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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of November 2023

Commission File Number: 001-40370

BITFARMS LTD.

(Exact Name of Registrant as Specified in Its Charter)

110 Yonge Street, Suite 1601, Toronto, Ontario, Canada M5C 1T4

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ☐ Form 40-F ☒

DOCUMENTS INCLUDED AS PART OF THIS FORM 6-K

This report on Form 6-K, includes the interim condensed consolidated financial statements for the three and nine months ended September 30, 2023, and management’s discussion and analysis for the three and nine months ended September 30, 2023.

See the Exhibits listed below.

Exhibits

Exhibit No.		Description
99.1		Interim Condensed Consolidated Financial Statements for the three and nine months ended September 30, 2023.
99.2		Management’s Discussion & Analysis for the three and nine months ended September 30, 2023.
99.3		CEO Certification of Interim Filings - Interim Certificate dated November 7, 2023.
99.4		CFO Certification of Interim Filings - Interim Certificate dated November 7, 2023.
99.5		Material Change Report dated November 7, 2023.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BITFARMS LTD.

By:	/s/ L. Geoffrey Morphy
	Name:	L. Geoffrey Morphy
	Title:	President and Chief Executive Officer

Date: November 7, 2023

Exhibit 99.1

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2023 AND 2022

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

BITFARMS LTD.

TABLE OF CONTENTS

		Page
	Financial Statements
	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 Significant Accounting Policies	9
4.	Significant Accounting Judgments and Estimates	10
5.	Acquisitions of Assets	11
6.	Other Assets	12
7.	Digital Assets	13
8.	Impairment	14
9.	Property, Plant and Equipment	15
10.	Intangible Assets	17
11.	Long-term Deposits, Equipment Prepayments, Commitments and Other	18
12.	Trade Payables and Accrued Liabilities	18
13.	Long-term Debt	19
14.	Leases	21
15.	Income Taxes	22
16.	Asset Retirement Provision	23
17.	Share Capital	23
18.	Financial Instruments	25
19.	Transactions and Balances with Related Parties	26
20.	Net Earnings (Loss) Per Share	27
21.	Share-based Payment	27
22.	Additional Details to the Statement of Profit or Loss and Comprehensive Profit or Loss	29
23.	Geographical Information	31
24.	Additional Details to the Statements of Cash Flows	32

Page

BITFARMS LTD.

INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

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

		As of September 30,			As of December 31,
	Notes	2023			2022
Assets
Current
Cash			46,775			30,887
Trade receivables			1,157			701
Other assets	6		7,102			4,512
Short-term prepaid deposits	8		4,180			12,921
Taxes receivable			4,324			12,142
Digital assets	7		16,809			4,635
Digital assets - pledged as collateral	7, 13		2,166			2,070
Assets held for sale			1,220			1,220
			83,733			69,088
Non-current
Property, plant and equipment	9, 23		203,452			219,428
Right-of-use assets	14		15,108			16,364
Long-term deposits, equipment prepayments and other	11		26,683			38,185
Intangible assets	10		3,821			33
Total assets			332,797			343,098
Liabilities
Current
Trade payables and accrued liabilities	12		16,659			20,541
Current portion of long-term debt	13		9,913			43,054
Current portion of lease liabilities	14		3,114			3,649
			29,686			67,244
Non-current
Long-term debt	13		108			4,093
Lease liabilities	14		13,168			14,215
Asset retirement provision	16		2,335			1,979
Total liabilities			45,297			87,531
Shareholders’ equity
Share capital			499,678			429,120
Contributed surplus			71,983			65,512
Accumulated deficit			(284,161	)		(239,065	)
Total equity			287,500			255,567
Total liabilities and equity			332,797			343,098

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

November 6, 2023		*/s/ Nicolas Bonta*		*/s/ Geoffrey Morphy*		*/s/ Jeffrey Lucas*
Date of approval of the financial statements		Chairman of the Board of Directors		President & Chief Executive Officer		Chief Financial Officer

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 September 30,						Nine months ended September 30,
	Notes	2023			2022			2023			2022
Revenues	7, 23		34,596			33,247			100,125			115,391
Cost of revenues	22		43,462			37,186			123,384			92,789
Gross (loss) profit			(8,866	)		(3,939	)		(23,259	)		22,602

Operating expenses
General and administrative expenses	22		8,372			10,299			25,887			39,534
Realized loss on disposition of digital assets	7		—			44,329			—			122,243
(Reversal of) revaluation loss on digital assets	7		1,183			(45,655	)		(1,512	)		21,118
Loss on disposition of property, plant and equipment			217			756			1,776			1,692
Impairment on short-term prepaid deposits, equipment and construction prepayments, property, plant and equipment and right-of-use assets	8		—			84,116			9,982			84,116
Impairment on goodwill	8		—			—			—			17,900
Operating loss			(18,638	)		(97,784	)		(59,392	)		(264,001	)
Net financial income	22		(336	)		(8,251	)		(12,706	)		(24,191	)
Net loss before income taxes			(18,302	)		(89,533	)		(46,686	)		(239,810	)
Income tax expense (recovery)	15		401			(4,725	)		(23	)		(17,603	)
Net loss			(18,703	)		(84,808	)		(46,663	)		(222,207	)

Other comprehensive income (loss)
Item that will not be reclassified to profit or loss:
Change in revaluation surplus - digital assets, net of tax	7		(824	)		—			1,567			—
Total comprehensive loss, net of tax			(19,527	)		(84,808	)		(45,096	)		(222,207	)

Loss per share	20
Basic and diluted			(0.07	)		(0.40	)		(0.19	)		(1.09	)
Weighted average number of common shares outstanding	20
Basic and diluted			273,907,000			210,378,000			251,010,000			203,839,000

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

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			Retained earnings (accumulated deficit)			Revaluation surplus			Total equity
Balance as of January 1, 2023			224,200,000		429,120			65,512			(239,065	)		—			255,567
Net loss			—		—			—			(46,663	)		—			(46,663	)
Change in revaluation surplus - digital assets, net of tax			—		—			—			—			1,567			1,567
Total comprehensive loss, net of tax			—		—			—			(46,663	)		1,567			(45,096	)

Transfer of revaluation surplus on disposal of digital assets to retained earnings, net of tax			—		—			—			1,567			(1,567	)		—
Share-based payment	21		—		—			7,009			—			—			7,009
Issuance of common shares	17		52,942,000		69,858			—			—			—			69,858
Settlement of restricted share units	21		142,000		405			(405	)		—			—			—
Exercise of stock options	21		400,000		295			(133	)		—			—			162
Balance as of September 30, 2023			277,684,000		499,678			71,983			(284,161	)		—			287,500

Balance as of January 1, 2022			194,806,000		378,893			43,704			(15	)		—			422,582
Net loss			—		—			—			(222,207	)		—			(222,207	)
Share-based payment	21		—		—			17,993			—			—			17,993
Issuance of common shares and warrants	17		20,835,000		48,506			35			—			—			48,541
Deferred tax expense related to equity issuance costs	15		—		(3,895	)		—			—			—			(3,895	)
Exercise of stock options	21		70,000		42			(15	)		—			—			27
Balance as of September 30, 2022			215,711,000		423,546			61,717			(222,222	)		—			263,041

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

Page

BITFARMS LTD.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

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

		Nine months ended September 30,
	Notes	2023			2022
Cash flows from operating activities
Net loss			(46,663	)		(222,207	)
Adjustments for:
Depreciation and amortization	22		62,995			51,643
Impairment on short-term prepaid deposits, equipment and construction prepayments, property, plant and equipment and right-of-use assets	8		9,982			84,116
Impairment on goodwill	8		—			17,900
Net financial income	22		(12,706	)		(24,191	)
Digital assets earned	7		(96,350	)		(113,049	)
Proceeds from sale of digital assets earned	7		87,724			104,988
Realized loss on disposition of digital assets	7		—			122,243
(Reversal of) revaluation loss on digital assets	7		(1,512	)		21,118
Share-based payment	21		7,009			17,993
Income tax expense (recovery)	15		(23	)		(17,603	)
Loss on disposition of property, plant and equipment			1,776			1,692
Interest and financial expenses paid			(7,922	)		(14,139	)
Income taxes refunded (paid)			7,275			(14,931	)
Changes in non-cash working capital components	24		(1,557	)		(12,404	)
Net change in cash related to operating activities			10,028			3,169

Cash flows used in investing activities
Purchase of property, plant and equipment			(43,576	)		(116,217	)
Proceeds from sale of property, plant and equipment			2,884			4,790
Purchase of marketable securities	22		(33,759	)		(127,916	)
Proceeds from disposition of marketable securities	22		45,005			172,248
Acquisitions of assets	5		(2,394	)		—
Purchase of digital assets	7		—			(43,237	)
Proceeds from sale of digital assets purchased	7		—			20,682
Equipment and construction prepayments and other			(3,533	)		(54,891	)
Net change in cash related to investing activities			(35,373	)		(144,541	)

Cash flows from financing activities
Issuance of common shares	17		68,504			48,506
Repayment of long-term debt	13		(24,601	)		(23,174	)
Proceeds from long-term debt	13		—			67,168
Repayment of lease liabilities	14		(2,852	)		(4,122	)
Exercise of stock options	17, 21		162			27
Proceeds from credit facility			55			40,000
Repayment of credit facility			—			(76,863	)
Net change in cash related to financing activities			41,268			51,542

Net increase (decrease) in cash			15,923			(89,830	)
Cash, beginning of the period			30,887			125,595
Exchange rate differences on currency translation			(35	)		49
Cash, end of the period			46,775			35,814

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

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 and digital assets - unaudited)

NOTE 1:

NATURE OF OPERATIONS

Bitfarms Ltd. (the “Company” or “Bitfarms”) 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 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 on 110 Yonge Street, Suite 1601, Toronto, Ontario, Canada, M5C 1T4.

The activities of the Company mainly consist of selling its computational power for the purpose of cryptocurrency mining in multiple jurisdictions as described in Note 23 “Geographical Information”. The Company’s operations are currently located in Canada, the United States, Argentina and Paraguay. 9159-9290 Quebec Inc. (“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 BTC Blockchain (referred to as “Mining”). Bitfarms generally operates its Miners 24 hours a day, which produce computational power (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 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 hashrate may be in cryptocurrency, U.S. dollars, or another currency. Bitfarms accumulates the cryptocurrency fees it receives or exchanges them for U.S. dollars through reputable and established cryptocurrency trading platforms. Mining Pools generate revenue by Mining with purchased hashrate through the accumulation of Block Rewards and transaction fees issued by the BTC network. Mining Pools purchase hashrate and accept the risk of rewards not being commensurate with compensation paid with the aim to mine more blocks than their proportionate share in a given time period based on the computational power they have acquired.

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

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 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 required interest and principal payments on its long-term debt due 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 of 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 next BTC Halving is expected to occur in late April or early May 2024, at which time BTC block rewards will decrease from 6.25 BTC per block to 3.125 BTC per block. Once 21 million BTC are generated, the network will stop producing more. While BTC prices have had a history of price fluctuations around BTC Halving events, there is no guarantee that the price change will be favorable or would compensate for the reduction in Mining reward and the compensation from Mining Pools.

At current BTC prices, the Company’s existing cash resources and the proceeds from any sale 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 may be diluted. If the Company is unable to obtain financing from external sources or issuing securities, or if funds from operations and proceeds from any sale of the Company’s BTC holdings are negatively impacted by the BTC price, the Company may have difficulty meeting its payment obligations.

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 and digital assets - unaudited)

NOTE 3:

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

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 (“IFRS”) as issued by the International Accounting Standards Board applicable to the preparation of interim financial statements, including International Accounting Standard (“IAS”) 34, Interim Financial Reporting. These Financial Statements were approved by the Board of Directors on November 6, 2023.

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, 2022.

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, 2022, 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.

New accounting amendments issued and adopted by the Company

The following amendments to existing standards were adopted by the Company as of January 1, 2023:

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

Amendments to IAS 1 change the requirements in IAS 1 with regard to disclosure of accounting policies. Applying the amendments, an entity discloses its material accounting policies instead of its significant accounting policies. Further amendments to IAS 1 explain how an entity can identify a material accounting policy.

Amendments to IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors (“IAS 8”)

Amendments to IAS 8 replace the definition of a change in accounting estimates. Under the new definition, accounting estimates are “monetary amounts in financial statements that are subject to measurement uncertainty.”

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

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 and digital assets - unaudited)

NOTE 3:

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

New accounting amendments 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, 2024 and thereafter, with an earlier application permitted:

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

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

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, 2022.

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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 and digital assets - unaudited)

NOTE 5:

ACQUISITIONS OF ASSETS

Acquisition of assets in Baie-Comeau

On July 5, 2023, the Company acquired 100% of the shares of a corporation that owns the right to 22 MW of hydro power capacity in Baie-Comeau, Quebec. The consideration transferred at closing totaled $1,964 (CAD$2,603), of which $610 (CAD$814) was paid in cash and $1,354 (CAD$1,789) was paid through the issuance of 821,000 common shares of the Company.

The acquisition of Baie-Comeau does not meet the definition of a business combination under IFRS 3, Business Combinations, as Baie-Comeau’s primary assets consist mainly of a contractual right up to 22 MW of hydro power capacity. Therefore, the transaction has been recorded as an acquisition of a group of assets.

The assets acquired and the liabilities assumed were recognized and measured by allocating the fair value of the consideration paid to their relative fair values at the closing date of the transaction. All financial assets acquired and financial liabilities assumed were recorded at fair value.

