Exhibit 99.1

 

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023

(Expressed in thousands of U.S. dollars - unaudited)

BITFARMS LTD.

TABLE OF CONTENTS

		Page
	Financial Statements (unaudited)
	Interim Consolidated Statements of Financial Position	3
	Interim Consolidated Statements of Profit or Loss and Comprehensive Profit or Loss	4
	Interim Consolidated Statements of Changes in Equity	5
	Interim Consolidated Statements of Cash Flows	6
	Notes to the Interim Condensed Consolidated Financial Statements
1.	Nature of Operations	7
2.	Liquidity	8
3.	Basis of Presentation and Material Accounting Policy Information	9
4.	Significant Accounting Judgments and Estimates	13
5.	Other Assets	14
6.	Digital Assets	14
7.	Derivative Assets and Liabilities	15
8.	Assets Held for Sale	18
9.	Property, Plant and Equipment	19
10.	Intangible Assets	22
11.	Long-term Deposits, Equipment Prepayments, Commitments and Other	23
12.	Trade Payables and Accrued Liabilities	25
13.	Long-term Debt	25
14.	Leases	27
15.	Income Taxes	28
16.	Share Capital	29
17.	Financial Instruments	30
18.	Transactions and Balances with Related Parties	31
19.	Net Loss Per Share	31
20.	Share-based Payments	32
21.	Additional Details to the Statement of Profit or Loss and Comprehensive Profit or Loss	33
22.	Geographical Information	34
23.	Additional Details to the Statements of Cash Flows	35
24.	Subsequent Events	35

2   Page

BITFARMS LTD.

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(Expressed in thousands of U.S. dollars - unaudited)

		As of March 31,			As of December 31,
	Notes	2024			2023
Assets
Current
Cash			65,961			84,038
Trade receivables			729			714
Other assets	5		3,592			2,199
Short-term prepaid deposits			4,507			6,393
Digital assets	6		57,542			31,870
Digital assets - pledged as collateral	6, 13		—			2,101
Derivative assets	7		3,016			1,281
Assets held for sale	8		1,972			1,388
			137,319			129,984
Non-current
Property, plant and equipment	9, 22		177,767			186,012
Right-of-use assets	14		13,225			14,315
Long-term deposits, equipment prepayments and other	11		93,616			44,714
Intangible assets	10		4,546			3,700
Total assets			426,473			378,725
Liabilities
Current
Trade payables and accrued liabilities	12		23,888			20,739
Current portion of long-term debt	13		151			4,022
Current portion of lease liabilities	14		2,126			2,857
Taxes payable			777			1,110
Warrant liabilities	7, 16		18,576			40,426
			45,518			69,154
Non-current
Long-term debt	13		1,491			—
Lease liabilities	14		12,183			12,993
Asset retirement provision			1,867			1,816
Total liabilities			61,059			83,963
Shareholders’ equity
Share capital			586,255			530,123
Contributed surplus			59,689			56,622
Revaluation surplus			12,876			2,941
Accumulated deficit			(293,406	)		(294,924	)
Total equity			365,414			294,762
Total liabilities and equity			426,473			378,725

Should be read in conjunction with the notes to the interim condensed consolidated financial statements

May 14, 2024	/s/ Nicolas Bonta	/s/ Jeffrey Lucas
Date of approval of the financial statements	Chairman of the Board of Directors & Interim Chief Executive Officer	Chief Financial Officer

3   Page

BITFARMS LTD.

INTERIM CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND COMPREHENSIVE PROFIT OR LOSS

(Expressed in thousands of U.S. dollars, except per share amounts - unaudited) 

	Three months ended March 31,
	Notes		2024			2023 (restated - Note 3d)
Revenues		6, 22		50,317			30,050
Cost of revenues		21		(60,999	)		(38,403	)
Gross loss				(10,682	)		(8,353	)
Operating expenses
General and administrative expenses		21		(13,196	)		(8,360	)
Realized gain on disposition of digital assets		6		—			587
Reversal of revaluation loss on digital assets		6		—			2,695
Gain (loss) on disposition of property, plant and equipment				170			(1,566	)
Operating loss				(23,708	)		(14,997	)
Net financial income		21		11,443			10,967
Net loss before income taxes				(12,265	)		(4,030	)
Income tax recovery		15		6,285			330
Net loss				(5,980	)		(3,700	)
Other comprehensive income (loss)
Item that will not be reclassified to profit or loss:
Change in revaluation surplus - digital assets, net of tax		6		17,433			1,225
Total comprehensive income (loss), net of tax				11,453			(2,475	)
Loss per share		19
Basic and diluted				(0.02	)		(0.02	)
Weighted average number of common shares outstanding		19
Basic and diluted				338,745,000			232,541,000

Should be read in conjunction with the notes to the interim condensed consolidated financial statements

4   Page

BITFARMS LTD.

INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(Expressed in thousands of U.S. dollars, except number of shares - unaudited)

	Notes		Number of shares		Share capital		Contributed surplus			Accumulated deficit			Revaluation surplus			Total equity
Balance as of January 1, 2024				334,153,000		530,123		56,622			(294,924	)		2,941			294,762
Net loss				—		—		—			(5,980	)		—			(5,980	)
Change in revaluation surplus - digital assets, net of tax				—		—		—			—			17,433			17,433
Total comprehensive income (loss), net of tax				—		—		—			(5,980	)		17,433			11,453
Transfer of revaluation surplus on disposal of digital assets to accumulated deficit, net of tax				—		—		—			7,498			(7,498	)		—
Share-based payment		20		—		—		3,094			—			—			3,094
Issuance of common shares		16		16,997,000		37,268		—			—			—			37,268
Exercise of stock options and warrants		16, 20		5,142,000		18,864		(27	)		—			—			18,837
Balance as of March 31, 2024				356,292,000		586,255		59,689			(293,406	)		12,876			365,414
Balance as of January 1, 2023 (restated - Note 3d)				224,200,000		404,934		47,653			(197,189	)		—			255,398
Net loss				—		—		—			(3,700	)		—			(3,700	)
Change in revaluation surplus - digital assets, net of tax				—		—		—			—			1,225			1,225
Total comprehensive income (loss), net of tax				—		—		—			(3,700	)		1,225			(2,475	)
Share-based payment		20		—		—		2,536			—			—			2,536
Issuance of common shares		16		15,940,000		15,764		—			—			—			15,764
Exercise of stock options		16, 20		122,000		76		(29	)		—			—			47
Balance as of March 31, 2023 (restated - Note 3d)				240,262,000		420,774		50,160			(200,889	)		1,225			271,270

Should be read in conjunction with the notes to the interim condensed consolidated financial statements

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BITFARMS LTD.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of U.S. dollars - unaudited)

			Three months ended March 31,
	Notes		2024			2023 (restated - Note 3d)
Cash flows from operating activities
Net loss				(5,980	)		(3,700	)
Adjustments for:
Depreciation and amortization		21		38,977			20,700
Net financial income		21		(11,443	)		(10,967	)
Digital assets earned		6		(49,423	)		(29,208	)
Proceeds from sale of digital assets earned		6		49,570			28,483
Realized gain on disposition of digital assets		6		—			(587	)
Reversal of revaluation loss on digital assets		6		—			(2,695	)
Share-based payment		20		3,094			2,536
Income tax recovery		15		(6,285	)		(330	)
Loss (gain) on disposition of property, plant and equipment				(170	)		1,566
Interest and financial income received (expenses paid)				524			(2,099	)
Income taxes paid				(260	)		—
Changes in non-cash working capital components		23		(323	)		(2,670	)
Net change in cash related to operating activities				18,281			1,029
Cash flows used in investing activities
Purchase of property, plant and equipment				(3,920	)		(8,104	)
Proceeds from sale of property, plant and equipment				1,043			2,405
Purchase of marketable securities		21		(2,284	)		(7,163	)
Proceeds from disposition of marketable securities		21		2,622			9,334
Equipment and construction prepayments				(74,015	)		—
Net change in cash related to investing activities				(76,554	)		(3,528	)
Cash flows from financing activities
Issuance of common shares		16		37,268			15,764
Repayment of long-term debt		13		(4,075	)		(13,474	)
Proceeds from long-term debt		13		1,695			—
Repayment of lease liabilities		14		(779	)		(1,394	)
Exercise of stock options and warrants		16, 20		6,027			47
Net change in cash related to financing activities				40,136			943
Net decrease in cash				(18,137	)		(1,556	)
Cash, beginning of the period				84,038			30,887
Exchange rate differences on currency translation				60			47
Cash, end of the period				65,961			29,378

