due to lack of scale as

Rest of the answer

an individual miner, a participant is more likely to prevail in successful transaction validation services by contributing hashrate via participation in a mining pool. As such, each participant engaged the Company as pool operator to access the mining software purchased by the Company (and therefore access connectivity into the blockchain network), and to employ the Company to facilitate the tracking of collective and individual miners’ hash rate to determine pro rata block rewards and transaction fees to be remitted to each participant. Therefore, the Company believes that its contract is with the pool participants who are its customers, and its performance obligation as pool operator was solely to provide facilitation services to its customers (the pool participants). As discussed in the response to comment 15 above, contract inception is at each minute when a pool participant is providing computing power simultaneously to the Company providing agency services when a block is closed (i.e., won) as that is the point in time at which all the criteria in ASC 606-10-25-1 are met.

response to the Staff’s request, the ensuing analysis is therefore focused on the provision of the transaction verification services, the entity who controls it, and the Company’s role in its facilitation thereof under the premise that as Operator, the Company’s contract is with pool participants who are its customers.

“Control” is defined in ASC 606-10-25-25 as the ability to direct the use of, and obtain substantially all of the remaining benefits from, an asset.

ASC 606-10-55-37 states “An entity is principal if it controls the specified good or service before that good or service is transferred to a customer…An entity that is a principal may satisfy its performance obligation to provide the specified good or service itself or it may engage another party (for example, a subcontractor) to satisfy some or all of the performance obligation on its behalf.”

In this regard, given the pool participants control whether and when the hashrate is generated to provide transaction verification services, the pool participants control the service of providing transaction verification services. However, each individual miner may still satisfy its performance obligation of providing the transaction verification services by engaging the pool operator (i.e., Marathon) to fulfill facilitation and connectivity into the network services on such miner’s behalf.

Tell us who was primarily responsible for fulfillment from the blockchain’s perspective and which party was the miner of record. Tell us whether the blockchain network had any record of the pool participant’s involvement in the arrangement.

Company acknowledges that Marapool wallet (i.e., Operator wallet) was the miner of record recognized by the blockchain network with no further record of the pool participants’ involvement in fulfilling transaction verification services. However, the pool participants were the ones fulfilling the specified service of providing transaction verification to the blockchain network as the pool participants were the ones providing the actual hashrate and were the ones who owned the mining rigs to be able to do so. The reason that Marapool as Operator was the miner of record, however, was to be able to fulfill its obligations to its customers (the pool participants) to provide access and connectivity into the blockchain. Said another way, the pool participants engaged the Company to be the Operator in such pool participants’ fulfillment of transaction verification services to the network.

Company further considers the pool participants’ arrangement with the Company and the blockchain network similar to that of a shipping pool as illustrated in Example 9.3.40 (Shipping Vessel Pooling Arrangement) from KPMG’s Revenue Recognition Handbook. In those scenarios, “a contract is entered into with Company A as the manager, Company B as the shipping vessel owner, and Customer Z [end customer] to have Company B’s ship transport a specified product from Sydney to Los Angeles. The companies determine that the owner of the vessel assigned to fulfill the customer contract (Company B) is the contract’s principal rather than the manager (Company

A). This conclusion is based on […] Company A does not lease the pool vessels owned by Companies B […] because Company

A does not have the right to obtain substantially all of the economic benefits from use of the asset. A direct evaluation of the control principle in paragraph 606-10-25-25 is inconclusive to the principal versus agent analysis. Although Company A does not control the ‘means’ of providing the service (i.e., it does not own or lease those vessels), it does control aspects of the service – i.e., the identification of the customer, the specifications of the service to be provided and the price for the service. In contrast, the vessel owner (Company

B) controls the means of providing the service, but does not control those significant aspects of the service controlled by Company A.”

This is similar to our view that the pool participants, rather than the Company, were obligated to fulfill the service of transaction verification services to the customer (network and transaction requestors) as such, the pool participants are the principal in the contract with the blockchain network while Company as Operator (i.e., Company A in the example) does not have the right to obtain substantially all of the economic benefits from use of the assets (mining rigs).

us whether, as the pool operator, you had the discretion to determine which transactions to validate within a mined block.

respect to whether the Company as pool operator had the discretion to determine which transactions to validate within a mined block, the Company did not have the discretion to do so. The mining software employed by the Company at the time was non-discretionary and non-discriminatory in that it allocated the transactions to validate to each individual miner based on highest probability of success using proprietary algorithms within the software. The Company itself had no control over the source code of the software, such algorithms, and ultimately, the assignment or allocation of transactions to verify within a block to participants. Further, the pool participants also have the option to discontinue use of the Company as operator should the Company decide to change the pool’s software.

Explain why inventory risk and pricing risk are relevant to your conclusion, given the nature of BTC transaction verification services and the transaction fees and block rewards are pre-determined by the bitcoin blockchain network.

respect to inventory risk, the Company, as pool Operator, had an equivalent of inventory risk incurred in the form of monthly license fees for the DMG Blockchain Solutions software that it used to connect to the network, track and manage mining pool activity. These license fees are owed regardless of whether the participants successfully mine a block through Marapool. The pool participants had an equivalent of inventory risk as they incurred costs to acquire or lease miners, along with associated maintenance, colocation and utility costs, without recovery if they did not successfully mine blocks. Therefore, “inventory risk” was shared between the pool participants and the Company (as pool Operator), which we believe made it an inconclusive indicator as to whether the pool operator or pool participant was the principal to transaction validation services. We further acknowledge that given the pre-determined transaction fees and block rewards (and therefore pool fees), the pricing risk factor is not applicable in this arrangement.

how you compensated pool participants for the provision of their computing power to your mining pool. Tell us whether the pool participant’s reward was contingent on successfully solving transactions.

respect to compensating pool participants for their provision of computing services to the mining pool, the Company does not view itself as being the entity compensating the participants as it is the network and transaction requestors who do so via the block rewards and transaction fees, respectively. While the block rewards and transaction fees are only earned upon successfully solving a block, this does not impact the fact that the Operator is not the one who compensates the pool participants. The Company merely acts as agent in its operator role to collect such rewards into a wallet that is then remitted to each respective miner based on such miners’ pro rata contribution of computing power. The Company did not have legal rights or title to the entirety of the block reward and transaction fee outside of the amounts it was entitled to as a Private Pool Participant in Marapool.

the reasons stated above, the Company believes that it does not control the transaction verification services as pool operator. Rather, it is employed as an agent service provider to the participants who do control the transaction verification services by their ability to control the contributed computing power and ability to direct/engage the Company as Operator to connect them to the network and increase their success rate in mining for digital assets.

Read in the reply ↗

In your proposed revised revenue recognition policy for your operation of a mining pool that included certain third parties, your reference to ASC 606-10-55-39 appears to suggest the accounting conclusion is limited to the indicators listed there.

Rest of the question

To the extent you chose to retain a description of the required accounting analysis, please revise your disclosure to be consistent with the guidance which states that an entity is a principal if it controls the specified good or service before that good or service is transferred to a customer. Refer to ASC 606-10-55-37.

Company respectfully refers the Staff to our response to comment 18 above for the Company’s evaluation of its position as agent in its arrangement with pool participants as Operator which includes an overall analysis of why the Company does not control the specified service of transaction verification for the network and transaction requestor.

Rest of the answer

We acknowledge the Staff’s request to revise our disclosures to indicate that the Company’s analysis does not solely rely on the guidance in ASC 610-10-55-39 and to clarify that our analysis includes consideration of the control principle per ASC 606-10-55-37 and will therefore revise disclosures going forward as follows using the Q3 2022 10-Q as the basis with additional disclosure underlined and deleted disclosure stricken through:

September 2021 until May 2022, the Company entered into pool service contracts with third-party mining pool participants, whom the Company considered to be a customer under FASB ASC 606. In these contracts, the Company provided a facilitator service to connect miners to the blockchain network and to track hash rate generated by each pool participant in exchange for non-cash consideration equal to a percentage of the block reward and transaction fee earned by the individual pool participants as pool fees. These contracts were terminable at any time by either party and the Company’s enforceable right to compensation only began when the Company provided the facilitator services

The Company is engaged by performance obligations under the arrangement with third-party pool participants were to provide access to the pool’s software license, connectivity to the blockchain network, and to track the hash rate generated by each pool participant to enable calculation of the pro rata block reward and transaction fee payment to each pool participant (i.e., the performance obligation in its contract with each pool participant). In accordance with ASC 606-10-55-37, the Company has determined that because it does not have primary responsibility for fulfilling the promise to provide the service, it does not bear sole inventory risk, and there is no pricing risk, it does not control the transaction verification services to the network and transaction requestor and is an agent to the pool participants’ provision of transaction verification services. The transaction consideration the Company received is non-cash and variable in that the pool fees earned is based on the block reward and transaction fees earned by pool participants. The non-cash consideration is measured at the estimated fair value of the contract inception, which occurs simultaneously to when the Company has earned the pool fees (i.e., upon successful mining of a block). The

Company is able to estimate variable consideration at the point in time it has earned the fees without risk of significant revenue reversal as the Company has visibility to the exact timing of when the pool successfully solves for a block as pool operator (as compared to when the Company is a participant in a third-party operated pool) and the block rewards and transaction fees each pool participant is entitled to base on contributed hash rate. As the Company can estimate the amount of pool fees prior to the receipt of the fees in the pool’s digital wallet, the Company measures the non-cash consideration at the fair value on the date the pool fees are earned (using the stated convention below), which occurs simultaneously to contract inception. Fair value of the digital asset award received is determined using the daily closing U.S. dollar spot rate of the related digital currency on the date the pool fees are earned, which is not materially different than the fair value at contract inception which occurs simultaneously to the time the pool participants have earned the award from the requester and network. There is no significant financing component in these transactions. Fees associated with the licensed software used in the operation of the private pool are recorded as cost of revenues.

Read in the reply ↗

We note your proposed revised revenue recognition policy in response to prior comment 13 in your letter dated August 26, 2022. As previously requested in comment 13 in our letter dated May 27, 2022, please revise to ensure your disclosures distinguish your revenue recognition policies between when you operate a mining pool as the sole participant, when you operated a mining pool with third party participants, and

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when you participated in another mining pool. Please also provide us with a comprehensive analysis of ASC 606 supporting how you recognized revenue as a pool participant. In your analysis, address what you believed to be the promised good or service, how you measured the transaction price, and how and when you determined the promised good or service was transferred.

Company respectfully acknowledges the Staff’s comment 20 and has, accordingly, expanded its disclosures in the September 30, 2022

10-Q filing (Q3 2022 10-Q Pg.11 through 14) under NOTE 3 – REVENUES FROM CONTRACTS WITH CUSTOMERS to distinguish revenue recognition policies between when the Company operates a mining pool as the sole participant (“Private Pool Participant”), when the Company operated a mining pool with third party participants (“Operator”) and when the Company participates in another mining pool

(“Participant”) in line with the disclosure requirements from FASB ASC Topic 606,

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Revenue from Contracts with Customers

(ASC “606”).

also respectfully acknowledge the Staff’s request for a comprehensive analysis of revenue recognition for the Company’s operation as a pool participant and have provided an analysis over the five-step revenue recognition policy below which replaces the previously provided policy in the August 1, 2022, response to your SEC letter dated June 24, 2022:

606 Pool Participant Analysis:

Company has contracts with third-party mining pool operators to provide computing power (i.e., generating hash rate) to their respective mining pools as a participant. These contracts are terminable at any time by either party and the Company’s enforceable right to compensation only begins when the Company provides computing power to the mining pool operator. In exchange for providing computing power, the Company is entitled to a fractional share of the BTC reward (noncash consideration) that the mining pool operator receives, for successfully adding a block to the blockchain. The Company’s fractional share of the block reward 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, net of any pool fees.

Identify the customer and the contract order to identify the contract, the Company referred to the criteria under ASC 606-10-25-1. Under this relationship, the Company considers the pool operator to be the Company’s customer, and the Company’s promise to the pool operator is to provide computing power to the pool operator in order for such computing power to be pooled to provide transaction verification services. The Company further acknowledges that the customer when the Company is a Private Pool Participant (in Marapool) is the blockchain network and transaction requestor (and not the Operator) due to the specific facts and circumstances of Marapool operator’s arrangement with each of its pool participants as discussed in response 18 above. The consideration for the Company’s services is determined and paid by the pool operator. However, as the contract is terminable by either party at will, the contract term does not begin until the Company begins to provide computing power to the pool operator. The criteria in FASB ASC 606-10-25-1 would be met as follows at each minute neither party (Company or pool operator) terminates the contract and computing power is provided by the Company. At each of those minutes, a contract exists as:

the operator and the Company have approved the mining pool participation contract typically evidenced by a written “terms of service” agreement;

party’s rights, the consideration to be transferred, and the payment terms are clear;

transaction has commercial substance (that is, the risk, timing, or amount of the Company’s future cash flows is expected to change as a result of the contract); and is probable, as the pool operators with which the Company contracts are reputable and well-known pool operators within digital asset mining, and as calculation and remittance of consideration to which the Company is entitled is governed by the agreed-upon payment mechanisms as outlined in the specific pool agreement. Specifically, the contract inception continually resets at each minute under which neither party terminates the arrangement and the Company is providing computing power.

the performance obligations in the contract

Company’s promise to provide computing power to the mining pool under its contract with a pool operator represents a contractually agreed-upon task for a customer per ASC 606-10-25-18(d). It is also the sole performance obligation in each contract as the Company’s contracts do not contain other promises.

Measure and allocate the transaction price

Under each contract with third party pool operators to provide computing power, all consideration is variable consideration that is fully constrained until such fees are received from the pool operator given there is lack of visibility into the amount of block rewards and transaction fees earned at each respective minute (i.e., under each contract) which results in lack of ability to recognize revenue without it being probable that significant revenue reversal would not occur. The Company does not have the ability to estimate the amount of consideration expected to be received as the success rate of the pool (i.e., being the first to solve the equation) is neither consistent nor estimable.

The Company therefore constrains this consideration pursuant to ASC 606-10-32-11 through 32-12 as it is not probable that a subsequent change in the estimate of the amount of the consideration would not result in a significant revenue reversal given the unpredictable and competitive nature of how BTC rewards are earned. Specifically, there is a high likelihood that the pool the Company participates is unsuccessful in adding a block to the network. These factors contain an inherent level of unpredictability in estimating the consideration to be received and also high probability of significant reversal should any revenue be recognized before the uncertainty related to the variability (i.e., successful mining of a block) is first resolved.

Company considered ASC 606-10-32-16 and observed no significant financing component in these transactions.

Recognize revenue customer (pool operator) simultaneous receives and consumes the benefits of the Company’s service of providing computing power as the Company performs the service. Therefore, the revenue for the sole performance obligation in these contracts is recognized over time in accordance with ASC 606-10-25-27(a). At each minute (i.e., contract) at which neither party has terminated the arrangement, the

Company is providing computing power, and the pool was successful in closing a block, the Company should recognize revenue over that minute in the amount of the Company’s pro rata entitlement to the mined block rewards and transaction fee. Notwithstanding that the variable consideration is constrained, the ASC 606-10-32-21 requires noncash consideration to be measured at fair value at contract inception which is at each minute under the circumstances described in the preceding sentence. However, as the consideration is variable and constrained until the Company receives confirmation of the consideration it earned via the settlement of the block reward in the

Company’s digital wallet, the Company does not recognize revenue until such consideration is received in the Company’s digital wallet (i.e., the contingency to variability is resolved). The Company has determined that the fair value of block rewards and transaction fees paid in BTC is using BTC’s closing price in USD at 23:59 on the date such block rewards and transaction fees is not materially different than the fair value of such block rewards and transaction fees at contract inception.

connection with responding to the staff’s comments, the Company acknowledges that (i) it is responsible for the adequacy and accuracy of the disclosure in its filing; (ii) staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and (iii) it may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

hope you find that these responses adequately address the staff’s questions, but please contact the undersigned at hugh@marathondh.com or our counsel, Jolie Kahn, Esq., at joliekahnlaw@sbcglobal.net, if you have any further questions or would like to discuss our responses.

Read in the reply ↗

We note your disclosure that realized gain on sale of digital currencies have now been reclassified as other non-operating income. Please revise such classification, consistent with your response to prior comment 1 in your letter dated August 1, 2022 indicating you would present realized gain on the sale of digital currencies as a component of income or loss from operations on a prospective basis with prior

Rest of the question

comparative periods reclassified. Digital Currencies, Digital currencies, restricted and Digital currencies loaned, page 8

We note the Staff’s comment and will classify the realized gains on sales of digital currencies to be reflected in operating income for all periods presented consistent with our prior response in our letter of August 1, 2022. This will be addressed in our Form 10-K for the year ended December 31, 2022. Read in the reply ↗

We note your response to prior comment 4. We note that impairment exists whenever carrying value exceeds fair value. Given the significant intraday volatility that has occurred in historical periods, it does not appear that your accounting convention complies with the ASC 350-30-35-19 requirement to recognize impairment whenever carrying value exceeds fair value. Please revise.

We thank the staff for your consideration of our position on impairment of indefinite lived intangibles, which we previously believed was appropriate based on our interpretation of the standards and our use of industry guidance on ASC 350 and ASC 820. We acknowledge your direction to revise our position and as such we are restating our historical financials in the upcoming 10-K filing such that impairment of digital assets will be reflected utilizing the intraday low price.

A draft of our updated disclosure follows:

assets are included in current assets in the consolidated balance sheets.

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Digital assets are accounted for as indefinite lived intangible assets, and are initially measured at cost, in accordance with FASB ASC 350 – Intangibles-Goodwill and Other. Digital assets, restricted represent collateral for long-term loans and as such are classified as a non-current asset.

These digital assets are not amortized but are 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 an impairment exists and records impairment equal to the amount by which the carrying value exceeds the fair value

Read in the reply ↗

We continue to consider your response to prior comments 6, 11, 12, and 13 and may have further comment.

for prior comment 6 – We have reviewed this position further and have decided to restate our previously issued financial statements to correct this classification error. We have concluded that the error, which we had previously considered a significant deficiency, constitutes a material weakness around the application of GAAP and this material weakness, along with other material weaknesses will be disclosed in our upcoming 10-K filing.

Response for prior comments 11, 12, and 13 – It is our understanding from conversations with the Staff that the Staff is no longer pursuing the issues

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discussed in these prior comments. Please confirm our understanding if possible.

Investments,

Read in the reply ↗

We note your expanded disclosure in response to prior comment 8. Revise to also address how you account for your $35.5 million investment in Auradine, Inc. preferred stock, including the basis for the classification and the initial and subsequent measurement. Note 3 - Revenues from Contracts with Customers, page 11

We acknowledge the Staff’s comment and confirm that we will expand our disclosure in the “Investments” section of the SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES footnote to clarify the accounting for the $35.5 million investment in Auradine,

Inc., preferred stock, including the basis for the classification and the initial and subsequent measurement in our upcoming 10-K filing for the year ended December 31, 2022 as follows:

which may be made from time to time for strategic reasons (and not to engage in the business of investments) are included in non-current assets in the consolidated

Rest of the answer

balance sheets. Investments without a readily determinable fair value are recorded at cost minus impairment, plus or minus changes from observable price changes in orderly transactions for identical or similar investments of the same issuer in accordance with the measurement alternative described in Topic 321 Investments – Equity Securities (“ASC 321”). As part of the Company’s policy to maximize return on strategic investment opportunities, while preserving capital and limiting downside risk, the Company may at times enter into equity investments or Simple Agreements for Future Equity (“SAFE”) agreements.

The nature and timing of the Company’s investments will depend on available capital at any particular time and the investment opportunities identified and available to the Company.

On

December 21, 2021 and December 30, 2021, the Company entered into two separate SAFE agreements classified on the balance sheet as non-current assets. SAFE agreements are accounted for as equity securities without readily determinable fair value at cost minus impairment, as adjusted for observable price changes in orderly transactions for identical or similar investment of the same issue pursuant to ASC 321.

February 3, 2022, the Company invested approximately $10 million in convertible preferred stock of Compute North Holdings, Inc. The acquisition of convertible preferred stock was accounted for as investments in equity securities without readily determinable fair value at cost minus impairment, as adjusted for observable price changes in orderly transactions for identical or similar investment of the same issuer pursuant to ASC 321. This investment was subject to an impairment of $10.0 million following Compute North’s Chapter 11 Bankruptcy filing in September 2022 (See COMPUTE NORTH BANKRUPTCY footnote).

May 3, 2022, the Company converted $2.0 million from a SAFE investment into preferred stock while purchasing an additional $3.5 million of preferred stock in Auradine, Inc. along with entering into a commitment to acquire $30.0 million of additional shares of preferred stock. This forward contract was accounted for under ASC 321 as an equity security.

September 27, 2022, the Company increased its investment in the preferred stock of Auradine, Inc. by $30.0 million, bringing its total carrying amount of investment in Auradine, Inc. preferred stock to $35.5 million. The preferred stock is accounted for as investments in equity securities without a readily determinable fair value at cost minus impairment, as adjusted for observable price changes in orderly transactions for identical or similar investments from the same issuer pursuant to ASC 321. During 2022, there were no noted impairments or other adjustments (See NOTE 15 - RELATED PARTY TRANSACTIONS footnote).

As of December 31, 2022, the Company has one remaining SAFE investment with a carrying value of $1.0 million, with no noted impairments or other adjustments.

Read in the reply ↗

As we continue to evaluate your accounting policy disclosure for your Participant, Private Pool Participant, and Operator revenue streams, please further revise your revenue recognition policy disclosure to ensure the following items are succinctly articulated: • How you determine when a contract exists, including what consideration was given to whether the contracts are terminable by either party at any time

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without compensation; • The nature of your performance obligations, ensuring consistent references to computing power and transaction verification services; • How the transaction price is determined, including when you measure noncash consideration. In this regard, you disclose that it is measured at contract inception, but we also note your disclosures that it is determined using the daily closing rate. Please also clarify any reference to consideration as variable if it is known at contract inception; • Whether your conclusion that the accounting convention for measuring noncash consideration is not materially different is based on the volatility of bitcoin on the day it is measured or for purposes of financial reporting; and • Disclose the amount of revenue recognized from each of your types of arrangements in each of the periods presented.