The purchase price and the net assets acquired are as follows:

		As of July 5,
	Notes	2023

Purchase price
Cash consideration			610
Value of 821,000 common shares transferred at closing			1,354
Transaction costs			218
			2,182

Net assets acquired
Security deposits			241
Leasehold improvements			7
Trade payables and accrued liabilities			(174	)
Customer deposit			(207	)
Intangible - access rights to electricity	10		2,315
			2,182

In addition, the Company separately entered into a lease agreement with a third party for a site to install the infrastructure to operate the acquired capacity. Refer to Note 14.

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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 and digital assets - unaudited)

NOTE 5:

ACQUISITIONS OF ASSETS (Continued)

Acquisitions of assets in Paraguay

On July 14, 2023, the Company acquired 100% of the shares of two corporations that own the rights to 50 MW and 100 MW, respectively, of hydro power capacity in Villarrica and Yguazu, respectively, Paraguay. The cash considerations totaled $1,095 and $450, respectively.

The transactions have been recorded as acquisitions of a group of assets as the acquirees’ primary assets consist mainly of contractual rights to electricity supply. The purchase prices and the net assets acquired as of July 14, 2023 are as follows:

	Notes	Villarrica		Yguazu

Purchase price
Cash consideration paid at closing			95		250
Cash consideration payable			1,000		200
Transaction costs			17		4
			1,112		454

Net assets acquired
Cash, cash equivalent and other current assets			17		27
Property, plant and equipment			30		6
Intangible - access rights to electricity	10		1,065		421
			1,112		454

NOTE 6:

OTHER ASSETS

	As of September 30,		As of December 31,
	2023		2022
Sales taxes receivable*		5,961		3,816
Electrical component inventory		730		588
Other receivables		411		108
		7,102		4,512

* Refer to Note 22c for more details about the provision applied to the Argentine value-added tax (VAT) receivable included in sales taxes receivable.

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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 and digital assets - unaudited)

NOTE 7:

DIGITAL ASSETS

BTC transactions and the corresponding values for the three and nine months ended September 30, 2023 and 2022 were as follows:

	Three months ended September 30,
	2023						2022
	Quantity			Value			Quantity			Value
Balance of digital assets including digital assets pledged as collateral as of July 1,		549			16,734			3,144			62,204
BTC earned*		1,172			32,899			1,515			32,276
BTC exchanged for cash and services		(1,018	)		(28,354	)		(2,595	)		(55,695	)
Realized loss on disposition of digital assets**		—			(425	)		—			(44,329	)
Change in unrealized gain (loss) on revaluation of digital assets**		—			(1,879	)		—			45,655
Balance of digital assets including digital assets pledged as collateral as of September 30,		703			18,975			2,064			40,111
Less digital assets pledged as collateral as of September 30,***		(80	)		(2,166	)		(1,724	)		(33,496	)
Balance of digital assets excluding digital assets pledged as collateral as of September 30,		623			16,809			340			6,615

	Nine months ended September 30,
	2023						2022
	Quantity			Value			Quantity			Value
Balance of digital assets including digital assets pledged as collateral as of January 1,		405			6,705			3,301			152,856
BTC earned*		3,692			96,350			3,733			113,049
BTC purchased		—			—			1,000			43,237
BTC exchanged for cash and services		(3,394	)		(87,724	)		(5,970	)		(125,670	)
Realized gain (loss) on disposition of digital assets**		—			1,272			—			(122,243	)
Change in unrealized gain (loss) on revaluation of digital assets**		—			2,372			—			(21,118	)
Balance of digital assets including digital assets pledged as collateral as of September 30,		703			18,975			2,064			40,111
Less digital assets pledged as collateral as of September 30,***		(80	)		(2,166	)		(1,724	)		(33,496	)
Balance of digital assets excluding digital assets pledged as collateral as of September 30,		623			16,809			340			6,615

* 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 and nine months ended September 30, 2023, a loss of $824, net of $297 of deferred income tax recovery, and a gain of $1,567, net of $565 of deferred income tax expense, respectively, were presented in Other comprehensive income (three and nine months ended September 30, 2022: nil and nil, respectively).

*** Refer to Note 13 for details of the Company’s long-term debt and BTC pledged as collateral.

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 and digital assets - unaudited)

NOTE 8:

IMPAIRMENT

The impairment loss on short-term prepaid deposits, equipment and construction prepayments, property, plant and equipment and right-of-use assets for three and nine months ended September 30, 2023 were nil and $9,982, respectively (three and nine months ended September 30, 2022: $84,116 for both periods).

Impairment on short-term prepaid deposits during the second quarter of 2023

Background

In 2022, the Company entered into agreements with external brokers to be able to proceed with the importation of its miners into Argentina. Under the agreements, the Company was required to make advance deposits to the external brokers, which were classified as short-term prepaid deposits on the consolidated statements of financial position. During the three months ended June 30, 2023, the Company decided to terminate the importation agreements with the external brokers as of June 30, 2023.

ii.

Impairment loss

The Company assumed the cost of terminating the importation agreements with the brokers in order to execute its new importation strategy, resulting in the Company forgoing a balance of $6,982 of deposits. Accordingly, as of June 30, 2023, the Company impaired $6,982 of short-term prepaid deposits. This impairment is presented in the consolidated statements of profit or loss and comprehensive profit or loss under Impairment on short-term prepaid deposits and property, plant and equipment.

Impairment on mineral assets during the second quarter of 2023

Background

The Suni mineral asset was acquired in connection with the reverse acquisition of Bitfarms Ltd (Israel) on April 12, 2018 and its value, at the time, was estimated at $9,000 based on an independent appraiser’s valuation. Suni is an iron ore deposit located in Canada that was held by the acquiree. Since its acquisition, following the presence of impairment indicators, the Suni mineral asset was written down to a net book value of $3,000 as of December 31, 2022.

ii.

Impairment loss

During the three months ended June 30, 2023, in connection with the planned disposal of the Suni mineral asset, management tested the cash-generating unit for impairment, resulting in a further impairment charge of $3,000 and bringing the carrying amount to nil. This impairment charge is presented in the consolidated statements of profit or loss and comprehensive profit or loss under Impairment on short-term prepaid deposits and property, plant and equipment. On July 27, 2023, the Company sold the Suni mineral asset for a nominal amount to a third party.

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 and digital assets - unaudited)

NOTE 9:

PROPERTY, PLANT AND EQUIPMENT

As of September 30, 2023 and December 31, 2022, 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, 2023			308,205			9,000			4,392			45,278			1,082			367,957
Additions			57,614			—			456			5,112			200			63,382
Additions related to asset acquisitions	5		13			—			—			30			—			43
Dispositions			(6,410	)		(9,000	)		—			(5	)		(74	)		(15,489	)
Transfer to assets held for sale			(5,695	)		—			—			—			—			(5,695	)
Balance as of September 30, 2023			353,727			—			4,848			50,415			1,208			410,198

Accumulated Depreciation
Balance as of January 1, 2023			120,097			6,000			270			21,636			526			148,529
Depreciation			57,778			—			114			2,498			132			60,522
Dispositions			(5,094	)		(9,000	)		—			(5	)		(56	)		(14,155	)
Transfer to assets held for sale			(4,938	)		—			—			—			—			(4,938	)
Impairment	8		—			3,000			—			—			—			3,000
Impairment on deposits transferred to PPE			13,319			—			—			469			—			13,788
Balance as of September 30, 2023			181,162			—			384			24,598			602			206,746

Net book value as of September 30, 2023			172,565			—			4,464			25,817			606			203,452

			BVVE and electrical components			Mineral assets			Land and buildings			Leasehold improvements			Vehicles			Total
Cost
Balance as of January 1, 2022			156,647			9,000			4,549			5,783			547			176,526
Measurement period adjustment to business combination			(1,127	)		—			(18	)		—			—			(1,145	)
Additions			164,437			—			3,239			39,495			552			207,723
Dispositions			(3,609	)		—			(3,378	)		—			(17	)		(7,004	)
Transfer to assets held for sale			(8,143	)		—			—			—			—			(8,143	)
Balance as of December 31, 2022			308,205			9,000			4,392			45,278			1,082			367,957

Accumulated Depreciation
Balance as of January 1, 2022			35,766			1,800			286			1,560			264			39,676
Depreciation			66,319			—			193			1,703			124			68,339
Dispositions			(2,562	)		—			(366	)		—			(13	)		(2,941	)
Transfer to assets held for sale			(6,040	)		—			—			—			—			(6,040	)
Impairment			24,820			4,200			157			13,107			151			42,435
Impairment on deposits transferred to PPE			1,794			—			—			5,266			—			7,060
Balance as of December 31, 2022			120,097			6,000			270			21,636			526			148,529

Net book value as of December 31, 2022			188,108			3,000			4,122			23,642			556			219,428

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 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 September 30, 2023 and December 31, 2022 are as follows :

	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		7,735			9,289		—			409			17,433
Dispositions		(1,380	)		—		(2,591	)		(409	)		(4,380	)
Quantity as of September 30, 2023		51,730			16,461		3,120			—			71,311
Classified as assets held for sale		(1,132	)		—		(3,120	)		—			(4,252	)
Presented as property, plant and equipment		50,598			16,461		—			—			67,059

* Includes 1,132 M20S classified as assets held for sale, 36,018 M30S, 12,653 M31S and 1,927 M50 Miners as of September 30, 2023.

** Includes 1,848 T3 and 1,272 T2T Miners classified as assets held for sale as of September 30, 2023.

	MicroBT Whatsminer*			Bitmain S19j Pro		Innosilicon T3 & T2T**			Canaan Avalon A10			Bitmain S19XP			Other Bitmain Antminers***			Total
Quantity as of January 1, 2022		18,675			7,172		6,446			1,024			—			8,073			41,390
Additions		28,499			—		—			—			801			—			29,300
Dispositions		(1,799	)		—		(735	)		(1,024	)		(801	)		(8,073	)		(12,432	)
Quantity as of December 31, 2022		45,375			7,172		5,711			—			—			—			58,258
Classified as assets held for sale		(2,512	)		—		(1,272	)		—			—			—			(3,784	)
Presented as ROU asset****		(3,000	)		—		—			—			—			—			(3,000	)
Presented as property, plant and equipment		39,863			7,172		4,439			—			—			—			51,474

* Includes 2,512 M20S classified as assets held for sale, 30,210 M30S and 12,653 M31S Miners.

** Includes 4,439 T3 and 1,272 T2T Miners classified as assets held for sale.

*** Included Antminer T15 and Antminer S15 Miners classified as assets held for sale and written off.

**** Includes 3,000 Whatsminer M31S+ with a net book value of approximately $3,330.

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 and digital assets - unaudited)

NOTE 10:

INTANGIBLE ASSETS

	Notes	Systems software		Access rights to electricity		Favorable lease		Total
Cost
Balance as of January 1, 2023			5,150		—		2,000		7,150
Additions related to asset acquisitions	5		—		3,801		—		3,801
Additions			20		—		—		20
Balance as of September 30, 2023			5,170		3,801		2,000		10,971

Accumulated amortization
Balance as of January 1, 2023			5,117		—		2,000		7,117
Amortization			17		16		—		33
Balance as of September 30, 2023			5,134		16		2,000		7,150

Net book value as of September 30, 2023			36		3,785		—		3,821

	Systems software		Access rights to electricity		Favorable lease		Total
Cost
Balance as of January 1, 2022		5,150		—		1,800		6,950
Measurement period adjustment to business combination		—		—		200		200
Balance as of December 31, 2022		5,150		—		2,000		7,150

Accumulated amortization
Balance as of January 1, 2022		5,008		—		261		5,269
Amortization		109		—		1,739		1,848
Balance as of December 31, 2022		5,117		—		2,000		7,117

Net book value as of December 31, 2022		33		—		—		33

Additions related to acquisitions of assets

During the three and nine months ended September 30, 2023, the Company made three acquisitions of groups of assets, resulting in additional access rights to electricity. These access rights represent a contractual right to hydro power capacity and are classified as intangible assets. The assets acquired, including these intangible assets, and the liabilities assumed were recognized and measured by allocating the fair value of the consideration paid to their relative fair values at the closing date of the transactions. Refer to Note 5 for more details. The following table summarizes these access rights:

Acquisitions	Additions to intangibles		Additional capacity	Term of contractual access rights	Amortization method and period
Baie-Comeau, Quebec		2,315	22 MW	No termination date	Straight-line over the lease term of the facility
Villarrica, Paraguay		1,065	50 MW	Ending in December 31, 2027	Straight-line over the access rights period
Yguazu, Paraguay		421	100 MW	Ending in December 31, 2027	Straight-line over the access rights period
		3,801	172 MW

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 and digital assets - unaudited)

NOTE 11:

LONG-TERM DEPOSITS, EQUIPMENT PREPAYMENTS, COMMITMENTS AND OTHER

		As of September 30,		As of December 31,
		2023		2022
VAT receivable			—		2,083
Security deposits for energy, insurance and rent			5,219		3,872
Equipment and construction prepayments	a		21,464		32,230
			26,683		38,185

Equipment and construction prepayments

As of September 30, 2023, the Company has deposits on BVVE and electrical components in the amount of $14,897, which includes $19,097 of credits for orders placed at fixed prices, but not yet received, as described below, with a book value of $13,127 due to previously recorded impairments of $5,930. In addition, the Company has deposits for construction work and materials in the amount of $6,567, mainly for the Paraguay expansion.

Commitments

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 which was fully utilized during the nine months ended September 30, 2023 for the acquisition of hydro Miners and hydro containers.

As of September 30, 2023, the Company had no commitments.

Contingent liability

In 2021, the Company imported Miners into Washington State, which the Chinese manufacturer asserted 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%. Since the request for information by U.S. Customs and Border Protection, the Company has been working with the manufacturer to validate their origination by visiting contract manufacturer sites, and by examining and documenting the manufacture and assembly of the Miners by the manufacturer and its third-party contractors.