Should be read in conjunction with the notes to the interim condensed consolidated financial statements

6   Page

BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited)

NOTE 1: NATURE OF OPERATIONS

Bitfarms Ltd. was incorporated under the Canada Business Corporations Act on October 11, 2018 and continued under the Business Corporations Act (Ontario) on August 27, 2021. The consolidated financial statements of the corporation comprise the accounts of Bitfarms Ltd. and its wholly-owned subsidiaries (together referred to as the “Company” or “Bitfarms”). The common shares of the Company are listed on the Nasdaq Stock Market and the Toronto Stock Exchange (NASDAQ/TSX: BITF). Its registered office is located at 110 Yonge Street, Suite 1601, Toronto, Ontario, Canada, M5C 1T4.

The activities of the Company are mainly comprised of selling its computational power used for hashing calculations for the purpose of cryptocurrency mining in multiple jurisdictions as described in Note 22 “Geographical Information”. The Company’s operations are currently located in Canada, the United States, Argentina and Paraguay. Volta, a wholly-owned subsidiary of the Company, assists the Company in building and maintaining its server farms and provides electrician services to both commercial and residential customers in Quebec.

Bitfarms owns and operates server farms comprised of computers (referred to as “Miners”) designed for the purpose of validating transactions on the Bitcoin Blockchain (referred to as “Mining”). Bitfarms generally operates its Miners 24 hours a day to produce computational power used for hashing calculations (measured by hashrate) that Bitfarms sells to a Mining Pool under a formula-driven rate commonly known in the industry as Full Pay Per Share (“FPPS”). Under FPPS, Mining Pools compensate Mining companies for their computational power used for hashing calculations, measured through hashrate, based on what the Mining Pool would expect to generate in revenue for a given time period if there was no randomness involved. The fee paid by a Mining Pool to Bitfarms for its computational power used for hashing calculations may be in cryptocurrency, U.S. dollars, or another currency. However, the fees are generally paid to the Company on a daily basis in BTC. Bitfarms accumulates the cryptocurrency fees it receives or exchanges them for U.S. dollars through reputable and established cryptocurrency trading platforms.

Terms and definitions

In these financial statements, the terms below have the following definitions:

	Term	Definition
1	Backbone	Backbone Hosting Solutions Inc.
2	Volta	9159-9290 Quebec Inc.
3	Backbone Argentina	Backbone Hosting Solutions SAU
4	Backbone Paraguay	Backbone Hosting Solutions Paraguay SA
5	Backbone Mining	Backbone Mining Solutions LLC
6	BTC	Bitcoin
7	BVVE	Blockchain Verification and Validation Equipment (primarily Miners)
8	CAD	Canadian Dollars
9	USD	U.S. Dollars
10	ARS	Argentine Pesos

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BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited)

NOTE 2: LIQUIDITY

Bitfarms is primarily engaged in the cryptocurrency Mining industry, a highly volatile industry subject to significant inherent risk. Declines in the market prices of cryptocurrencies, an increase in the difficulty of BTC mining, delays in the delivery of Mining equipment, changes in the regulatory environment and adverse changes in other inherent risks can significantly and negatively impact the Company’s operations and cash flows and its ability to maintain sufficient liquidity to meet its financial obligations. Adverse changes to the factors mentioned above have impacted the recoverability of the Company’s digital assets and property, plant and equipment, resulting in impairment losses being recorded.

The Company’s current operating budget and future estimated cash flows indicate that the Company will generate positive cash flow in excess of the Company’s cash commitments within the twelve-month period. These analyses are based on BTC market factors including price, difficulty and network hashrate for the twelve-month period following the date these interim condensed consolidated financial statements were authorized for issuance.

A BTC Halving is scheduled to occur once every 210,000 blocks, or roughly every four years, until the total amount of BTC rewards issued reaches 21 million, which is expected to occur around 2140. The most recent BTC Halving occurred on April 19, 2024, at which time BTC block rewards decreased from 6.25 BTC per block to 3.125 BTC per block. Once 21 million BTC are generated on or about the year 2140, the network will stop producing more BTC, and the industry will then need to rely on transaction fees and/or other sources of revenue. While BTC prices have had a history of significant fluctuations around BTC Halving events, there is no guarantee that the price change will be favorable or would compensate for the reduction in Mining rewards and the compensation from Mining Pools.

At current BTC prices, the Company’s existing cash resources and the proceeds from sales of its BTC treasury and BTC earned may not be sufficient to fund capital investments to support its growth objectives. If the proceeds from the sale of BTC are not sufficient, the Company would be required to raise additional funds from external sources to meet these requirements. There is no assurance that the Company will be able to raise such additional funds on acceptable terms, if at all.

If the Company raises additional funds by issuing securities, existing shareholders’ ownership in the Company may be diluted. If the Company is unable to obtain financing, including by issuing securities, or if funds from operations and proceeds from sales of the Company’s BTC holdings are negatively impacted by the BTC price, the Company may have difficulty meeting its payment obligations.

8   Page

BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited)

NOTE 3: BASIS OF PRESENTATION AND MATERIAL ACCOUNTING POLICY INFORMATION

a. Basis of preparation and measurement

The interim condensed consolidated financial statements (“Financial Statements”) of the Company comprise the accounts of Bitfarms Ltd. and its wholly-owned subsidiaries. These Financial Statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (“IFRS Accounting Standards”) applicable to the preparation of interim financial statements, including International Accounting Standard 34, Interim Financial Reporting. These Financial Statements were approved by the Board of Directors on May 14, 2024.

These Financial Statements do not include all the information required for full annual financial statements and should be read in conjunction with the audited annual consolidated financial statements of the Company and the notes thereto for the year ended December 31, 2023.

These Financial Statements have been prepared under the same accounting policies used in the audited annual consolidated financial statements for the year ended December 31, 2023, except for new accounting standards issued and adopted by the Company which are described below. The accounting policies have been applied consistently by the Company’s entities and to all periods presented in these Financial Statements, unless otherwise indicated.

The Financial Statements have been prepared on the historical cost basis, except for the revaluation of certain financial instruments and digital assets recorded at fair value, and assets held for sale measured at the lower of their carrying amount and fair value less costs to sell.

9   Page

BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited)

NOTE 3: BASIS OF PRESENTATION AND MATERIAL ACCOUNTING POLICY INFORMATION (Continued)

b. New accounting amendments issued and adopted by the Company

The following amendments to existing standards were adopted by the Company as of January 1, 2024:

Amendments to IFRS 16, Leases (“IFRS 16”) 

Amendments to IFRS 16 require a seller-lessee to subsequently measure lease liabilities arising from a leaseback in a manner that does not recognize any amount of the gain or loss that relates to the right-of-use retained. The new requirements do not prevent a seller-lessee from recognizing in profit or loss any gain or loss relating to the partial or full termination of a lease.

Amendments to IAS 1, Presentation of the Financial Statements (“IAS 1”) 

Amendments to IAS 1 clarify how to classify debt and other liabilities as current or non-current. The amendments help to determine whether, in the interim consolidated statements of financial position, debt and other liabilities with an uncertain settlement date should be classified as current (due or potentially due to be settled within one year) or non-current. The amendments also include clarifying the classification requirements for debt that an entity might settle by converting into equity.

Amendments to IAS 1 specify that covenants to be complied with after the reporting date do not affect the classification of debt as current or non-current at the reporting date. Instead, the amendments require information about these covenants be disclosed in the notes to the financial statements.