The Company respectfully acknowledges the Staff’s comment and will accordingly revise its accounting policy and expand its disclosures in the “Revenue From Contracts with Customers” section of the SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Footnote to revise the revenue recognition policy in line with the disclosure requirements under ASC Topic 606, Revenue from Contracts with Customers in our upcoming 10-K filing for the year ended December 31, 2022. The following responses correspond to each point in the foregoing comment from the Staff.

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The responses below should be reviewed in conjunction with the revised revenue recognition policy as stated below in comment 7.

a)

– c) The Company acknowledges the Staff’s comment and accordingly revised the revenue recognition policy. Please refer to the respective sections for the revised policy stated in the response to comment 7 below.

d)

The Company has evaluated the quantitative impact of the difference between recognizing revenue at fair value of bitcoin at contract inception versus recognizing revenue using the accounting convention i.e. at the daily closing U.S. dollar spot rate of bitcoin on the date of contract inception (when the Company is a pool operator) or the date block rewards and transaction fees to which the Company is entitled for its contribution to a third party mining pool is received, respectively. The impact is quantitatively immaterial to the

Company’s consolidated statement of operations for all periods presented as indicated below:

(in thousands)

Years ended December 31,

2022

2021 (Restated)

Operator

Company’s accounting convention

$ 113,491

$ 138,589

Revenues at contract inception

113,856

138,595

Difference

(365 )

(6 )

Participant

4,262

20,574

4,236

20,619

(45 )

Total Revenue

117,753

159,163

118,092

159,214

(339 )

(51 ) e)

Please refer to the disaggregation of revenues recognized for each of our identified revenue streams as presented in our revised revenue recognition policy in the response to comment 7 below.

Read in the reply ↗

In order to help us to continue to evaluate your accounting policy for your participation in third party bitcoin mining pools, please address the following: a) Clarify for us whether your contracts with third party bitcoin mining pool operators are terminable by either party at any time without compensating the other party for the termination (that is, other than paying amounts due as a result of goods or services

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transferred up to the termination date). b) Clarify for us whether you are only entitled to consideration for computing power provided for the successful placement of a block on the bitcoin blockchain by the third party and that you are not entitled to any compensation for computing power provided for unsuccessful attempts to place a block on the bitcoin blockchain by the third party. c) Provide your materiality analysis for the difference between your accounting convention for measuring noncash consideration received for your third party pool participation for each quarterly and year-to-date period through December 31, 2022.

The Company respectfully acknowledges the Staff’s comment along with previous comments and will accordingly revise its accounting policy and expand its disclosures in the “Revenue From Contracts with Customers” section of the SUMMARY OF

SIGNIFICANT ACCOUNTING POLICIES Footnote in our upcoming 10-K filing for the year ended December 31, 2022. The following responses correspond to each point in the foregoing comment from the Staff.

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The responses below should be reviewed in conjunction with the revised revenue recognition policy as stated below in comment 7.

We acknowledge the Staff’s comment and confirm that our contracts with third-party mining pool operators are terminable at any time by either party for convenience without compensating the other party for such termination.

b)

We acknowledge the Staff’s comment and confirm that the Company is only entitled to consideration for computing power provided for the successful placement of a block on the bitcoin blockchain by the third-party mining pool and that the Company is not entitled to any compensation for computing power provided for unsuccessful attempts to place a block on the bitcoin blockchain by the third party.

c)

The Company has evaluated the quantitative impact of the difference between recognizing revenue at fair value of bitcoin at contract inception (i.e., upon successful placement of a block on the bitcoin blockchain) versus recognizing revenue at the daily closing U.S.

dollar spot rate of bitcoin on the date of receipt of the block rewards and transaction fees to which the Company is entitled for its contribution to a third-party mining pool. The impact is quantitatively immaterial to the Company’s consolidated statement of operations for all periods presented as follows:

For the interim periods and year ended December 31, 2022 (in thousands)

For the three months ended

Year Ended

March 31

June 30

September 30

December 31

$ -

$ 633

$ 2,607

$ 1,022

$ 4,262

-

636

2,579

1,021

(3 )

Further, the Company has qualitatively evaluated the materiality of such revision and has determined that the revision is also qualitatively immaterial as the new treatment of amounts received will not result in any of the following:

● a misstatement or omission that would reverse the loss to profit or profit to loss;

potential effect of the misstatement on the company’s policy; or

● deemed incompliance with local regulations, laws, agreements, loan covenants or other material agreements in place at the time of reporting.

Read in the reply ↗

In order to help us continue to evaluate your accounting policy for your role as a pool operator, please address the following: a) Confirm for us whether the specified good or service being received by the bitcoin blockchain is the successful placement of a block on the bitcoin blockchain (i.e., transaction verification services).

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b) Supplement your ASC 606 control analysis to evaluate control over the placement/broadcasting of a block on the bitcoin blockchain assuming participation by the mine pool participant. In your analysis, clarify how an individual mine pool participant could exercise control over the transaction verification service on behalf of the pool. c) Clarify the role of individual miners that participated in your pool. In your reply, clarify whether an individual miner created and proposed individual blocks to be broadcast to the bitcoin blockchain (and if so, how they were able to do so) or alternatively, whether they directed their computing power to specific nonce ranges. d) Clarify the material terms of the software license and whether that license conveyed control to an individual miner over the mining server used by the company to establish and maintain its node. e) Clarify for us the nature of your relationship with and the role of NYDIG in your bitcoin mining pool and in the node you operated. We note that you refer to NYDIG as a custodian. f) Provide your materiality analysis of the fair value of the pro rata block reward and transaction fee payment attributable to each third-party pool participant for each quarterly and year-to-date period in which third parties participated in your mining pool.

The Company respectfully acknowledges the Staff’s comment along with previous comments provided in the comment letters dated October 11, 2022, and June 14, 2022, and will accordingly revise its accounting policy for when the Company is a pool operator and expand its disclosures in the “Revenue From Contracts with Customers” section of SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Footnote in our upcoming 10-K filing for the year ended December 31, 2022 as follows:

SIGNIFICANT

ACCOUNTING POLICIES - REVENUES FROM CONTRACTS WITH CUSTOMERS

The

Company recognizes revenue under ASC 606, Revenue

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

● Step

1: Identify the contract with the customer

2: Identify the performance obligations in the contract

3: Determine the transaction price

4: Allocate the transaction price to the performance obligations in the contract

5: Recognize revenue when the Company satisfies a performance obligation

In order to identify the performance obligations in a contract with a customer, a company 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:

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).

If 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:

● Variable consideration

● Constraining estimates of variable consideration existence of a significant financing component in the contract

● Noncash

● Consideration payable to a customer

Variable 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.

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

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.

Application of the five-step model to the Company’s mining operations

Company’s ongoing major or central operation is to provide computing power to collectives of third-party bitcoin miners (such collectives,

“mining pools”) as a participant (“Participant”) and bitcoin transaction verification services to the bitcoin network through a Company-operated mining pool as the operator and a participant (“Operator”) (such activity as Participant and Operator, collectively, “mining”). The Company currently mines in a self-operated pool, which was previously open to third-party pool participants from September 2021 until May 2022.

following table presents revenue of the Company disaggregated for those arrangements in which the Company is the Operator and Participant

(in thousands):

2020

4,357

$ 117,753

$ 159,163

$ 4,357

From

September 2021 until May 2022, the Company privately operated its own bitcoin mining pool, MaraPool. As the Operator, the Company views the transaction requestor and the bitcoin network, collectively, as its customers (referred to as “Customer”) under FASB

ASC 606 Revenue from Contracts with Customers (“Topic 606”) because the provision of transaction verification services

(successful mining) is an output of the Company’s ordinary activities. A contract with a customer exists at the point when the

Company successfully validates a transaction to the distributed ledger. At this point, the performance obligation to validate the requested transaction has been satisfied in accordance with FASB ASC 606-10-25-30, and the criteria in FASB ASC 606-10-25-1 would be met as follows:

Both, the Customer (requester and the network) and the Company have approved the contract and have evidenced they are committed to the transaction at the point of successfully validating and adding the transaction to the distributed ledger. Each party’s rights, the consideration to be transferred, and the payment terms are clear. The transaction has commercial substance (that is, the risk, timing, or amount of the Company’s future cash flows is expected to change as a result of the contract). Collection of the fees is probable because the fees are transferred to the Company as part of closing a successful block.

contracts are terminable at any time by either party without compensation. By successfully mining a block, the Company satisfies its lone performance obligation of providing transaction verification services to the Customer and, thus, recognizes revenue at that point in time. The amount to which the Company is entitled for successfully validating a block of transactions is fixed at the point in time the contract is deemed to exist and the performance obligation is satisfied. Thus, there is no variable consideration.

the Operator, the Company also engages unrelated third-party mining enterprises (“pool participants”) to contribute computing power, and in exchange, remits 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). The MaraPool wallet (owned by the Company as Operator) is recorded on the distributed ledger as the proof of work winner and assignee of all validations and, therefore, the transaction verifier of record.

The pool participants enter into contracts with the Company as Operator; they do not directly enter into contracts with the network or the requester and are not known verifiers of the transactions assigned to the pool. As Operator, the Company delegates mining work to the pool participants utilizing software that algorithmically assigns work to each individual miner. By virtue of its selection and operation of the software, the Company as Operator controls delegation of work to the pool participants. This indicates that the Company directs the mining pool participants to contribute its hash rate to solve in areas that the Company designates. Therefore, the Company determined that it controls the service of providing transaction verification services to the network and requester. Accordingly, the Company records all of the transaction fees and block rewards earned from transactions assigned to MaraPool as revenue from contracts with customers under Topic 606, and the portion of the transaction fees and block rewards remitted to MaraPool participants as cost of revenues, net of pool fees collected.

ASC

606-10-32-21 requires entities to measure the estimated fair value of noncash consideration at contract inception, which is the same 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. 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 earned) and has been consistently applied in all periods presented. The Company also uses an accounting convention to recognize revenue on the day the transaction fees and block rewards are settled in the Company’s wallet, which can sometimes be up to 24 hours later. However, this accounting convention individually, and in aggregate with the aforementioned accounting convention also do 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.

Expenses associated with providing the bitcoin transaction verification services to the Customers, such as rent, electricity cost, and transaction fees and block rewards. Depreciation on digital currency mining equipment is recorded as a component of cost of revenues.

When the Company is a Participant in a third-party operated mining pool, the Company provides computing power (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 customer under Topic 606. These contracts are terminable at any time by either party without compensation, and an enforceable right to compensation for the Company only arises when the pool in which it participates successfully mines a block. Therefore, there is no contract until a block is won by the mining pool, at which point all the criteria in FASB ASC 606-10-25-1 are met. Before that time, either party could terminate the arrangement without the Company being entitled to any compensation for its contributed computing power to date.

exchange for providing computing power, the Company is entitled to consideration equal to a fractional share of the block reward and transaction fee (non-cash consideration), earned by the pool for successfully adding a block to the blockchain. The amount of consideration to which the Company is entitled is a fractional share of the block reward and transaction fee that 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, net of any pool fees due to the pool operator.

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 and fixed at the point in time the contract is determined to exist and the performance obligation of contributing hash power towards the successful block validation satisfied.

Company is entitled to its fractional share of the block reward and transaction fee at the time the pool successfully validates the applicable block of transactions. However, the Company does not have visibility to exactly know when a block is successfully validated (i.e., when contract inception and corresponding performance obligation satisfaction occurs). Therefore, the Company does not recognize revenue until it receives confirmation of the consideration to which it is entitled from a successful block validation, usually via the settlement of the fractional share of block reward and transaction fee in the Company’s digital wallet. The difference between the revenue that would be recognized using the successful block validation date versus the confirmation (usually, settlement) date is immaterial

Company further applies an accounting convention that uses the daily quoted closing U.S. dollar spot rate of bitcoin on the settlement date to determine the fair value of non-cash bitcoin consideration received in Company’s wallet during that day. This accounting convention of measuring pool participant revenue based on the closing U.S. dollar spot rate of bitcoin on the settlement date instead of the fair value of the bitcoin at contract inception (i.e., point in time the applicable block is successfully validated) does not result in materially different revenue recognition for any period presented.

associated with providing computing power services to third-party operated mining pools, such as rent and electricity cost are recorded as cost of revenues. Depreciation on digital currency mining equipment is also recorded as a component of cost of revenues.

following responses correspond to each point in the foregoing comment from the Staff and should be reviewed in conjunction with the revised revenue recognition disclosure proposed for the December 31, 2022 10-K filing above:

a) The

Company confirms that the specified service being received by the bitcoin blockchain and the transaction requester (i.e., Customers) is transaction verification services.

b) In our revised analysis, we have concluded that the Company, as Operator, is primarily responsible for fulfilling the performance obligation of providing transaction verification services to the bitcoin network and requester, (Customers). The Company, rather than the pool participants, enters into the contract with the Customers. The pool participants enter into contracts only with the Company as Operator; they do not enter into contracts with the network or the requester, and are not known verifiers of the transactions assigned to the pool. Further, as Operator, the Company delegates mining work to the pool participants utilizing software that algorithmically assigns work to each individual miner. By virtue of its selection and operation of the software, the Company controls delegation of mining work to the pool participants. This indicates that the Company directs the mining pool participants to contribute its hash rate to solve in areas that the Company designates. Therefore, the Company determined that it controls the service of providing transaction verification services to the network and requester, with pool participants acting, in effect, as subcontracting contributors to the specified transaction verification service. Accordingly, the Company revised its revenue recognition policy as outlined above.

c) As documented in b), the Company respectfully advises the Staff that it has revised its revenue recognition policy and concluded that the Company as an Operator controls the transaction verification services provided to Customers. We believe the response to b) also addresses the question in c), specifically, that it is the Company as Operator that is the block validator of record and directs pool participants as to how to employ their computing power.

d) In our revised analysis, we have concluded that the Company, as Operator, controls the service of providing transaction verification services to the Customers and utilizes mining software to allocate work to third party pool participants. As stated in our response to b), the Company selected the mining software to be used, owns the license to it, and operates the software.

e) The

Company is a party to a Digital Asset Custodial Agreement with NYDIG, which was entered into in July 2021. Pursuant to the agreement, the Company appointed NYDIG to act as a custodian for and to hold custodied assets for the benefit of the Company. The duties of NYDIG with respect to the Company’s custodied assets includes receiving and holding custodied assets for safekeeping for the benefit of the Company, delivering custodied assets to the

Company in accordance with the Company’s specific instructions, and performing various administrative duties in accordance with the Company’s instructions. Pursuant to the terms and agreement, NYDIG has no right, interest, or title in those custodied assets. The custodied assets will at all times be identifiable in NYDIG’s database as being stored in the account for the benefit of the Company.

f) The

Company has revised its policy to recognize all successfully mined bitcoin by Marapool as revenue when it is Operator and to recognize the fractional share block reward and transaction fee payment attributable to each third-party pool participant as cost of revenue, retrospectively applicable as part of the Company’s restatement of historical financials in the Company’s upcoming 10-K. Accordingly the Company respectfully advises the Staff that this request no longer appears applicable.

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In response to prior comment 20, you indicate that you provided computing power to the third party pool operator in your capacity as a pool participant in the third party’s bitcoin mining pool. Please explain the differences in the facts and circumstances of the Marapool bitcoin mining pool the Company operated that leads you to believe that the Marapool pool participants provide transaction verification services to

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the bitcoin blockchain, as noted from your response to prior comment 18, rather than computing power to the Company, as pool operator of Marapool.

After considering the Staff’s comments to our previous responses and upon completing additional review of the specific facts and circumstances of our mining pool and our arrangements with pool participants, we have changed our position and now conclude that pool participants provide computing power to the pool with the pool (and therefore the Company as Operator of the pool) providing transaction verification services to the bitcoin blockchain and transaction requester.

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We have therefore determined that our previous conclusion that we acted as an Agent in operating a pool with third party participants was incorrect. We are restating our historical financials in the upcoming 10-K filing to present revenue recognition and related cost of revenues reflecting the Company’s role as a principal for the periods in which we operated a third-party mining pool.

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We note that the interest rate of the RLOC is based, in part, on Loan to Value (“LTV”) Ratio. Tell us what consideration you gave to separately accounting for any embedded derivative related to the interest rate. Refer to ASC 815-15.

On July 28, 2022, the Company entered into a revolving credit agreement (“RLOC”) with Silvergate Bank (“Silvergate”, or Lender”) under which the Lender will make revolving advances to the Company. In considering whether the Company would need to separately account for any embedded derivative related to the interest rate, the Company evaluated the following features:

i. Applicable

Margin (adjusts between 1.25% to 2.75% based on the LTV ratio determined as the outstanding advances divided by the value of dollars of bitcoin held in the collateral account (“LTV

Ratio”));

ii.

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Floor

Rate (adjusts between 5.25% and 6.75% based on the LTV Ratio);

Applicable Margin and Floor Rate (features (i) and (ii)) met all the criteria for bifurcation in FASB ASC 815-15-25-1 for the following reasons: (a) indexation to the price of bitcoin is not clearly and closely related to the debt host (i.e., the drawn advances); (b) the debt host is not remeasured at fair value under otherwise applicable US GAAP with changes in fair value reported in earnings; and (c) the features meet the definition of a derivative as outlined in ASC 815-10-15-83 (i.e., the underlying is the value of bitcoin held in the collateral account, the notional is the principal amount of the advance, the embedded feature requires a nominal initial net investment, and the cash payment of the Applicable Margin or Floor Rate is not associated with the underlying and would, therefore, cause the embedded feature to meet the net settlement criterion pursuant to ASC 815-10-15-99).

However, the Company notes that it borrowed $50 million in advances in October, 2022 repaid it in two tranches in November, 2022 and December,

2022, and therefore determined that there is no impact to the Company’s consolidated statements of operations and consolidated condensed balance sheet arising from the bifurcation of such derivatives given that the derivatives were entered into and settled within the same reporting period. Accordingly, the Company did not record or disclose such bifurcated derivatives and will monitor future borrowings under the RLOC to determine whether the impact of bifurcation of the features under such future borrowings would be material.

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Provide disclosure of any significant crypto asset market developments material to understanding or assessing your business, financial condition and results of operations, or share price since your last reporting period, including any material impact from the price volatility of crypto assets.

We acknowledge the Staff’s guidance and we have added additional disclosure to our upcoming 10-K filing for Comments

10, 11 and 12 in an effort to disclose the significant crypto market development and their impact on the company. A draft of which follows:

Significant crypto market developments and impacts to the Company:

was a challenging year for the crypto sector in general, as macroeconomic conditions (including higher inflation and rising interest rates as compared to recent years) resulted in weaker equity markets and a general “risk off” sentiment that appear to have had a negative

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impact on bitcoin prices. As the Company’s stock price trends in the same direction as bitcoin prices, an effect to bitcoin prices certainly carried through to the Company’s stock price and availability of capital for operations. This set of circumstances was exacerbated by a series of unforeseen events which hit the sector. These included:

● De-pegging of $LUNA in the second quarter of 2022, bankruptcies of key players in the crypto universe, including Three Arrows Capital, Voyager, and Celsius.

fourth quarter collapse of FTX , which drove additional credit related bankruptcies and a significant decline in bitcoin prices and bitcoin mining rig prices.

these events led to the decline in the price of bitcoin, on top of unfavorable macroeconomic conditions, the Company’s financial condition, results and operations and stock price were adversely impacted. The resulting declines in financial performance and operational challenges faced by the Company in 2022 were most evident in the following areas:

● Total margin decline: We saw reduced profitability of our operations due to depressed bitcoin prices and delays in scaling our operations. Total margin was a loss of $xx.x million in the current-year period compared with income of $xx.x million in the prior-year period, a decline of $xx.x million (note this is intended as a template, and all “xx.x” placeholders throughout will be updated in the 10-K filing).

● Digital assets book value decline: We experienced significant impairments ($xx.x million) and unrealized losses ($xx.x million) on digital assets held on our balance sheet and in an investment fund during the year ended December 31, 2022.

assets - fair value decline: At December 31, 2022, the fair value of a single bitcoin was approximately $16,545, a 63% decline in fair value from December 31, 2021, when a single bitcoin was worth approximately $45,208. At December 31, 2022, the Company held approximately 7,815 bitcoin ($123.3 million book value) on the balance sheet.

assets utilized as collateral - fair value declines and additional collateral requirements:

On November 9, 2022, bitcoin prices declined to a new yearly low on concerns of financial instability in the industry as a result of the FTX collapse. 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 outstanding borrowings under its Term Loan and RLOC facilities, bringing its total collateral balance to 9,490 bitcoin (or approximately $153.9 million). The Company’s total bitcoin holdings as of November 9, 2022, were 11,440 bitcoin, of which 1,950 (approximately

$31.6 million) were unrestricted. During November and December 2022, the Company repaid the

$50 million in RLOC borrowings. These repayments, along with a modest recovery of bitcoin prices through December 31, 2022, enabled the Company to reduce its bitcoin held as collateral to approximately 4,417 bitcoin (with a value of approximately $73.1 million) by December

31, 2022.

● Impairment of bitcoin mining rigs and advances to vendors: We also saw significant declines in the fair value bitcoin mining rigs during the fourth quarter. As a result, the Company assessed the need for an impairment write-down of both bitcoin mining rigs (held as fixed assets) and advances to vendors (a current asset) representing deposits associated with the future delivery of mining rigs. We recognized impairment charges for both the bitcoin mining rigs ($xxx.x million) and the advances to vendors ($xxx.x million) – a total impairment of approximately $xxx.x million.

We also suffered from the impact of the “cryptowinter” on other parties.

● Direct impact of vendor bankruptcy filing: On September

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

During the year ended December 31, 2022, the recorded impairment charges of approximately

$xx.x million in operating expenses (replated to deposits) and approximately $xx.x million

(related to certain loans and preferred stock investments) as non-operating expenses.