During the three months ended September 30, 2023, the Company has obtained documentary evidence of the Miners’ manufacture outside of China, and has sent the supporting documentation to the U.S. Customs and Border Protection in defense of its position that Miners were manufactured outside China and the related 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 September 30, 2023.

NOTE 12:

TRADE PAYABLES AND ACCRUED LIABILITIES

	As of September 30,		As of December 31,
	2023		2022
Trade accounts payable and accrued liabilities		7,621		12,897
Government remittances		9,038		7,644
		16,659		20,541

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 and digital assets - unaudited)

NOTE 13:

LONG-TERM DEBT

	As of September 30,			As of December 31,
	2023			2022
Equipment financing		9,875			47,020
Vehicle loans		146			127
Total long-term debt		10,021			47,147
Less current portion of long-term debt		(9,913	)		(43,054	)
Non-current portion of long-term debt		108			4,093

Movement in long-term debt is as follows:

	As of September 30,			As of December 31
	2023			2022
	nine-month period			twelve-month period
Balance as of January 1,		47,147			11,167
Issuance of long-term debt		55			67,201
Payments		(27,006	)		(38,532	)
Gain on extinguishment of long-term debt		(12,580	)		—
Interest on long-term debt		2,405			7,311
Balance as of period end		10,021			47,147

Equipment financing activity

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 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.

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 and digital assets - unaudited)

NOTE 13:

LONG-TERM DEBT (continued)

Equipment financing activity (continued)

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 is 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 Company pledged 80 BTC as collateral with a fair market value of $2,166 as of September 30, 2023. The pledged BTC is held in a segregated Coinbase Custody account, which BTC is owned by the Company unless there is an event of default under the NYDIG Loan.

Summary of equipment financing

As of September 30, 2023, the Company’s equipment financing consisted only of the NYDIG Loan. The NYDIG Loan balance and the net book value (“NBV”) of its related collateral, as of September 30, 2023, are as follows:

		Maturity date		Stated rate				Effective rate*				Monthly repayment ($)				Long-term debt balance ($)				NBV of Collateral ($)				Collateral**
NYDIG Loan		February 2024			12.0	%			14.4	%			2,043				9,875				24,921				10,395

* Represents the implied interest rate after capitalizing financing and origination fees.

** Represents the quantity of Whatsminers received in connection with the equipment financing and pledged as collateral for the related loan.

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 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 nine months ended September 30, 2023 and the year ended December 31, 2022:

	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		1,019			509			—			1,528			1,527
Reclass to property, plant and equipment		—			—			(364	)		(364	)		—
Depreciation		(2,198	)		(155	)		(26	)		(2,379	)		—
Lease termination		—			(41	)		—			(41	)		(23	)
Payments		—			—			—			—			(3,905	)
Gain on extinguishment of lease liabilities		—			—			—			—			(255	)
Interest		—			—			—			—			1,053
Foreign exchange		—			—			—			—			21
As of September 30, 2023		14,515			578			15			15,108			16,282
Less current portion of lease liabilities														(3,114	)
Non-current portion of lease liabilities														13,168

	Leased premises			Vehicles			Other equipment			Total ROU assets			Lease liabilities
As of January 1, 2022		9,038			283			76			9,397			13,573
Additions and extensions to ROU assets		9,526			118			1,693			11,337			11,354
Depreciation		(1,975	)		(129	)		(121	)		(2,225	)		—
Lease termination		(104	)		(7	)		—			(111	)		(112	)
Impairment		(791	)		—			(1,243	)		(2,034	)		—
Payments		—			—			—			—			(7,528	)
Interest		—			—			—			—			1,451
Foreign exchange		—			—			—			—			(874	)
As of December 31, 2022		15,694			265			405			16,364			17,864
Less current portion of lease liabilities														(3,649	)
Non-current portion of lease liabilities														14,215

Reliz Lease

In February 2023, the Company negotiated a modification to its lease agreement with Reliz Ltd. (where BlockFi was the lender to Reliz Ltd.) in order to settle its outstanding lease liability of $373 for a payment of $118. Refer to Note 22 for more details.

Baie-Comeau

On July 5, 2023, in conjunction with the Baie-Comeau acquisition, the Company entered into a lease agreement with a third party for a site to install the infrastructure to operate the acquired capacity. The lease agreement is for an industrial site in Baie-Comeau for an initial term of 10 years at $16 (CAD$21) a month with an annual adjustment at the lesser of (i) the change in the Consumer Price Index and (ii) 3%. The lease agreement also provides the Company with the option to purchase the site for $2,248 (CAD$3,000) with an annual adjustment at the lesser of (i) the change in the Consumer Price Index and (ii) 3% throughout the lease term.

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 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 September 30, 2023, 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 September 30,					Nine months ended September 30,
	2023		2022			2023			2022
Current tax expense (recovery):
Current year		104		(819	)		360			(9,220	)
Prior year		—		—			182			68
		104		(819	)		542			(9,152	)

Deferred tax expense (recovery):
Current year		297		(4,149	)		(565	)		(8,600	)
Prior year		—		243			—			149
		297		(3,906	)		(565	)		(8,451	)
		401		(4,725	)		(23	)		(17,603	)

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 and digital assets - unaudited)

NOTE 16:

ASSET RETIREMENT PROVISION

	As of September 30,		As of December 31,
	2023		2022
	nine-month period		twelve-month period
Balance as of January 1,		1,979		239
Additions during the period		192		1,701
Accretion expense		157		93
Effect of change in the foreign exchange rate		7		(54	)
Balance as of period end		2,335		1,979

As of September 30, 2023, the Company estimated the costs of restoring its leased premises to their original state at the end of their respective lease terms to be $4,326 (December 31, 2022: $3,950), discounted to present value of $2,335 (December 31, 2022: $1,979) using annual discount rates between 7% and 10% (December 31, 2022: between 7% and 10%) over the lease periods, which were estimated to range from seven to ten years depending on the location.

NOTE 17:

SHARE CAPITAL

Common shares

The Company’s authorized share capital consists of an unlimited number of common shares without par value. As of September 30, 2023, the Company had 277,684,000 issued and outstanding common shares (December 31, 2022: 224,200,000).

Warrants

Details of the outstanding warrants are as follows:

	Nine months ended September 30,
	2023				2022
	Number of warrants		Weighted average exercise price (USD)		Number of warrants		Weighted average exercise price (USD)
Outstanding, January 1,		19,153,000		4.21		19,428,000		4.16
Granted		—		—		25,000		3.47
Outstanding, September 30,		19,153,000		4.21		19,453,000		4.16

The weighted average contractual life of the warrants as of September 30, 2023 was 0.7 years (September 30, 2022: 1.7 years).

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 and digital assets - unaudited)

NOTE 17:

SHARE CAPITAL (Continued)

Significant transactions

Garlock Acquisition

In the first quarter of 2022, the Company acquired a building in Quebec referred to as “Garlock” in exchange for cash consideration of $1,783 and the issuance of 25,000 warrants granted with a strike price of $3.47 and a contractual life of 2 years.

ii.

At-The-Market Equity Offering Program

Bitfarms commenced an at-the-market equity offering program (the “ATM program”) on August 16, 2021, 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 proceeds of up to $500,000. The ATM program expired on September 12, 2023.

During the nine months ended September 30, 2023, the Company issued 52,121,000 common shares in the ATM program in exchange for gross proceeds of $70,770 at an average share price of approximately $1.36. The Company received net proceeds of $68,504 after paying commissions of $2,187 to the sales agent for the program and $79 in other transaction costs.

During the nine months ended September 30, 2022, the Company issued 20,835,000 common shares in the ATM program in exchange for gross proceeds of $50,181 at an average share price of approximately $2.41. The Company received net proceeds of $48,506 after paying commissions of $1,585 to the sales agent and $90 in other transaction costs.

iii.

Stock Options

During the nine months ended September 30, 2023, option holders exercised stock options to acquire 400,000 common shares (nine months ended September 30, 2022: 70,000) resulting in proceeds of approximately $162 (nine months ended September 30, 2022: $27) being paid to the Company.

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 and digital assets - unaudited)

NOTE 18:

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 September 30,		As of December 31,
		2023		2022
Financial assets at amortized cost
Cash	Level 1		46,775		30,887
Trade receivables	Level 2		1,157		701
Other receivables	Level 2		411		108
Total carrying amount and fair value			48,343		31,696

Financial liabilities at amortized cost
Trade accounts payable and accrued liabilities	Level 2		7,621		12,897
Long-term debt	Level 2		10,021		47,147
Total carrying amount and fair value			17,642		60,044

Net carrying amount and fair value			30,701		(28,348	)

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.

Derivative assets

Starting in the first quarter of 2023, the Company entered into forward BTC option contracts to sell digital assets to reduce the risk of variability of future cash flows resulting from future sales of digital assets. The fair value of option contracts is categorized as Level 2 in the fair value hierarchy and is presented under Other assets in the consolidated statements of financial position when there is an outstanding contract at period end. As of September 30, 2023, there were no outstanding contracts. 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. The Company did not apply hedge accounting on these contracts.

During the three and nine months ended September 30, 2023, the realized loss on settled contracts amounting to nil and $180, respectively, were recognized in net financial income included in the consolidated statements of profit or loss and comprehensive profit or loss (three and nine months ended September 30, 2022: nil and nil). Refer to Note 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 and digital assets - unaudited)

NOTE 19:

TRANSACTIONS AND BALANCES WITH RELATED PARTIES

The following table details balances payable to related parties:

	As of September 30,		As of December 31,
	2023		2022
Trade payables and accrued liabilities
Directors’ remuneration		—		1,522
Director and senior management incentive plan		46		95
		46		1,617

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

Transactions with related parties

During the three and nine months ended September 30, 2022, the Company made rent payments totaling approximately $95 and $273, respectively, to companies controlled by certain directors of the Company. No such payments were made for the three and nine months ended September 30, 2023. The rent payments were classified as interest included in financial expenses and principal repayment of lease liabilities. During the year ended December 31, 2022, the Company’s leases with companies controlled by directors were renewed with third parties.

In December 2022, the Company’s consulting agreements with two of its directors were terminated, their roles and responsibilities were reduced and termination payments totaling $1,466 were accrued and included in trade payables and accrued liabilities as at December 31, 2022 (as of September 30, 2023, balance accrued: nil). The consulting fees totaled approximately $417 and $843 for the three and nine months ended September 30, 2022, respectively (for the three and nine months ended September 30, 2023: nil).

The transactions described above were incurred in the normal course of operations. These transactions are included in the consolidated statements of profit or loss and comprehensive profit or loss as follows:

	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
General and administrative expenses		—		417		—		843
Net financial expenses		—		26		—		70
		—		443		—		913

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 and digital assets - unaudited)

NOTE 20:

NET EARNINGS (LOSS) PER SHARE

For the three and nine months ended September 30, 2023 and 2022, potentially dilutive securities have not been included in the calculation of diluted earnings (loss) per share because their effect is antidilutive. 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 and nine months ended September 30, 2023, would have totaled approximately 4,343,000 and 3,952,000 (three and nine months ended September 30, 2022: 1,531,000 and 2,014,000, respectively).

NOTE 21:

SHARE-BASED PAYMENT

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 September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Equity-settled share-based payment plans		2,011		3,961		7,009		17,993

Options

On March 31, 2023, upon the voluntary surrender by option holders, the Company cancelled outstanding options exercisable for 10,535,000 common shares. The Company intended, but had no obligation, to the persons who formerly held the cancelled options to grant new options no less than 90 days after the cancellation date of the original options. As the options were cancelled without the concurrent grant of a replacement award, the cancellation was treated as a settlement for no consideration, and all remaining unrecognized share-based payment expense associated with the cancelled options was accelerated for an amount of $914 during the nine months ended September 30, 2023.

During the nine months ended September 30, 2023, the Board of Directors approved stock option grants to purchase 8,471,000 common shares in accordance with the Long-Term Incentive Plan (the “LTIP Plan”) adopted on May 18, 2021 (nine month ended September 30, 2022: 5,523,000 common shares). All options issued according to the LTIP Plan become exercisable when they vest and can be exercised for a maximum period of 5 years from the date of the grant.

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 and digital assets - unaudited)

NOTE 21:

SHARE-BASED PAYMENT (Continued)

Details of the outstanding stock options are as follows:

	Nine months ended September 30,
	2023					2022
	Number of Options			Weighted Average Exercise Price ($CAD)		Number of Options			Weighted Average Exercise Price ($CAD)
Outstanding, January 1,		21,804,000			3.47		12,547,000			5.06
Granted		8,471,000			1.89		5,523,000			2.50
Exercised		(400,000	)		0.54		(70,000	)		0.41
Forfeited		—			—		(170,000	)		6.16
Cancelled		(10,535,000	)		5.17		—			—
Expired		(340,000	)		5.47		(15,000	)		5.01
Outstanding, September 30,		19,000,000			1.85		17,815,000			4.27
Exercisable, September 30,		3,035,000			0.51		1,391,000			0.41

The weighted average contractual life of the stock options as of September 30, 2023 was 4.0 years (September 30, 2022: 4.0 years).