Amendments to IAS 7, Statement of Cash Flows (“IAS 7”) and IFRS 7, Financial Instruments: Disclosures (“IFRS 7”)

Amendments to IAS 7 and IFRS 7 introduce disclosure requirements to enhance the transparency of supplier finance arrangements and their effects on an entity’s liabilities, cash flows and exposure to liquidity risk.

The adoption by the Company of the amendments listed above did not have a significant impact on the Company’s Financial Statements.

c. New accounting amendments and standard issued to be adopted at a later date

The following amendments to existing standards have been issued and are applicable to the Company for its annual period beginning on January 1, 2025, with an earlier application permitted:

Amendments to IAS 21, The Effects of Changes in Foreign Exchange Rates (“IAS 21”)

Amendments to IAS 21 require an entity to apply a consistent approach in assessing whether a currency can be exchanged into another currency and, when it cannot, in determining the exchange rate to use and the disclosures to provide.

The Company is currently evaluating the impact of adopting the amendments on the Company’s Financial Statements.

10   Page

BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 3: BASIS OF PRESENTATION AND MATERIAL ACCOUNTING POLICY INFORMATION (Continued)

c. New accounting amendments and standard issued to be adopted at a later date (Continued)

The following new standard has been issued and is applicable to the Company for its annual period beginning on January 1, 2027, with an earlier application permitted:

IFRS 18, Presentation and Disclosure in Financial Statements (“IFRS 18”)

On April 9, 2024, the International Accounting Standards Board issued IFRS 18, the new standard on presentation and disclosure in financial statements, which will replace IAS 1, with a focus on updates to the statement of profit or loss. The key new concepts introduced in IFRS 18 relate to:

● the structure of the statement of profit or loss, including specified totals and subtotals;

● required disclosures in the financial statements for certain profit or loss performance measures that are reported outside an entity’s financial statements (i.e., management-defined performance measures); and

● enhanced principles on aggregation and disaggregation which apply to the primary financial statements and notes in general.

The Company is currently evaluating the impact of adopting the new standard on the Company’s Financial Statements.

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BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 3: BASIS OF PRESENTATION AND MATERIAL ACCOUNTING POLICY INFORMATION (Continued)

d. Restatement

During the year ended December 31, 2023, the Company identified errors in its accounting for warrants issued in connection with certain private placement financings in 2021. The warrants and broker warrants are convertible for a fixed number of common shares of the Company but have a contingent cashless exercise clause which results in a classification of the warrants and broker warrants as a financial liability and measurement of such warrants at fair value through profit or loss, not equity.

The effects of the restatement on the affected financial statement line items for the prior period are as follows:

Interim consolidated statements of profit or loss and comprehensive profit or loss extract for the three months ended March 31, 2023 - Restatement

	Three months ended March 31,
	2023 (as reported)			Warrant adjustments			2023 (as restated)
Operating loss		(14,997	)		—			(14,997	)
Net financial income (expenses)		12,188			(1,221	)		10,967
Net loss before income taxes		(2,809	)		(1,221	)		(4,030	)
Income tax recovery		330			—			330
Net loss		(2,479	)		(1,221	)		(3,700	)
Other comprehensive income (loss)
Item that will not be reclassified to profit or loss:
Change in revaluation surplus - digital assets, net of tax		1,225			—			1,225
Total comprehensive loss, net of tax		(1,254	)		(1,221	)		(2,475	)
Loss per share
Basic and diluted		(0.01	)		(0.01	)		(0.02	)

Interim consolidated statements of cash flows extract for the three months ended March 31, 2023 - Restatement

	Three months ended March 31,
	2023 (as reported)			Warrant adjustments			2023 (as restated)
Cash flows from operating activities
Net loss		(2,479	)		(1,221	)		(3,700	)
Adjustments for:
Net financial income		(12,188	)		1,221			(10,967	)
Net change in cash related to operating activities		1,029			—			1,029

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BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 4: SIGNIFICANT ACCOUNTING JUDGMENTS AND ESTIMATES

The preparation of the Financial Statements requires Management to undertake judgments, estimates and assumptions about recognition and measurement of assets, liabilities, income and expenses. These estimates and judgments are based on Management’s best knowledge of the events or circumstances and actions the Company may take in the future. The actual results may differ from these assumptions and estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to assumptions and estimates are recognized in the period in which the assumption or estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

The significant judgements made by Management in applying the Company’s accounting policies and the key sources of estimation uncertainty were the same as those described in the audited annual consolidated financial statements for year ended December 31, 2023, except for the following:

Property, plant and equipment

Estimates of useful lives, residual values and methods of depreciation are reviewed annually. Any changes based on additional available information are accounted for prospectively as a change in accounting estimate.

During the three months ended March 31, 2024, in connection with the replacement of older Miners following the Company’s transformative fleet upgrade as described in Note 9 - Property, Plant and Equipment, the Company reviewed and adjusted the useful lives, residual values and method of depreciation of older Miners that will be replaced by the new fleet in 2024.

For these Miners, the depreciation was accelerated to bring the book value to the estimated recoverable value at the time they are expected to be replaced. The residual values were adjusted to reflect the expected proceeds from the eventual sale and the depreciation method was modified from sum-of-years to straight-line method.

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BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 5: OTHER ASSETS

	As of March 31,		As of December 31,
	2024		2023
Sales taxes receivable*		1,138		805
Electrical component inventory		1,017		705
Other receivables		1,437		689
		3,592		2,199

* Refer to Note 21b for more details about the provision applied to the Argentine value-added tax (VAT) receivable included in sales taxes receivable.

NOTE 6: DIGITAL ASSETS

BTC transactions and the corresponding values for the three months ended March 31, 2024 and 2023 were as follows:

	Three months ended March 31,
	2024						2023
	Quantity			Value			Quantity			Value
Balance of digital assets including digital assets pledged as collateral as of January 1,		804			33,971			405			6,705
BTC earned*		943			49,423			1,297			29,208
BTC exchanged for cash and services		(941	)		(49,570	)		(1,267	)		(28,483	)
Realized gain on disposition of digital assets**		—			11,063			—			587
Change in unrealized gain on revaluation of digital assets**		—			12,655			—			4,362
Balance of digital assets including digital assets pledged as collateral as of March 31,		806			57,542			435			12,379
Less digital assets pledged as collateral as of March 31,***		—			—			(74	)		(2,122	)
Balance of digital assets excluding digital assets pledged as collateral as of March 31,		806			57,542			361			10,257

* Management estimates the fair value of BTC earned on a daily basis as the quantity of cryptocurrency received multiplied by the price quoted on Coinbase on the day it was received. Management considers the prices quoted on Coinbase to be a level 2 input under IFRS 13, Fair Value Measurement.

** A portion of the realized gain on disposition of digital assets and the change in unrealized gain on revaluation of digital assets is presented in other comprehensive income after reversing previously recorded revaluation loss on digital assets in the statement of profit or loss. For the three months ended March 31, 2024, a gain of $17,433, net of $6,285 of deferred income tax expense, was presented in other comprehensive income (three months ended March 31, 2023: $1,225 and $442, respectively).

*** Refer to Note 13 for details of the Company’s long-term debt and BTC pledged as collateral. During the three months ended March 31, 2024, the NYDIG Loan balance was fully repaid and the BTC previously pledged as collateral thereunder became unencumbered.

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BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 7: DERIVATIVE ASSETS AND LIABILITIES

BTC option contracts

Starting in the first quarter of 2023, the Company purchased BTC option contracts that gave it the right, but not the obligation, to sell digital assets at a fixed price. Option contracts are used to reduce the risk of BTC price volatility and reduce the variability of cash flows resulting from future sales of digital assets. The Company did not apply hedge accounting on these contracts.