● Impact of bankruptcies and FTX collapse on our primary lender: Silvergate Bank serves as the lender for our Term Loan and RLOC facilities, through which we may borrow up to $200 million provided we post sufficient collateral in bitcoin. Silvergate has filed disclosure with the SEC regarding its financial woes, including doubts about its ability to continue as a going concern and need to postpone the filing of its Annual Report with the SEC as a result of severe declines in its deposit base and less than adequate capitalization. This has led to a mass exodus of industry leading crypto clients and turned the country’s crypto friendliest bank to having headlines along the lines of crypto businesses fleeing the beleaguered bank, thus creating both a credit void as well as massive reputational risk for crypto clients.

early February, 2023 Marathon provided Silvergate Bank with the required 30-day notice for the prepayment of the $50 million outstanding under the Term Loan Facility, terminating the entire term loan facility. The prepayment is to be completed on March 8. While the Company still maintains a $100 million revolving credit facility with Silvergate Bank, with a zero balance outstanding, it is deciding whether to, at a minimum, drastically reduce the size of the facility, if not terminating it in full.

anticipate that businesses in this and related industries may continue to experience economic and operational challenges, and the first half of 2023 will continue to be a period of challenge and uncertainty in the industry. We are continuously evaluating strategic opportunities which we may decide to undertake as part of our strategic growth initiatives; however, we can offer no assurances that any strategic opportunities which we decide to undertake will be achieved on the schedule or within the budget we anticipate, if at all, in our competitive and evolving industry. See Part I, Item 1A. “Risk Factors” in this 2022 Annual Report for additional discussion regarding potential impacts our competitive and evolving industry may have on our business.

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We note that you own crypto assets and certain of these crypto assets may serve as collateral for loan, margin, rehypothecation, or other similar activities to which you or your affiliates are a party. Identify and quantify the crypto assets used in these financing arrangements and disclose the nature of your relationship for loans with parties other than third-parties.

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State whether there are any encumbrances on the collateral. Discuss whether the current crypto asset market disruption has affected the value of the underlying collateral.

Please refer to draft disclosure included in response to comment 10. Read in the reply ↗

If material to an understanding of your business, describe any direct or indirect exposures to other counterparties, customers, custodians, or other participants in crypto asset markets known to: • Have filed for bankruptcy, been decreed insolvent or bankrupt, made any assignment for the benefit of creditors, or have had a receiver appointed for them.

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• Have experienced excessive redemptions or suspended redemptions or withdrawals of crypto assets. • Have the crypto assets of their customers unaccounted for. • Have experienced material corporate compliance failures.

No numbered answer found in the reply. Read the reply ↗

We note your discussion of the impact of the Compute North Bankruptcy. To the extent material, also discuss how the bankruptcies of FTX and BlockFi, as well as any other crypto asset companies, and the downstream effects of those bankruptcies have impacted or may impact your business, financial condition, customers, and counterparties, either directly or indirectly.

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Clarify whether you have material assets that may not be recovered due to the bankruptcies or may otherwise be lost or misappropriated.

Please refer to draft disclosure included in response to comment 10 for disclosure on the downstream impacts of the FTX and other bankruptcies on our business. As discussed above and on p. 23 of our third quarter 10-Q, as referenced, we have thoroughly discussed the impact of the Compute North Bankruptcy. We have material assets unrecovered as discussed with respect to Compute North.

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To the extent that we give deposits for hosting arrangements, we could lose those deposits in a bankruptcy, if we become an unsecured creditor, and we have disclosed this with respect to the Compute North situation.

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We note that, in early July 2022, the Company expanded certain hosting arrangements with Compute North. We further note from your Q2 2022 earnings call that under the renegotiated contract, you now have the ability to control when the miners will be curtailed and can benefit from selling energy back to the grid.

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Please provide us with a detailed accounting analysis of whether the revised agreement with Compute North, LLC is or contains a lease under ASC 842. Also address the energy agreements as part of your analysis.

We wish to clarify certain points made during the Q2 2022 earnings call related to the new contract. The Company is not a party to the PPA, nor do we have the option to control when miners are curtailed. The power provider makes that determination. Also, we do not directly sell energy back to the grid, the power provider does.

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Our contract enables us to receive a credit on our monthly bill for a proportion of the benefits from the sale of wind energy to the grid.

August 4, 2022, the Company entered into a revised agreement (“Agreement”) with Compute North, LLC (“CN”, or

“Supplier”) for Supplier to provide space within a mining facility (“Facility”) to house and service the Company’s bitcoin miners. Such Agreement also includes the provision of rack space, 240V power source, ambient air cooling, redundant internet connectivity, physical security, some degree of technical support, miner configuration, miner monitoring, and performance enhancing firmware at a specified service level for 60 months.

Company considered whether the Agreement contains a lease under ASC 842, specifically considering whether the Company would be deemed to have a lease of the entire Facility (through its right to use the Facility’s capacity), or lease of rack space (i.e., equipment needed to house the Company’s miners).

Capacity evaluating whether the capacity for which the Company has contracted for under the Agreement represents a lease, the Company first considered whether the capacity represents an identified asset. The Company determined that the total power output of the Facility is 273 MW, and the Company has the contractual right to receive about 219 MW of power output which represents approximately 80% of the total capacity of the Facility. Given the Agreement does not convey to the Company substantially all the capacity of the Facility, there is no identified asset and a lease does not exist.

Notwithstanding that there is no identified asset related to the production of the electricity, the Company further considered whether the Company has control over the Facility; specifically, whether the Company would have the ability to direct how and for what purpose the capacity of the Facility is being used. When energy costs on the power grid are higher than the profit of mining bitcoin, the Supplier curtails bitcoin mining activity and sells energy derived from its power purchase agreement back to the power grid and credit the Company the proceeds in excess of a contracted price against the Company’s energy bill. The determination of when electricity would be supplied to the

Company’s miners is solely at the discretion of the Supplier, for the Supplier’s economic benefit, and the Company does not have the ability to direct whether, and when, its miners’ activities would be curtailed for energy to be sold back to the power grid. Further, so long as Supplier meets its service level arrangements as specified in the agreement, Compute North, LLC has the ability to direct the timing of when such miners are in operation and where such miners would be racked at the Facility. Therefore, the Company determined that because it does not have the right to direct how and for what purpose the energy capacity of the Facility is used, the

Agreement does not contain a lease.

Rack

Space rack space within the Facility is an implicitly identified asset given the rack space will be made available to the Company and the specific racks to which the Company’s miners will be attached is known when the Company’s miners are brought to the Facility and attached.

Further, the rack space is physically distinct from other rack space in the Facility. However, the Agreement does not explicitly identify rack space that is uniquely identifiable and specifically designated for the Company’s use. In addition, the Supplier has a substantive substitution right because if the Company requires additional rack space, the Supplier can obtain another readily available rack within the Facility and the Company cannot prevent the Supplier from substituting one rack space for another in order to optimize its inventory of rack space and configuration according to customer demand. Given the Supplier has a substantive substitution right pursuant to the

Agreement, there is no identified asset and a lease does not exist.

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Please provide us with a detailed accounting analysis of whether the hosting agreement with Applied Blockchain is or contains a lease under ASC 842.

The Company’s agreement (“Agreement”) with Applied Blockchain, Inc. (“APLD”) provides energized cryptocurrency mining facilities at Ellendale ND, Garden City TX, and Jamestown ND (each, a “Facility”, collectively, the

“Facilities”) for the Company’s mining operations. The Company has contracted with APLD to have access to a specified amount of KW/H of energy at a certain service level of output of the Facilities that includes use of rack space, air conditioning power to be available 95% of the time during a calendar year, network infrastructure based on fiber optic internet connection,

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filtered ambient air, and monitoring and troubleshooting of the Company’s miners on a 24 hours a day, 7 days a week basis.

Company considered whether the Agreement contains a lease under ASC 842, specifically considering whether the Company would be deemed to have a lease at each of Ellendale, Garden City, and Jamestown Facilities (through its right to the Facility’s output of electricity).

Ellendale

ND

Company first evaluated whether a capacity portion of the Facility is an identified asset. At Ellendale, the Facility has a Capacity of 180 MW and the Company contracted for consumption of 100% of the Facility’s power capacity. Therefore, the Company’s capacity portion represents substantially all (>90%) of the capacity of the Facility and the entirety of the Facility is an identified asset.

Company next considered whether the Company has the right to control the Facility for a period of time. The Company determined that it has the right to obtain economic benefits from the Facility in the form of MW of electricity powering the Company’s miners. Further, given the Company has the right to direct APLD to operate the Facility in a manner it predetermined per the Agreement with APLD not having the right to change those operating instructions. Therefore, Management determined that the Company controls the use of the Ellendale

Facility.

the Ellendale Facility represents an identified asset that the Company controls, the Agreement contains an embedded lease of the Ellendale

Facility. However, as of December 31, 2022, none of our mining rigs were installed in Ellendale, and the facility was under construction.

As such, the Facility has not been made available for use by the Company as the Facility is not able to operate in its predetermined manner as stipulated by the Agreement and the Company is unable to direct the use of the electricity of the Facility. As the lease commencement date has not occurred, the Company has not recognized this lease as of December 31, 2022.

Garden

City TX total power capacity at the Garden City Facility is 200 MW, and the amount of electricity the Company is contracted to receive is about

99 MW which represents approximately 50% of the total power capacity of the Facility. Given the Agreement does not convey to the Company substantially all the capacity of the Facility, there is no identified asset with respect to the Facility, and as such, no lease of the

Facility exists.

Management notes that the Agreement provides the Company with the use of racks for placement and attachment of the Company’s miners within the Facility. While specifically identifiable racks are not designated in the Agreement for use by the Company, Management notes that during the fourth quarter of 2022 the Company’s miners had been brought to the Facility and attached to the racks. Therefore, the racks became implicitly identifiable at this time because the individual racks to which the Company’s miners are attached became known. Additionally, the racks are physically distinct from other racks in the Facility and any relocation of any of the Company’s miners to another location within the Facility may only be made upon the Company’s approval. As the Company can prevent the supplier from substituting the racks, the supplier does not have substantive substitution right. Given there (i) is a specified asset, (ii) the asset is physically distinct, and (iii) is not subject to substantive supplier substitution rights, the racks within the Facility represent an identified asset upon delivery to the Facility during the fourth quarter.

next considered whether the Company has the right to control the racks for a period of time. The Company determined that it has the right to obtain economic benefits from the racks in the form of placement and storage of the Company’s miners. Furthermore, the Company has the ability to direct APLD to operate the racks in a manner it predetermined per the Agreement, with APLD not having the right to change those operating instructions, Therefore the Company controls the use of the racks. As the racks represent an identified asset that the Company controls, Management determined that the use of the racks represents an embedded lease within the Agreement at December respectfully clarifies for the Staff, that because the Company’s miners had not been brought to the Facility and attached to the racks as at September 30, 2022, no identified asset existed with regard to the use of the racks and therefore no embedded lease existed at September 30, 2022.

Jamestown total power capacity at Jamestown is 100W and the amount of electricity the Company is contracted to receive is about 33 MW which represents approximately 33% of the total power capacity of the Facility. Given the Agreement does not convey substantially all the capacity of the Facility to the Company, there is no identified asset, and no lease of the Facility exists.

notes that the Agreement provides the Company with the use of racks for placement and attachment of the Company’s miners within the Facility. However, specifically identifiable racks are not designated in the Agreement for use by the Company; therefore the racks are not explicitly specified in the contract. In addition, Management notes that as of December 31, 2022, none of the Company’s miners had been brought to the Facility and attached to the racks. Therefore, the racks are also not implicitly identifiable because the individual racks to which the Company’s miners will be attached remain unknown. As such, Management determined as of December

31, 2022, there is no identified asset with respect to the use of the racks and therefore no lease of the racks exists. Management will re-evaluate whether the arrangement contains a lease at the time any Company miners are brought to the Facility and attached to the racks, resulting in the racks becoming implicitly identifiable.

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Describe any material risk to you, either direct or indirect, due to excessive redemptions, withdrawals, or a suspension of redemptions or withdrawals, of crypto assets. Identify any material concentrations of risk and quantify any material exposures.

Because our business is limited to Bitcoin mining, there are no redemption and withdrawal scenarios that directly impact our business as this is not relevant to our business model. Read in the reply ↗

To the extent material, discuss any reputational harm you may face in light of the recent disruption in the crypto asset markets. For example, discuss how market conditions have affected how your business is perceived by customers, counterparties, and regulators, and whether there is a material impact on your operations or financial condition.

As stated above, our business is limited to the mining of bitcoin. Thus, we do not have customers. With regard to counterparties and regulators, we appear to have fared better than most bitcoin miners; however, we have included concerns for counterparties and regulators in the answer to Comment 18. Read in the reply ↗

Describe any material risks to your business from the possibility of regulatory developments related to crypto assets and crypto asset markets. Identify material pending crypto legislation or regulation and describe any material effects it may have on your business, financial condition, and results of operations.

We have considered your comments 17, 18 and 19 and provide hereinbelow one comprehensive risk factor to cover all three sets of concerns.

are subject to an extensive, highly evolving and uncertain regulatory and business landscape and any adverse changes to, or our failure to comply with, any laws and regulations, and adverse business reactions from counterparties could adversely affect our brand, reputation, business, operating results, and financial condition.

Our business is subject to extensive laws, rules, regulations, policies, orders, determinations, directives, treaties, and legal

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and regulatory interpretations and guidance, as well as counterparty risk in the markets in which we operate, including regulatory aspects from financial services, federal energy and other regulators, the SEC, the CFTC, credit, crypto asset custody, exchange, and transfer, cross-border and domestic money and crypto asset transmission, consumer and commercial lending, usury, foreign currency exchange, privacy, data governance, data protection, cybersecurity, fraud detection, antitrust and competition, bankruptcy, tax, anti-bribery, economic and trade sanctions, anti-money laundering, and counter-terrorist financing, as well as the same regulatory risks applicable to counterparties, most notably hosting businesses, as well as the recent economic issues and bankruptcies befalling some in this industry. Many of these legal and regulatory regimes were adopted prior to the advent of the internet, mobile technologies, crypto assets, and related technologies. As a result, some applicable laws and regulations do not contemplate or address unique issues associated with the crypto economy, are subject to significant uncertainty, and vary widely across U.S. federal, state, and local and international jurisdictions. These legal and regulatory regimes, including the laws, rules, and regulations thereunder, evolve frequently and may be modified, interpreted, and applied in an inconsistent manner from one jurisdiction to another, and may conflict with one another. Moreover, the complexity and evolving nature of our business and the significant uncertainty surrounding the regulation of the crypto economy requires us to exercise our judgment as to whether certain laws, rules, and regulations apply to us, and it is possible that governmental bodies and regulators may disagree with our conclusions. To the extent we have not complied with such laws, rules, and regulations, we could be subject to significant fines, revocation of licenses, limitations on our products and services, reputational harm, and other regulatory consequences, each of which may be significant and could adversely affect our business, operating results, and financial condition.

Additionally, various governmental and regulatory bodies, including legislative and executive bodies, in the United States and in other countries may adopt new laws and regulations, the direction and timing of which may be influenced by changes in the governing administrations and major events in the crypto economy. For example, following the failure of several prominent crypto trading venues and lending platforms, such as FTX, Celsius Networks, Voyager and Three Arrows Capital in 2022 (even though these do not directly affect our business), the

U.S. Congress expressed the need for both greater federal oversight of the crypto economy and comprehensive cryptocurrency legislation.

In the near future, various governmental and regulatory bodies, including in the United States, may introduce new policies, laws, and regulations relating to crypto assets and the crypto economy generally, and crypto asset platforms in particular. The failures of risk management and other control functions at other companies that played a role in these events could accelerate an existing regulatory trend toward stricter oversight of crypto asset platforms and the crypto economy.

Due to our business activities, we may be subject to ongoing examinations, oversight, and reviews and currently are, and expect in the future, to be subject to investigations and inquiries, by U.S. federal and state regulators, many of which have broad discretion to audit and examine our business. Moreover, new laws, regulations, or interpretations may result in additional litigation, regulatory investigations, and enforcement or other actions, including preventing or delaying us from offering certain products or services offered by our competitors or could impact how we offer such products and services. Adverse changes to, or our failure to comply with, any laws and regulations have had, and may continue to have, an adverse effect on our reputation and brand and our business, operating results, and financial condition.

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Describe any material risks you face related to the assertion of jurisdiction by U.S. and foreign regulators and other government entities over crypto assets and crypto asset markets.

We have reviewed the above comment in conjunction with this comment and provided a comprehensive risk factor to cover both above. Read in the reply ↗

Describe any material risks related to safeguarding your or your affiliates’ crypto assets. Describe any material risks to your business and financial condition if your policies and procedures surrounding the safeguarding of crypto assets, conflicts of interest, or comingling of assets are not effective.

Our primary risk in this area would be the custody of digital assets - The Company does not hold any digital assets on exchanges and all of its bitcoin (including bitcoin pledged as collateral for borrowings) is held in segregated custody accounts at a third-party

Custodian that utilizes “cold storage” at all times. In the case of any pledged collateral, Silvergate may only claim the collateral upon providing notice to the Custodian that an Event of Default (as defined in our loan agreements) has occurred and is ongoing. Read in the reply ↗

To the extent material, describe any gaps your board or management have identified with respect to risk management processes and policies in light of current crypto asset market conditions as well as any changes they have made to address those gaps.

We have discussed the recent “crypto winter” with our Board and management team extensively over the duration and have not identified any gaps in risk management or processes. Our finance and legal team, under the guidance of our CEO and Board, are continually evaluating our business model and results to address the ever changing crypto market conditions and business dynamics. Read in the reply ↗

Describe any material financing, liquidity, or other risks you face related to the impact that the current crypto asset market disruption has had, directly or indirectly, on the value of the crypto assets you use as collateral or the value of your crypto assets used by others as collateral.

As of the date of this letter, the only vehicles we have pursuant to which our bitcoin may be used as collateral are our

$50 million term loan and our Revolving Credit Facility (“RLOC”) with Silvergate Bank. In early February we gave notice of the prepayment of the $50 million term loan and the termination of the term loan facility. This prepayment and termination is scheduled for March 8, 2023. We have not historically used the RLOC facility as a major source of long term financing nor do we intend to so use this in the future.

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Therefore, we do not view this as a material risk In addition, we have begun conversations with Silvergate to reduce the size of the RLOC facility from $100 million to $50 million. We expect to pick up these conversations in the latter half of March.

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To the extent material, describe any of the following risks due to disruptions in the crypto asset markets: • Risk from depreciation in your stock price. • Financing risk, including equity and debt financing. • Risk of increased losses or impairments in your investments or other assets.

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• Risks of legal proceedings and government investigations, pending or known to be threatened, in the United States or in other jurisdictions against you or your affiliates. • Risks from price declines or price volatility of crypto assets.

Please refer to our previous responses. We feel we have adequately disclosed the potential risks which arise from the volatility in the price of bitcoin in our existing risk factors. Read in the reply ↗

We note the recent enactment of legislation in New York establishing a two-year moratorium on issuing permits for certain cryptocurrency mining operations that use carbon-based power sources. Although you do not operate in New York, discuss the possibility of similar laws being enacted in jurisdictions that you do operate in.

We are aware of the two year partial ban in New York. We do not believe that this legislation will lead to similar laws being enacted in jurisdictions in which we operate. In fact, in the jurisdictions in which we operate, namely Texas, the opposite seems to be the case. See “Crypto Mining Ban Makes New York Potential Model for Other States” by Rosemarie Miller, in i.e.

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Miller, in Forbes, on December 7, 2022 (stating that opposed to New York, other states are enacting measures to encourage, rather than discourage, mining); and https://blockchain.bakermckenzie.com/2022/11/29/new-york-enacts-two-year-crypto-mining-moratorium/ (“In contrast, other U.S. states have adopted policies to attract crypto-mining.”). As a result, we do not see that there is a risk at this time or that a risk factor would be appropriate.

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We do not believe that your response to prior comment 1 provides a sufficient basis to support the Company’s conclusion that it does not transfer control of the bitcoin it loaned. We observe that the nature of the Company’s bitcoin lending arrangements is different than that of a repurchase agreement as described in ASC 606-10-55-68.

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We further observe that, based on the Company’s analysis and representation of the facts, the borrower of the Company’s bitcoin could deploy the bitcoin at its discretion, bore the risk of loss or theft of those bitcoin, and otherwise had the ability to direct the use of the bitcoin transferred to it under such a lending arrangement. As such, please tell us whether you considered derecognizing the bitcoin lent and concurrently recognizing a receivable reflective of the Company’s right to receive bitcoin from the borrower. We note such accounting may be appropriate based on your facts and circumstances. We further note that such receivable may be measured at the fair value of the lent bitcoin, both initially and at subsequent reporting dates and that such accounting may include a separately recognized allowance for expected credit losses under the principles of ASC Topic 326 that incorporates forecasts reflecting the Company’s expectation of credit losses on such receivable.

We acknowledge the Staff’s comments and confirm our previous responses that we did consider derecognizing the bitcoin lent and recognizing a receivable reflecting our right to receive the bitcoin back from the borrower. We concluded in our assessment that the Company retained control and as such, derecognition was not appropriate.

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We acknowledged in our previous response 1 that we were aware that lenders’ accounting for digital assets was being debated in practice and that we believed that our application of ASC 606 in determining whether we or the borrower controlled the loaned digital assets was appropriate at the time we made the determination.

However, we note that during the fourth quarter of 2022, the Staff provided additional guidance around lenders’ accounting for loans for crypto intangible assets, including bitcoin loans. This guidance calls for the derecognition of the bitcoin loaned and the recognition of a receivable reflective of the Company’s right to receive bitcoin from the borrower, which differs from our conclusion on the matter. The Staff stated that they would not object to a lender that applies their views as the adoption of a new accounting principle with retrospective application to all periods presented in its financial statements.

connection with responding to the staff’s comments, the Company acknowledges that (i) it is responsible for the adequacy and accuracy of the disclosure in its filing; (ii) staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and (iii) it may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

hope you find that these responses adequately address the staff’s questions, but please contact the undersigned at hugh@marathondh.com or our counsel, Jolie Kahn, Esq., at joliekahnlaw@sbcglobal.net, if you have any further questions or would like to discuss our responses.

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Clarify the types of businesses that are "ancillary" to your bitcoin mining business that you may expand into in the future.

In order to address comments which request revision of information in the 2022 10-K, we propose to file an Amendment No. 1to

Form 10-K for the year ended December 31, 2022 (the “10-K/A”), which will be filed subsequent to our submission of this comment response letter. The 10-K/A will contain, verbatim, all proposed disclosures set forth in this comment response letter, subject to any further comments we may receive from the Staff.