The inputs used to value the option grants using the Black-Scholes model are as follows:

Grant date	June 30, 2023
Dividend yield (%)	—
Expected share price volatility (%)		104	%
Risk-free interest rate (%)		4.49	%
Expected life of stock options (years)		3
Share price (CAD)		1.89
Exercise price (CAD)		1.89
Fair value of options (USD)		0.89
Vesting period (years)		1.5
Number of options granted		8,471,000

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 and digital assets - unaudited)

NOTE 21:

SHARE-BASED PAYMENT (Continued)

Restricted Unit Shares (“RSU”)

Details of the RSUs are as follows:

	Nine months ended September 30,
	2023					2022
	Number of RSUs			Weighted Average Grant Price ($CAD)		Number of RSUs		Weighted Average Grant Price ($CAD)
Outstanding, January 1,		400,000			3.73		200,000		5.01
Granted		—			—		200,000		2.45
Settled		(142,000	)		3.65		—		—
Outstanding, September 30,		258,000			3.77		400,000		3.73

On May 19, 2022, the Board of Directors approved the grant of 200,000 RSUs to certain members of senior management which vest 25% upfront and an additional 25% every 6 months. The value of the RSUs on the grant date was $1.91 per unit.

NOTE 22:

ADDITIONAL DETAILS TO THE STATEMENT OF PROFIT OR LOSS AND COMPREHENSIVE PROFIT OR LOSS

Cost of revenues

	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Energy and infrastructure		20,396		15,489		57,339		38,970
Depreciation and amortization		21,767		20,720		62,995		51,643
Purchases of electrical components		890		688		1,830		1,252
Electrician salaries and payroll taxes		409		289		1,220		924
		43,462		37,186		123,384		92,789

General and administrative expenses

	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Salaries and share-based payment		4,939		6,097		15,136		23,648
Professional services		1,795		1,835		5,325		6,459
Insurance, duties and other		1,165		1,992		4,077		7,951
Travel, motor vehicle and meals		295		233		678		894
Hosting and telecommunications		105		110		311		431
Advertising and promotion		73		32		360		151
		8,372		10,299		25,887		39,534

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 and digital assets - unaudited)

NOTE 22:

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

Net financial income

		Three months ended September 30,						Nine months ended September 30,
	Notes	2023			2022			2023			2022
Gain on disposition of marketable securities	a		(4,120	)		(13,690	)		(11,246	)		(44,332	)
Gain on extinguishment of long-term debt and lease liabilities	b		—			—			(12,835	)		—
Loss on foreign exchange			2,070			8			5,059			1,884
Interest on credit facility and long-term debt			481			3,020			2,405			9,916
Discount expense on VAT receivable	c		1,046			1,919			2,748			6,929
Interest on lease liabilities			334			374			1,053			1,034
Other financial (income) expenses			(147	)		118			110			378
			(336	)		(8,251	)		(12,706	)		(24,191	)

Gain on disposition of marketable securities

During the three and nine months ended September 30, 2023 and 2022, the Company funded its expansion in Argentina through the acquisition of marketable securities and 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.

Gain on extinguishment of the BlockFi loan and Reliz lease liability

In February 2023, the Company negotiated a settlement of its loan agreement with BlockFi with a then outstanding debt balance of $20,330 for a payment of $7,750. As a result, a gain on extinguishment of long-term debt was recognized in the amount of $12,580 during the nine months ended September 30, 2023.

In February 2023, the Company modified its lease agreement with Reliz Ltd. in order to settle its outstanding lease liability of $373 for a payment of $118. As a result, a gain on extinguishment of lease liabilities was recognized in the amount of $255 during the nine months ended September 30, 2023.

Discount expense on VAT receivable

A portion of the Argentine VAT receivable is not expected to be settled within the next 12 months and, therefore, it has been classified as a long-term receivable in Note 11 with the short-term portion being included in sales tax receivable in Note 6. The Company has discounted this VAT receivable to its present value. The discounted amount is classified within Net financial income during the three and nine months ended September 30, 2023. Historically, ARS has devalued significantly when compared to USD due to high levels of inflation in Argentina, which may result in the Company recording future foreign exchange losses on its Argentina VAT receivable.

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 and digital assets - unaudited)

NOTE 23:

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 September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Canada		24,230		27,445		74,177		90,540
USA		3,491		4,581		11,675		21,650
Argentina		5,129		158		9,221		158
Paraguay		1,746		1,063		5,052		3,043
		34,596		33,247		100,125		115,391

* Revenues are presented based on the geographical contribution of computational power (measured by hashrate) or sales to external customers.

Property, Plant and Equipment

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

	As of September 30,		As of December 31,
	2023		2022
Canada		111,051		142,654
USA		23,527		32,664
Argentina		58,507		31,927
Paraguay		10,367		12,183
		203,452		219,428

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 and digital assets - unaudited)

NOTE 24:

ADDITIONAL DETAILS TO THE STATEMENTS OF CASH FLOWS

	Nine months ended September 30,
	2023			2022
Changes in working capital components:
Increase in trade receivables, net		(456	)		(377	)
Decrease (increase) in other current assets		(831	)		1,364
Decrease (increase) in deposits		3,309			(8,997	)
Decrease in trade payables and accrued liabilities		(3,289	)		(3,992	)
Decrease in taxes payable		(290	)		(402	)
		(1,557	)		(12,404	)
Significant non-cash transactions:
Issuance of common shares in connection with acquisitions of assets		1,354			—
Addition of ROU assets, property, plant and equipment and related lease liabilities		1,527			9,182
Purchase of property, plant and equipment financed by short-term credit		674			1,910
Equipment prepayments realized as additions to property, plant and equipment		6,331			51,948
Deferred tax expense related to equity issuance costs		—			(3,895	)

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Exhibit 99.2

Management’s Discussion & Analysis

For the three and nine months ended September 30, 2023

2023

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

TABLE OF CONTENTS

1.	Introduction	3
2.	Company Overview	4
3.	Financial Highlights	5
4.	Third Quarter 2023 Financial Results and Operational Highlights	6
5.	Production and Mining Operations	7
6.	Expansion Projects	9
7.	Financial Performance	13
8.	Selected Quarterly Information	23
9.	Non-IFRS and Other Financial Measures and Ratios	24
10.	Liquidity and Capital Resources	31
11.	Financial Position	40
12.	Financial Instruments	41
13.	Related Party Transactions	42
14.	Internal Controls Over Financial Reporting	42
15.	Share Capital	42
16.	Risk Factors	43
17.	Significant Accounting Estimates	49
18.	Significant Accounting Policies and New Accounting Policies	49
19.	Cautionary Note Regarding Forward-Looking Statements	49
20.	Cautionary Note Regarding Non-IFRS and Other Financial Measures and Ratios	51
21.	Additional Information	51
22.	Glossary of Terms	52

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

1. INTRODUCTION

The following Management’s Discussion and Analysis (the “MD&A”) for Bitfarms Ltd. (together with its subsidiaries, the “Company” or “Bitfarms”) has been prepared as of November 6, 2023. This MD&A is intended to supplement the Company’s third quarter 2023 unaudited interim condensed consolidated financial statements and its accompanying notes (the “Financial Statements”), and the Company’s 2022 audited annual consolidated financial statements and its accompanying notes (the “2022 Annual Financial Statements”). This MD&A should be read in conjunction with the Company’s Annual Information Form dated March 20, 2023, which is available on SEDAR at www.sedarplus.ca and EDGAR at www.sec.gov/edgar.

The Company’s Financial Statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”), including IAS 34, Interim Financial Reporting. The Company’s Financial Statements and this MD&A are reported in thousands of US dollars and US dollars, respectively, except where otherwise noted.

Bitfarms’ management team (“Management”) is responsible for the preparation and integrity of the Financial Statements including the maintenance of appropriate information systems, procedures and internal controls. Management is also responsible for ensuring that information disclosed externally, including the Financial Statements and MD&A, is complete and reliable.

The Company utilizes a number of non-IFRS financial measures and ratios in assessing operating performance. Non-IFRS financial measures and ratios may exclude the impact of certain items and are used internally when analyzing operating performance. Refer to Section 9 - Non-IFRS and Other Financial Measures and Ratios and Section 20 - Cautionary Note Regarding Non-IFRS and Other Financial Measures and Ratios of this MD&A for more information.

This MD&A contains forward-looking statements. Refer to the risk factors described in Section 16 - Risk Factors of this MD&A, Section 18 - Risk Factors of the Company’s MD&A for the year ended December 31, 2022 dated March 20, 2023 and to Section 19 - Cautionary Note Regarding Forward-Looking Statements of this MD&A for more information. This MD&A contains various terms related to the Company’s business and industry which are defined in Section 22 - Glossary of Terms of this MD&A.

In this MD&A, the following terms shall have the following definitions:

Term		Definition
Q3 2023		Three months ended September 30, 2023
Q3 2022		Three months ended September 30, 2022
YTD Q3 2023		Nine months ended September 30, 2023
YTD Q3 2022		Nine months ended September 30, 2022

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

2. COMPANY OVERVIEW

Founded in 2017, Bitfarms (NASDAQ/TSX: BITF) is a global, publicly traded Bitcoin mining company. Bitfarms runs vertically integrated mining operations with in-house management system and company-owned electrical engineering, installation service, and onsite technical repair. The Company’s proprietary data analytics system delivers best-in-class operational performance and uptime.

Bitfarms owns and operates server farms comprised of computers (referred to as “Miners”) designed for the purpose of validating transactions on the Bitcoin (“BTC”) Blockchain (referred to as “Mining”). Bitfarms generally operates its Miners 24 hours a day, which produce computational power (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 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 hashrate may be in cryptocurrency, U.S. dollars, or another currency. Bitfarms accumulates the cryptocurrency fees it receives or exchanges them for U.S. dollars through reputable and established cryptocurrency trading platforms. Mining Pools generate revenue by Mining with purchased hashrate through the accumulation of Block Rewards and transaction fees issued by the BTC network. Mining Pools purchase hashrate and accept the risk of rewards not being commensurate with compensation paid with the aim to mine more blocks than they should in a given time period based on the computational power they have acquired.

Bitfarms currently has 11 operating Mining facilities situated in four countries: Canada, the United States, Argentina and Paraguay. Powered predominately by environmentally friendly hydro-electric and long-term power contracts, Bitfarms is committed to using sustainable, locally-based and often underutilized energy infrastructure.

The Company’s ability to operate and secure power through its production sites is summarized as follows:

Country	Operating power as of November 6, 2023	Contracted power as of November 6, 2023
Canada	158 MW	179 MW	^1, 2
United States	18 MW	24 MW	²
Paraguay	10 MW	160 MW	²
Argentina	54 MW	210 MW	²
	240 MW	573 MW

¹	The Company has secured the rights for 10 MW of hydro-electricity in the province of Quebec, but does not currently have an expansion plan for these 10 MW of power. Bitfarms is continuing its efforts to search for economically viable properties for these 10 MW of hydro-electricity.
²	Refer to section 6 - Expansion Projects for details on the timing of the remaining MW not yet operational.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

3. FINANCIAL HIGHLIGHTS

	Three months ended September 30,						Nine months ended September 30,
(U.S.$ in thousands except where indicated)	2023			2022			2023			2022
Revenues		34,596			33,247			100,125			115,391
Gross (loss) profit		(8,866	)		(3,939	)		(23,259	)		22,602
Gross margin ⁽¹⁾		(26	)%		(12	)%		(23	)%		20	%
Operating loss		(18,638	)		(97,784	)		(59,392	)		(264,001	)
Operating margin ⁽¹⁾		(54	)%		(294	)%		(59	)%		(229	)%
Net loss		(18,703	)		(84,808	)		(46,663	)		(222,207	)
Basic and diluted loss per share		(0.07	)		(0.40	)		(0.19	)		(1.09	)
Gross Mining profit ⁽²⁾		12,505			16,789			39,017			74,089
Gross Mining margin ⁽²⁾		38	%		52	%		40	%		66	%
Adjusted EBITDA ⁽²⁾		6,866			10,325			21,107			52,326
Adjusted EBITDA margin ⁽²⁾		20	%		31	%		21	%		45	%

	As of September 30,		As of December 31,
	2023		2022
Total assets		332,797		343,098
Current financial liabilities		17,534		55,951
Non-current financial liabilities		108		4,093
Long-term debt included in financial liabilities		10,021		47,147

There have not been any distributions or cash dividends declared per share for the periods disclosed above.

¹	Gross margin and Operating margin are supplemental financial ratios; refer to section 9 - Non-IFRS and Other Financial Measures and Ratios.
²	Gross Mining profit, Gross Mining margin, Adjusted EBITDA and Adjusted EBITDA margin are non-IFRS measures or ratios; refer to section 9 - Non-IFRS and Other Financial Measures and Ratios.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

4. THIRD QUARTER 2023 FINANCIAL RESULTS AND OPERATIONAL HIGHLIGHTS

Financial

●

Revenues of $34.6 million, gross loss of $8.9 million (gross margin¹ of negative 26%) including non-cash depreciation and amortization expense of $21.8 million, operating loss of $18.6 million (operating margin¹ of negative 54%) and net loss of $18.7 million;

●

Gross Mining profit² of $12.5 million (38% gross Mining margin²); and

●

Adjusted EBITDA² of $6.9 million (20% adjusted EBITDA margin²).

Operations

●

Earned 1,172 BTC at an average direct cost of $16,900 per BTC² or an average total cash cost of $22,700 per BTC²and held 703 BTC valued at approximately $19.0 million as of September 30, 2023;

●

Increased hashrate from 5.3 EH/s to 6.1 EH/s through the installation of approximately 10,400 additional Miners; and

●

Sold 1,018 BTC at an average price of $27,900 per BTC for total proceeds of $28.4 million, a portion of which was used to repay equipment-related indebtedness.

Expansions

●

Fully utilized remaining Miner manufacturer credits of $19.1 million for the purchase of nine MicroBT hydro containers, with a total capacity of 20 MW, and approximately 2,000 MicroBT M53S+ hydro Miners to be deployed in Paraguay and Quebec.