Reconciliation of the fair value measurement of derivatives (Level 2):

	As of March 31,					As of December 31,
	2024					2023
	Derivative Assets			Derivative Liabilities		Derivative Assets		Derivative Liabilities
	three-month period					twelve-month period
Balance as of January 1,		1,281			—		—		—
Remeasurement recognized in statement of profit or loss during the period		2,490			—		28		20
Purchases		631			—		1,253		366
Sales		(1,386	)		—		—		(386	)
Balance as of period end		3,016			—		1,281		—

The following gain or loss on derivatives are recognized in Net financial income in the interim consolidated statements of profit or loss and comprehensive profit or loss:

	Three months ended March 31,
	2024		2023
Unrealized change in fair value of outstanding contracts		2,128		(35	)
Realized gain on settled contracts		362		70
		2,490		35

15   Page

BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 7: DERIVATIVE ASSETS AND LIABILITIES (Continued)

Warrant liabilities

The fair value of warrant liabilities is as follows:

	As of March 31,		As of December 31,
	2024		2023
2023 private placement		16,586		34,276
2021 private placements		1,990		6,150
		18,576		40,426

In November 2023, the Company completed a private placement that included 22,222,000 warrants and 3,000,000 broker warrants to purchase common shares. The warrants and broker warrants are convertible for a fixed number of common shares of the Company but have a contingent cashless exercise clause which results in a classification of the warrants and broker warrants as a financial liability and measurement of such warrants at fair value through profit or loss recognized in Net financial income.

Details of the outstanding warrants are as follows:

	Three months ended March 31,
	2024					2023
	Number of warrants			Weighted average exercise price (USD)		Number of warrants		Weighted average exercise price (USD)
Outstanding, January 1,		35,105,000			2.83		19,153,000		4.21
Exercised		(5,111,000	)		1.17		—		—
Expired		(121,000	)		2.47		—		—
Outstanding, March 31,		29,873,000			3.12		19,153,000		4.21

The weighted average contractual life of the warrants as of March 31, 2024, was 1.1 years (March 31, 2023: 1.2 years).

On January 7, 2024, 96,000 broker warrants from the January 7, 2021 private placement expired and were derecognized, which resulted in a non-cash gain on revaluation of warrants of $61 included in Net financial income.

In February 2024, 5,000,000 warrants and 111,000 broker warrants related to the 2023 private placement were exercised resulting in the issuance of 5,111,000 common shares for proceeds of approximately $5,986.

On March 11, 2024, 25,000 warrants relating to the acquisition of the Garlock building in Quebec issued during the first quarter of 2022 expired. These warrants were recorded as equity instruments.

16   Page

BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 7: DERIVATIVE ASSETS AND LIABILITIES (Continued)

Warrant liabilities (Continued)

The Black-Scholes model and inputs below were used in determining the weighted average values of the warrants and broker warrants prior to their derecognition as described in Note 16 and at period end.

2023 warrants and broker warrants

	Remeasurement on settlement of warrants			Remeasurement at period end
Measurement date	February 12 to 28, 2024			March 31, 2024			December 31, 2023
Dividend yield (%)		—			—			—
Expected share price volatility (%)		87	%		86	%		91	%
Risk-free interest rate (%)		4.67	%		4.59	%		4.23	%
Expected life of warrants (years)		2.74			2.65			2.90
Share price (CAD)		4.42			3.01			3.85
Exercise price (USD)		1.17			1.17			1.17
Fair value of warrants (USD)		2.51			1.53			2.15
Number of warrants outstanding (exercised)		(5,111,000	)		10,841,000			15,952,000

2021 warrants and broker warrants

	Remeasurement at period end
Measurement date	March 31, 2024			December 31, 2023
Dividend yield (%)		—			—
Expected share price volatility (%)		95	%		82	%
Risk-free interest rate (%)		4.59	%		4.23	%
Expected life of warrants (years)		0.21			0.46
Share price (CAD)		3.01			3.85
Exercise price (USD)		4.21			4.20
Fair value of warrants (USD)		0.10			0.32
Number of warrants outstanding		19,032,000			19,128,000

17   Page

BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 8: ASSETS HELD FOR SALE

As of March 31, 2024 and December 31, 2023, assets held for sale consisted of the following:

		As of March 31,		As of December 31,
	Notes	2024		2023
Miners	i.		1,571		521
Mining electrical components			401		867
			1,972		1,388

i. Miners held of sale

The following table summarizes the movement of Miners held for sale:

	MicroBT WhatsMiner M30 & M31 Miners				Innosilicon T2T & T3, Canaan Avalon A10 and Antminer T15 & S15 Miners						MicroBT WhatsMiner M20S Miners						Bitmain S19j Pro Miners						TOTAL
	Qty		Value		Qty			Value			Qty			Value			Qty			Value			Qty			Value
Balance as of January 1, 2023	—		—		1,272			190			2,512			1,030			—			—			3,784			1,220
Additions		—		—		1,848			198			—			—			300			205			2,148			403
Dispositions		—		—		—			—			(1,781	)		(714	)		—			—			(1,781	)		(714	)
Impairment		—		—		(3,120	)		(388	)		—			—			—			—			(3,120	)		(388	)
Balance as of December 31, 2023		—		—		—			—			731			316			300			205			1,031			521
Additions		7,696		1,363		—			—			—			—			—			—			7,696			1,363
Dispositions		—		—		—			—			(258	)		(108	)		(300	)		(205	)		(558	)		(313	)
Balance as of March 31, 2024		7,696		1,363		—			—			473			208			—			—			8,169			1,571

a. S19j Pro Bitmain Miners

During the three months ended March 31, 2024, the Company sold 300 Bitmain S19j Pro Miners with a carrying amount of $205 and disposed of them for net proceeds of $205 resulting in no gain or loss.

b. MicroBT WhatsMiner M30 and M31 Miners

During the three months ended March 31, 2024, the Company ceased using 2,775 MicroBT WhatsMiner M30 Miners and 4,921 MicroBT WhatsMiner M31 Miners and planned to dispose of them within the next 12 months.

c. MicroBT WhatsMiner M20S Miners

During the three months ended March 31, 2024, the Company sold 258 MicroBT WhatsMiner M20S Miners with a carrying amount of $108 and disposed of them for net proceeds of $34 resulting in a loss of $74. Management determined that the remaining MicroBT WhatsMiner M20S Miners continue to meet the criteria to be classified as held for sale as of March 31, 2024.

18   Page

BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 9: PROPERTY, PLANT AND EQUIPMENT

As of March 31, 2024 and December 31, 2023, property, plant and equipment (“PPE”) consisted of the following:

	Notes	BVVE and electrical components			Mineral assets		Land and buildings		Leasehold improvements			Vehicles			Total
Cost
Balance as of January 1, 2024			354,803			—		5,740		50,728			1,262			412,533
Additions			28,480			—		3,247		305			14			32,046
Dispositions			(4	)		—		—		(560	)		(27	)		(591	)
Transfer to assets held for sale	8		(24,875	)		—		—		—			—			(24,875	)
Balance as of March 31, 2024			358,404			—		8,987		50,473			1,249			419,113
Accumulated Depreciation
Balance as of January 1, 2024			199,794			—		424		25,656			647			226,521
Depreciation			37,028			—		38		1,012			39			38,117
Dispositions			(3	)		—		—		(423	)		(16	)		(442	)
Transfer to assets held for sale	8		(23,403	)		—		—		—			—			(23,403	)
Impairment on deposits transferred to PPE			553			—		—		—			—			553
Balance as of March 31, 2024			213,969			—		462		26,245			670			241,346
Net book value as of March 31, 2024			144,435			—		8,525		24,228			579			177,767