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Where we indicate in this letter that language will be added in the

10-K/A, the language will also be included prospectively in all future periodic filings and other disclosure filed with the SEC, where relevant. In response to this comment, we will revise to include the following language in the 10-K/A:

Ancillary businesses are those that relate to the Bitcoin ecosystem but may be above and beyond those directly related to the self-mining of bitcoin. The ancillary businesses most closely related to mining of bitcoin may include, but will not be limited to, management of bitcoin mining facilities for third party owners and advisory and consulting services to third parties seeking to set up and operate bitcoin mining facilities and joint ventures for bitcoin mining projects in domestic and international jurisdictions such as our project in Abu Dhabi, United Arab Emirates. We will also seek to be involved in bitcoin related projects including but not limited to development of technologies in immersion, hardware, firmware, mining pools and side chains that use the bitcoin blockchain.

We will also seek to be involved in the development of projects and technologies for generating electricity from renewable energy sources as well as methane gas capture to power bitcoin mining projects.

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Please revise to also address any material risk or impact that the current crypto asset market disruption may have on the use and valuation of your mining rigs. In this regard, we note the decrease in the cost of bitcoin mining rigs that was driven by the drop in bitcoin prices during the fourth quarter ended December 31, 2022 resulted in significant impairment of your mining rigs and the deposits with bitcoin

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mining equipment manufacturers. Also address the risk that bitcoin mining rigs would have to be shut down for lack of profitability once the price of bitcoin declines below a certain amount. We may have further restrictions on our liquidity due to unique risks which we could face in 2023, page 24

In response to this comment, we will add in the following new risk factor in the 10-K/A:

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 our 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 high of almost $21,500 earlier in the quarter.

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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 our mining rigs and deposits for future mining rig purchases. As a result, we recorded an impairment charge of $332,933 thousand on these assets during that period, although operations were unaffected and continued throughout. Furthermore, future decreases in the value of bitcoin could cause us 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 our profitability to the point that we would have to consider whether there would be less diminution of value if we were to leave certain of our miners 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 miners. 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 miners.

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We note your response to prior comment 23 regarding various risks due to disruptions in the crypto asset markets. Please address the termination of your term loan and line of credit with the now closed Silvergate Bank, which was your primary lender. Clarify here and in your MD&A section how the lack of access to up to $200 million of bank loans and credit will impact your operations and liquidity.

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For example, clarify whether the lack of a lender and current market conditions will make it difficult to meet your funding obligations for the Abu Dhabi joint venture or the buildout of your mining operations in 2023. Further, clarify whether you may have difficulty finding another lender that will offer you similar or favorable terms given the current volatile environment in the crypto asset markets.

We will add the following disclosure in the 10-K/A:

The termination of the $200 million in loan facilities with Silvergate Bank did not have a material impact on our operations or forecasts with regard to liquidity. The loans were fully collateralized by our holdings of bitcoin and as such, we were only permitted to borrow up to a percentage (65%) of the value of the bitcoin held as collateral.

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Specific percentages and conditions are set forth in our

Management’s Discussion and Analysis in disclosure regarding Bitcoin held as collateral for loans (“Digital assets, restricted”).

response to the disruptions in the crypto markets and rising interest rates during the fourth quarter of 2022, we decided to move away from leverage and instead chose to rely on increased levels of cash and higher balances of unrestricted bitcoin holdings, which we are now selling periodically (starting in January 2023) as a means of generating cash for operations. By selling bitcoin outright, we can realize 100% of the then value of the bitcoin when addressing liquidity needs (refer to the Liquidity outlook disclosure in MD&A on page 49 for further disclosure regarding our liquidity analysis).

It is important to note that in measuring our prospective liquidity forecasts, we did not include loan availability given the loans were collateralized. In addition, we believe that with the consistently higher bitcoin mining levels which we have achieved, selling bitcoin is a more conservative and sustainable methodology for providing liquidity given current market conditions and interest rates.

believe that with the increased cash, access to our ATM Facility, as needed, and bitcoin holdings and with periodic access to capital markets, we have sufficient liquidity to fund operations and growth initiatives, including our investment in the UAE joint venture.

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We note that your cash is primarily held at Signature Bridge Bank, NA, as overseen by the FDIC, since Signature Bank, NA, was closed by New York State banking regulators. Please address the risk to your cash, acknowledging that your deposits are only insured up to $250,000 at the bank, however, the federal government will provide you access to your funds but are not required to do so under current banking laws or in

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the future. Address how you will mitigate such risks in the future for bank failure of any institution where you will hold a material amount of cash assets.

We did not experience a risk or damage as a result of the recent bank closures, and will address as follows in our 10-K/A:

response to the closure of Signature Bank, we have moved all of our cash to other FDIC insured institutions and did not suffer any loss of funds whatsoever from this event. In order to help mitigate and avoid concentration risk with a single bank, we have diversified our cash holdings and now maintain cash management relationsips at four commercial banking institutions.

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In addition, as a result of the current elevated risk of possible insolvency of banks, we have implemented a policy of purchasing short-term US treasury bills as an additional means of risk mitigation for periods when our cash balances are higher than our near-term anticipated and planned operating cash flow needs.

Management’s

Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Policies and Estimates Digital assets,

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Please explain how you determined that the price of digital assets used for purposes of assessing impairment is a Level 2 input under ASC 820. Refer to ASC 820-10-35-37 through 35-54A. Also explain how the use of “multiple observable inputs (exchanges) that provide slightly differing benchmarks of digital asset value” is consistent with the guidance in ASC 820-10-35-5.

The data the Company utilized in assessing impairment for the years ended December 31, 2021, December 31, 2022, and all interim periods within, was sourced from CoinMarketCap as reported by Yahoo Finance. The prices quoted on CoinMarketCap are not based on any single exchange but are based on volume weighted average of several exchanges including Coinbase.

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As a result, CoinMarketCap is not a market and is not considered to be the principal market for Company’s bitcoin but uses inputs that include quoted prices from Coinbase and other exchanges, the CoinMarketCap price used by the Company in its assessment of impairment as reported in the 10-K is considered to be a Level 2 input.

Company acknowledges the Staff’s comment and that ASC 820-10-35-5 and 35-5A assume that the fair value measurement ordinarily assumes transactions of the asset in its principal market and that absent evidence to the contrary, the market on which an entity normally transacts for the relevant asset is presumed to be the principal market. The Company transacts in bitcoin through a broker

(NYDIG), which is in itself not a market. Therefore, the Company has no transactional market for bitcoin and determined that Coinbase is its principal market as it provides the most reliable and greatest volume and level of activity for bitcoin for which the Company can access at each of the impacted measurement dates. Management has determined that Coinbase was its principal market for the years ended December 31, 2021, December 31, 2022, and all interim periods within. The Company further notes that volume and activity data for bitcoin is reasonably available from Coinbase, and that ASC 820-10-35-36B states in part “in all cases, if there is a quoted price in an active market (that is a Level 1 input) for the asset or a liability, a reporting entity should use that quoted price without adjustment when measuring fair value, except as specified in paragraph 820-10-35-41-C.” The Company therefore determined that its use of CoinMarketCap pricing data was not in compliance with GAAP for the years ended December 31, 2021, December 31, 2022, and the interim periods within.

Company notes that the CoinMarketCap and Coinbase daily closing prices are on average 99.97% similar, and intraday low prices are on average 99.65% similar. The Company evaluated the impact resulting from its use of a Level 2 input and determined that the misstatement is both quantitatively and qualitatively immaterial to the Company’s financial statements as of and for the years ended December

31, 2021 and December 31, 2022 as well as for each interim periods within. The cumulative difference is immaterial and will be corrected as an out-of-period adjustment in the financial statements for the quarterly period ended March 31, 2023 (along with transparent disclosure as to the nature and effect of the adjustment) as the effect is immaterial to the projected 2023 full year income statement. Management further notes that the misstatement does not mask any changes in earnings or trends, does not change income to a loss, and is not expected to result in any negative market reaction. As such, the misstatement is not considered to be qualitatively material to reasonable users of the Company’s financial statements.

Company will disclose the movement of bitcoin pricing from a Level 2 to a Level 1 input in accordance with disclosure requirements in Topic 820. Management also confirms that as of January 1, 2023 it utilizes Coinbase pricing in its determination of impairment of its bitcoin. As Coinbase is the Company’s principal market, observable pricing from Coinbase is therefore a Level 1 input and will be disclosed as such.

Additionally, we will revise our disclosure in the 10-K/A to remove “multiple observable inputs” and state the following instead “as these were based on observable quoted prices in the Company’s principal market for identical assets.”

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Please tell us why your policy indicates that any realized gains or losses from sales of digital assets are included in other income (expense). In this regard, we note the classification of realized and unrealized gains (losses) on digital assets loan receivable and digital assets within operating loss on your statements of other comprehensive income (loss).

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Also refer to your response to comment 1 in your letter dated August 1, 2022 indicating you would present realized gain on the sale of digital currencies as a component of income or loss from operations.

We advise the Staff that realized gains (losses) from sales of digital assets are included in operating expenses, which is part of our operating income (loss) subtotal. We will revise our MD&A critical accounting policy discussion in the 10-K/A to correct the disclosure language. Read in the reply ↗

Please clarify your performance obligation in contracts with mining pool operators as a participant. You indicate that computing power is the only performance obligation, but also indicate that providing computing power to solve a block is the primary output of your ordinary activities.

As stated on page 72 in NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, providing computing power is the only performance obligation of the Company when it is a participant in mining pools operated by others. On page 39, we state that “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 activities.” purpose of this sentence is merely to describe for users of our financial statements how the computing power we provide to these mining pools is

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used by those pools; we do not believe it suggests a performance obligation other than as we have articulated it

(i.e., the provision of computing power). We believe it is useful information to our financial statement users to understand not only what our performance obligation is but also the process to which we are contributing this computing power (blockchain mining).

The reference to solving a block relates to our goal when we self-mine and is the goal of the third-party pool when we are a participant in a third-party pool; however, when we participate in a third-party pool, our only performance obligation is provision of computing power.

To clarify, we will add the following disclosure in the 10-K/A:

Company utilizes computing power on rigs to solve complex cryptographic algorithms in support of the bitcoin blockchain in a process known as “solving a block”. This solving of a block is the primary output of the Company’s ordinary activities while conducting self-mining. However, when we participate in a third-party pool, the provision of providing our computing power to the pool is the only performance obligation in the Company’s contracts with 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.

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We note your statement on page 39 that “There is currently no definitive guidance under GAAP or alternative accounting framework for the accounting for digital assets recognized as revenue or held,” and your disclosure on page 29 that “no official guidance has yet been provided by the Financial Accounting Standards Board.” Please help us understand the basis for these statements and consider the need to revise or

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remove this disclosure.

Our intent was solely to communicate that there is not currently any explicit GAAP that refers to crypto or other digital assets. However, we acknowledge the Staff’s comment and its underlying intent and will revise our disclosure in the 10-K/A to remove the last two sentences under the Participant section on page 39 to address the comment. Read in the reply ↗

You indicate that the impairment tests for items of property and equipment other than mining rigs are performed annually and the recoverable amounts in property equipment are determined based on the higher of value-in-use or fair value less costs to sell. Tell us how your accounting policy complies with ASC 360-10-35-17 and 35-21. Results of Operations, page 42

We will revise the disclosure in the 10-K/A, revising the listing of critical accounting policies that appears on page 35 to consolidate the “Property and Equipment” and “Impairment of long-lived assets” into a single caption entitled “Long-lived assets” and replacing the disclosure under “Property and Equipment” and “Impairment of long-lived assets” that appears on pages 39 and 40 with the following:

Long-lived assets

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

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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 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.

Management 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.

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We note that you disclose your bitcoin production during the period in the supplemental information provided in the charts on pages 42 and 45. Tell us what consideration you gave to also discussing and analyzing additional metrics that are key performance indicators, such as the average BTC produced per day, operational/energized hash rate, and installed hash rate, as disclosed in your monthly press releases

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announcing updates to your bitcoin production and mining operation. Refer to Item 303(a) of Regulation S-K and SEC Release No. 33-10751.

The focus of our MD&A discussion around revenues, cost of revenues and margin is on the actual production results achieved during the period being discussed. We consider the discussion on these areas and the table (as shown on page 43) to be critical components of our MD&A. This disclosure provides the investor with specific information on the drivers of our revenues, cost of revenues and total margin by isolating:

● the impact of changes in actual BTC prices (for revenues), changes in production activity levels (for both revenues and cost of revenues), in the underlying costs of production

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(in the case of cost of revenues, energy, hosting and other), and due to depreciation (in the case of costs of revenues – depreciation and amortization).

Notwithstanding the foregoing, we have reviewed Section 303(a) and will track all disclosure in our monthly production updates into our MD&A. While we have not provided information related to operational or energized hash rate and installed hash rate in the MD&A section because these indicators are relatively new and as of a point in time (and not average for the periods discussed), we concur that these are useful metrics used by management that may provide investors updates on scaling of the operation as it relates to energization and operation of our sites. Therefore, we will provide the operational and energized hash rate metrics and average bitcoin production per day in our future filings.

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In your discussion of the change in cost of revenues, please explain how higher production costs of $30,134 thousand per bitcoin mined contributed to an increase in cost of revenues of only $45,226 thousand during the year ended December 31, 2022. In this regard, we note that bitcoin production increased by 947 BTC in 2022.

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Tell us if $30,134 thousand is actually the increase in production costs for the total bitcoin mined during the year, rather than the increase per bitcoin, and, if so, please revise.

The phrase “of $30,134 thousand” was misplaced in error. The sentence should read in relevant part “ “higher production costs per bitcoin mined contributed to a $30,134 thousand increase in cost of revenues.”

This is clarified in the table on page 43. We will revise our disclosure in the 10-K/A to address this issue. Read in the reply ↗

Please revise to describe the underlying reasons for the material changes in stock-based compensation expense. Refer to Item 303(b) of Regulation S-K.

We will revise the disclosure in the 10-K/A to add the following as the third sentence in the paragraph entitled “General and administrative expenses”:

“The significant decrease from 2021 to 2022 was primarily related to stock-based incentive compensation payments made to the former Chairman and CEO in 2021.” Read in the reply ↗

Please explain the nature of the items included in the line item of “realized and unrealized gains (losses) on digital assets loan receivable and digital assets” and how you differentiate unrealized losses included in this line item from impairment included in the line item of “impairment of digital assets.” To the extent that this line item only includes changes in fair value related to digital assets loan

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receivable and realized gains and losses on digital assets, please consider revising the caption accordingly.

We acknowledge this comment and will revise the caption in the 10-K/A to “Unrealized gains (losses) on digital assets loan receivable and realized gains on digital assets”.

We confirm that all impairment on digital assets held is recorded in the line item “Impairment of digital assets”. Read in the reply ↗

Please tell us why the collection of loaned bitcoin is the same amount as the issuance of loaned bitcoin in your supplemental schedule of non-cash investing and financing activities. In this regard, we note from your rollforward on page 66 that you recognized loaned digital assets of $13,324 in 2022.

We acknowledge the Staff’s comment and will revise the amount that should have been recognized as “Collection of loan denominated in Bitcoin” to be $13,324 thousand in the 10-K/A to reflect the carrying value of the Bitcoin loan immediately prior to re-recognition and not the $27,784 thousand value of the Bitcoin at derecognition. Read in the reply ↗

We note that you include the year ended December 31, 2022 in your tables depicting the impacts of the errors. Considering your assertion that the period ended December 31, 2022 was not subject to restatement, please tell us why your tables show the impact for that period.

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In addition, revise to disclose the impact of each of the errors on the six months ended June 30, 2022 and the nine months ended September 30, 2022.

We acknowledge the Staff’s comment and will revise the tables in NOTE 2 - RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS to remove the December 31, 2022 period from the restatement tables as they were not subject to the restatement. We will also revise to reflect the changes showing the impact of each error on the six months ended June 30, 2022 and nine months ended September 30, 2022 for years ended December 31, 2022 and December 31, 2021 in the 10-K/A. Read in the reply ↗

Please revise to refrain from referring to guidance issued by the SEC in December 2022. In this regard, the Staff believes its views regarding the accounting for loans of digital assets are in accordance with GAAP.

We acknowledge the Staff’s comments and will accordingly revise the disclosures in the 10-K/A as follows by means of additional disclosures underlined and deleted disclosures stricken through:

NOTE

2 – RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS

Company also recorded adjustments to the Consolidated Financial Statements to reflect our retrospective adoption of the digital asset lending policy reflected on page [TBD] relating to the full retrospective adoption of crypto loan derecognition guidance issued by the SEC in December 2022, which includes considerations under ASU 2016-13,

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“Financial Instruments - Credit Losses (ASC

326) Measurement of Credit Losses on Financial Instruments”.

the Company will refrain from referring to guidance issued by the SEC in future filings relating to our digital asset lending policy.

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Please revise to include the operating income (loss) amounts in your restated consolidated statements of other comprehensive income (loss) for the year ended December 31, 2021.

We will revise the table in the 10-K/A to include the amounts which were dropped from the table. Read in the reply ↗

As we continue to evaluate your Operator accounting policy disclosure, please clarify when you recognize revenue. We note your disclosure that you measure the fair value of bitcoin earned using the daily quoted closing U.S. dollar spot rate, but you state that you recognize revenue at the point in time that a block is successfully mined.

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That is, your disclosure implies that you recognize revenue throughout the day when the block is solved, before it is measured at the end of the day.

We acknowledge the Staff’s comment and clarify that we do not record revenue journal entries throughout each day. We record revenue for all blocks successfully mined as an Operator during a given day on that day, but not as each block is solved. We will clarify our disclosure in the 10-K/A and prospectively to state: “By successfully mining a block, the Company satisfies its lone performance obligation of providing transaction verification services and, thus, recognizes earns revenue at that point in time.” measure that revenue earned at that day’s daily quoted closing U.S.

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dollar spot rate of bitcoin (instead of the fair value of the bitcoin at contract inception) as a non-GAAP accounting convention. As previously indicated in our response to comment 5 in the letter received on February 22, 2023, this measurement accounting convention does not result in a material difference from measuring the revenue at contract inception in accordance with ASC 606-10-32-21.

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We note your disclosure that you measure the fair value of bitcoin earned using the daily quoted closing U.S. dollar spot rate each day for reasons of operational practicality. As we continue to evaluate your Operator accounting policy disclosure, please further explain why it is appropriate to measure noncash consideration other than at contract inception in accordance with ASC 606-10-32-21.

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Tell us what consideration you gave to measuring noncash consideration at the point in time that the block is successfully solved.

The Company clarifies for the Staff that, as an Operator, we recognize revenue as described in the preceding comment. The Company acknowledges that its measurement accounting convention described in the preceding comment is not in accordance with

ASC 606-10-32-21. However, the Company has evaluated the impact of the difference between measuring mining revenue as an Operator at the fair value of bitcoin at contract inception versus recognizing revenue using the aforementioned accounting convention.

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The impact is quantitatively and qualitatively immaterial to the Company’s consolidated statements of operations for all periods presented as communicated in our response to comment 5 in the letter received on February 22, 2023.

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As we continue to evaluate your Participant accounting policy disclosure, please tell us and further revise your revenue recognition policy disclosure to ensure the following items are succinctly articulated, as previously requested in prior comment 5: • Explain the payment terms of your contracts, including how the amount of compensation paid to you by third-party pool operators is determined; • Clearly disclose

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what you believe is the duration and inception of your contracts. In this regard, you disclose that your contracts are “period-to-period” contracts and a new contract is determined to exist “each period” that neither party terminates the arrangement. Revise to define what you consider to be the “period.” We note from your response to comment 20 in your letter dated December 2, 2022 and your response to prior comment 6 in your letter dated March 10, 2023 that such period reflects a distinct increment of time of a minute. However, you also indicate in response (d) to prior comment 6 in your letter dated March 10, 2023 that contract inception is upon successful placement of a block on the bitcoin blockchain; • Indicate when you believe that you satisfy your performance obligation; and • Clarify your disclosure of why you believe variable consideration is no longer constrained upon settlement, consistent with the guidance in ASC 606-10-32-11 and 32-12. That is, you indicate this is the point that the “variability is resolved” and there is no longer the “reasonable possibility” of significant reversal of revenue and, before settlement, the estimation of variable consideration “carries the risk of” a significant revenue reversal. In this regard, variable consideration should be constrained to the extent that it is probable that a significant reversal of revenue will occur when the uncertainty related to the variable consideration is subsequently resolved.

The following responses correspond to each point in the foregoing comment from the Staff. The responses below should be reviewed in conjunction with the revenue recognition policy, which we will revise in the 10-K/A and prospectively in all future periodic filings.

Explain the payment terms of your contracts, including how the amount of compensation paid to you by third-party pool operators is determined;

Response:

The Company will revise the disclosure in the 10-K/A and prospectively augment its disclosure to expressly state:

consideration to which the Company is entitled to is a

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fractional share of the block reward 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 has 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.”

Clearly disclose what you believe is the duration and inception of your contracts. In this regard, you disclose that your contracts are “period-to-period” contracts and a new contract is determined to exist “each period” that neither party terminates the arrangement. Revise to define what you consider to be the “period.” We note from your response to comment 20 in your letter dated December

2, 2022 and your response to prior comment 6 in your letter dated March 10, 2023 that such period reflects a distinct increment of time of a minute. However, you also indicate in response (d) to prior comment 6 in your letter dated March 10, 2023 that contract inception is upon successful placement of a block on the bitcoin blockchain;

Response:

The Company considers each time increment that it provides computing power to the pool operator to be distinct from all other such time increments. Because of the Company’s non-cash consideration measurement accounting convention (see comment 18), the

Company does not believe it needs to define these time increments as anything less than a day, and therefore has not undertaken a process to do so; defining these distinct periods precisely as each second, minute or hour would not have any effect on the Company’s revenue recognition. We believe the following underlined text addition will adequately clarify the disclosure to ensure users of our financial statements appropriately understand the very short-term nature of these periods:

Company considers the third-party mining pool operators its customer 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.

Indicate when you believe that you satisfy your performance obligation; and

Response:

The Company satisfies its performance obligation to provide computing power to the pool operator over time as described in 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.

your disclosure of why you believe variable consideration is no longer constrained upon settlement, consistent with the guidance in ASC 606-10-32-11 and 32-12. That is, you indicate this is the point that the “variability is resolved” and there is no longer the “reasonable possibility” of significant reversal of revenue and, before settlement, the estimation of variable consideration “carries the risk of” a significant revenue reversal. In this regard, variable consideration should be constrained to the extent that it is probable that a significant reversal of revenue will occur when the uncertainty related to the variable consideration is subsequently resolved.