Argentina

●

Imported and installed approximately 1,300 new M50 Whatsminer Miners, 700 new S19j Pro Antminer Miners and 5,500 new S19j Pro+ Antminer Miners, which increased capacity to 51 MW and added approximately 0.8 EH/s to the Rio Cuarto facility, bringing its total hashrate to approximately 1.5 EH/s.

Canada

●

Acquired 22 MW of hydro power capacity and leased a site in Baie-Comeau, Quebec and operated 5 MW at the end of September 2023;

●

Installed approximately 2,500 Miners in Baie-Comeau, Quebec that were redeployed from Magog, Quebec; and

●

Imported and installed approximately 2,900 new Antminer S19j Pro+ Miners in Magog, Quebec, which added a net 110 PH/s after replacing the older generation Miners, and bringing its total hashrate to approximately 330 PH/s.

Paraguay

●

Acquired two power purchase agreements for up to 50 MW and 100 MW of hydro power capacity in Paso Pe and Yguazu, respectively, and started construction of the Paso Pe facility.

Financing

●

Paid down $5.7 million in equipment-related indebtedness, reducing the total outstanding balance to $9.9 million as of September 30, 2023; and

●

Raised $30.9 million in net proceeds through the Company’s at-the-market equity offering program.

¹	Gross margin and Operating margin are supplemental financial ratios; refer to section 9 - Non-IFRS and Other Financial Measures and Ratios.
²	Gross Mining profit, Gross Mining margin, Adjusted EBITDA, Adjusted EBITDA margin, Direct Cost per BTC and Total Cash Cost per BTC are non-IFRS measures or ratios; refer to section 9 - Non-IFRS and Other Financial Measures and Ratios.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

5. PRODUCTION AND MINING OPERATIONS

Key Performance Indicators

	Three months ended September 30,							Nine months ended September 30,
	2023		2022		% Change			2023		2022		% Change
Total BTC earned		1,172		1,515		(23	)%		3,692		3,733		(1	)%
Average Watts/Average TH efficiency*		36		38		(5	)%		36		39		(8	)%
BTC sold		1,018		2,595		(61	)%		3,394		5,970		(43	)%

* Average Watts represents the energy consumption of Miners

Q3 2023 v. Q3 2022

●

1,172 BTC earned in Q3 2023, compared to 1,515 BTC earned in Q3 2022, representing a decrease of 23% as a result of an 82% increase in average network difficulty, partially offset by an increase in hashrate from the Company’s expansions and the upgrade of its Miner fleet;

●

36 Watts/TH efficiency in Q3 2023, compared to 38 Watts/TH efficiency in Q3 2022, representing an improvement of 5% due to the Company upgrading its fleet with more efficient Miners; and

●

1,018 BTC sold in Q3 2023, compared to 2,595 BTC in Q3 2022. In Q3 2023, the proceeds were used in part to fund operations and repay equipment financing indebtedness, whereas in Q3 2022, the proceeds were mainly used to repay part of the BTC backed credit facility for $15.0 million, fund operations and to manage liquidity.

YTD Q3 2023 v. YTD Q3 2022

●

3,692 BTC earned during YTD Q3 2023, compared to 3,733 BTC earned during YTD Q3 2022, representing a decrease of only 1% from the previous year;

●

36 Watts/TH efficiency during YTD Q3 2023, compared to 39 Watts/TH efficiency during YTD Q3 2022, an improvement of 8% due to the Company upgrading its fleet with more efficient Miners; and

●

3,394 BTC sold in YTD Q3 2023, compared to 5,970 BTC in YTD Q3 2022. The proceeds were used for the same purposes as those explained in the Q3 2023 v. Q3 2022 section above.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

5. PRODUCTION AND MINING OPERATIONS (Continued)

Key Performance Indicators (Continued)

	As of September 30,
	2023			2022			% Change
Period-end operating EH/s		6.1			4.2			45	%
Period-end operating capacity (MW)		234			176			33	%
Hydro power (MW)		183			166			10	%
Hydro power proportion of period-end operating capacity		78	%		94	%		(16	)%

As of September 30, 2023 v. as of September 30, 2022

●

6.1 EH/s online as of September 30, 2023, compared to 4.2 EH/s online as of September 30, 2022, an increase of 45%, as a result of the Company’s expansions in Sherbrooke (Quebec), Baie-Comeau (Quebec) and Rio Cuarto (Argentina) as well as the upgrade of its Miner fleet;

●

234 MW operating capacity as of September 30, 2023, compared to 176 MW operating capacity as of September 30, 2022, an increase of 33%, as a result of expansion in Sherbrooke mainly related to phase three of the Bunker that was completed in November 2022 (resulting in an additional 12 MW), the installation of approximately 12,600 Miners in Rio Cuarto, Argentina in Q2 and Q3 2023 (resulting in an aggregate 41 MW) and the expansion in Baie-Comeau (resulting in an additional 5 MW); and

●

183 MW hydro power as of September 30, 2023, compared to 166 MW hydro power as of September 30, 2022, an increase of 10% as a result of the Company’s expansion in Sherbrooke mainly related to phase three of the Bunker, and representing 78% of the Company’s total operating energy capacity.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

6. EXPANSION PROJECTS

The Company has described its expansion plans below under the sections entitled “Argentina Expansion”, “Paraguay Expansion”, “Washington Expansion” and “Baie-Comeau Expansion”. These expansion projects only include updates for 2023. For background or historical information on these expansions, refer to the Company’s MD&A for the year ended December 31, 2022, dated March 20, 2023.

As of September 30, 2023, the Company operated 6.1 EH/s, achieving its Q3 2023 target of 6.3 EH/s in October 2023, due to some electrical infrastructure vendor delays that pushed back the Baie-Comeau, Quebec facility’s full installation by a few weeks. The Company’s ending hashrate target for March 31, 2024, including the current partial deployment in Paraguay, is set at 7.0 EH/s. The Company continues to evaluate opportunities that will expand its infrastructure and Mining hardware to increase the Company’s hashrate, provided such opportunities are accretive based on current macro factors and specific performance.

The estimated costs and timelines to achieve these expansion plans may change based on, among other factors, the prevailing price of BTC, network difficulty, supply and cost of cryptocurrency Mining equipment, the ability to import equipment into countries in a cost-effective manner, the supply of electrical and other supporting infrastructure equipment, the availability of construction materials, currency exchange rates, the impact of geopolitical events or global health related issues such as pandemics on the supply chains described above, and the Company’s ability to fund its initiatives. The Company’s expansion plans rely on a consistent supply of electricity at cost-effective rates; refer to Section 18 - Risk Factors (Section Economic Dependence on Regulated Terms of Service and Electricity Rates Risks) of the Company’s MD&A for the year ended December 31, 2022, dated March 20, 2023 for further details, including a description of these and other factors.

Argentina Expansion

2023 update

In February 2023, Management elected to postpone the development of additional infrastructure in Argentina until (i) the increased power permit is obtained by the private Argentinian power producer, (ii) the importation limitations are resolved and (iii) natural gas prices stabilize at an acceptable level.

In April 2023, in anticipation of the power permit approval, the Company, using credits and cash, purchased over 6,200 new Bitmain and MicroBT Miners to fill out an additional 22 MW in the Argentinian facility. These new Miners, when fully installed as expected in the third quarter of 2023, were projected to improve the overall w/TH efficiency and generate a total 1.3 EH/s at the Argentina facility.

In April 2023, the Company confirmed the receipt of the necessary power permits by the private Argentinian power producer to expand production at its Argentina facility. The Company completed testing of its Rio Cuarto substation, which is now online.

In April 2023, the Company began to draw power from the private power producer and installed 2,100 new Miners that were delivered in March and April 2023. Energizing these miners and ending underclocking of previously installed miners in line with improved economics increased the active capacity to 18 MW and the Company’s operational hashrate to over 5.0 EH/s.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

6. EXPANSION PROJECTS (Continued)

Argentina Expansion (Continued)

2023 update (Continued)

Drawing power from the private Argentinian power producer enabled the Company to commence purchasing low-cost power under its purchase agreement at approximately $0.03 per kWh, before VAT, on an annualized basis, or possibly less as the Company reaches full capacity at the facility. The Company expects the cost of BTC earned at this farm to decrease substantially as it actively scales up operations at the facility.

In June 2023, 1,650 new high efficiency BTC Miners were purchased for Argentina at an average direct cost of $12.98/TH, in addition to the 6,200 Miners purchased in April 2023. In addition, 2,900 MicroBT Miners were delivered, installed and energized, contributing an additional 290 PH/s and driving the Company’s operational hashrate to 5.3 EH/s as of June 30, 2023.

In August and September 2023, approximately 1,300 new M50 Whatsminer miners, 700 new S19j Pro Antminer Miners and 5,500 new S19j Pro+ Antminer Miners were imported and installed, increasing the warehouse’s capacity to 51 MW and operational hashrate to 1.5 EH/s.

The Company retains the option, subject to the receipt of additional government approvals, to build out other facilities in Argentina to the full contracted amount of 210 MW. Due to changing economic, financial and political conditions in Argentina, the Company is not yet in a position to determine when or if construction of additional infrastructure in Argentina will commence.

Position as of September 30, 2023

As of September 30, 2023, the Company had placed deposits of $4.5 million with suppliers for existing and additional construction work. Overall, in Argentina, the Company has also acquired $62.5 million of property, plant and equipment, incurred $0.3 million of expenditures relating to design and feasibility studies and recorded cumulative gains on the disposition of marketable securities of $69.0 million associated with the mechanism to convert funds into Argentine Pesos for disbursements.

Paraguay Expansion

2023 update

In January 2023, all of the older generation Miners at the Villarrica facility were replaced with approximately 2,900 new M30S Whatsminer Miners generating approximately 290 PH/s, a 165 PH/s increase, or 132%, compared to the hashrate that was being produced by the older generation Miners. During the three months ended March 31, 2023, the Company sold the older generation Miners to a third party for approximately $0.2 million.

In July 2023, the Company acquired two power purchase agreements in Paraguay for up to 150 MW of eco-friendly hydro power: up to 50 MW in Villarrica, in close proximity to the Company’s existing operations in Paraguay, and up to 100 MW in Yguazu, a new location close to the Itaipu dam, the third largest hydro-electric dam in the world. The new facility in Villarrica is referred to as the Paso Pe facility. At Yguazu, the Company has the opportunity to develop a new farm with up to 100 MW of Mining capacity, the timeline for which is being determined. Hydro power at both locations will be provided at a contracted cost of approximately $0.039 per kWh, before VAT, until December 31, 2027 and is not subject to annual inflationary adjustments.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

6. EXPANSION PROJECTS (Continued)

Paraguay Expansion (Continued)

Paso Pe facility

In August 2023, the Company placed orders using vendor credits for eight 2.4 MW hydro containers and approximately 1,900 hydro-cooling Miners capable of producing approximately 675 PH/s once installed.

In September 2023, construction commenced as planned at the Paso Pe facility, beginning with an 80 MW substation, followed by building-out a Mining facility consisting of 30 MW of air-cooled warehouses and the 20 MW of hydro containers, expected to be completed during the first quarter of 2024.

The cost of developing the 30 MW of air-cooled warehouse, constructing an 80 MW substation capable of accommodating the current 50 MW requirement with capacity for expansion, and the installation of the high voltage lines, is estimated to range from $16.0 million to $19.0 million.

Position as of September 30, 2023

As of September 30, 2023, the Company had placed deposits of $2.0 million and $1.5 million with suppliers for construction costs and for electrical components, respectively.

Paraguayan laws regulating crypto-assets activities

On July 18, 2022, the Paraguayan Congress approved a bill regulating the Mining, trading, intermediation, exchange, transfer, custody and administration of crypto-assets and instruments. The proposed legislation by the Paraguayan Congress aimed to create an attractive regulatory environment within the country through the establishment of a straightforward licensing regime with clear requirements for operating crypto-assets activities in the country. On August 30, 2022, the proposed law was vetoed by the Paraguayan president and returned to the Paraguayan Congress to be modified and potentially resubmitted.

It is unknown if and when a new law will be approved. The absence of specific law in Paraguay regarding crypto assets has not materially impacted the Company’s current operations in the country. National elections took place on April 30, 2023, and the country’s new president, from the same political party as his predecessor, was inaugurated on August 15, 2023.

Washington Expansion

2023 update

In April 2023, the Company received approval from the power supplier for 6 MW that is estimated to be energized in the first quarter of 2024. The Company began constructing another facility on Company-owned land in June 2023 with an estimated cost of $2.1 million, including $0.9 million paid in Q2 2023 to the power supplier for establishing the connection.

In July 2023, the Company de-energized its 2 MW immersion cooling pilot project as the equipment did not perform to the Company’s expectations of performance and costs. The 2 MW of hydro-electricity remains available to the Company to use in the future.

In September 2023, the Company upgraded ventilation and cooling systems, increasing average uptime.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

6. EXPANSION PROJECTS (Continued)

Baie-Comeau (Canada) Expansion

Background

In April 2023, the Company entered into agreements to acquire shares of a Company that owns the right to consume 22 MW of hydro power capacity in Baie-Comeau, Quebec, and to lease a site to install the infrastructure to operate the acquired capacity. The 22 MW facility could add over 600 PH/s when in full production. The Baie-Comeau area is home to five hydro-electricity generation facilities with over 5.4 gigawatts of nameplate capacity. Adding reliable hydro power is part of the Company’s strategy to cost-effectively expand its operating footprint.