		BVVE and electrical components			Mineral assets			Land and buildings		Leasehold improvements			Vehicles			Total
Cost
Balance as of January 1, 2023			308,205			9,000			4,392		45,278			1,082			367,957
Additions			63,598			—			1,348		5,924			272			71,142
Additions related to asset acquisitions			13			—			—		30			—			43
Dispositions			(7,325	)		(9,000	)		—		(5	)		(92	)		(16,422	)
Transfer to assets held for sale	8		(9,688	)		—			—		—			—			(9,688	)
Effect of change in discount rate			—			—			—		(499	)		—			(499	)
Balance as of December 31, 2023			354,803			—			5,740		50,728			1,262			412,533
Accumulated Depreciation
Balance as of January 1, 2023			120,097			6,000			270		21,636			526			148,529
Depreciation			77,551			—			154		3,556			194			81,455
Dispositions			(5,756	)		(9,000	)		—		(5	)		(73	)		(14,834	)
Transfer to assets held for sale	8		(8,418	)		—			—		—			—			(8,418	)
Impairment			1,882			3,000			—		—			—			4,882
Impairment on deposits transferred to PPE			14,438			—			—		469			—			14,907
Balance as of December 31, 2023			199,794			—			424		25,656			647			226,521
Net book value as of December 31, 2023			155,009			—			5,316		25,072			615			186,012

19   Page

BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 9: PROPERTY, PLANT AND EQUIPMENT (Continued)

BVVE

Further details of the quantity and models of BTC BVVE held by the Company as of March 31, 2024 and December 31, 2023 are as follows :

	Notes		MicroBT WhatsMiner*			Bitmain S19j Pro			Bitmain T21		Total
Quantity as of January 1, 2024				51,738			16,361			—		68,099
Additions				100			—			2,982		3,082
Dispositions				(258	)		(300	)		—		(558	)
Quantity as of March 31, 2024				51,580			16,061			2,982		70,623
Classified as assets held for sale		8		(8,169	)		—			—		(8,169	)
Presented as property, plant and equipment				43,411			16,061			2,982		62,454

* Includes 473 M20S classified as assets held for sale, 36,018 M30 of which 2,775 M30 are classified as assets held for sale, 12,517 M31 of which 4,921 M31 are classified as assets held for sale and 2,572 M50 Miners.

Refer to Note 8 for more details on assets held for sale.

	Notes		MicroBT WhatsMiner*			Bitmain S19j Pro			Innosilicon T3 & T2T			Bitmain S19XP			Total
Quantity as of January 1, 2023				45,375			7,172			5,711			—			58,258
Additions				8,281			9,289			—			409			17,979
Dispositions				(1,918	)		(100	)		(5,711	)		(409	)		(8,138	)
Quantity as of December 31, 2023				51,738			16,361			—			—			68,099
Classified as assets held for sale		8		(731	)		(300	)		—			—			(1,031	)
Presented as property, plant and equipment				51,007			16,061			—			—			67,068

* Includes 731 M20S classified as assets held for sale, 36,018 M30S, 12,517 M31S and 2,473 M50 Miners.

Refer to Note 8 for more details on assets held for sale.

20   Page

BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 9: PROPERTY, PLANT AND EQUIPMENT (Continued)

Changes in the useful life, residual value and depreciation method of certain BVVE

i. Background

During the three months ended March 31, 2024, the Company exercised its purchase option for 28,000 Bitmain T21 Miners and entered into purchase agreements to acquire 19,280 Bitmain T21 Miners, 3,888 Bitmain S21 Miners and 740 Bitmain S21 hydro Miners. Refer to Note 11 for more details. The Company intends to liquidate its older Miners that are expected to be replaced with the Bitmain T21 Miners, Bitmain S21 Miners, Bitmain S21 hydro Miners and other hydro Miners.

ii. Accelerated depreciation

The older Miners will remain in service until the new Miners are installed to replace them. The Company has changed the usage and the retention strategy of the older Miners and, accordingly, revised their specific useful life, residual value and depreciation method.

The changes are summarized as follows:

● decreasing the specific useful life of the older Miners from 5 years to 2 years to reflect their eventual disposal in 2024;

● decreasing the residual values to reflect the expected proceeds from the eventual disposals; and

● accelerating the depreciation method from sum-of-years over 5 years to straight-line method over 2 years to represent the change in pattern in which their future economic benefits are expected to be consumed by the Company.

During the three months ended March 31, 2024, the Company recorded accelerated depreciation of $18,503 on its older Miners. These assets are expected to be depreciated to their residual values by the end of 2024.

The decision to replace the older Miners, as well as a review of the useful life, residual value and depreciation method were indicators for impairment testing. As a result, the Company performed evaluations of the recoverable amount of the assets for operating the cryptocurrency mining facilities in Quebec, Washington State, Argentina and Paraguay separately. Based on its calculations, which were based on discounted cash flow models, the Company determined that no impairment loss should be recorded during the three months ended March 31, 2024.

21   Page

BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 10: INTANGIBLE ASSETS

	Systems software		Access rights to electricity		Total
Cost
Balance as of January 1, 2024		5,150		3,801		8,951
Additions		—		912		912
Balance as of March 31, 2024		5,150		4,713		9,863
Accumulated amortization
Balance as of January 1, 2024		5,138		113		5,251
Amortization		4		62		66
Balance as of March 31, 2024		5,142		175		5,317
Net book value as of March 31, 2024		8		4,538		4,546

	Systems software		Access rights to electricity		Total
Cost
Balance as of January 1, 2023		5,150		—		5,150
Additions related to asset acquisitions		—		3,801		3,801
Balance as of December 31, 2023		5,150		3,801		8,951
Accumulated amortization
Balance as of January 1, 2023		5,117		—		5,117
Amortization		21		113		134
Balance as of December 31, 2023		5,138		113		5,251
Net book value as of December 31, 2023		12		3,688		3,700

Additions related to access rights to electricity

In April 2023, the Company received approval from the power supplier in Washington State for a 6 MW expansion. During the second quarter of 2023, the Company began constructing an additional production facility on Company-owned land and paid $912 to the power supplier for establishing the connection, which was capitalized as long-term deposits, equipment, prepayments and other. During the three months ended March 31, 2024, the power supplier established the electricity connection, allowing the Company to access the 6 MW of hydro power capacity. As a result, the balance of $912 was reclassified from long-term deposits, equipment, prepayments and other to intangible assets.

22   Page

BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 10: INTANGIBLE ASSETS (continued)

The following table summarizes the access rights to electricity:

Year	Location	Additions to intangibles ($)		Additional capacity		Term of contractual access rights	Amortization method and period
2024	Washington State, USA		912	6 MW		No termination date	Declining balance 4%
			912	6 MW
2023	Baie-Comeau, Quebec		2,315	22 MW		No termination date	Straight-line over the lease term of the facility
2023	Paso Pe, Paraguay		1,065	50 MW	*	Ending in December 31, 2027	Straight-line over the access rights period
2023	Yguazu, Paraguay		421	100 MW		Ending in December 31, 2027	Straight-line over the access rights period
			3,801	172 MW
				178 MW

* In November 2023, the Company finalized an amendment to the existing contract for an additional 20 MW of energy capacity for a total capacity of 70 MW.

NOTE 11: LONG-TERM DEPOSITS, EQUIPMENT PREPAYMENTS, COMMITMENTS AND OTHER

		As of March 31,		As of December 31,
		2024		2023
Security deposits for energy, insurance and rent			5,331		4,901
Equipment and construction prepayments	a		88,285		39,813
			93,616		44,714

a. Equipment and construction prepayments

The following table details the equipment and construction prepayments:

		As of March 31,		As of December 31,
		2024		2023
Miner credits	i.		—		11,330
Bitmain T21 Miners Purchase Order and Purchase Option	ii.		66,333		16,912
March 2024 Purchase Order	iii.		8,718		—
Other BVVE and electrical components	iv.		4,963		4,400
Construction work and materials	v.		8,271		7,171
			88,285		39,813

i. Miner credits

In December 2022, the Company renegotiated its previous purchase agreements for 48,000 Miners by extinguishing the outstanding commitments of $45,350 without penalty and establishing a $22,376 credit for deposits previously made. The Company received $3,279 of Miners, reducing the outstanding credit balance to $19,097 of as December 31, 2022, which was fully utilized during 2023 for the acquisition of hydro Miners and hydro containers. These items were received or in transit during the three months ended March 31, 2024 and the long-term deposit balance was reduced to nil upon the transfer to property, plant and equipment.