Response:

While the Company knows the general formula used by the pool operator to calculate the fractional share to which pool participants are entitled, it has no visibility into the key inputs to that formula, including the total amount of computing power (hashrate) provided by the pool at any given time and the Company’s percentage share relative to others within the pool. Therefore, the

Company does not have the ability to reliably estimate the non-cash consideration to which it is entitled for the provision of its computing power to the pool until such consideration is remitted to the Company.

Company will revise the disclosures in the 10-K/A to clarify that it does not have visibility into the inputs that determine the fractional block reward and transaction fees share to which it is entitled for contributing computing power when the pool solves a block. Specifically, the Company does not know its contributed computing power relative to the pool’s total computing power;

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 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).

Read in the reply ↗

We note your supplemental response to prior comment 6 in your letter dated March 10, 2023 regarding the quantitative impact of your accounting convention as a Participant. As we continue to evaluate your accounting policy, please also provide us with your sensitivity analysis of the impact of the difference between recognizing revenue at fair value of bitcoin at contract inception versus recognizing and measuring

Rest of the question

revenue at the daily closing U.S. dollar spot rate of bitcoin on the date of receipt of the block rewards and transaction fees for the quarterly and annual periods in the year ended December 31, 2021.

The Company has evaluated the quantitative impact of the difference between recognizing revenue at fair value of bitcoin at contract inception versus recognizing revenue at the daily closing U.S. dollar spot rate of bitcoin on the date of receipt (settlement) of the block rewards and transaction fees to which the Company is entitled for its contribution to a third-party mining pool.

Rest of the answer

The impact is quantitatively immaterial to the Company’s consolidated statements of operations for all quarterly and annual periods in the year ended December 31, 2021 as follows (in thousands):

Three months ended March 31:

Sensitivity analysis

Variance $

Variance

%

3rd pty pool rev low

Avg high avg

24-hour sensitivity

$ 9,124

$ 8,706

$ 9,038

$ 9,370

$ 418

$ 86

$ (246 )

4.6 %

0.9 %

-2.7 %

48-hour

9,124

8,655

8,981

9,306

469

143

(182 )

5.1 %

1.6 %

-2.0 %

72-hour

8,596

8,919

9,242

528

205

(118 )

5.8 %

2.2 %

-1.3 % months ended June 30:

24-hour sensitivity

11,072

10,841

11,151

11,461

231

(79 )

(389 )

2.1 %

-0.7 %

-3.5 %

48-hour sensitivity

10,800

11,107

11,414

272

(35 )

(342 )

2.5 %

-0.3 %

-3.1 %

72-hour sensitivity

10,851

11,136

11,421

221

(64 )

(349 )

2.0 %

-0.6 %

-3.2 % months ended September 30:

378

373

381

390

(3 )

(12 )

1.3 %

-0.8 %

389

(11 )

-2.9 %

376

385

393

(7 )

(15 )

0.5 %

-1.9 %

-4.0 %

Year ended December 31:

20,574

19,920

20,570

21,221

654

(647 )

3.2 %

0.0 %

19,828

20,469

21,109

746

105

(535 )

3.6 %

-2.6 %

19,823

20,440

21,056

751

134

(482 )

3.7 %

0.7 %

-2.3 %

Read in the reply ↗

As we continue to evaluate your revenue recognition policy as a Participant, please clarify the basis for measuring noncash consideration using the daily closing U.S. dollar spot rate of bitcoin on the date of settlement.

Rest of the question

Although, as indicated in response to prior comment 6 in your letter dated March 10, 2023, you do not have visibility into the exact moment of contract inception, tell us what consideration you gave to measuring noncash consideration at the point in time that the third-party mining pool is successful in the placement of a block on the bitcoin blockchain. Tell us how much transaction fees and your proportional contribution of computing power to the pool actually vary from block to block during a single 24-hour period.

The Company typically receives its settlement within 24 hours of the pool winning a block. If a block is won over a holiday or a weekend, the settlement could take up to 72 hours after winning a block. Because the Company does not have visibility into exactly when a block was won, it does not know when the related contract (i.e., the period during which the Company provided computing power that resulted in solving the block) inception occurred.

Rest of the answer

Therefore, the Company performed an analysis to compare the price at which it measured its non-cash bitcoin revenue (i.e., using the daily closing U.S. dollar spot rate of bitcoin on the settlement date) to the daily low, high, and average U.S. dollar spot rates of bitcoin for the 24 hours, 48 hours, and 72 hours preceding settlement.

While the likelihood of settlement occurring 72 hours from contract inception is low, the Company used all three periods (and the

“high” and “low” scenarios) to quantify the theoretical “worst-case scenario” for all affected transactions. The difference between measuring entitled revenue according to the Company’s accounting convention as compared to the high and low bitcoin prices over the preceding 24 hours, 48 hours and 72 hours is quantitatively immaterial to the Company’s consolidated statements of operations for all periods presented and therefore the Company has concluded that any difference between recognition of revenue at settlement (measured according to the Company’s accounting convention) versus the revenue that would have been recognized and measured at contract inception (if that point in time was known) would also be immaterial. We direct the

Staff to our response to comment 21 and our response to the Staff’s comment 6 in the letter dated February 22, 2023 for the sensitivity analyses performed by the Company. Because our accounting convention results in only an immaterial difference, no further consideration was given to applying GAAP precisely in this regard in lieu of our convention.

With respect to the variability of transaction fees earned for each block and the Company’s proportional contribution of computing power:

Company does not have visibility to the transaction fees earned from some of the third-party mining pools in which it participates.

The Company receives the consideration to which it is entitled (block reward and transaction fees) in aggregate. While the Company can estimate the split between block rewards and transaction fees based on global transaction price averages, it is not possible to identify how much of these fees are earned for each block at the contract inception since the Company does not have visibility on the exact computing power contributed for each block. Therefore, the Company is unable to identify its proportional contribution of computing power to the pool by block.

Read in the reply ↗

In response to comment 20 in your letter dated December 2, 2022, you state, “ASC 60610-32-21 requires noncash consideration to be measured at fair value at contract inception which is at each minute...” However, you state in your response to prior comment 6 in your letter dated March 10, 2023, “as a participant in a third party pool, the company has no visibility into the exact time of contract inception and it is

Rest of the question

therefore impossible to fair value the revenue recognition at the contact inception.” You also indicate that the amount of remuneration to which you are entitled is not known at the time a block is won as the transaction fees per block, and the proportion of the Company’s contributed computing power to the pool (which have significant effect on the fractional share of the block reward and transaction fees to which the Company is entitled) are both unknown until settlement into the Company’s wallet. Tell us what impact, if any, your inability to measure noncash consideration in accordance with GAAP has on your assessment of controls and procedures.

The Company reviewed the currently available SOC 1 on some of the third-party pool operators including controls around completeness and accuracy of reward data per customer. While the Company has comfort over the third-party Operator controls over the number of bitcoin to which the Company is entitled, there are no controls that allow the Company to identify the exact point in time when the block is won.

Rest of the answer

This is a pervasive condition across the industry and no participants in third party pools have the visibility into the exact time a block is won (and therefore, to which contract period an earned fractional share relates) or the number of blocks won on a real-time basis. Meanwhile, the Company has adequate procedures in place to be able to ensure its measurement accounting convention results in only immaterial differences from a precise application of ASC 606-10-32-21 (as presented in comments 21 and

22 above) such that this convention and the operational reasons underlying it also do not suggest a controls or procedures deficiency.

Read in the reply ↗

In response to prior comment 15, you indicate that the use of the racks at the Garden City, TX facility represents an embedded lease within the agreement at December 31, 2022. Please confirm that these embedded leases are included in your leases disclosures.

The Garden City, TX lease was determined to be a short-term lease with a noncancellable lease term of 30 days. We were not reasonably certain to not terminate the lease as of December 31, 2022 under the facts and circumstances. Upon the occurrence of certain events, such as the energization of the facility, we will reassess the likelihood of termination and adjust the lease term accordingly in compliance with ASC 842-10-35-1a.

Rest of the answer

Since the initial term of the lease is less than one month it has been excluded from our calculation of short-term lease cost in our footnotes in accordance with ASC 842-20-50-4c. As such, this lease is not included in our lease disclosures.

Read in the reply ↗

You indicate that the Court noted that a jury is more likely to accept $150,000,000 as an appropriate damages amount if liability is found. Please explain why you disclose on page 31 that the Court would more likely accept $150,000.

This was a typographical error resulting from our moving to a convention of thousands in our 2022 10-K. The previous disclosure of $150,000 was changed to “$150,000 thousand” instead of “$150 thousand.” We will revise disclosure of this matter in the 10-K/A. Read in the reply ↗

Please revise to ensure your financial statements labeled “as reported” are consistent with those as reported in your periodic reports. Consider also including the statements of other comprehensive income (loss) as reported initially in your periodic reports filed in 2021, as well as the statements of other comprehensive income (loss) as restated in your periodic reports filed in 2022, along with the restatement

Rest of the question

adjustments as reflected in those periodic reports filed in 2022.

We acknowledge the Staff’s comment and agree that the “as reported” financial statements differ from the initial periodic filings in 2021 due to immaterial reclassifications. We will revise the schedules as requested in the 10-K/A. Read in the reply ↗

Please revise to provide a statement as to whether or not internal control over financial reporting is effective. Refer to Item 308(a)(3) of Regulation S-K. In addition, your definition of internal control over financial reporting is narrower than defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act.

Rest of the question

Confirm that your assessment was based on the full definition of internal controls over financial reporting, and revise your disclosure, accordingly.

We confirm that our assessment was based on the full definition of internal controls over financial reporting and will revise item 9a in the 10-K/A. Our proposed disclosure is outlined in response to comment 28 below. Read in the reply ↗

You indicate that you identified a weakness in internal control over financial reporting related to the application and interpretation of GAAP. Please revise to indicate whether this weakness was a material weakness. In addition, tell us what consideration you gave to whether more than one material weakness existed related to your restatements. Exhibits, page 108

The missing word “material” in the first sentence is noted and was a typographical error. We did consider and discuss the material weakness related to the application of GAAP both internally and with our Auditors and concluded that it was a material weakness that resulted in accounting errors in four areas. We will revise the item 9A disclosure in the 10-K/A filing to address both comments 27 and 28 as follows:

ITEM

9A.

Rest of the answer

CONTROLS AND PROCEDURES

Conclusions Regarding Effectiveness of Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Annual Report to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

Based on this evaluation, our management concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of December 31, 2022.

further discussed below under “Management’s Report on Internal Control Over Financial Reporting, management has identified certain material weaknesses, as set forth below. We have developed a remediation plan for the weaknesses, which is described below under

“Remediation.” As a result of such material weaknesses, the report of our independent registered public accounting firm for the fiscal year ended December 31, 2022, Marcum LLP, regarding its audit of our internal control over financial reporting as of December

31, 2022, which is included below under the heading “Report of Independent Registered Public Accounting Firm on Internal Control over Financial Reporting”, expresses an adverse opinion on our internal control over financial reporting as of December 31, 2022.

recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures.

Report on Internal Control over Financial Reporting is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and

15d-15(f) under the Exchange Act. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of annual or interim consolidated financial statements will not be prevented or detected on a timely basis.

utilized the criteria established in the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) to assess the effectiveness of our internal control over financial reporting as of December 31, 2022.

Based on that assessment and the material weaknesses described below, our management has concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2022.

Material

Weaknesses in Internal Control and Plan for Remediation

Based on its evaluation, management identified material weaknesses in internal control over financial reporting. These material weaknesses included:

a material weakness related to the application and interpretation of generally accepted accounting principles (“GAAP”) that resulted in errors in four specific accounting areas, including consolidation, impairment of digital assets, disposal of property and equipment and principal versus agent considerations in revenue recognition.

material weakness related to the design and implementation of user access controls to ensure appropriate segregation of duties, or program change management controls for certain financially relevant systems impacting the Company’s processes around revenue recognition and digital assets to ensure that IT program and data changes affecting the Company’s

(i) financial IT applications, (ii) digital currency mining equipment, and (iii) underlying accounting records, are identified, tested, authorized and implemented appropriately to validate that data produced by its relevant IT system(s) were complete and accurate.

Automated process-level controls and manual controls that are dependent upon the information derived from such financially relevant systems were also determined to be ineffective as a result of such deficiency.

material weakness related to the ineffective design of a key manual control to detect material misstatements in revenue.

These material weaknesses create a reasonable possibility that a material misstatement to our consolidated financial statements or disclosures would not be prevented or detected on a timely basis. The material weakness related to the application and interpretation of GAAP, as described above, resulted in a material misstatement to the Company’s previously issued Consolidated Financial Statements. The material weaknesses associated with the design and implementation of user access controls and the manual control over revenue recognition did not result in a material misstatement to the Company’s previously issued Consolidated Financial Statements, nor in the Consolidated

Financial Statements included in this Annual Report on Form 10-K.

Remediation

Board of Directors and management take internal control over financial reporting and the integrity of our financial statements seriously.

Management continues to work to improve its controls related to the material weaknesses described above. Management will continue to implement measures to remediate the material weaknesses, such that these controls are designed, implemented, and operating effectively.

In order to achieve the timely implementation of the above, Management has commenced the following actions and will continue to assess additional opportunities for remediation on an ongoing basis:

Continue the process we started during 2022 of adding to our internal resources to enhance our capabilities in the areas of technical accounting, financial reporting, and internal controls, including a full time person dedicated to internal controls the process started during 2022 of utilizing external third-party technical accounting resources to supplement our ability to interpret and apply GAAP as we continue to build our internal capabilities in these areas to utilize external third-party audit and SOX 404 implementation firms to enable the Company to improve the Company’s controls related to our material weaknesses.

to evaluate existing processes and implement new processes and controls where necessary in connection with remediating our material weaknesses, such that these controls are designed, implemented, and operating effectively recognize that the material weaknesses in our internal control over financial reporting will not be considered remediated until the remediated controls operate for a sufficient period of time and can be tested and concluded by management to be designed and operating effectively.

Because our remediation efforts are ongoing, we cannot provide any assurance that these remediation efforts will be successful or that our internal control over financial reporting will be effective as a result of these efforts.

continue to evaluate and work to improve our internal control over financial reporting related to the identified material weaknesses, and management may determine to take additional measures to address control deficiencies or determine to modify the remediation plan described above. In addition, we will report the progress and status of the above remediation efforts to the Audit Committee on a periodic basis.

Change in Internal Control Over Financial Reporting

Other than what is disclosed above, there were no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 2022.”

Exhibits,

Read in the reply ↗

You indicate in response to prior comment 7 that you entered in a Digital Asset Custodial Agreement with NYDIG in July 2021. Tell us what consideration you gave to filing the agreement as an exhibit. Refer to Item 601(b)(10) of Regulation S-K.

We will add this agreement as an Exhibit 10-K/A.

connection with responding to the Staff’s comments, the Company acknowledges that (i) it is responsible for the adequacy and accuracy of the disclosure in its filing; (ii) Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and (iii) it may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

hope you find that these responses adequately

Rest of the answer

address the Staff’s questions, but please contact the undersigned at fred@mara.com and Jolie Kahn, Esq., at joliekahnlaw@sbcglobal.net, if you have any further questions or would like to discuss our responses.

Read in the reply ↗

We note your proposed risk factor disclosure in response to prior comment 2 and the risk factor included on page 37 of your Form 10-Q for the quarterly period ended March 31, 2023. Despite the complexity of the projection, please revise to disclose your current estimate of the minimum bitcoin price that you would turn off your miners assuming all other costs remain unchanged, along with the assumptions used in the

Rest of the question

computation of such estimate such as electricity and hosting prices, or disclose that such an estimate is not practicable.

Due to the complexity of the analysis and multiple variables involved in determining this theoretical price, such an estimate is not practicable. We have articulated the following reasons, which constitute the most salient reasons and some of which we have previously discussed:

●

The

Company believes the analysis to try to determine such a minimum price to be competitive business information, the disclosure of which would be detrimental to our business and competitive position.

Estimating the minimum bitcoin price is very challenging due to factors such as global hash rate vs.

Rest of the answer

our hash rate, difficulty factor and the reliability of those estimations.

U.S.

Securities and Exchange Commission

Page

Company has certain contracts with fixed costs that will be incurred irrespective of whether it shuts down operations or continues to produce bitcoin, so this factors significantly into whether there is an optimal shut down price.

Company discloses non-GAAP measure of marginal cost of revenue without depreciation and amortization in the Management Discussion and Analysis section of the Form 10-K. The users of the financial statements may use that information to determine a theoretical breakeven price under those historical variables. The Company’s marginal cost of revenue without depreciation and amortization per bitcoin for the year ended December 31, 2022, was approximately $17,500 and for the three months ended March 31, 2023, was approximately

$15,900.

Read in the reply ↗

We note your response to prior comment 8. As previously requested, please also tell us what consideration you gave to revising or removing the disclosure on page 29 that “no official guidance has yet been provided by the Financial Accounting Standards Board.” In this regard, we note from your response that the intent of your disclosures was to communicate that there is not currently any explicit GAAP that refers to

Rest of the question

crypto or other digital assets.

The Company acknowledges to the Staff that its disclosure that “no official guidance has yet been provided by the Financial

Accounting Standards Board” was incorrect and is summarized in responses to the Staff’s comments below regarding current revenue recognition policies. The Company will revise the disclosure in the proposed Amendment No. 1 to its Form 10-K for the year ended

December 31, 2022 (the “10-K/A”) to remove the statement which will be filed subsequent to our submission of this comment response letter.

Rest of the answer

The Company has also removed the statement from its first quarter Form 10-Q for the period ended March 31, 2023 and its second quarter Form 10-Q for the period ended June 30, 2023.

Read in the reply ↗

We note your proposed revision to the caption, “Unrealized gains (losses) on digital assets loan receivable and realized gains on digital assets.” Please explain why you refer to the gains (losses) on digital assets loan receivable as only unrealized. In this regard, we note that the digital assets were returned in June 2022.

The Company acknowledges the Staff’s comment and will revise the nomenclature of the account to reflect “Gains on digital assets and gains (losses) on digital assets loan receivable” in the Form 10-K/A to be filed subsequent to submission of this comment letter response. The Company will also reflect the revision in its second quarter Form 10-Q for the period ended June 30, 2023. Read in the reply ↗

Please revise to include the correct amounts for cash flows from the sale of digital assets in Investment Fund in 2022 and 2021.

The Company acknowledges the Staff’s comment and will correct the presentation error for the sale of digital assets in the

Consolidated Statements of Cash Flows in the Form 10-K/A to be filed subsequent to our submission of this comment response letter. Read in the reply ↗

We note your response to prior comment 18. As we continue to evaluate your Operator accounting policy disclosure, please further clarify when you recognize revenue. We note that you measure the fair value of bitcoin earned using the daily quoted closing U.S.

Rest of the question

dollar spot rate, but you indicate in your proposed revised disclosure, and your revised disclosure in your Form 10-Q for the three months ended March 31, 2023, that you earn revenue at the point in time that you satisfy your lone performance obligation of providing transaction verification services by successfully mining a block.

The Company acknowledges the Staff’s comment and further clarifies that as an Operator, the Company earns revenue at the point in time that it satisfies the lone performance obligation of providing transaction verification services by successfully mining a block.

Consistent with ASC 606, revenue should be measured at the time the Company satisfies the obligation and not at the daily quoted closing

U.S. dollar spot rate. We will revise our Operator accounting policy disclosure in our second quarter Form 10-Q for the period ended

June 30, 2023, as discussed in our responses below. Read in the reply ↗

You acknowledge in response to prior comment 19 that your measurement accounting convention as an Operator is not in accordance with ASC 606. Notwithstanding that the impact is quantitatively and qualitatively immaterial to the historical periods presented, please revise your accounting to comply with U.S. GAAP.

The Company acknowledges the Staff’s comment. As noted in the response to comment 5 above, the Company will revise its Operator accounting policy to measure the revenue earned using the quoted spot rate for bitcoin at the time that it successfully mines the respective block. As the Company has acknowledged to the Staff in prior comment responses, the impact of the change is quantitatively and qualitatively immaterial to the financial statements.

Rest of the answer

For example, the first quarter ended March 31, 2023, the impact of the change in the Operator accounting policy was a reduction in the reported revenue of approximately $40 thousand out of the total reporting revenues of $33,256 thousand. The Company will revise its accounting as an Operator and record an out-of-period adjustment for the impact of the change effective

January 1, 2023, in our second quarter Form 10-Q for the period ended June 30, 2023.

Read in the reply ↗

In response to prior comment 20, you refer to more than one third-party mining pool in which you participate. As we continue to evaluate your accounting policy as a pool participant, please tell us the name of the pools you participated in during each of the periods presented, along with the percentage of revenue and payout methodologies attributable to each.

Per the Staff’s request, the table below summarizes by third-party mining pool, the percentage of third-party mining pool revenue to total reported revenue for the years ended December 31, 2021, December 31, 2022, and the first quarter ended March 31, 2023:

Year

Ended

December

31,

2021

Quarter

March

2023

June

30,

ViaBTC

2 %

-

F2

Pool

11 %

Braiins

(fka Slush) Pool

Foundry

35 %

4 %

3rd

Party Pool Revenue

13 % following are the payout methodologies employed by each of the above-listed third-party pools:

Pay-Per-Share

(PPS) Model

Fractional

Share Payment

Rest of the answer

Structure

Full

Pay-Per-Share (FPPS) Model

Of the four third-party pools that we have participated in, the Braiins pool is the only pool that pays rewards only when it successfully mines a block. The Company’s fractional share of the successfully mined block and transaction fee is based on the proportion of computing power the Company contributed to the mining pool operator as compared to the total computing power contributed by all mining pool participants in solving the block.

ViaBTC, F2 and Foundry pools pay rewards based on the hash rate provided by the Company to the mining pool as a percentage of total network hash rate, together with other inputs. Unlike the Braiins pool, the Company is entitled to consideration even if a block is not successfully placed by the mining pool operator.

Read in the reply ↗

We continue to evaluate your response to prior comment 21 and may have further comments.

The Company acknowledges that the Staff may have further comments. Read in the reply ↗

You indicate in response to prior comment 22 that, as a pool participant, you do not have visibility into exactly when a block is won. Please tell us why you do not have this information considering it appears to be publicly available information published by your pool operators.