In July 2023, the Company completed the acquisition. The consideration transferred at closing totaled $2.0 million (CAD$2.6 million), of which $0.6 million (CAD$0.8 million) was paid in cash and $1.4 million (CAD$1.8 million) was paid through the issuance of 821,000 common shares of the Company. The lease agreement is for an industrial site in Baie-Comeau for an initial term of 10 years and provides the Company with the option to purchase the site for $2.2 million (CAD $3.0 million) with an annual adjustment at the lesser of (i) the change in the Consumer Price Index and (ii) 3% throughout the lease term.

2023 and 2024 plan

Following the closing of the acquisition, the Company immediately commenced production at Baie-Comeau with an initial 3 MW online. In connection with the acquisition, the Company increased its total hashrate target to 6.3 EH/s, which was achieved on October 20, 2023.

The Company plans to minimize development-related and build-out expenditures by relocating miners from other facilities to Baie-Comeau and by applying infrastructure equipment repurposed from the December 2022 sale of the former De La Pointe facility. In June and August 2023, approximately 2,500 Whatsminer M31S+ miners were redeployed from Magog and installed at the Baie-Comeau facility.

The Company fully energized the 11 MW facility on October 20, 2023 and is planning to commission the remaining 11 MW during the second half of 2024 after local grid infrastructure improvements have been completed. The cost of electrical infrastructure and leasehold improvements for the first 11 MW of the facility totaled $2.8 million.

The Company plans to continue to lease the property and complete the physical improvements for the second 11 MW by the third quarter of 2024. The Company expects the total cost to be approximately $9.2 million, including $3.9 million for the leasehold improvements, which will involve the construction of a new building and $2.5 million for the electrical infrastructure.

As of September 30, 2023, the Company has $4.0 million of property, plant and equipment relating to the Baie-Comeau facility, including infrastructure equipment that was repurposed from other facilities.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

7. FINANCIAL PERFORMANCE

Consolidated Financial & Operational Results

	Three months ended September 30,												Nine months ended September 30,
(U.S.$ in thousands except where indicated)	2023			2022			$ Change			% Change			2023			2022			$ Change			% Change

Revenues		34,596			33,247			1,349			4	%		100,125			115,391			(15,266	)		(13	)%
Cost of revenues		43,462			37,186			6,276			17	%		123,384			92,789			30,595			33	%
Gross (loss) profit		(8,866	)		(3,939	)		(4,927	)		125	%		(23,259	)		22,602			(45,861	)		(203	)%
Gross margin ⁽¹⁾		(26	)%		(12	)%		—			—			(23	)%		20	%		—			—
Operating expenses
General and administrative expenses		8,372			10,299			(1,927	)		(19	)%		25,887			39,534			(13,647	)		(35	)%
Realized loss on disposition of digital assets		—			44,329			(44,329	)		(100	)%		—			122,243			(122,243	)		(100	)%
(Reversal of) revaluation loss on digital assets		1,183			(45,655	)		46,838			103	%		(1,512	)		21,118			(22,630	)		(107	)%
Loss on disposition of property, plant and equipment		217			756			(539	)		(71	)%		1,776			1,692			84			5	%
Impairment on short-term prepaid deposits, equipment and construction prepayments, property, plant and equipment and right-of-use assets		—			84,116			(84,116	)		(100	)%		9,982			84,116			(74,134	)		(88	)%
Impairment on goodwill		—			—			—			—	%		—			17,900			(17,900	)		(100	)%
Operating loss		(18,638	)		(97,784	)		79,146			(81	)%		(59,392	)		(264,001	)		204,609			(78	)%
Operating margin ⁽¹⁾		(54	)%		(294	)%		—			—			(59	)%		(229	)%		—			—
Net financial income		(336	)		(8,251	)		7,915			(96	)%		(12,706	)		(24,191	)		11,485			(47	)%
Net loss before income taxes		(18,302	)		(89,533	)		71,231			(80	)%		(46,686	)		(239,810	)		193,124			(81	)%
Income tax expense (recovery)		401			(4,725	)		5,126			108	%		(23	)		(17,603	)		17,580			(100	)%
Net loss		(18,703	)		(84,808	)		66,105			(78	)%		(46,663	)		(222,207	)		175,544			(79	)%
Basic and diluted loss per share (in U.S. dollars)		(0.07	)		(0.40	)		—			—			(0.19	)		(1.09	)		—			—
Change in revaluation surplus - digital assets, net of tax		(824	)		—			(824	)		(100	)%		1,567			—			1,567			100	%
Total comprehensive loss, net of tax		(19,527	)		(84,808	)		65,281			(77	)%		(45,096	)		(222,207	)		177,111			(80	)%
Gross Mining profit ⁽²⁾		12,505			16,789			(4,284	)		(26	)%		39,017			74,089			(35,072	)		(47	)%
Gross Mining margin ⁽²⁾		38	%		52	%		—			—			40	%		66	%		—			—
EBITDA ⁽²⁾		4,280			(65,419	)		69,699			107	%		19,767			(177,217	)		196,984			111	%
EBITDA margin ⁽²⁾		12	%		(197	)%		—			—			20	%		(154	)%		—			—
Adjusted EBITDA ⁽²⁾		6,866			10,325			(3,459	)		(34	)%		21,107			52,326			(31,219	)		(60	)%
Adjusted EBITDA margin ⁽²⁾		20	%		31	%		—			—			21	%		45	%		—			—

¹	Gross margin and Operating margin are supplemental financial ratios; refer to section 9 - Non-IFRS and Other Financial Measures and Ratios.
²	Gross Mining profit, Gross Mining margin, EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-IFRS measures or ratios; refer to section 9 - Non-IFRS and Other Financial Measures and Ratios.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

7. FINANCIAL PERFORMANCE (Continued)

Revenues

Q3 2023 v. Q3 2022

Revenues were $34.6 million in Q3 2023, compared to $33.2 million in Q3 2022, an increase of $1.3 million, or 4%.

The most significant factors impacting the increase in Bitfarms’ revenues in Q3 2023, compared to Q3 2022, are presented in the table below. Revenues increased mostly due to the increase in average Bitfarms’ BTC hashrate and average BTC price, partially offset by lower BTC earned as a result of the increase in network difficulty.

(U.S. $ in thousands except where indicated)	Note		BTC			$			% Change
BTC and revenues, including Volta, for the three months ended September 30, 2022				1,515			33,247			—
Impact of increase in network difficulty during Q3 2023 as compared to Q3 2022		1		(953	)		(26,568	)		(80	)%
Impact of increase in average Bitfarms’ BTC hashrate during Q3 2023 as compared to Q3 2022		2		610			16,964			51	%
Impact of difference in average BTC price in Q3 2023 as compared to Q3 2022		3					10,227			31	%
Other Mining variance and change in Volta							726			2	%
BTC and revenues for the three months ended September 30, 2023				1,172			34,596			4	%

Notes
1	Calculated as the difference in BTC earned in Q3 2023 compared to Q3 2022, based on the change in network difficulty, multiplied by Q3 2023 average BTC price
2	Calculated as the difference in BTC earned in Q3 2023 compared to Q3 2022, based on the change in Bitfarms' average BTC hashrate, multiplied by Q3 2023 average BTC price
3	Calculated as the difference in average BTC price in Q3 2023 compared to Q3 2022 multiplied by BTC earned in Q3 2022

The following tables summarize the Company’s revenues and average hashrate by country:

	Three months ended September 30,
(U.S.$ in thousands except where indicated)	2023		2022		$ Change			% Change
Canada		24,230		27,445		(3,215	)		(12	)%
USA		3,491		4,581		(1,090	)		(24	)%
Argentina		5,129		158		4,971			3146	%
Paraguay		1,746		1,063		683			64	%
		34,596		33,247		1,349			4	%

	Three months ended September 30,
(Hashrate in EH/s except where indicated)	2023		2022		Change		% Change
Canada		3.6		3.1		0.5		16	%
USA		0.6		0.6		—		—	%
Argentina		0.8		—		0.8		100	%
Paraguay		0.3		0.1		0.2		200	%
		5.3		3.8		1.5		39	%

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

7. FINANCIAL PERFORMANCE (Continued)

Revenues (Continued)

Q3 2023 v. Q3 2022 (Continued)

The Company’s Canadian operations accounted for a smaller portion of total revenues in Q3 2023 largely due to the expansion of operations in Argentina. Bitfarms earned the majority of its revenues from its Canadian operations in Q3 2023, which accounted for 70% of total revenues, compared to 83% in Q3 2022. The Argentina, USA and Paraguay operations accounted for 15%, 10% and 5% of total revenues in Q3 2023, respectively, compared to nil, 14% and 3% in Q3 2022, respectively. For the Canadian operations, the impact of the increase in network difficulty was partially offset by the increase in average BTC price and the average hashrate increase of 0.5 EH/s, or 16%, which resulted in revenues decreasing by $3.2 million during Q3 2023 as compared to Q3 2022. Revenues from the Company’s USA operations decreased by $1.1 million in Q3 2023 as compared to Q3 2022 due to the increase in network difficulty, which was partially offset by the increase in average BTC price. The average hashrate increase of the Argentina and Paraguay operations of 0.8 EH/s, or 100%, and 0.2 EH/s, or 200%, respectively, resulted in Q3 2023 revenues from the Company’s operations in those jurisdictions increasing by $5.0 million and $0.7 million, respectively, compared to Q3 2022.

YTD Q3 2023 v. YTD Q3 2022

Revenues were $100.1 million in YTD Q3 2023, compared to $115.4 million in YTD Q3 2022, a decrease of $15.3 million, or 13%.

The most significant factors impacting the decrease in Bitfarms’ revenues in YTD Q3 2023, compared to YTD Q3 2022, are presented in the table below. Revenues decreased mostly due to the increase in network difficulty and the decrease in average BTC price, partially offset by the increase in average Bitfarms’ hashrate.

(U.S. $ in thousands except where indicated)	Note		BTC			$			% Change
BTC and revenues, including Volta, for the nine months ended September 30, 2022				3,733			115,391			—
Impact of increase in network difficulty during YTD Q3 2023 as compared to YTD Q3 2022		1		(2,294	)		(60,321	)		(52	)%
Impact of increase in average Bitfarms’ BTC hashrate during YTD Q3 2023 as compared to YTD Q3 2022		2		2,253			58,334			51	%
Impact of difference in average BTC price in YTD Q3 2023 as compared to YTD Q3 2022		3					(14,712	)		(13	)%
Other Mining variance and change in Volta							1,433			1	%
BTC and revenues for the nine months ended September 30, 2023				3,692			100,125			(13	)%

Notes
1	Calculated as the difference in BTC earned in YTD Q3 2023 compared to YTD Q3 2022, based on the change in network difficulty, multiplied by YTD Q3 2023 average BTC price
2	Calculated as the difference in BTC earned in YTD Q3 2023 compared to YTD Q3 2022, based on the change in Bitfarms' average BTC hashrate, multiplied by YTD Q3 2023 average BTC price
3	Calculated as the difference in average BTC price in YTD Q3 2023 compared to YTD Q3 2022 multiplied by BTC earned in YTD Q3 2022

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

7. FINANCIAL PERFORMANCE (Continued)

Revenues (Continued)

YTD Q3 2023 v. YTD Q3 2022 (Continued)

The following tables summarize the Company’s revenues and average hashrate by country:

	Nine months ended September 30,
(U.S.$ in thousands except where indicated)	2023		2022		$ Change			% Change
Canada		74,177		90,540		(16,363	)		(18	)%
USA		11,675		21,650		(9,975	)		(46	)%
Argentina		9,221		158		9,063			5736	%
Paraguay		5,052		3,043		2,009			66	%
		100,125		115,391		(15,266	)		(13	)%

	Nine months ended September 30,
(Hashrate in EH/s except where indicated)	2023		2022		Change		% Change
Canada		3.6		2.4		1.2		50	%
USA		0.6		0.6		—		—	%
Argentina		0.5		—		0.5		100	%
Paraguay		0.2		0.1		0.1		100	%
		4.9		3.1		1.8		58	%

The Company’s Canadian operations accounted for a smaller proportion of total revenues in YTD Q3 2023 largely due to the expansion of operations in Argentina. Bitfarms earned the majority of its revenues from its Canadian operations in YTD Q3 2023, which accounted for 74% of total revenues, compared to 78% in YTD Q3 2022. The Argentina, USA and Paraguay operations accounted for 9%, 12% and 5% of total revenues in YTD Q3 2023, respectively, compared to nil, 19% and 3% in YTD Q3 2022, respectively. For the Company’s Canadian operations, the impact of the increase in network difficulty and the decrease in average BTC price was partially offset by the average hashrate increase of 1.2 EH/s, or 50%, which resulted in revenues decreasing by $16.4 million during YTD Q3 2023 as compared to YTD Q3 2022. Revenues from the Company’s USA operations decreased by $10.0 million during YTD Q3 2023 as compared to YTD Q3 2022 due to the increase in network difficulty and the decrease in average BTC price. The average hashrate increase of the Argentina and Paraguay operations of 0.5 EH/s, or 100%, and 0.1 EH/s, or 100%, respectively, resulted in YTD Q3 2023 revenues increasing by $9.1 million and $2.0 million, respectively, compared to YTD Q3 2022.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

7. FINANCIAL PERFORMANCE (Continued)

Cost of Revenues

	Three months ended September 30,									Nine months ended September 30,
(U.S.$ in thousands except where indicated)	2023		2022		$ Change		% Change			2023		2022		$ Change		% Change
Energy and infrastructure		20,396		15,489		4,907		32	%		57,339		38,970		18,369		47	%
Depreciation and amortization		21,767		20,720		1,047		5	%		62,995		51,643		11,352		22	%
Purchases of electrical components		890		688		202		29	%		1,830		1,252		578		46	%
Electrician salaries and payroll taxes		409		289		120		42	%		1,220		924		296		32	%
		43,462		37,186		6,276		17	%		123,384		92,789		30,595		33	%

Q3 2023 v. Q3 2022

Bitfarms’ cost of revenues for Q3 2023 was $43.5 million compared to $37.2 million for Q3 2022. The increase in cost of revenues was mainly attributable to:

●

A $4.9 million, or 32%, increase in energy and infrastructure expenses, mainly due to the Company adding new Miners, which increased energy utilization to an average of 197 MW during Q3 2023 versus 152 MW for the same period in 2022, and higher energy rates in 2023, resulting in an increase in electricity costs of $5.5 million. The availability and pricing of energy may be negatively affected by governmental or regulatory changes in energy policies in the countries, provinces and states where the Company operates.