23   Page

BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 11: LONG-TERM DEPOSITS, EQUIPMENT PREPAYMENTS, COMMITMENTS AND OTHER (Continued)

a. Equipment and construction prepayments (Continued)

ii. Bitmain T21 Miners Purchase Order and Purchase Option

During the fourth quarter of 2023, the Company placed a firm purchase order for 35,888 Bitmain T21 Miners (the “Purchase Order’’) totaling $95,462 with deliveries scheduled from March 2024 to May 2024 and made a non-refundable deposit of $9,464. In addition, the Company secured a purchase option for an additional 28,000 Bitmain T21 Miners (the “Purchase Option’’) totaling $74,480 and made a non-refundable deposit of $7,448. This Purchase Option gives the Company the right, exercisable until December 31, 2024, but not the obligation, to purchase, up to 28,000 additional Bitmain T21 Miners.

During the three months ended March 31, 2024, the Company made additional deposits of $57,356 towards the Purchase Order, of which approximately 3,000 Bitmain T21 Miners with a book value of $7,935 were received or in transit. During the same period, the Company also fully exercised the Purchase Option with deliveries scheduled from September 2024 to October 2024. As of March 31, 2024, the deposit balance for the Purchase Order and the Purchase Option was $66,333.

iii. March 2024 Purchase Order

During the three months ended March 31, 2024, the Company purchased an additional 19,280 Bitmain T21 Miners, 3,888 Bitmain S21 Miners and 740 Bitmain S21 Hydro Miners (collectively defined as the “March 2024 Purchase Order’’) for $51,285, $13,608 and $4,338, respectively, with deliveries scheduled from April 2024 to November 2024. The Company made a deposit of $8,718 for the March 2024 Purchase Order during the three months ended March 31, 2024.

iv. Other BVVE and electrical components

As of March 31, 2024, the Company had deposits for other BVVE and electrical components in the amount of $4,963.

v. Construction work and materials

As of March 31, 2024, the Company had deposits for construction work and materials in the amount of $8,271, mainly for the Paraguay expansions.

b. Commitments

The Company’s remaining payment obligations in connection with the Purchase Order, the Purchase Option and the March 2024 Purchase Order are outlined below:

	As of March 31,
	2024
Three months ending June 30, 2024		39,528
Three months ending September 30, 2024		85,889
Three months ending December 31, 2024		30,772
		156,189

If the Company is unable to meet its payment obligations, it could result in the loss of equipment prepayments and deposits paid by the Company under the Purchase Order and remedial legal measures being taken against the Company, which may result in damages payable by the Company and forced continuance of the contractual arrangement. Under such circumstances, the Company’s growth plans and ongoing operations could be adversely impacted.

24   Page

BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 11: LONG-TERM DEPOSITS, EQUIPMENT PREPAYMENTS, COMMITMENTS AND OTHER (Continued)

c. Contingent liability

In 2021, the Company imported Miners into Washington State that the vendor located in China claimed originated in Malaysia. In early 2022, U.S. Customs and Border Protection challenged the origination of the Miners, asserting their manufacture in China, and notified the Company of a potential assessment of a U.S. importation duty of 25%.

During the third quarter of 2023, the Company submitted the supporting documentation to U.S. Customs and Border Protection in defense of its position that the Miners were manufactured outside China and the associated custom duties in the amount of $9,424 do not apply. While the final outcome of this matter is uncertain at this time, Management has determined it is not probable that it will result in a future cash outflow for the Company, and, as such, no provision was recorded as of March 31, 2024.

NOTE 12: TRADE PAYABLES AND ACCRUED LIABILITIES

	As of March 31,		As of December 31,
	2024		2023
Trade accounts payable and accrued liabilities		10,669		9,077
Government remittances		13,219		11,662
		23,888		20,739

NOTE 13: LONG-TERM DEBT

	As of March 31,			As of December 31,
	2024			2023
Building financing		1,642			—
Equipment financing		—			4,022
Total long-term debt		1,642			4,022
Less current portion of long-term debt		(151	)		(4,022	)
Non-current portion of long-term debt		1,491			—

Movement in long-term debt is as follows:

	As of March 31,			As of December 31
	2024			2023
	three-month period			twelve-month period
Balance as of January 1,		4,022			47,147
Issuance of long-term debt		1,695			—
Payments		(4,147	)		(33,233	)
Gain on extinguishment of long-term debt		—			(12,580	)
Interest on long-term debt		72			2,688
Balance as of period end		1,642			4,022

25   Page

BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 13: LONG-TERM DEBT (Continued)

a. Building financing

During three months ended March 31, 2024, the Company sold its Garlock building in Sherbrooke, Quebec for $1,695 and immediately leased it back for 10 years. Since the lease agreement included a substantive repurchase option of the building in a form of a call option, the Company has not transferred the control of the asset to the buyer, and the transaction does not qualify as a sale. Accordingly, it is accounted for as a financing arrangement for the proceeds received from the buyer, and the building continues to be recognized as property, plant and equipment of the Company.

b. Equipment financing activity

Repayment of NYDIG Loan

In June 2022, Backbone entered into an equipment financing agreement, referred to as the “NYDIG Loan”, for gross proceeds of $36,860 collateralized by 10,395 WhatsMiner M30S Miners. The net proceeds received by the Company were $36,123, net of origination and closing fees of $737. As part of the agreement, the Company was required to maintain in a segregated wallet an approximate quantity of BTC whose value equates to at least one month of interest and principal payments on the outstanding loan. The pledged BTC was held in a segregated Coinbase Custody account and owned by the Company unless there was an event of default under the NYDIG Loan.

During three months ended March 31, 2024, the NYDIG Loan balance was fully repaid, and the Company’s Miners collateralizing the loan and BTC pledged as collateral became unencumbered.

Repayment of Foundry Loans #2, #3 and #4

In April and May 2021, the Company entered into four loan agreements for the acquisition of 2,465 WhatsMiner Miners referred to as “Foundry Loans #1, #2, #3 and #4.” During 2022, Foundry Loan #1 matured and was fully repaid. In January 2023, the principal amounts of the remaining Foundry Loans #2, #3 and #4 were fully repaid before their maturity date with forgiveness of prepayment penalties totaling $829.

Settlement of the loan with BlockFi Lending LLC (“BlockFi”)

In February 2022, Backbone Mining entered into an equipment financing agreement for gross proceeds of $32,000 collateralized by 6,100 Bitmain S19j Pro Miners referred to as the “BlockFi Loan”. The net proceeds received by the Company were $30,994 after capitalizing origination, closing and other transaction fees of $1,006.

In December 2022, Backbone Mining ceased making installment payments, which constituted a default under the loan agreement, and the BlockFi Loan was classified as current.

On February 8, 2023, BlockFi and the Company negotiated a settlement of the loan in its entirety with a then- outstanding debt balance of $20,330 for cash consideration of $7,750, discharging Backbone Mining of all further obligations and resulting in a gain on extinguishment of long-term debt of $12,580 recognized in Net financial expenses (income) in the consolidated statements of profit or loss and comprehensive profit or loss during the three months ended March 31, 2023. Upon settlement, all of Backbone Mining’s assets, including the 6,100 Miners collateralizing the loan, were unencumbered.