The Company acknowledges the Staff’s comment that visibility into exactly when a block is won or the earned reward for participating in third-party pools is publicly available information. We researched the available information for the third-party Braiins pool and acknowledge that visibility to when the pool wins a block and our fractional share of the block and transaction fee is available on a daily basis.

Rest of the answer

The Company further acknowledges to the Staff that when the Company participates in PPS and FPPS pools (Foundry, F2, ViaBTC) where the reward is 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, the Company has the ability to estimate the consideration earned on a daily basis based on its contributed hash rate, and other inputs.

Read in the reply ↗

We note your response to prior comment 22 explaining why, as a pool participant, you do not have visibility into transaction fees earned for each block and the Company’s proportional contribution of computing power. As previously requested, please tell us how much transaction fees and your proportional contribution of computing power to the pool actually vary from block to block during a single 24-hour period.

Rest of the question

In this regard, you indicated in your March 10, 2023 response to comment 6 that one of the factors you considered in assessing whether it is probable that a significant revenue reversal could occur is that “There are always a broad range of possible consideration amounts to which the Company could be entitled because the transaction fees vary from block to block, as does the Company’s proportional contribution of computing power to the pool.” In addition, you indicate in your proposed revised accounting policy disclosure and your disclosure in the Form 10-Q for the three months ended March 31, 2023 that the fact your fractional share substantively varies from block to block is one of the reasons for constraining variable consideration.

The Company acknowledges the Staff’s comment and as noted in the response to comment 9 above, the Company does have visibility when it participates in the Braiins pool into exactly when a block and transaction fee is won, and can estimate rewards when it participates in FPPS and PPS pools based on contributed hash rate.

Company respectfully advises the Staff that it will revise its Participant accounting policies for block rewards and transaction fees as summarized below.

Rest of the answer

As the Company has acknowledged to the Staff in prior comment responses, the impact of the change is quantitatively and qualitatively immaterial to the financial statements. For example, the first quarter ended March 31, 2023, the impact of the change in the Participant accounting policy was a reduction in the reported revenue of approximately $200 thousand out of the total reporting revenues of $33,256 thousand. The Company will record an out-of-period adjustment for the impact of the change effective January 1, 2023, in our second quarter Form 10-Q for the period ended June 30, 2023.

PPS and FPPS Model pools – reward based on a contractual formula

Current policy: Recognize revenue upon settlement (when reward is received in our wallet) measured using the end of day spot rate of bitcoin.

Revised policy: Recognize revenue, which is earned when the Company provides computing power to the pool operator on a daily basis based on the contractual payout formula. The Company’s contribution of computing power to FPPS and PPS pools occur only when it is unable to mine in its company-owned pool (as Operator) and as such the amount of contributed hash rate can be intermittent during a given day.

To align to the variable contribution of hash rate on a daily basis, the Company will measure the daily reward using the average daily spot price of bitcoin.

Share Payment Structure pools – reward only when the pool successfully mines a block policy: Recognize revenue upon settlement (when reward is received in our wallet) measured using the end of day spot rate of bitcoin.

policy: Recognize revenue (block and transaction fees) for the Company’s fractional share of the successfully mined block measured using the spot price of bitcoin at the time the pool successfully mines the block.

Read in the reply ↗

Please be advised that we continue to evaluate your response to prior comment 23 and we may have further comments.

No numbered answer found in the reply. Read the reply ↗

We note that proceeds from sale of digital assets is classified within cash flows from operating activities on the statement of cash flows for the three months ended March 31, 2023. Please provide us with your comprehensive accounting analysis, with reference to the authoritative accounting guidance, to support the classification as an operating activity.

Rest of the question

In this regard, you indicate on page 25 that you commenced a program to sell some of your bitcoin as a means of offsetting monthly cash operating costs. To the extent that bitcoin received as noncash consideration in the ordinary course of business is not converted nearly immediately into cash, the Staff would not object to the classification of the proceeds from the sale of digital assets within cash flows from investing activities. We note that classification of the proceeds from the sale of digital assets within investing activities is consistent with your critical accounting policy disclosure on page 26 and your classification of the cash flows from the disposition of digital currencies in 2019 and 2020 addressed in your August 1, 2022 response to comment 5.

The Company acknowledges the Staff’s comment and have determined that the appropriate classification for the proceeds from sale of digital assets is in investing activities. While the Company sells a portion of its bitcoin mined as part of its mining operations to fund operating expenses, the Company acknowledges its strategy is to hold its significant digital assets as an investment. Additionally, the Company uses the first-in-first-out (FIFO) method when selling its digital assets which is aligned with reporting such proceeds as an investing activity.

Rest of the answer

The Company will report the proceeds from sale of digital assets as an investing activity in the Condensed Consolidated

Statements of Cash Flows in its second quarter Form 10-Q for the period ended June 30, 2023. The Company will also file a Current Report on Form 8-K with the Securities and Exchange Commission (“SEC”) on August 8, 2023, noting that the Company’s previously filed interim unaudited Consolidated Financial Statements for the period ended March 31, 2023, as set forth in the Company’s Quarterly

Report on Form 10-Q for the three months ended March 31, 2023 and filed with the SEC on May 10, 2023, should no longer be relied upon and a restatement is required for the previously issued Consolidated Financial Statements. Please refer to the Form 10-Q for the period ended June 30, 2023, filed with the SEC on August 8, 2023:

Read in the reply ↗

Please revise to correct the typographical error noted in your response to prior comment 25. That is, we note from your response that the disclosure should indicate that the Court noted that a jury is more likely to accept $150 thousand as an appropriate damages amount if liability is found.

The Company acknowledges the Staff’s comment and will correct the typographical error in in the Form 10-K/A for the year ended

December 31, 2022, expected to be filed subsequent to our submission of this comment response letter. Read in the reply ↗

We note your disclosure of total margin excluding depreciation and amortization in the supplemental information table. Please revise to provide the disclosure requirements of Item 10(e)(1)(i) of Regulation S-K for this non-GAAP measure.

The Company acknowledges the Staff’s comment and will revise the disclosure for non-GAAP measures in in the 10-K/A to be filed subsequent to our submission of this comment response letter and in our second quarter Form 10-Q for the period ended June 30, 2023, with the following proposed disclosure to describe the usefulness of the non-GAAP measure to investors and to provide a reconciliation of the non-GAAP measure to the nearest GAAP measure.

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To the extent applicable, we will make similar disclosures in future filings.

Non-GAAP

Financial Measures addition to the results determined in accordance with GAAP, the Company also provides adjusted EBITDA and total margin excluding depreciation and amortization, which are non-GAAP measures. The Company provides investors with reconciliations from net loss to adjusted EBITDA and total margin to total margin excluding depreciation and amortization as components of Management’s Discussion and Analysis. The

Company defines 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. The Company defines total margin excluding depreciation and amortization as (a) GAAP total revenues less (1) costs of revenues – energy, hosting and other, (2) costs of revenues – depreciation and amortization less, and (b) adjustment to add back the impact of depreciation and amortization.

Adjusted

EBITDA and total margin excluding depreciation and amortization are not financial measures of performance under GAAP and, as a result, these measures may not be comparable to similarly titled measures of other companies. Non-GAAP financial measures are subject to material limitations as they are not in accordance with, or a substitute for, measurements prepared in accordance with GAAP. 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.

Reconciliation to Total margin excluding depreciation and amortization:

Three

Months Ended March 31,

Favorable

(in thousands)

(Unfavorable)

Total revenues

$ 51,132

$ 51,732

$ (591 )

Cost of revenues – energy, hosting and other

(33,377 )

(12,522 )

(20,855 ) of revenues – depreciation and amortization

(17,733 )

(13,877 )

(3,856 ) margin (total revenues less total cost of revenues)

$ 22

$ 25,324

$ (25,302 )

Exclude:

Depreciation and amortization margin excluding depreciation and amortization

$ 17,755

$ 39,201

$ (21,446 ) connection with responding to the Staff’s comments, the Company acknowledges that (i) it is responsible for the adequacy and accuracy of the disclosure in its filing; (ii) Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and (iii) it may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

hope you find that these responses adequately address the Staff’s questions, but please contact the undersigned at salman.khan@mara.com and Jolie Kahn, Esq., at joliekahnlaw@sbcglobal.net, if you have any further questions or would like to discuss our responses.

Read in the reply ↗

We note from your response to prior comment 7 that 11% of total reported revenue for the year ended December 31, 2021 was generated through F2 Pool. As previously requested, please provide us with a copy of the related written agreement of the terms and conditions of this arrangement.

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If the terms of service are publicly available, you may provide us with the URL address, but please ensure your response adequately considers any relevant prior versions, if applicable. In addition to the written terms and conditions agreement, if the parties have approved any other agreements that you considered when identifying the contract with the customer in accordance with ASC 606, please provide copies of any such written agreements or a description of any agreements that were approved orally or in accordance with other customary business practices.

The Company acknowledges the Staff’s comment and in response, provides the following URL address to an archival copy of the

F2Pool “Terms of Service” that was in effect during 2021 (https://web.archive.org/web/20211019154138/http://www.f2pool.com/terms).

The Company operated as a participant in the F2 Pool in 2021 in accordance with the Terms of Service stated by the F2 Pool and did not approve any other agreements orally or in accordance with other customary business practices that we considered when identifying the contract with the customer in accordance with ASC 606.

Rest of the answer

The Company has not participated in the F2 Pool since the year ended December

31, 2021.

U.S.

Read in the reply ↗

You continue to indicate in your revised Participant policy in your Form 10-Q for the quarterly period ended June 30, 2023 that the transaction consideration the Company receives is entirely variable. Please revise to clarify your disclosure.

Rest of the question

In this regard, we note from your response to prior comment 9 that you have the ability to estimate the consideration earned on a daily basis based on your contributed hash rate and other inputs for the PPS and FPPS pools and you have visibility as to when the pool wins a block and your fractional share of the block and transaction fee is available on a daily basis for the Braiins pool.

The Company acknowledges the Staff’s comment and proposes to clarify its disclosure regarding variable consideration as follows.

In its prior response to the Staff, the Company acknowledged that it has visibility into when a block is won when it participates in third-party pools that pay rewards only when the pool successfully mines a block. For these pools (i.e.

Rest of the answer

Braiins pool), the transaction consideration remains variable and cannot be reliably estimated without risk of significant revenue reversal until the pool successfully mines a block.

Therefore, revenue is constrained until the block is won at which point in time, the Company recognizes revenue for the fractional share of the bitcoin to which it is entitled to for its contribution to the pool’s successful mining efforts.

The

Company also participates in PPS and FPPS pools, which pay rewards based on a contractual formula, regardless of whether the pool successfully mines any blocks during the period of time the Company is contributing computing power to the pool’s mining efforts. For these pools, the Company earns revenue based on the contributed hash rate and other inputs. The transaction consideration the Company earns for its provision of computing power to the pool is variable based on the hash rate contributed as a proportion of total hash rate produced by the pool. In these PPS and FPPS pools, however, such transaction consideration can be estimated and therefore is recognized over the period that hash rate is being contributed. Accordingly, the Company will revise its Participant policy disclosures in its Form 10-Q for the period ended September 30, 2023, to be filed in November 2023 as follows to clarify its revenue recognition policy depending on the type of third-party pool that it participates in:

Providing 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.

Read in the reply ↗

We continue to evaluate your responses to prior comments regarding your revenue recognition policy and may have further comments.

The Company acknowledges that the Staff may have further comments. Read in the reply ↗

We note your disclosure of the impacts of the change in accounting principle on the financial statements for the three ended March 31, 2022 and six months ended June 30, 2022. Please revise to also disclose the effect of the change in accounting principle on the current period and any prior periods retrospectively adjusted, as well as the cumulative effect of the change on accumulated deficit as of the earliest

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period presented. Refer to ASC 250-10-50-1(b).

The Company acknowledges the Staff’s comment. The change in accounting principle impacted the accounting for loaned bitcoin which occurred in the third and fourth quarter of 2021 and returned when the loan was terminated in the second quarter of 2022. The Company will present the requested revised disclosure in the notes to the condensed consolidated financial statements in the Company’s

Form 10-Q for the period ended September 30, 2023, to be filed in November 2023. Read in the reply ↗

We note from your disclosure on page 74 in the Form 10-K for the fiscal year ended December 31, 2022 that you reduced the estimated useful life for the asset group of mining rigs from 5 to 3 years, effective January 1, 2023. Please revise to provide the disclosures required by ASC 250-10-50-4.

The Company acknowledges the Staff’s comment. Per ASC 250-10-50-4, “If a change in estimate does not have a material effect in the period of change but is reasonably certain to have a material effect in later periods, a description of that change in estimate shall be disclosed whenever the financial statements of the period of change are presented.” ASC 250-10-50-4 further states,

“The effect on income from continuing operations, net income (or other appropriate captions of changes in the applicable net assets or performance indicator), and any related per-share amounts of the current period

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shall be disclosed for a change in estimate that affects several future periods, such as a change in service lives of depreciable assets.” Accordingly, we will add required disclosure in Management’s Discussion and Analysis section of the Form 10-K/A which will be filed subsequent to the Company’s submission of this comment response letter.

Management’s

Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Policies and Estimates

Read in the reply ↗

We note in response to prior comment 12 that you have determined that the appropriate classification for the proceeds from sale of digital assets is in investing activities. Please revise your disclosure indicating that sales of digital assets are included within operating activities.

The Company acknowledges the Staff’s comment and will present the following revised disclosure in the Company’s Management’s

Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates, under the subtitle Digital Assets in the Form 10-Q for the period ended September 30, 2023, to be filed in November 2023:

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

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consolidated statements of operations.

Read in the reply ↗

Consistent with your response to prior comment 13 and your disclosure on page 28, please revise to indicate that the Court noted that a jury is more likely to accept $150,000 as an appropriate damages amount if liability is found. In this regard, your disclosure indicates the amount is $150.

The Company respectfully directs the Staff to page 7 of the Company’s Form 10-Q for the quarterly period ended June 30, 2023, where the Company noted in the heading for the notes to condensed consolidated financial statements that dollars in the document are in thousands:

MARATHON

DIGITAL HOLDINGS, INC.

Rest of the answer

AND SUBSIDIARIES

NOTES

TO CONDENSED CONSOLIDTED FINANCIAL TATEMENTS

(Dollars in thousands, except per share and per bitcoin amounts) connection with responding to the Staff’s comments, the Company acknowledges that (i) it is responsible for the adequacy and accuracy of the disclosure in its filing; (ii) Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and (iii) it may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We hope you find that these responses adequately address the Staff’s questions, but please contact the undersigned at salman.khan@mara.com and Jolie Kahn, Esq., at joliekahnlaw@sbcglobal.net, if you have any further questions or would like to discuss our responses.

Read in the reply ↗

We continue to evaluate your responses to prior comments regarding your revenue recognition policy and may have further comments.

The Company acknowledges that the Staff may have further comments. Read in the reply ↗

Your accounting policy disclosure indicates, “Variable 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…” Please revise to clarify that the constraint is based on cumulative revenue under the accounting contract, rather than implying it is based on cumulative revenue earned from a

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customer.

The Company acknowledges the Staff’s comment and respectfully directs the Staff to the updated disclosure on page 12 of the

Company’s Form 10-Q for the period ended September 30, 2023, filed with the Commission on November 8, 2023:

Variable 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. Read in the reply ↗

In the last paragraph on page 17, you indicate that when you provide bitcoin transaction verification services as the operator and a participant in a private pool, it is included as “Operator” revenue. Please tell us why it is necessary to also refer to when you are a participant in a private pool considering that the mining pool is Company-operated and this intercompany activity would be eliminated.

The Company acknowledges the Staff’s comment and respectfully directs the Staff to the updated disclosure on page 12 of the

Company’s Form 10-Q for the period ended September 30, 2023, filed November 8, 2023:

The

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 collectives of third-party bitcoin miners (such collectives, “mining pools”) as a

Rest of the answer

participant

(“Participant”).

Read in the reply ↗

In the last paragraph on page 17, you state that you provide computing power to collectives of third-party bitcoin miners as a participant. Please clarify how you define computing power. In this regard, consider revising your accounting policy to define the performance obligation as a service to perform hash calculations for the pool operator.

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Please revise your disclosure to use consistent terms to describe this performance obligation.

The Company acknowledges the Staff’s comment and respectfully directs the Staff to the updated disclosure on page 12 of the

Company’s ongoing major or central operation is to provide bitcoin transaction verification services to the bitcoin network through power to perform hash calculations to collectives of third-party bitcoin miners (such collectives, “mining pools”) as a participant (“Participant”). Read in the reply ↗

For Operator revenue, please revise to describe the components of the consideration received. That is, explain the nature of block rewards and transactions fees.

The Company acknowledges the Staff’s comment and respectfully directs the Staff to the updated disclosure on page 13 of the

Company is currently entitled to 6.25 bitcoin as block reward for each successful block. The Company is also entitled to a transaction fee determined by market participants payable in bitcoin for each successful block. Read in the reply ↗

For Participant contracts, please revise to provide a more complete description of the payout formulas by identifying the formula inputs that create variability for each type of compensation.

The Company acknowledges the Staff’s comment and respectfully directs the Staff to the updated disclosure on page 14 of the

When 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 network-driven inputs, measured at the average daily spot rate of bitcoin determined using the Company’s primary trading platform for bitcoin. Read in the reply ↗

For Participant contracts, you indicate that a new contract is determined to exist each period that neither the Company, nor the pool operator, terminates the arrangement. Considering that the termination provisions are similar to a renewal option, revise to disclose, if true, that such renewal option is not a material right because either the pricing in the renewal periods is the exact same as the pricing in the

Rest of the question

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 then market rates.

The Company acknowledges the Staff’s comment and respectfully directs the Staff to the updated disclosure on page 14 of the

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. 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. Read in the reply ↗

In response to prior comment 7, you refer to the heading for the notes to condensed consolidated financial statements indicating that dollars in the document are in thousands. We note no such reference regarding the dollar amounts in Part II of your filing. Please revise to ensure you disclose the short citation is applicable throughout your filing.

The Company acknowledges the Staff’s comment and respectfully directs the Staff to page 40 of the Company’s Form 10-Q for the period ended September 30, 2023, filed November 8, 2023:

PART

II - OTHER INFORMATION (All dollar amounts expressed in PART II Items 1-4 are expressed in thousands unless otherwise indicated.)

In connection with responding to the Staff’s comments, the Company acknowledges that (i) it is responsible for the adequacy and accuracy of the disclosure in its filing; (ii) Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission

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from taking any action with respect to the filing; and (iii) it may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We hope you find that these responses adequately address the Staff’s questions, but please contact the undersigned at salman.khan@mara.com and Jolie Kahn, Esq., at joliekahnlaw@sbcglobal.net, if you have any further questions or would like to discuss our responses.

Read in the reply ↗

We continue to evaluate your responses to prior comments regarding your revenue recognition policy and may have further comments.

The Company acknowledges that the Staff may have further comments. Read in the reply ↗

We note the disclosure of your share of available miner rewards in your press release included on Form 8-K submitted on November 8, 2023. In addition, we note your disclosure of the number of blocks won in your announcements of Bitcoin production and mining operation updates starting for November 2023, in addition to transaction fees as a percentage of total in your announcement for December 2023.

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Tell us what consideration you gave to discussing and analyzing these metrics in your periodic reports as statistical measure that enhance an understanding of your financial condition, cash flows and other changes in financial condition and results of operations. Refer to Item 303(a) of Regulation S-K and SEC Release No. 33-10751.

The Company acknowledges the Staff’s comment. The Company continually evaluates key performance indicators and metrics that can provide readers with greater insight into the business. Accordingly, the Company added the following metrics in its monthly production reports:

● Share of available miner rewards – in addition to providing the rewards (blocks plus transaction fees) we earned in a given period, this metric provides additional insight into what our share of the available network rewards were during a given period.

Rest of the answer

This metric provides the reader a gauge of our progress in growing our hash rate in relation to the global hash rate.

● Number of blocks won – this metric provides insight into the number of blocks we earned in each period that are included in the total rewards (blocks and transaction fees) earned.

As transaction fees fluctuate in relation to the total rewards earned, this metric provides the reader the number of blocks earned excluding the impact of transaction fees.

● Transaction fees as a percentage of total – as noted above, as transaction fees fluctuate in relation to the total reward (block plus transaction fees), this metric provides insight into the significance of transaction fees as part of the total reward earned.

We believe the above metrics are relevant to provide additional insight into our monthly production activity as the business continues to evolve. We recognize that these metrics should also be included in our periodic reports to enhance a reader’s understanding of our financial condition, cash flows and other changes in financial condition and results of operations. Accordingly, we will include these metrics in our management’s discussion & analysis of financial condition and results of operations in our December 31,

2023 Form 10-K. Additionally, we will include similar disclosures in our future periodic reports.

Read in the reply ↗

You indicate that the increase in revenues for the nine months ended September 30, 2023 as compared to the prior-year period was partially offset by a decrease in revenue resulting from lower bitcoin prices in the current year period. Please clarify this explanation in light of your disclosure that bitcoin prices have generally been increasing during the current year period.

The Company acknowledges the Staff’s comment and respectfully directs the Staff to the following clarification. While bitcoin prices did generally increase during the nine months ended September 30, 2023, it was 23% lower than the price of bitcoin in the nine-month period ended September 30, 2022. As revenue is based on the price of bitcoin, the lower bitcoin price in the current year period contributed to lower revenues in comparison to the prior period. We will ensure to clarify the disclosures in our December 31, 2023 Form 10-K, and in our future periodic reports. Read in the reply ↗

We note your discussion of the changes in cost of revenues – energy, hosting and other in the three and nine months ended September 30, 2023 compared to the prior interim periods indicating that the changes were driven by the impact of bitcoin production and production costs. The tables that follow appear to indicate that these costs relate to production activity and unit costs, respectively.

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Please elaborate on what these factors represent and clarify the underlying reasons for the changes in each period.

The Company acknowledges the Staff’s comment and respectfully directs the Staff to the following clarification:

● For the three-month period ended September 30, 2023, cost of revenues – energy, hosting and other increased compared to the three-month period ended September 30, 2022. The increase was primarily driven by higher production of bitcoin, which increased by 2,874 bitcoin or

467% over the prior year period. The tables that follow detail the impact of the higher production costs as a result of the increased production activity over the prior year period.