●

A $1.1 million increase in non-cash depreciation and amortization expense as the Company added new Miners and electrical infrastructure.

●

An increase in repairs and maintenance of $0.1 million.

These increases were partially offset by:

●

A decrease in rent expense of $0.7 million mainly due to the capitalization of the leased Washington facility, which was renewed in Q4 2022.

YTD Q3 2023 v. YTD Q3 2022

Bitfarms’ cost of revenues was $123.4 million for YTD Q3 2023 compared to $92.8 million for YTD Q3 2022. The increase in cost of revenues was mainly due to:

●

A $18.4 million, or 47%, increase in energy and infrastructure expenses, mainly due to the Company adding new Miners and upgrading its fleet, which increased energy utilization to an average of 185 MW during YTD Q3 2023, compared to 126 MW for the same period in 2022, resulting in an increase in electricity costs of $20.0 million.

●

A $11.4 million increase in non-cash depreciation and amortization expense as the Company added new Miners and electrical infrastructure.

These increases were partially offset by:

●

A decrease in rent expense of $1.3 million mainly due to the capitalization of the leased Washington facility which was renewed in Q4 2022.

●

A decrease in repairs and maintenance of $0.3 million.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

7. FINANCIAL PERFORMANCE (Continued)

General & Administrative Expenses

	Three months ended September 30,										Nine months ended September 30,
(U.S.$ in thousands except where indicated)	2023		2022		$ Change			% Change			2023		2022		$ Change			% Change
Salaries and share-based payment		4,939		6,097		(1,158	)		(19	)%		15,136		23,648		(8,512	)		(36	)%
Professional services		1,795		1,835		(40	)		(2	)%		5,325		6,459		(1,134	)		(18	)%
Insurance, duties and other		1,165		1,992		(827	)		(42	)%		4,077		7,951		(3,874	)		(49	)%
Travel, motor vehicle and meals		295		233		62			27	%		678		894		(216	)		(24	)%
Hosting and telecommunications		105		110		(5	)		(5	)%		311		431		(120	)		(28	)%
Advertising and promotion		73		32		41			128	%		360		151		209			138	%
		8,372		10,299		(1,927	)		(18	)%		25,887		39,534		(13,647	)		(34	)%

Q3 2023 v. Q3 2022

Bitfarms’ general and administrative (“G&A”) expenses were $8.4 million in Q3 2023, compared to $10.3 million for Q3 2022. The decrease of $1.9 million, or 18%, in G&A expense was largely due to:

●

A $2.0 million decrease in non-cash share-based payment expense in connection with stock options granted in 2021, with fair values between $3.16 to $5.97, having a higher share-based payment expense in Q3 2022 than Q3 2023. As the majority of these 2021 stock options were fully vested or cancelled at the end of Q1 2023, as explained below, the Company did not incur an expense for these options in Q3 2023, compared to the time-based vesting expense in Q3 2022.

●

A $0.8 million decrease in the Company’s insurance, duties and other expense mostly due to lower insurance premiums reflecting lower asset values, particularly Miners, due to general market conditions, partially offset by a larger number of Miners.

These decreases were partially offset by:

●

A $0.8 million increase in salaries and wages due to the increase in the Company’s headcount in Q3 2023 compared to Q3 2022 to support the global expansion as well as merit, market-based adjustments and cost of living salary increases.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

7. FINANCIAL PERFORMANCE (Continued)

General & Administrative Expenses (Continued)

YTD Q3 2023 v. YTD Q3 2022

For YTD Q3 2023, Bitfarms’ G&A expenses were $25.9 million, compared to $39.5 million for the same period in 2022. The decrease of $13.6 million, or 34%, in G&A expenses was mainly due to:

●

An $11.0 million decrease in non-cash share-based payment expense in connection with:

◦

Stock options granted in 2021 with fair values between $3.16 to $5.97 had a higher share-based payment expense in YTD Q3 2022 than YTD Q3 2023 due to the time-based vesting method, which resulted in an accelerated recognition of share-based expense in earlier periods.

◦

The majority of those 2021 stock options were fully vested or cancelled at the end of the first quarter of 2023, which resulted in accelerated share-based payment expense of $0.9 million during YTD Q3 2023. Refer to Note 21 to the Financial Statements for more details. The Company only incurred the share-based payment expense for those cancelled options during the first 3 months of YTD Q3 2023, compared to the graded vesting expense in YTD Q3 2022.

●

The inclusion of $1.8 million of shipping costs and duties in YTD Q3 2022 from transferring older generation Miners from Canada to Paraguay, which did not occur in YTD Q3 2023.

●

A $1.4 million decrease in the Company’s insurance expense mostly due to refunds from insurers and lower premiums reflecting lower asset values, particularly Miners, due to general market conditions, partially offset by a larger number of Miners.

●

A $1.1 million decrease in professional fees mainly due to the termination of consulting agreements with two directors in the fourth quarter of 2022 and the previous owner of the Company’s Mining facility in Washington State in the first quarter of 2023.

The decrease was partially offset by:

●

A $2.5 million increase in salaries and wages as a result of hiring additional employees in YTD Q3 2023 compared to YTD Q3 2022 to support the global expansion as well as merit, market-based adjustments and cost of living salary increases.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

7. FINANCIAL PERFORMANCE (Continued)

Net financial income

	Three months ended September 30,												Nine months ended September 30,
(U.S.$ in thousands except where indicated)	2023			2022			$ Change			% Change			2023			2022			$ Change			% Change
Gain on disposition of marketable securities		(4,120	)		(13,690	)		9,570			(70	)%		(11,246	)		(44,332	)		33,086			(75	)%
Gain on extinguishment of long-term debt and lease liabilities		—			—			—			—	%		(12,835	)		—			(12,835	)		(100	)%
Loss on foreign exchange		2,070			8			2,062			nm			5,059			1,884			3,175			169	%
Interest on credit facility and long-term debt		481			3,020			(2,539	)		(84	)%		2,405			9,916			(7,511	)		(76	)%
Interest on lease liabilities		334			374			(40	)		(11	)%		1,053			1,034			19			2	%
Discount expense on VAT receivable		1,046			1,919			(873	)		(45	)%		2,748			6,929			(4,181	)		(60	)%
Other financial (income) expenses		(147	)		118			(265	)		(225	)%		110			378			(268	)		(71	)%
		(336	)		(8,251	)		7,915			(96	)%		(12,706	)		(24,191	)		11,485			(47	)%

nm: not meaningful

Q3 2023 v. Q3 2022

Bitfarms’ net financial income was $0.3 million for Q3 2023, compared to $8.3 million for Q3 2022. The $7.9 million decrease was primarily related to:

●

A $9.6 million decrease in gain on disposition of marketable securities due to less funds being sent to Argentina in Q3 2023 compared to Q3 2022 as the capital expenditures related to the first facility were mostly paid in 2022. The Company has been utilizing a mechanism since Q3 2021 to fund its Argentina expansion. The Company has been funding its expansion in Argentina through the acquisition of marketable securities and in-kind contribution of those securities to its wholly-owned Argentinian subsidiary that it controls. The subsequent disposition of those marketable securities in exchange for Argentine Pesos gave rise to a gain as the equivalent amount received in Argentine Pesos exceeded the amount of Argentine Pesos the Company would have received from a direct foreign currency exchange.

●

A $2.1 million increase in loss on foreign exchange due to the revaluation of the Company’s net monetary assets denominated in foreign currencies following the weakening of the Argentine Pesos at the end of Q3 2023 compared to the end of Q3 2022.

The decrease was partially offset by:

●

A $2.5 million decrease in interest expense on (i) the $100 million credit facility which commenced on December 30, 2021 and was fully repaid and extinguished in December 2022, (ii) the BlockFi Loan which commenced on February 18, 2022 and was extinguished in February 2023 as described below and (iii) the NYDIG Loan which commenced on June 15, 2022. The NYDIG Loan is classified as long-term debt in the statements of financial position.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

7. FINANCIAL PERFORMANCE (Continued)

Net financial income (Continued)

Q3 2023 v. Q3 2022 (Continued)

●

The discounting expense on the Argentina VAT receivable of $1.9 million during Q3 2022 relates to the country’s historically high rate of inflation and expected length of time before the VAT receivable is refunded and reflects the accounting under the effective interest rate method. During Q3 2023, new additions to the VAT receivable were discounted, which had a lesser balance than the amount discounted in Q3 2022, resulting in lesser expense in Q3 2023. The discounting expense was partially offset by increasing accretion income from the passage of time.

YTD Q3 2023 v. YTD Q3 2022

Bitfarms’ net financial income for YTD Q3 2023 was $12.7 million, compared to $24.2 million for YTD Q3 2022. The $11.5 million decrease was mainly due to:

●

A $33.1 million decrease in gain on disposition of marketable securities due to less funds being sent to Argentina during YTD Q3 2023 compared to YTD Q3 2022. The Company utilizes a mechanism beginning in Q3 2021 in which its Argentina expansion was funded as explained in the Q3 2023 v. Q3 2022 section above.

●

A $3.2 million increase in loss on foreign exchange due to the revaluation of the Company’s net monetary assets denominated in foreign currencies following the weakening of the Argentine Pesos at the end of Q3 2023 compared to the end of Q3 2022.

The decrease was partially offset by:

●

A $12.8 million gain on extinguishment of long-term debt and lease liabilities during YTD Q3 2023. In February 2023:

◦

BlockFi and the Company negotiated a settlement of the loan in its entirety for cash consideration of $7.8 million, resulting in a gain on extinguishment of long-term debt of $12.6 million; and

◦

The Company negotiated a modification to its lease agreement with Reliz Ltd. (where BlockFi was the lender to Reliz Ltd.) in order to settle its outstanding lease liability of $0.4 million for a payment of $0.1 million. As a result, a gain on extinguishment of lease liabilities was recognized in the amount of $0.3 million.

●

A $7.5 million decrease in interest expense due to the same factors explained in the Q3 2023 v. Q3 2022 section above.

●

A $4.2 million decrease in discounting expense on the Argentina VAT receivable during YTD Q3 2023 compared to YTD Q3 2022 due to the same reason explained in the Q3 2023 v. Q3 2022 section above.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

7. FINANCIAL PERFORMANCE (Continued)

Impairment

The impairment loss on short-term prepaid deposits, equipment and construction prepayments, property, plant and equipment and right-of-use assets for the three and nine months ended September 30, 2023 were nil and $10.0 million, respectively (three and nine months ended September 30, 2022: $84.1 million for both periods).

Impairment on short-term prepaid deposits during the second quarter of 2023

In October 2022, the Argentinian government changed the importations system previously in place and imposed additional controls on imports into Argentina as a way of limiting the outflow of U.S. dollars from the country. In the first quarter of 2023, the Company was able to apply for a self-importation license based on its extended operating history in Argentina and successfully became a self-importer in Argentina to reduce the importation expenses and facilitate the importation of Miners. Accordingly, the Company terminated all pending importation agreements with external brokers as of June 30, 2023.

The Company assumed the cost of terminating the importation agreements with the brokers in order to execute its new importation strategy, resulting in the Company forgoing a balance of $7.0 million of deposits. Accordingly, as of June 30, 2023, the Company impaired $7.0 million of short-term prepaid deposits. This impairment is presented in the consolidated statements of profit or loss and comprehensive profit or loss under Impairment on short-term prepaid deposits and property, plant and equipment.

Impairment on mineral assets during the second quarter of 2023

The Suni mineral asset was acquired in connection with the reverse acquisition of Bitfarms Ltd (Israel) on April 12, 2018 and its value, at the time, was estimated at $9.0 million based on an independent appraiser’s valuation. Suni is an iron ore deposit located in Canada that was held by the acquiree. Since its acquisition, following the presence of impairment indicators, the Suni mineral asset was written down to a net book value of $3.0 million as of December 31, 2022.