26   Page

BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 14: LEASES

Set out below are the carrying amounts of the Company’s right-of-use (“ROU”) assets and lease liabilities and their activity during the three months ended March 31, 2024 and the year ended December 31, 2023:

	Leased premises			Vehicles			Other equipment			Total ROU assets			Lease liabilities
As of January 1, 2024		13,762			544			9			14,315			15,850
Additions and extensions to ROU assets		—			91			—			91			91
Depreciation		(742	)		(61	)		(5	)		(808	)		—
Lease termination		(373	)		—			—			(373	)		(518	)
Payments		—			—			—			—			(1,085	)
Interest		—			—			—			—			306
Foreign exchange		—			—			—			—			(335	)
As of March 31, 2024		12,647			574			4			13,225			14,309
Less current portion of lease liabilities														(2,126	)
Non-current portion of lease liabilities														12,183

	Leased premises			Vehicles			Other equipment			Total ROU assets			Lease liabilities
As of January 1, 2023		15,694			265			405			16,364			17,864
Additions and extensions to ROU assets		1,020			534			—			1,554			1,553
Reclass to property, plant and equipment		—			—			(364	)		(364	)		—
Depreciation		(2,952	)		(213	)		(32	)		(3,197	)		—
Lease termination		—			(42	)		—			(42	)		(23	)
Payments		—			—			—			—			(5,025	)
Gain on extinguishment of lease liabilities		—			—			—			—			(255	)
Interest		—			—			—			—			1,391
Foreign exchange		—			—			—			—			345
As of December 31, 2023		13,762			544			9			14,315			15,850
Less current portion of lease liabilities														(2,857	)
Non-current portion of lease liabilities														12,993

27   Page

BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 15: INCOME TAXES

Deferred taxes

Deferred taxes are computed at a tax rate of 26.5% based on tax rates expected to apply at the time of realization. Deferred taxes relate primarily to the timing differences on recognition of expenses relating to the depreciation of fixed assets, loss carryforwards and professional fees relating to the Company’s equity activity that are recorded as a reduction of equity.

As at March 31, 2024, the Company has analyzed the recoverability of its deferred tax assets and has concluded that it is not more likely than not that sufficient taxable profit is expected to utilize these deferred tax assets.

Current and deferred income tax (expense) recovery

	Three months ended March 31,
	2024		2023
Current tax expense:
Current year		—		(112	)
Prior year		—		—
		—		(112	)
Deferred tax recovery:
Current year		6,285		442
Prior year		—		—
		6,285		442
		6,285		330

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BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 16: SHARE CAPITAL

Common shares

The Company’s authorized share capital consists of an unlimited number of common shares without par value. As of March 31, 2024, the Company had 356,292,000 issued and outstanding common shares (December 31, 2023: 334,153,000).

i. At-The-Market Equity Offering Program (“ATM Program”)

Bitfarms commenced an at-the-market equity offering program on March 11, 2024 (the “2024 ATM Program”), pursuant to which the Company may, at its discretion and from time-to-time, sell common shares of the Company, resulting in the Company receiving aggregate gross proceeds of up to $375,000.

During the three months ended March 31, 2024, the Company issued 16,997,000 common shares in the 2024 ATM Program in exchange for gross proceeds of $39,341 at an average share price of approximately $2.31. The Company received net proceeds of $38,107 after paying commissions of $1,180 to the sales agent for the 2024 ATM Program and $54 in other transaction costs. The Company capitalized $839 of professional fees and registration expenses to initiate the 2024 ATM Program.

During the three months ended March 31, 2023, the Company issued 15,940,000 common shares in the 2021 ATM Program in exchange for gross proceeds of $16,360 at an average share price of approximately $1.03. The Company received net proceeds of $15,764 after paying commissions of $548 to the sales agent for the 2021 ATM Program and $47 in other transaction costs.

ii. Stock Options

During the three months ended March 31, 2024, option holders exercised stock options to acquire 31,000 common shares (three months ended March 31, 2023: 122,000) resulting in proceeds of approximately $41 (three months ended March 31, 2023: $47) being paid to the Company.

iii. Warrants

In February 2024, 5,000,000 warrants and 111,000 broker warrants related to the 2023 private placement were exercised resulting in the issuance of 5,111,000 common shares for proceeds of approximately $5,986.

The Black Scholes model and the inputs described in Note 7 were used in determining the values of the warrants and broker warrants prior to their derecognition, which resulted in a non-cash loss on revaluation of warrants of $1,836 included in Net financial income.

29   Page

BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 17: FINANCIAL INSTRUMENTS

Measurement categories and fair value

Financial assets and financial liabilities have been classified into categories that determine their basis of measurement. The following tables show the carrying values and the fair value of assets and liabilities for each of the applicable categories:

		As of March 31,		As of December 31,
Measurement		2024		2023
Financial assets at amortized cost
Cash	Level 1		65,961		84,038
Trade receivables	Level 3		729		714
Other receivables	Level 3		1,437		689
Financial assets at fair value through profit and loss
Derivative assets	Level 2		3,016		1,281
Total carrying amount and fair value			71,143		86,722
Financial liabilities at amortized cost
Trade accounts payable and accrued liabilities	Level 3		10,669		9,077
Long-term debt	Level 2		1,642		4,022
Financial liabilities at fair value through profit and loss
Warrant liabilities	Level 2		18,576		40,426
Total carrying amount and fair value			30,887		53,525
Net carrying amount and fair value			40,256		33,197

The carrying amounts of trade receivables, other receivables, trade payables and accrued liabilities and long-term debt presented in the table above are a reasonable approximation of their fair value.

BTC option contracts

The fair value of option contracts is categorized as Level 2 in the fair value hierarchy and is presented under derivative assets and liabilities in the consolidated statements of financial position when there is an outstanding contract at period end. Their fair values are a recurring measurement. Fair value of derivative financial instruments generally reflects the estimated amounts that the Company would receive or pay, taking into consideration the counterparty credit risk or the Company’s credit risk at each reporting date. The Company uses market data such as BTC option futures to estimate the fair value of option contracts at each reporting date.

Warrant liabilities

Warrant liabilities related to the 2021 and 2023 private placements are classified as financial liabilities at fair value through profit or loss with the change in fair value recorded to Net financial income. The fair value measurement is categorized as Level 2 in the fair value hierarchy, is a recurring measurement and is calculated using a Black-Scholes pricing model at each reporting date.

Refer to Note 7 for more details.

30   Page

BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 18: TRANSACTIONS AND BALANCES WITH RELATED PARTIES

The following table details balances payable to related parties:

	As of March 31,		As of December 31,
	2024		2023
Trade payables and accrued liabilities
Directors’ remuneration		116		112
Senior management remuneration		1,614		—
Director and senior management incentive plan		46		1,567
		1,776		1,679

Amounts due to related parties are unsecured, non-interest bearing and payable on demand.

Transactions with related parties

In March 2024, the Board of Directors elected to terminate the employment agreement of the Company’s Chief Executive Officer (the “CEO”). It was planned that the CEO would depart upon completion of an executive search and would lead the Company during the interim. A termination payment under the CEO’s employment agreement totaling $1,614 is expected to be paid after the CEO’s departure. However, the final amount of the termination payment has not yet been agreed to by the Company and the CEO and may be subject to change. During the three months ended March 31, 2024, $1,614 was accrued and included in Trade payables and accrued liabilities (as of December 31, 2023: nil).

The transaction described above occurred in the normal course of operations and recognized in profit or loss under General and administrative expenses.

NOTE 19: NET LOSS PER SHARE

For the three months ended March 31, 2024 and 2023, potentially dilutive securities have not been included in the calculation of diluted loss per share because their effect is anti-dilutive. The additional potentially dilutive securities that would have been included in the calculation of diluted earnings per share, had their effect not been anti-dilutive for the three months ended March 31, 2024, would have totaled approximately 16,035,000 (three months ended March 31, 2023: 3,577,000).

31   Page

BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 20: SHARE-BASED PAYMENTS

The share-based payment expense related to stock options and restricted stock units (“RSU”) for employees, directors, consultants and former employees received was as follows:

	Three months ended March 31,
	2024		2023
Equity-settled share-based payment plans		3,094		2,536

Options

Details of the outstanding stock options are as follows:

	Three months ended March 31,
	2024					2023
	Number of Options			Weighted Average Exercise Price ($CAD)		Number of Options			Weighted Average Exercise Price ($CAD)
Outstanding, January 1,		20,939,000			2.41		21,804,000			3.47
Exercised		(31,000	)		1.85		(122,000	)		0.52
Forfeited		(105,000	)		2.95		—			—
Cancelled		—			—		(10,535,000	)		5.40
Expired		—			—		(15,000	)		2.45
Outstanding, March 31,		20,803,000			2.41		11,132,000			1.68
Exercisable, March 31,		9,911,000			1.79		2,286,000			0.48

The weighted average contractual life of the stock options as of March 31, 2024 was 3.8 years (March 31, 2023: 3.9 years).