Rest of the answer

Additionally, the tables show that while the higher production activity resulted in an increase in cost of revenue, the total cost per bitcoin produced decreased compared to the prior year period.

the nine-month period ended September 30, 2023, cost of revenues – energy, hosting and other increased compared to the nine-month period ended September 30, 2022. The increase was primarily driven by higher production of bitcoin, which increased by 6,028 bitcoin or

233% over the prior year period. The tables that follow detail the impact of the higher production the tables show that the cost per bitcoin produced in the current year period increased compared to the prior year period, which contributed to the increase in cost of revenue compared to the prior period.

will ensure to clarify the disclosures in our December 31, 2023 Form 10-K, and in our future periodic reports.

Read in the reply ↗

Please revise to include an assessment of disclosure controls and procedures as of September 30, 2023.

The Company acknowledges the Staff’s comment and respectfully informs the staff that the Company’s assessment of disclosure controls and procedures on page 38 should have stated September 30, 2023, instead of June 30, 2023. The Company’s management concluded that its disclosure controls and procedures were not effective at the reasonable assurance level as of September 30, 2023.

Rest of the answer

We will update management’s conclusion of its disclosure controls and procedures in the December 31, 2023 Form 10-K.

In connection with responding to the Staff’s comments, the Company acknowledges that (i) it is responsible for the adequacy and accuracy of the disclosure in its filing; (ii) Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and (iii) it may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

hope you find that these responses adequately address the Staff’s questions, but please contact the undersigned at salman.khan@mara.com and Zabi Nowaid, Esq., at zabi.nowaid@mara.com, if you have any further questions or would like to discuss our responses.

Read in the reply ↗

As it relates to your pool operator activities, we note your statement that, “The Company’s ongoing major or central operation is to provide bitcoin transaction verification services to the bitcoin network…” Please revise to indicate, if true, that you also provide these services to the transaction requestor, in addition to the bitcoin network.

The Company acknowledges the Staff’s comment that in addition to providing verification services to the bitcoin network, we also provide these services to the transaction requestor.

Please see attached exhibit to this letter of our revised revenue recognition policy footnote that will be included in the Form 10-K for the year ended December 31, 2023, reflecting the requested revision. Read in the reply ↗

As it relates to your pool participant activities, we note that your reference to “…to provide computing power…” is too general to distinguish whether you provide a good or service and too general to describe the nature of such good or service.

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Please revise to clarify, if true, that as a pool participant in mining pools not operated by you that you provide a service of performing hash calculations for pool operators.

The Company acknowledges and agrees with the Staff’s comment. Please see attached exhibit to this letter of our revised revenue recognition policy footnote that will be included in the Form 10-K for the year ended December 31, 2023, reflecting the requested revision. Read in the reply ↗

Your statement that “The Company currently mines in a self-operated pool” appears to be inconsistent with your disclosure that a pool in which nonconsolidated entities participate does not exist subsequent to May 2022 and, for the period from September 2021 to May 2022, appears to conflate your pool participation activities and your pool operator activities.

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That is, as it relates to the activities of what you call “a self-operated pool” for all periods, including from September 2021 to May 2022 when nonconsolidated entities participated in your mining pool, it appears that your consolidated financial statements would depict you providing a transaction verification service, not a service of providing hash calculations. Please tell us if our understanding is correct. If our understanding is correct, reconsider the use of this phrase or make appropriate clarifying revision.

No numbered answer found in the reply. Read the reply ↗

Revise the table so that “Operator - block reward” revenue is not characterized as revenue from contracts with customers. Refer to ASC 606-10-50-4.

No numbered answer found in the reply. Read the reply ↗

We note your disclosures related to your Operator revenue policy indicating that a contract is deemed to exist at the point in time that the performance obligation is satisfied. Please further revise your disclosure to include your assertions that, if true: • the transaction requestor and the bitcoin network each have a unilateral enforceable right to terminate their respective contracts at any time without penalty;

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• for each of these respective contracts, contract inception and completion occur simultaneously upon block validation; that is, the contract begins upon, and the duration of the contract does not extend beyond, the validation of an individual blockchain transaction; and • each respective contract contains a single performance obligation to perform a transaction validation service and that this performance obligation is satisfied at the point-in-time when a block is successfully mined.

No numbered answer found in the reply. Read the reply ↗

Revise your Operator revenue policy to clarify, if true, that the transaction price is fixed as of the inception of each individual contract, contract inception occurs at the same point in time you validate a block, and that you measure such noncash consideration at the point in time the Company successfully validates a block, which is contract inception.

No numbered answer found in the reply. Read the reply ↗

Consider clarifying the statement within the first sentence of the Participant revenue policy that references “only when the Company-operated mining pool is not available.” We note this statement appears to be referring to the Company’s business practice, rather than describing its accounting policy; however, as it relates to business practice, it is not clear what “not available” means and the frequency of this

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occurrence. We also note that a Company-operated pool does not exist after May 2022.

The Company acknowledges and agrees with the Staff’s comment. We have removed the reference “only when the Company-operated mining pool is not available” and focused on the accounting policy when we are a participant in third-party pools. From a business practice perspective, we primarily operate as a pool operator and participate in third-party pools when our own pool is not available due to maintenance and other temporary factors.

Please see attached exhibit to this letter of our revised revenue recognition policy footnote that will be included in the Form 10-K for the year ended December

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31, 2023, reflecting the requested revision.

Read in the reply ↗

For your Participant revenue policy, we note the revised description of your performance obligation in response to prior comment 4. As previously requested, please further revise your disclosures throughout the policy to consistently describe the nature of your performance obligation.

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That is, revise references to computing power or hash rate to more accurately describe the performance obligation as a service to perform hash calculations for the pool operator. Please make similar revision to references in your Pool Operator policy in which you state that you engaged unrelated third-party mining enterprises (“pool participants”) to “contribute computing power” and to “contribute their hash rate.” In addition, in the 5th paragraph of your Participant revenue policy, please reconsider the appropriateness of referring to this as the “primary” output of your ordinary activities, considering you also generate revenue as a pool operator.

No numbered answer found in the reply. Read the reply ↗

In your Participant revenue policy, as previously requested, please revise to provide a more precise description of the payout formulas and identify the formula inputs that create variability for each component of the payout formula (i.e., block reward, transaction fee, and pool fee rate).

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Also, please describe the measurement period for the underlying variables used to calculate the payout (e.g., for the 24-hour period beginning at midnight UTC daily). Also, ensure your disclosure articulates the difference between PPS and FPPS payout methodologies. For example, revise to clarify that, under FPPS, transaction fees are also earned in addition to the block reward. In addition, in your description of rewards paid only when the pool successfully mines a block, replace your references to computing power in describing your fractional share with more precise terms.

No numbered answer found in the reply. Read the reply ↗

Please refer to the second paragraph in your Participant revenue policy and revise your disclosure to address the following: • Clarify, if true, that contract inception occurs once your performance of hash calculations commences.

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That is, clarify, if true, that your enforceable right to compensation only begins when you commence providing hash calculation services for the mining pool operator; • Revise the sentence that starts with “These contracts are period-to-period contracts…” to be more precise. Similarly, remove the example that refers to second, minute or hour. For example, disclose your assertion that each party has the unilateral right to terminate the contract at any time without any compensation to the other party for such termination and, if true, that as a result the contract is continuously renewed many times throughout the day, such that the duration of each contract is less than daily; and • Clarify the statement indicating the implied renewal option is not a material right. More specifically, is it correct that “… there are no upfront or incremental fees in the initial contract…” and “…the terms, conditions, and compensation amounts for the renewal options are at the then market rates”?

No numbered answer found in the reply. Read the reply ↗

In your Participant revenue policy, we note your disclosure that, for PPS and FPPS contracts, you measure revenue based on the average daily spot rate of bitcoin. Please tell us and clarify in your disclosure whether this is a simple average and whether the average is computed using spot prices on the date of contract inception.

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Also, consider replacing the reference to measuring “revenue earned” with “noncash consideration” to better distinguish your policy for measurement pursuant to Step 3 of ASC 606 from recognition pursuant to Step 5 of ASC 606.

No numbered answer found in the reply. Read the reply ↗

We note that for third-party mining pools in which you participate that pay rewards only when the pool successfully mines a block that you measure noncash consideration using the spot rate of bitcoin at the time that the block is successfully mined.

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We note that this does not comply with the requirement in ASC 606-10-32-21 to measure noncash consideration at contract inception and is inconsistent with the method you use to measure noncash consideration in your other mine pool participant contracts for which you measure noncash consideration based on the average daily spot rate of bitcoin on the date of contract inception. Please revise to select an accounting policy that uses the same measurement approach for each date, consistently applied for all types of participant contracts, to measure the fair value of noncash consideration on the date of contract inception. Please provide us with your materiality analysis of the impact of this correction on each of the financial statement periods presented.

Our participation in pools that only pay rewards when the pool successfully mines a block is not a material portion of our total revenues. Below is the revenue from such pools as a percentage of total revenue:

Year ended December 31,

(in thousands, except %’s)

2023

2022

2021

Braiins (fka Slush) pool revenue

$ 1,807

$ 3,926

$ —

Total revenues

$ 387,508

$ 117,753

$ 159,163

Braiins as a % of total revenue

0.47 %

3.33 %

— %

Based on the immateriality of revenue from such pools, we have concluded the impact of the change from measuring revenue at the time a block is successful

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mined to a consistent methodology of measuring all participant revenue based on the simple average daily spot rate of bitcoin on the date of contract inception would not have a material impact on our results of operations.

Read in the reply ↗

Please revise your Participant revenue policy to clarify for each payout method whether variable consideration is constrained and to reference in your disclosure the threshold for application of the constraint articulated in ASC 606-10-32-11. If variable consideration is constrained, clarify in your disclosure whether the uncertainties underlying the constraint are resolved on the date of contract inception.

The Company acknowledges and agrees with the Staff’s comment. Please see attached exhibit to this letter of our revised revenue recognition policy footnote that will be included in the Form 10-K for the year ended December 31, 2023, reflecting the requested revision. Read in the reply ↗

In your Participant revenue policy, please revise to disclose when revenue is recognized and how that relates to the date on which control of the contracted service transfers and the date of contract inception. For example, if non-cash consideration is recognized on the same day that control of the contracted service transfers to the mining pool operator and that is the same day as contract inception, revise your

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disclosure to state this.

No numbered answer found in the reply. Read the reply ↗

We note your response to prior comment 4. As previously requested, please also ensure your disclosures in future filings elaborate on the underlying reasons for the changes in each of the factors contributing to the change in cost of revenues – energy, hosting and other. For example, provide an indication of the impact that uptime and average network difficulty have on your bitcoin production costs.

The Company acknowledges the Staff’s comment. We will elaborate on the underlying reasons for the changes in each of the factors contributing to the change in cost of revenues – energy, hosting and other in the Management’s Discussion and Analysis of Financial Condition and Results of Operations section of the Form 10-K for the year ended December 31, 2023, and future filings.

In connection with responding to the Staff’s comments, the Company acknowledges that (i) it is responsible for the adequacy and accuracy of the disclosure in its filing; (ii) Staff comments or changes to disclosure in

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response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and (iii) it may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

We hope you find that these responses adequately address the Staff’s questions, but please contact the undersigned at salman.khan@mara.com and Zabi Nowaid, Esq., at zabi.nowaid@mara.com, if you have any further questions or would like to discuss our responses.

Read in the reply ↗

In your Operator revenue policy, the statement in the third bullet that “Contract inception occurs at the same point in time the Company validates a block” as well as the last two bullets appear to be repetitive considering your other revised disclosures.

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Please remove these statements and consider disclosing that the transaction price is fixed as of the inception of each individual contract in the paragraph discussing the measurement of noncash consideration.

The Company acknowledges and agrees with the Staff’s comment. Please see attached exhibit to this letter of our revised revenue recognition policy footnote that will be included in the Form 10-K for the year ended December 31, 2023, reflecting the requested revision. Read in the reply ↗

We note your proposed revisions in response to prior comment 9. In your Participant revenue policy, please further elaborate on the description of the payout formulas to address the following: • Clarify how daily earnings are calculated from midnight-to-midnight UTC time without double-counting contracts occurring at 24:00 UTC.

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Revise to disclose, if true, that the measurement period for the underlying variables used to calculate the payout is for the 24-hour period beginning at midnight UTC daily. Also revise to describe the measurement period for the underlying variables used to calculate the payout from third-party mining pools that pay rewards only when the pool successfully validates a block; and • Describe each of the components of the FPPS and PPS payout formulas and how they are computed, including a description of the computation of the block reward, transaction fee, and pool fee inputs, as applicable. Clarify, if true, that the PPS calculation of the block reward is the same as the FPPS calculation of the block reward. Provide a similar description of the inputs to how your fractional share of the successfully mined block and transaction fees are computed for third-party mining pools that pay rewards only when the pool successfully validates a block.

revenue recognition policy footnote that will be included in the Form 10-K for the year ended December 31, 2023, reflecting the requested Read in the reply ↗

You indicate that your Participant revenue policy is to aggregate the individual contracts that renew multiple times throughout the day in a 24-hour period. Please revise as not to imply that your contracts are combined based on the guidance in ASC 606-10-25-9.

revenue recognition policy footnote that will be included in the Form 10-K for the year ended December 31, 2023, reflecting the requested Read in the reply ↗

We note your proposed revised disclosures in response to prior comment 13. As previously requested, please revise your Participant revenue policy to reference in your disclosure the threshold for application of the constraint for variable consideration articulated in ASC 606-10-32-11.

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In this regard, your proposed revised disclosures indicate that variable consideration is not constrained because amounts are determined and settled by the pool operator within one day of completing the contract so you have the ability to estimate the variable consideration with reasonable certainty. Revise to indicate, if true, that the variable consideration is estimated and it is not constrained because it is probable that a significant reversal in the amount of revenue recognized from the contract will not occur when the uncertainty is subsequently resolved.

revenue recognition policy footnote that will be included in the Form 10-K for the year ended December 31, 2023, reflecting the requested Read in the reply ↗

In your proposed revised Participant revenue policy when you participate in third-party mining pools that pay rewards only when the pool successfully mines a block, you indicate that noncash consideration varies based upon whether the third-party mining pool successfully validates a block. Revise to also indicate the formula inputs that create variability in the amount of noncash consideration.

revenue recognition policy footnote that will be included in the Form 10-K for the year ended December 31, 2023, reflecting the requested Read in the reply ↗

In your proposed revised Participant revenue policy when you participate in third-party indicate that you determined that variable consideration is not constrained. You previously represented to us and disclosed that, upon the performance of hash calculations, the transaction consideration remained variable and could not be reliably estimated without risk of significant revenue reversal until the pool operator

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successfully mined a block and, therefore, variable consideration was constrained until the block was won, at which point in time, the constraint was lifted. Please clarify whether variable consideration is constrained when you participate in third-party mining pools that pay rewards only when the pool successfully mines a block. If not, please provide a comprehensive analysis of the basis for the change in your determination.

revenue recognition policy footnote that will be included in the Form 10-K for the year ended December 31, 2023, reflecting the requested Read in the reply ↗

We note your proposed revised disclosures in your Participant revenue policy in response to prior comment 11 indicating that you measure noncash consideration on the date of contract inception (when you commence providing hash calculation services) based on the simple average daily spot rate of bitcoin.

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As previously requested, please clarify in your disclosure whether this average is computed using the spot prices on the same day of contract inception. That is, revise to state, if true, that the estimated fair value of noncash consideration is measured using the simple average daily spot rate of bitcoin on the date of contract inception. In addition, in regard to noncash consideration measurement, rather than stating that the date of contract inception is when you commence providing hash calculation services, please revise to clarify that the date of contract inception is the day you commence providing hash calculation services. Refer to the guidance in ASC 606-1032-21 indicating that the estimated fair value of the noncash consideration should be measured on the date of contract inception.

The

Company acknowledges and agrees with the Staff’s comment. Please see attached exhibit to this letter of our revised revenue recognition policy footnote that will be included in the Form 10-K for the year ended December 31, 2023, reflecting the requested Read in the reply ↗

In response to prior comment 12, you indicate that the change in how noncash consideration is measured for your participation in pools that only pay rewards when the pool successfully mines a block would not have a material impact on your results of operations based on the immateriality of revenue from such pools.

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Please revise to disclose the error, how you are addressing the error, and the impact of the change on results of operations.

revenue recognition policy footnote that will be included in the Form 10-K for the year ended December 31, 2023, reflecting the requested Read in the reply ↗

In response to prior comment 14, we note your proposed revised disclosures in your Participant revenue policy indicating that you recognize noncash consideration within a 24-hour period that control of the contracted service transfers to the mining pool operator. Clarify whether “within a 24-hour period” is the same day that control is transferred or the day after control is transferred.

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That is, tell us and disclose whether revenue is recognized on the same day that control of the contracted service transfers to the mining pool operator, which is the same day as contract inception. In this regard, you previously represented to us in your October 12, 2023 response to comment 2 that revenue is recognized at the point in time that the block is won for mining pools that pay rewards only when the pool successfully mines a block or over the period that hash rate is being contributed for mining pools that pay rewards based on a contractual formula. Please clarify when revenue is recognized and how that relates to the date on which control of the contracted service transfers and the date of contract inception.

revenue recognition policy footnote that will be included in the Form 10-K for the year ended December 31, 2023, reflecting the requested connection with responding to the Staff’s comments, the Company acknowledges that (i) it is responsible for the adequacy and accuracy of the disclosure in its filing; (ii) Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any action with respect to the filing; and (iii) it may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal

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securities laws of the United States.

hope you find that these responses adequately address the Staff’s questions, but please contact the undersigned at salman.khan@mara.com and Zabi Nowaid, Esq., at zabi.nowaid@mara.com, if you have any further questions or would like to discuss our responses.

Read in the reply ↗

We note that you early adopted ASU 2023-08 in the fourth quarter of fiscal year ended December 31, 2023, effective January 1, 2023. Please revise to disclose the adjustments to each interim period in accordance with ASC 250-10-50-1(b)(2) or tell us why such disclosures are not required. Also, refer to Item 302(a) of Regulation S-K.

The Company acknowledges the Staff’s comment and respectfully directs the Staff to the Company’s Note 18 – Quarterly

Financial Data (unaudited) that together with Note 4 – Digital Assets, Adoption of ASU 2023-08, Accounting for and Disclosure of

Crypto Assets discloses the results of the Company’s early adoption of ASU 2023-08 on income from continuing operations, net income and income (loss) per share on each of the interim periods affected.

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The Company will include disclosure of the effect of the Company’s early adoption of ASU 2023-08 on income from continuing operations, net income, income (loss) per share and related balances on each interim period of calendar year 2023 affected on Form 10-K/A to be filed as an amendment to the Company’s Annual

Report on Form 10-K for the fiscal year ended December 31, 2023.

Read in the reply ↗

We note that you enacted a voluntary change in accounting principle from LIFO to FIFO during the quarter ended March 31, 2023. Please revise to disclose the effects of these accounting changes on the annual prior periods presented, consistent with comment 4 in our letter dated September 29, 2023. Refer to ASC 250-10-45-15, 50-1, and 50-2 and Rule 3-03(c) of Regulation S-X.

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In addition, it appears the voluntary change in accounting principle from LIFO to FIFO was reported through retrospective application to all prior periods in accordance with ASC 250-10-45-5. As such, please clarify your statements throughout that indicate the change was effective January 1, 2023 to indicate the change was applied retrospectively to all prior periods presented. Finally, please tell us what consideration you gave to labeling the prior period financial statements “as adjusted.”

The Company acknowledges the Staff’s comment and respectfully directs the Staff to the Company’s Note 2 – Voluntary

Change in Accounting Principle on Form 10-Q for the quarterly period ended June 30, 2023 that together with Note 2 – Voluntary

Change in Accounting Principle on Form 10-Q for the quarterly period ended September 30, 2023, disclose the Company’s reporting of its retrospective application of its voluntary change in accounting principle from LIFO to FIFO.

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In each of those filings, the

Company labeled disclosures impacted by the retrospective application of its voluntary change in accounting principle from LIFO to

FIFO “as restated.” The Company believed its quarterly disclosures of the impact of the voluntary change in accounting principle from LIFO to FIFO were sufficient to not have to repeat in the Form 10-K for the period ended December 31, 2023. The Company acknowledges the Staff’s comments and will include disclosure of the effects of the voluntary change in accounting principle from LIFO to FIFO on the annual prior periods and, in addition, include “as adjusted” instead of “as restated” on Form 10-K/A to be filed as an amendment to the Company’s Annual Report on Form 10-K for the fiscal year ended December

31, 2023.

Read in the reply ↗

We note your footnote disclosure indicating that cash and cash equivalents as of December 31, 2023 includes government backed securities and investments. Please revise to provide the disclosures required by ASC 320-10-45-12.

The Company acknowledges the Staff’s comment and respectfully informs the staff that it will update Note 8 – Fair

Value Measurement to separate and disclose, by major security type, the fair value of its cash equivalents on Form 10-K/A to be filed as an amendment to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Read in the reply ↗

Please revise to disclose whether the other material weaknesses previously identified in your Form 10-Q for the quarterly period ended September 30, 2023 have been remediated. If so, explain in detail the corrective actions you have taken and procedures you have implemented to remediate them. Refer to Item 308(c) of Regulation S-K. Signatures, page 61

The Company acknowledges the Staff’s comment and respectfully informs the staff that we will update management’s explanation to provide detail of its corrective actions and procedures implemented to remediate prior material weaknesses on Form

10-K/A to be filed as an amendment to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023.

Signatures, Read in the reply ↗

The annual report should also be signed by your controller or principal accounting officer. Please revise. Refer to General Instruction D(2)(a) of Form 10-K.

The Company acknowledges the Staff’s comment and respectfully informs the staff that it will update the signature block of Mr. Salman Khan to reflect that he is signing on behalf of the Company in the capacity as the Principal Financial and Principal

Accounting Officer on Form 10-K/A to be filed as an amendment to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023. Read in the reply ↗

We note your disclosure of the non-GAAP measures of net income (loss) excluding the impact of the newly adopted FASB fair value accounting rules and net income (loss) per share excluding the impact of the newly adopted FASB fair value accounting rules. The non-GAAP adjustments to these measures have the effect of changing the recognition and measurement principles required to be applied in accordance with GAAP.