Restricted Share Units (“RSU’’)

Details of the RSUs are as follows:

	Three months ended March 31,
	2024				2023
	Number of RSUs		Weighted Average Grant Price ($CAD)		Number of RSUs		Weighted Average Grant Price ($CAD)
Outstanding, January 1,		625,000		4.05		400,000		2.98
Granted		175,000		2.95		—		—
Outstanding, March 31,		800,000		3.81		400,000		2.98

On March 28, 2024, the Board of Directors approved the grant of 175,000 RSUs (three months ended March 31, 2023: nil) to certain members of senior management, which vest 50% after approximately one month from the grant date and an additional 25% every 6 months. The value of the RSUs on the grant date was $2.17 per RSU.

32   Page

BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 21: ADDITIONAL DETAILS TO THE STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE PROFIT OR LOSS

Cost of revenues

	Three months ended March 31,
	2024			2023
Energy and infrastructure		(21,314	)		(17,027	)
Depreciation and amortization		(38,977	)		(20,700	)
Purchases of electrical components		(387	)		(320	)
Electrician salaries and payroll taxes		(321	)		(356	)
		(60,999	)		(38,403	)

General and administrative expenses

	Three months ended March 31,
	2024			2023
Salaries and share-based payments		(9,141	)		(5,157	)
Professional services		(1,658	)		(1,878	)
Insurance, duties and other		(1,957	)		(974	)
Travel, motor vehicle and meals		(246	)		(178	)
Hosting and telecommunications		(78	)		(92	)
Advertising and promotion		(116	)		(81	)
		(13,196	)		(8,360	)

Net financial income

		Three months ended March 31,
	Notes	2024			2023 (restated - Note 3d)
Gain (loss) on revaluation of warrants			9,040			(1,221	)
Gain on derivative assets and liabilities			2,490			35
Gain on disposition of marketable securities	a		338			2,171
Gain on extinguishment of long-term debt and lease liabilities			—			12,835
Interest income			680			266
Loss on foreign exchange			(61	)		(270	)
Interest on long-term debt			(72	)		(1,251	)
Provision expense on VAT receivable	b		(65	)		(1,009	)
Interest on lease liabilities			(306	)		(369	)
Other financial expenses			(601	)		(220	)
			11,443			10,967

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BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 21: ADDITIONAL DETAILS TO THE STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE PROFIT OR LOSS (Continued)

Net financial income (Continued)

a. Gain on disposition of marketable securities

During the three months ended March 31, 2024 and 2023, the Company funded its expansion in Argentina through the acquisition of marketable securities and the in-kind contribution of those securities to the Company’s subsidiary in Argentina. The subsequent disposition of those marketable securities in exchange for Argentine Pesos gave rise to a gain as the amount received in ARS exceeds the amount of ARS the Company would have received from a direct foreign currency exchange.

b. Provision expense on VAT receivable

Due to the political and economic uncertainties in Argentina, the Company is uncertain when, or if at all, the Argentine VAT receivable will be settled. As a result, the Company has recorded a provision to reduce the Argentine VAT receivable to nil. The provision is classified within Net financial income during the three months ended March 31, 2024. Prior to October 1, 2023, the Argentine VAT not expected to be settled within the next 12 months was classified as a long-term receivable in Note 11 with the short-term portion included in sales tax receivable in Note 5.

NOTE 22: GEOGRAPHICAL INFORMATION

Reportable segment

The reporting segments are identified on the basis of information that is reviewed by the chief operating decision maker (“CODM”) to make decisions about resources to be allocated and to assess performance. Accordingly, for Management purposes, the Company is organized into operating segments based on the products and services of its business units and has one material reportable segment, cryptocurrency Mining, which is the operation of server farms that support the validation and verification of transactions on the BTC blockchain, earning cryptocurrency for providing these services, as described in Note 1.

Revenues

Revenues* by country are as follows:

	Three months ended March 31,
	2024		2023
Canada		32,138		23,489
Argentina		11,576		1,296
USA		4,887		3,891
Paraguay		1,716		1,374
		50,317		30,050

*Revenues are presented based on the geographical contribution of computational power used for hashing calculations (measured by hashrate) or sales to external customers. During the three months ended March 31, 2024 and 2023, the Company earned 98% and 97% of its revenues, respectively, from one Mining pool. The Company has the ability to switch Mining Pools or to mine independently at any time.

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BITFARMS LTD.

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Expressed in thousands of U.S. dollars, except data relating to number of PPE, shares, warrants, options and digital assets - unaudited) 

NOTE 22: GEOGRAPHICAL INFORMATION (Continued)

Property, Plant and Equipment

The net book value of property, plant and equipment by country is as follows:

	As of March 31,		As of December 31,
	2024		2023
Canada		78,618		101,454
Argentina		50,598		54,657
USA		15,902		18,154
Paraguay		32,649		11,747
		177,767		186,012

NOTE 23: ADDITIONAL DETAILS TO THE STATEMENTS OF CASH FLOWS

	Three months ended March 31,
	2024			2023
Changes in working capital components:
(Increase) decrease in trade receivables, net		(15	)		327
Decrease (increase) in other current assets		885			(1,161	)
Increase in deposits		(1,670	)		(1,821	)
Increase in trade payables and accrued liabilities		550			97
Decrease in taxes payable		(73	)		(112	)
		(323	)		(2,670	)
Significant non-cash transactions:
Addition of ROU assets, property, plant and equipment and related lease liabilities		91			215
Purchase of property, plant and equipment financed by short-term credit		3,142			1,416
Equipment prepayments realized as additions to property, plant and equipment		26,717			4,714

NOTE 24: SUBSEQUENT EVENTS

2024 ATM Program

During the period from April 1, 2024 to May 14, 2024, the Company issued 42,155,000 common shares through the 2024 ATM Program in exchange for gross proceeds of $85,167 at an average share price of approximately $2.02. The Company received net proceeds of $82,477 after paying commissions of $2,690 to the sales agent. Refer to Note 16 for further details of the Company’s 2024 ATM program.

Canadian Sales Tax Refund

In April 2024, the Company received a positive ruling from the tax authorities that Canadian sales taxes paid by the Company will once again be refunded. Between February 5, 2022, the date on which the new tax legislation was enacted, and April 2024, the Company filed monthly sales tax claims totaling approximately $23,703 (CAD$32,000) that were not paid to the Company. The refund of sales taxes relates to sales taxes charged on various expenditures including, but not limited to electricity costs, cost of property, plant and equipment, professional services, etc.

Contingent Liability

As described in Note 18, in March 2024, as a result of the Company’s decision to terminate the CEO’s employment, a termination payment of $1,614 was accrued during the three months ended March 31, 2024 based on the terms of the CEO’s employment agreement, and classified in trade payables and accrued liabilities. On May 10, 2024, the CEO filed a Statement of Claim in the Superior Court of Ontario against the Company claiming damages for breach of contract, wrongful dismissal and aggravated and punitive damages for a total amount of $26,676. The Company believes the claims are without merit and intends to defend itself vigorously against the claims. Such matters are inherently uncertain, and there can be no guarantee that the outcome of any such matter will be decided favorably to the Company. The loss, if any, is not estimable at this time and Management does not believe the outcome of this matter will have a material adverse impact on its results of operations, cash flows and financial condition.

Yguazu Power Purchase Agreement Amendment

On May 13, 2024, the Company amended its power purchase agreement (“PPA”) for its future Yguazu facility in Paraguay to increase the contracted power from 100 MW to 200 MW beginning on January 1, 2025. The Company is required to pay security deposits totaling $16,245 between June 2024 and January 2025 for future electricity consumption. The security deposits paid to the energy supplier are refundable at the end of the contract term in December 2027 assuming the Company draws power based on the agreed upon schedule and is not in breach of other clauses in the PPA.

35   Page