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Please revise to refrain from presenting these individually tailored non-GAAP measures. Refer to Question 100.04 of Compliance and Disclosure Interpretations on Non-GAAP Financial Measures.

The Company acknowledges and respectfully advises the Staff that it did not intend to present a measure to have the effect of changing the recognition and measurement principles in accordance with GAAP. The Company will prospectively refrain from presenting such individually tailored non-GAAP measures.

In connection with responding to the Staff’s comments, the Company acknowledges that (i) it is responsible for the adequacy and accuracy of the disclosure in its filing; (ii) Staff comments or changes to disclosure in response to Staff comments do not foreclose the Commission from taking any

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action with respect to the filing; and (iii) it may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

hope you find that these responses adequately address the Staff’s questions, but please contact the undersigned at salman.khan@mara.com and Zabi Nowaid, Esq., at zabi.nowaid@mara.com, if you have any further questions or would like to discuss our responses.

Read in the reply ↗

Please be advised that we will send you comments regarding your confidential treatment request separately. Any such comments will need to be resolved prior to the effective date of the registration statement.

No reply letter found.

We note that you generated revenues from two settlement and license agreements for the three months ended March 31, 2014. Please revise your disclosure to provide context concerning the activities that resulted in this portion of your revenues.

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We refer you to comment 5 in our letter dated May 9, 2014 and comment 1 in our letter dated June 10, 2014 relating to the Form 10-K for the fiscal year ended December 31, 2013.

No reply letter found.

We note that to the best of your knowledge none of the selling stockholders is a brokerdealer or an affiliate of a broker-dealer other than as described in the footnotes. Please remove the knowledge qualifier.

No reply letter found.

We note that On May 2, 2014, you completed the acquisition of certain ownership rights from TechDev Holdings, LLC, Granicus IP, LLC and The Spangenberg Family Foundation for the Benefit of Children’s Healthcare and Education and pursuant to the agreement, you acquired 100% of the limited liability company membership interests of Dynamic Advances, LLC, IP Liquidity Ventures, LLC and Sarif Biomedical, LLC.

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Please tell us how you evaluated the significance of the acquisition pursuant to Rule 8-04 of Regulation S-X. To the extent the acquisition is significant, revise to include the financial statements required under Rules 8-04 and 8-05 of Regulation S-X.

No reply letter found.

We note that the auditor consents to the inclusion of their report dated March 31, 2014 on the consolidated financial statements for the years ended December 31, 2013 and 2012. Please revise to indicate whether the auditor also consents to the inclusion of the balance sheets dated as of December 31, 2013 and 2012. Note that this also applies to your 10- K/A for the fiscal year ended December 31, 2013.

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Also, revise to indicate whether the auditor consents to the reference to the firm as “experts” as disclosed on page 58 of the registration statement.

No reply letter found.

We note your amended and restated bylaws filed with your Form 8-K on July 31, 2014. Please revise this section to reflect that the company now has a classified board of directors whose terms expire between 2015 and 2017. Additionally, please ensure that you incorporate by reference your amended and restated bylaws into your registration statement.

We have included the disclosure on our classified board of directors under the Section entitled “Description of Capital Stock” and have incorporated by reference our amended and restated bylaws into the Registration Statement. Read in the reply ↗

We note your response to prior comment 4. Your response does not sufficiently address how you determined acquisition significance pursuant to Rule 8-04 of Regulation S- X. Please tell us how you assessed whether the acquired businesses were significant based on a comparison of your investments in and advances to the acquired businesses to your total consolidated assets at the end of the most recently completed

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fiscal year. To the extent you conclude that the acquired businesses are significant, revise to include the financial statements required pursuant to Rule 4-08(c) of Regulation S-X, as well as the pro forma financial information required pursuant to Rule 8-05 of Regulation S-X.

Summary

This transaction cited in Comment No. 2 is the purchase of three entities – Sarif Biomedical, LLC, Dynamic Advances, LLC and IP Liquidity Ventures, LLC (the “Entities”). Sarif contained three patents and Dynamic Advances and IP Liquidity Ventures held only contract rights to patents. Other than the trade names, no other assets were included in the purchase.

The Registrant first evaluated the purchases in the context of whether a business acquisition pursuant to Rule 3-05 and ASC 805 was present.

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The Registrant determined that the acquisition was not a business as contemplated by Rule 3-05 and ASC 805 and therefore the tests to determine significance pursuant to Rule 8-04 of Regulation S-X did not require the inclusion of financial statements.

Background

The Registrant is engaged in activities related to patent assertion for the purpose of deriving revenue from litigation-based settlement of claims against infringers. As such, the Registrant’s assets generally are patent claims that may be asserted against potential recoveries. Because patent claims are brought by entities (the patent owners) and courts recognize the plaintiff entity as the damaged party, when the Registrant acquires a patent (or an interest therein), the Registrant generally will acquire the entity. This avoids defects that can arise and lead to costly and disruptive motion practice and improper venue claims. The Registrant does not believe that acquiring the entity is determinative of whether it has acquired any ongoing business under applicable Rules and interpretations for the following reasons:

Definition of a business

Rule 3-05(a)(2) refers to the definition of a business in Rule 11-01(d), which states, in part:

“The term business should be evaluated in light of the facts and circumstances involved and whether there is sufficient continuity of the acquired entity’s operations prior to and after the transactions so that disclosure of prior financial information is material to an understanding of future operations. A presumption exists that a separate entity, a subsidiary, or a division is a business.”

There is a presumption in S-X 11-01(d) that a separate entity, subsidiary, or division is a business.

As noted above, a "business" for purposes of S-X 3-05, is identified by evaluating whether there is sufficient continuity of operations so that disclosure of prior financial information is material to an understanding of future operations. If sufficient continuity of operations exists, then presentation of historical financial statements is material to an understanding of future operations.

The SEC Staff's analysis of whether an acquisition constitutes the acquisition of a business, rather than of assets, focuses primarily on whether the nature of the revenue producing activity previously associated with the acquired assets will remain generally the same after the acquisition. In the absence of revenue producing activities, expense patterns are substituted, which is typical in development stage enterprises 1 that have not yet commenced revenue-producing activities (Rule 11-01(d)-2: Acquisition or Probable Acquisition of a Development Stage Enterprise or Cost Center). Accordingly, it may be appropriate to consider the consistency of expenditures and the nature of the revenue producing activity that is expected to occur after acquisition.

1 Statement 7 [ASC 915] defines a development stage enterprise as one that:

Is devoting substantially all of its efforts to establishing a new business and either of the following conditions exists:

a. Planned principal operations have not commenced.

b. Planned principal operations have commenced, but there has been no significant revenue therefrom.

As part of this analysis, the Registrant reviewed the purchase of the Entities with respect to the definition of a “business” in ASC 805-10-55-4 through ASC 805-10-55-9. In short, a business consists of inputs, with processes applied to those inputs that have the ability to create outputs.

The three elements of a business are defined as follows:

(i) Input. Any economic resource that creates, or has the ability to create, outputs when one or more processes are applied to it. Examples include long-lived assets (including intangible assets or rights to use long-lived assets), intellectual property, the ability to obtain access to necessary materials or rights, and employees;

(ii) Process. Any system, standard, protocol, convention, or rule that when applied to an input or inputs, creates or has the ability to create outputs. Examples include strategic management processes, operational processes, and resource management processes. These processes typically are documented, but an organized workforce having the necessary skills and experience following rules and conventions may provide the necessary processes that are capable of being applied to inputs to create outputs. Accounting, billing, payroll, and other administrative systems typically are not processes used to create outputs; and

(iii) Output. The result of inputs and processes applied to those inputs that provide or have the ability to provide a return in the form of dividends, lower costs, or other economic benefits directly to investors or other owners, members, or participants.

Analysis

The following are reasons for the Registrant’s decision to value the transaction as an asset purchase versus a business combination:

(i) Input. Intellectual property and contract rights to long-lived assets can qualify as Inputs, so the Entities may be considered by the Staff to meet this test. However, no employees, founders, or customers entered into or are in the employ of the Registrant, and no new meaningful economic resource of the Entities would be deemed to have been received upon the acquisitions.

(ii) Process. At the time of acquisition, the Entities had minimal or no operations. While there was some external activity in support of some of the patent contract rights, there was no activity related to the patents and with respect to all Entities:

-

There were no unique process or production techniques;

There were no employees nor had there ever been any employees;

There were no designs, prototypes, schematics, outlines or any other manifestation of providing a good or service;

There was no real estate or other assets in support of the patent contract rights or patents;

The trade names were and remain of no value.

From the Registrant’s perspective, any “processes” at the time of acquisition were irrelevant to the operations of a patent assertion entity’s acquisition since new and expanded lawsuit and licensing activities were the planned purpose of the acquisition. Given the commercial attributes of a process were fundamentally related to inchoate intellectual property, no processes of the acquired entities were important for the continuation by the Registrant, other than as relates to the post acquisition potential to make factual assertions in post-acquisition lawsuits of jurisdiction, venue and potential claims asserted in enforcement actions and licensing or commercialization expansion, principally intended to be reviewed and pursued post-acquisition by the Issuer. Further, the Registrant believes any other tasks including the maintenance of corporate records, minute books, state domicile, and patent maintenance fees to be akin to administrative tasks such as are recognized as not constituting processes. As noted above, ASC 805-10-55-4 through ASC 805-10-55-9 recognize that “Accounting, billing, payroll, and other administrative systems typically are not processes used to create outputs”.

(iii) Output. There was no output at the time of acquisition, nor had there ever been any output.

This leads the Registrant to the most salient point in its review. ASC 805-10-55-7 (d), states that the acquirer “will be able to obtain access to customers that will purchase the outputs.” While there are no customers in the monetization of patents or patent rights to purchase an output, more importantly, there has been no monetization or revenue earned from the patents underlying the contract rights and any activity around the monetization effort has yielded no results. Since the underlying patents or contract rights have never yielded any revenue to the Entities or the patents or contract rights they hold and the highly speculative nature of the enforcement process is such that a patent could by voided by any number of methods, there is no certainty that the Entities will ever generate licenses or obtain licensees (which is the closest representation of a customer) or succeed in any lawsuit. The Registrant identifies new defendants and licensees after the acquisition is completed and it is the post-acquisition analysis and patent management techniques of the Registrant (not the Entities) that is expected to yield results to the Registrant.

Finally, the Registrant provided the analysis to and discussed the treatment with its auditors, SingerLewak, and they agreed with management’s position.

Conclusion

Accordingly, given the tenuous nature of the processes related to the Entities and the failures under ASC 805-10-55-7(d) giving rise to a disqualifying treatment as a business combination, the above demonstrates that the Entities were not businesses and the treatment as asset acquisitions was appropriate. As a result, the inclusion of pro forma financial statements is not necessary.

Read in the reply ↗

We note your response to prior comment 5 and your revised consent which references the inclusion of the balance sheets. Please revise to indicate that the auditor’s consent covers all of the financial statements presented in the filing including the balance sheets. Note that this comment also applies to your 10-K/A for the fiscal year ended December 31, 2013.

We have included the revised consent to indicate that the auditor's consent covers all of the financial statements presented in the filing including the balance sheets and we have included the same in our 10-K/A filed today for the fiscal year ended December 31, 2013.

The Company acknowledges that:

· should the Commission or the staff, acting pursuant to delegated authority, declare the filing effective, it does not foreclose the Commission from taking any action with respect to the filing;

the action of the Commission or the staff, acting pursuant to delegated authority, in declaring the

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filing effective, does not relieve the company from its full responsibility for the adequacy and accuracy of the disclosure in the filing; and the company may not assert staff comments and the declaration of effectiveness as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

Read in the reply ↗

Please provide the duration of your patents or patent portfolios in future filings. Alternatively, provide your analysis of why this information is not required.

1:

In response to the Staff’s comment, the Company will provide the earliest, median and latest patent expiration dates of its patents in future filings, to the extent applicable. We also note that other companies in the Company’s industry such as Vringo, Inc. (NYSE MKT: VRNG), Pendrell (NASDAQ: PCO), Acacia (NASDAQ: ACTG), and VirnetX Holding Corp (NYSE MKT: VHC) provide information about their patents and patent portfolios in a similar manner. The Company will also consider disclosing its patent portfolios by respective categories in its future filings. Read in the reply ↗

We note that two customers accounted for approximately 55% of your revenue for the year ended December 31, 2013. In this section and in a prominently-positioned risk factor in future filings, please ensure that you discuss your past revenue concentration and highlight that a small number of customers have historically accounted for a large portion of your revenues.

2:

In response to the Staff’s comment, the Company has included in the Amended 10-K, a risk factor addressing the historically small number of customers which account for a large portion of our revenues. Please see page 13 of the Amended 10-K. The Company also confirms that it will provide a comparable risk factor in its future filings, to the extent applicable. Read in the reply ↗

Please tell us what consideration you have given to providing a description of the material terms of any agreement with IP Navigation Group LLC, a key supplier of your patent opportunities, including any revenue-sharing arrangements. Further, tell us what consideration you have given to filing the agreements as exhibits pursuant to Item 601(b)(10) of Regulation S-K.

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In this respect, tell us whether you believe these are related party agreements given the relationship between IP Navigation Group LLC, which was founded by Erich Spangenberg, and TechDev Holdings, LLC, a principal shareholder whose shares are beneficially held by Audrey Spangenberg. For additional guidance, please consider Question 105.05 of our Exchange Act Sections 13(d) and 13(g) and Regulation 13D-G Beneficial Ownership Reporting Compliance and Disclosure Interpretations.

3:

Upon review of the Schedule 13G that TechDev Holdings, LLC, Erich Spangenberg and Audrey Spangenberg filed with the Commission on May 8, 2014, the Company believes that TechDev Holdings, LLC, Erich Spangenberg and Audrey Spangenberg are affiliates, and the Company will report them as such in future filings, to the extent applicable.

In addition, the Company has added a description of the advisory services agreement dated May 13, 2013 between the Company and IP Navigation Group, LLC (of which Erich Spangenberg is CEO) (the “Advisory Services Agreement”) in the related party transaction

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footnote of the Amended 10-K and has filed the Advisory Services Agreement as Exhibit 10.62 to the Amended 10-K. The Company will also include a description of the material terms of the Marathon Opportunity Agreement dated May 2, 2014 between the Company and Erich Spangenberg in its Quarterly Report on Form 10-Q for the period ended June 30, 2014 (the “2nd Quarter 2014 10-Q”) and will file such agreement as an exhibit to the 2nd Quarter 2014 10-Q.

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In future filings please ensure that you discuss all of the material terms of your patent acquisition agreements including, but not limited to, a discussion of the types of patents acquired and the types and amounts of consideration remitted.

4:

The Company confirms that it will discuss all of the material terms of its patent acquisition agreements including, but not limited to, a discussion of the types of patents acquired and the types and amounts of consideration remitted in future filings, to the extent applicable. The Company reserves the right to seek confidential treatment of certain terms of such acquisition agreements after consulting with its legal counsel. Read in the reply ↗

Please briefly describe the nature of the payments from your customers that contributed approximately 55% of your revenue. To provide context concerning the activities that resulted in this portion of your revenue, explain in each instance the extent to which the revenue was from recurring or non-recurring licensing fees, exclusive or non-exclusive licenses, litigation settlement payments, sales of technology or

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other transactions that you concisely summarize. Additionally, please provide your analysis of whether agreements related to these transactions are required to be filed by Item 601(b)(10) of Regulation S-K. Lastly, please include this type of discussion in future filings.

5:

The Company has added the following disclosure in the Results of Operations section on page 25 of the Amended 10-K:

“As of December 31, 2013, two customers accounted for 100% of the Company's net accounts receivable. Revenues from two customers accounted for approximately 55% of the Company's revenue for the year ended December 31, 2013. There were no revenues in 2012. The Company derived these revenues from the one-time issuance of non-recurring, non-exclusive, non-assignable licenses to two different entities and their affiliates for certain of the Company’s patents.

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While the Company has a growing portfolio of patents, at this time, the Company expects that a significant portion of its future revenues will be based on one-time grants of similar non-recurring, non-exclusive, non-assignable licenses to a relatively small number of entities and their affiliates. Further, with the expected small number of firms with which the Company enters into license agreements, and the amount and timing of such license agreements, the Company also expects that its revenues may be highly variable from one period to the next.”

The Company enters into confidential settlement agreements with third party defendants. Accordingly, the Company believes that it is not industry norm to publicly file such agreements in its public filings and that the public disclosure of such settlement agreements would adversely affect the Company and its shareholders since third party defendants would be reluctant to settle with the Company if the terms of such settlement agreements were publicly disclosed.

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Please tell us what consideration you have given to filing or incorporating by reference your patent purchase agreements with TeleCommunication Systems, Inc. and Intergraph Corporation from whom you acquired patent portfolios in September 2013. For additional guidance, refer to Question 146.02 of our Regulation S-K Compliance and Disclosure Interpretations.

6:

The patent purchase agreements with TeleCommunication Systems, Inc. and Intergraph Corporation were filed as exhibits to the Registration Statement on Form S-1 that the Company filed with the Commission on December 31, 2013. The Company inadvertently did not include exhibits incorporating by reference the TeleCommunication Systems, Inc. and Intergraph Corporation agreements in its Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2013.

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The Company has included such agreements on the Exhibit Index to the Amended 10-K and has also filed the agreements with the pricing information and other material and relevant terms un-redacted as exhibits to the Amended 10-K. Simultaneously with the filing of the Amended 10-K, the Company has also withdrawn its confidential treatment request with respect to these agreements.

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Please tell us who served as your controller or principal accounting officer at the time of the filing. Be advised that any person who occupies more than one position should indicate each capacity in which he or she signs. See General Instruction D.2 to Form 10-K.

7:

As noted in the Chief Financial Officer Certifications signed by Mr. Richard Raisig that were filed concurrently with the Annual Report on Form 10-K for the Fiscal Year Ended December 31, 2013, Mr. Raisig served as the Company’s Principal Accounting and Financial Officer at the time of filing. On April 14, 2014, Mr. Raisig resigned as the Company’s Principal Financial and Accounting Officer. On May 15, 2014, Mr. Francis Knuettel II was appointed as the Company’s Principal Financial and Accounting Officer, and accordingly, Mr.

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Knuettel has executed the Amended 10-K and the certifications in such capacity.

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We note that the investor presentation dated January 2014 filed in a Form 8-K on January 22, 2014 states that you “believe that over the next 3 to 5 years [y]our current patent asset base may generate aggregate revenue in excess of $100 million.” Please tell us the basis for your statement, whether you have independent support for your projection, and the underlying assumptions.

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Tell us also the uncertainties and limitations of your projection and how you intend to update investors on the progress of your goal.

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The Company’s projected revenue set forth in the investor presentation dated January 2014 filed in a Form 8-K on January 22, 2014, was based on comprehensive analysis of the Company’s patent portfolio and the projected median revenue potential with respect to the assets that were at the time of disclosure under Marathon's ownership and control.

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The following detailed analysis was undertaken by the Company’s management prior to establishing its internal projections:

1)

Understand the claimed invention that the patent(s) cover.

2)

Find evidence of use of the claimed invention by third party products.

3)

Analyze the use of the Company’s claimed invention within the potential infringing products.

4)

Analyze and document the value of the infringing products to the companies that make, use, sell or offer for sale the infringing products.

5)

Calculate the apportioned value of the Company’s invention to the overall value of the infringing product to the market and the companies that are making, using, selling or offering for sale the infringing product.

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Calculate a reasonable royalty rate that would have likely been negotiated at the time that infringement commenced between the patent owner and infringing companies.

7)

Model the potential licensing revenue for each infringing company over the period of the remaining life of the infringed patent as well as a six-year look back from potential date of notice.

8)

Provide appropriate discounts based on timing of potential settlements with universe of infringing companies, as well as potential work-around product that could be used by infringing companies in lieu of the current infringing products.

9)

For each potential infringing company, the Company models the revenue across a period of time relating to the expected litigation time frame (usually 2-5 years).

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Each subsidiary is then rolled into a comprehensive set of integrated financial projections.

Additional assumptions that are taken into account, include the Company’s past litigation and settlement experience with all of the infringing companies, which federal district litigation is likely to be filed on behalf of the applicable Company subsidiary, the litigation team that the subsidiary retains, the Company’s cost to acquire the IP and recent case law from the Supreme Court of the United States, Federal Circuit courts or influential district courts.

Modifications of the assumptions occur periodically. Potential court decisions on the Company’s cases or related cases might cause the Company to alter our projections. As the Company enters into litigation settlements or achieves judicial outcomes, the revenues derived by the Company in connection with such settlements will collectively be reported in the Company’s periodic reports. Accordingly, investors will be updated on the Company’s results and be able to assess the accuracy of the estimate on a quarterly basis through the Company’s periodic reporting. The Company will also consider revising from time to time the information used in future investor presentations to the extent results vary markedly or assumptions become out of date.

The Company hereby acknowledges that:

• Staff comments or changes to disclosure in response to Staff comments in the filings reviewed by the Staff do not foreclose the Commission from taking any action with respect to the filing;

• The Company is responsible for the adequacy and accuracy of the disclosure in the filing; and

• The Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

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We note your response to prior comment 5. Please ensure in future filings that you discuss each material agreement individually, including the amount of revenue attributable to each agreement. Describe any differing licensing terms in the agreements such as provisions related to sub-licensing.

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The Company confirms that it will ensure in future filings that it discusses each material agreement individually, including the amount of revenue attributable to each agreement and that it will describe any differing licensing terms in the agreements, such as provisions related to sub-licensing. Read in the reply ↗

Please confirm that you will include the underlying assumptions you discuss in your letter and a statement regarding the uncertainties and limitations of your projections when and if you update this information.

2:

The Company confirms it will include the underlying assumptions indicated in the Staff’s comment, as well as a statement regarding the uncertainties and limitations of the Company’s projections when and if the Company updates this information.

As the Chief Executive Officer of the Company, the undersigned hereby acknowledges on behalf of the Company that:

• Staff comments or changes to disclosure in response to Staff comments in the filings reviewed by the Staff do not foreclose the Commission from taking any action with respect to the filing;

• The Company is responsible for the

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adequacy and accuracy of the disclosure in the filing; and

• The Company may not assert Staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

Read in the reply ↗