During the three months ended June 30, 2023, in connection with the planned disposal of the Suni mineral asset, management tested the cash-generating unit for impairment, resulting in a further impairment charge of $3.0 million and bringing the carrying amount to nil. This impairment charge is presented in the consolidated statements of profit or loss and comprehensive profit or loss under Impairment on short-term prepaid deposits and property, plant and equipment. On July 27, 2023, the Company sold the Suni mineral asset for a nominal amount to a third party.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

8. SELECTED QUARTERLY INFORMATION

(U.S. $ in thousands except earnings per share)	Q3 2023			Q2 2023			Q1 2023			Q4 2022			Q3 2022			Q2 2022			Q1 2022			Q4 2021
Revenues		34,596			35,479			30,050			27,037			33,247			41,815			40,329			59,598
Net (loss) income		(18,703	)		(24,894	)		(2,479	)		(16,843	)		(84,808	)		(141,918	)		4,519			9,677
Basic net (loss) earnings per share		(0.07	)		(0.10	)		(0.01	)		(0.08	)		(0.40	)		(0.70	)		0.02			0.05

Net (loss) income before income taxes		(18,302	)		(24,988	)		(2,809	)		(16,652	)		(89,533	)		(161,234	)		10,957			17,937
Interest expense		815			1,023			1,620			3,271			3,394			4,546			3,010			837
Depreciation and amortization		21,767			20,528			20,700			20,777			20,720			17,857			13,066			10,287
EBITDA⁽¹⁾		4,280			(3,437	)		19,511			7,396			(65,419	)		(138,831	)		27,033			29,061
EBITDA margin⁽¹⁾		12	%		(10	)%		65	%		27	%		(197	)%		(332	)%		67	%		49	%
Share-based payment		2,011			2,462			2,536			3,795			3,961			7,927			6,105			10,036
Realized (gain) loss on disposition of digital assets		—			—			(587	)		28,567			44,329			77,880			34			137
(Reversal of) revaluation loss on digital assets		1,183			—			(2,695	)		(23,284	)		(45,655	)		70,475			(3,702	)		3,869
Gain on extinguishment of long-term debt and lease liabilities		—			—			(12,835	)		—			—			—			—			—
Impairment (reversal) on short-term prepaid deposits, equipment and construction prepayments, property, plant and equipment and right-of-use assets		—			9,982			—			(8,903	)		84,116			—			—			1,800
Impairment on goodwill		—			—			—			—			—			17,900			—			—
Gain on disposition of marketable securities		(4,120	)		(4,955	)		(2,171	)		(7,317	)		(13,690	)		(19,705	)		(10,937	)		(3,875	)
Net financial expenses (income) and other		3,512			3,620			2,810			1,933			2,683			4,057			3,765			(552	)
Adjusted EBITDA⁽¹⁾		6,866			7,672			6,569			2,187			10,325			19,703			22,298			40,476
Adjusted EBITDA margin⁽¹⁾		20	%		22	%		22	%		8	%		31	%		47	%		55	%		68	%

Although the BTC Mining industry experiences volatility, it is not generally subject to seasonality or seasonal effects. Seasonal fluctuations in energy supply, however, may impact the Company’s operations. The majority of the Company’s operations during the above periods was in Quebec, where power was sourced directly from Hydro-Quebec, Hydro-Magog and Hydro-Sherbrooke. The Company also had operations in Washington State that were powered by the Grant County Power Utility District as well as operations in Paraguay that were powered by CLYFSA. In Q3 2022, the Company began operations in Argentina. The production facility in Argentina was temporarily connected to the power grid until the private power producer obtained the requisite permits to provide power directly to the Company in April 2023. Energy rates in Argentina increase during winter months of May through September, after which they return to their regular rates. Among other phenomena, changing weather in Quebec, Washington State, Paraguay or Argentina may impact seasonal electricity needs, and periods of extreme cold or extreme hot weather may contribute to service interruptions in cryptocurrency Mining operations. Changes to supply and/or demand of electricity may result in curtailment of electricity to the Company’s cryptocurrency Mining operations. The Company’s geographical diversification reduces the risk and extent of extreme weather and other external factors unduly affecting the Company’s overall performance.

For Q3 2023 details, refer to Section 7A - Financial Performance (Revenues); Section 10A - Liquidity and Capital Resources (Cash Flows); and Section 6 - Expansion Projects (Washington Expansion, Paraguay Expansion, Argentina Expansion and Baie-Comeau Expansion) of this MD&A.

¹	EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-IFRS measures or ratios; refer to section 9 - Non-IFRS and Other Financial Measures and Ratios.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

9. NON-IFRS AND OTHER FINANCIAL MEASURES AND RATIOS

Non-IFRS financial measures

The Company utilizes a number of non-IFRS financial measures and ratios in assessing operating performance. Non-IFRS financial measures and ratios may exclude the impact of certain items and are used internally when analyzing operating performance. Refer to Section 20 - Cautionary Note Regarding Non-IFRS and Other Financial Measures and Ratios of this MD&A.

Measures	Definition	Purpose
Gross Mining profit	Gross Profit before: (i) non-Mining revenues; (ii) depreciation and amortization; (iii) purchase of electrical components and other expenses; and (iv) electrician salaries and payroll taxes.	●	To assess profitability after power costs in cryptocurrency production and other infrastructure costs. Power costs are the largest variable expense in Mining.
		●	To provide the users of the MD&A the ability to assess the gross profitability of the Company’s core digital asset Mining operations.
EBITDA	Net income (loss) before: (i) interest expense; (ii) income tax expense; and (iii) depreciation and amortization.	●	To assess profitability before the impact of different financing methods, income taxes, depreciation of capital assets and amortization of intangible assets.
		●	To provide the users of the MD&A with additional information to assist them in understanding components of its financial results, including a more complete understanding of factors and trends affecting the Company’s performance.
		●	Used by management to facilitate comparisons of operating performance from period to period and to prepare annual operating budgets and forecasts.
Adjusted EBITDA	EBITDA adjusted to exclude: (i) share-based payment; (ii) non-cash finance expenses; (iii) asset impairment charges; (iv) realized gains or losses on disposition of digital assets and (reversal of) revaluation loss on digital assets; (v) gain on disposition of marketable securities, gains or losses on derivative assets and liabilities and discount expense on VAT receivable; (vi) loss on currency exchange; and (vii) other non-recurring items that do not reflect the core performance of the Company.	●	To assess profitability before the impact of all of the items in calculating EBITDA in addition to certain other non-cash expenses.
		●	To provide the users of the MD&A a consistent comparable metric for profitability of the Company’s core performance across time periods.
		●	Used by management to facilitate comparisons of operating performance from period to period and to prepare annual operating budgets and forecasts.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

9. NON-IFRS AND OTHER FINANCIAL MEASURES AND RATIOS (Continued)

Non-IFRS financial measures (Continued)

Measures	Definition	Purpose
Direct Cost	Cost of revenues before: (i) depreciation and amortization; (ii) purchases of electrical components; (iii) electrician salaries and payroll taxes; (iv) infrastructure; and (v) other direct expenses.	●	To assess the Company’s power costs, the largest variable expense in Mining.
		●	To provide the users of the MD&A a metric to evaluate the Company’s direct variable cost for its core digital asset Mining operations across time periods.
		●	Used by management to assess the operating performance from period to period and to prepare annual operating budgets and forecasts.
Total Cash Cost	Net (income) loss before income taxes before: (i) revenues; (ii) depreciation and amortization; (iii) purchases of electrical components; (iv) electrician salaries and payroll taxes; (v) share-based payment; (vi) realized gains or losses on disposition of digital assets; (vii) (reversal of) revaluation loss on digital assets; (viii) asset impairment charges; (ix) net financial income; (x) other direct expenses; and (xi) other non-recurring items that do not reflect the core performance of the Company.	●	To assess the total cash cost of the Company’s core digital asset Mining operations.
		●	To provide the users of the MD&A a consistent comparable metric for the liquidity impact of the Company’s mining activities across time periods.
		●	Used by management to assess the operating performance from period to period and to prepare annual operating budgets and forecasts.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

9. NON-IFRS AND OTHER FINANCIAL MEASURES AND RATIOS (Continued)

Non-IFRS financial ratios

Ratios	Definition	Purpose
Gross Mining margin	The percentage obtained when dividing Gross Mining profit by Mining related revenues.	●	To assess profitability after power costs in cryptocurrency production, the largest variable expense in Mining.
		●	To provide the users of the MD&A the ability to assess the profitability of the Company’s core digital asset Mining operations, exclusive of certain general and administrative expenses.
EBITDA margin	The percentage obtained when dividing EBITDA by Revenues.	●	To assess profitability before the impact of different financing methods, income taxes, depreciation of capital assets and amortization of intangible assets.
		●	Used by management to facilitate comparisons of operating performance from period to period and to prepare annual operating budgets and forecasts.
		●	Useful for providing users of the MD&A with additional information to assist them in understanding components of its financial results, including a more complete understanding of factors and trends affecting the Company’s performance.
Adjusted EBITDA margin	The percentage obtained when dividing Adjusted EBITDA by Revenues.	●	To assess profitability before the impact of all of the items in calculating EBITDA in addition to certain other non-cash expenses.
		●	To provide a consistent comparable metric for profitability of the Company’s core performance across time periods.
		●	Used by management to facilitate comparisons of operating performance from period to period and to prepare annual operating budgets and forecasts.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

9. NON-IFRS AND OTHER FINANCIAL MEASURES AND RATIOS (Continued)

Non-IFRS financial ratios (Continued)

Ratios	Definition	Purpose
Direct Cost per BTC	The amount obtained when dividing Direct Cost by the quantity of BTC earned.	●	To assess the Company’s power costs, the largest variable expense in Mining.
		●	To provide the users of the MD&A a metric to evaluate the Company’s direct variable cost for its core digital asset Mining operations across time periods.
		●	Used by management to assess the operating performance from period to period and to prepare annual operating budgets and forecasts.
Total Cash Cost per BTC	The amount obtained when dividing Total Cash cost by the quantity of BTC earned.	●	To assess the total cash cost of the Company’s core digital asset Mining operations.
		●	To provide the users of the MD&A a consistent comparable metric for the liquidity impact of the Company’s mining activities across time periods.
		●	Used by management to assess the operating performance from period to period and to prepare annual operating budgets and forecasts.

Supplemental financial ratios

The Company utilizes the following supplemental financial ratios in assessing operating performance.

Ratios	Definition	Purpose
Gross margin	The percentage obtained when dividing Gross profit by Revenues.	●	To assess profitability of the Company across time periods.
Operating margin	The percentage obtained when dividing Operating income (loss) by Revenues.	●	To assess operational profitability of the Company across time periods.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

9. NON-IFRS AND OTHER FINANCIAL MEASURES AND RATIOS (Continued)

A.	Reconciliation of Consolidated Net Income (loss) to EBITDA and Adjusted EBITDA

	Three months ended September 30,												Nine months ended September 30,
(U.S.$ in thousands except where indicated)	2023			2022			$ Change			% Change			2023			2022			$ Change			% Change

Revenues		34,596			33,247			1,349			4	%		100,125			115,391			(15,266	)		(13	)%

Net loss before income taxes		(18,302	)		(89,533	)		71,231			(80	)%		(46,686	)		(239,810	)		193,124			(81	)%
Interest expense		815			3,394			(2,579	)		(76	)%		3,458			10,950			(7,492	)		(68	)%
Depreciation and amortization		21,767			20,720			1,047			5	%		62,995			51,643			11,352			22	%
EBITDA		4,280			(65,419	)		69,699			107	%		19,767			(177,217	)		196,984			111	%
EBITDA margin		12	%		(197	)%		—			—			20	%		(154	)%		—			—
Share-based payment		2,011			3,961			(1,950	)		(49	)%		7,009			17,993			(10,984	)		(61	)%
Realized loss on disposition of digital assets		—			44,329			(44,329	)		(100	)%		—			122,243			(122,243	)		(100	)%
Impairment on short-term prepaid deposits, equipment and construction prepayments, property, plant and equipment and right-of-use assets		—			84,116			(84,116	)		(100	)%		9,982			84,116			(74,134	)		(88	)%
(Reversal of) revaluation loss on digital assets		1,183			(45,655	)		46,838			103	%		(1,512	)		21,118			(22,630	)		(107	)%
Impairment on goodwill		—			—			—			—	%		—			17,900			(17,900	)		(100	)%
Gain on extinguishment of long-term debt and lease liabilities		—			—			—			—	%		(12,835	)		—			(12,835	)		(100	)%
Gain on disposition of marketable securities		(4,120	)		(13,690	)		9,570			(70	)%		(11,246	)		(44,332	)		33,086			(75	)%
Net financial expenses and other		3,512			2,683			829			31	%		9,942			10,505			(563	)		(5	)%
Adjusted EBITDA		6,866			10,325			(3,459	)		(34	)%		21,107			52,326			(31,219	)		(60	)%
Adjusted EBITDA margin		20	%		31	%		—			—			21	%		45	%		—			—

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

9. NON-IFRS AND OTHER FINANCIAL MEASURES AND RATIOS (Continued)

B.	Calculation of Gross Mining Profit and Gross Mining Margin

	Three months ended September 30,												Nine months ended September 30,
(U.S.$ in thousands except where indicated)	2023			2022			$ Change			% Change			2023			2022			$ Change			% Change
Gross (loss) profit		(8,866	)		(3,939	)		(4,927	)		125	%		(23,259	)		22,602			(45,861	)		(203	)%
Non-Mining revenues (1)		(1,697	)		(971	)		(726	)		75	%		(3,775	)		(2,342	)		(1,433	)		61	%
Depreciation and amortization		21,767			20,720			1,047			5	%		62,995			51,643			11,352			22	%
Purchases of electrical components and other		892			690			202			29	%		1,836			1,262			574			45	%
Electrician salaries and payroll taxes		409			289			120			42	%		1,220			924			296			32	%
Gross Mining profit		12,505			16,789			(4,284	)		(26	)%		39,017			74,089			(35,072	)		(47	)%
Gross Mining margin		38	%		52	%		—			—			40	%		66	%		—			—

(1) Non-Mining revenues reconciliation:

	Three months ended September 30,												Nine months ended September 30,
(U.S.$ in thousands except where indicated)	2023			2022			$ Change			% Change			2023			2022			$ Change			% Change
Revenues		34,596			33,247			1,349			4	%		100,125			115,391			(15,266	)		(13	)%
Less Mining related revenues for the purpose of calculating gross Mining margin:
Mining revenues		(32,899	)		(32,276	)		(623	)		2	%		(96,350	)		(113,049	)		16,699			(15	)%
Non-Mining revenues		1,697			971			726			75	%		3,775			2,342			1,433			61	%

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

9. NON-IFRS AND OTHER FINANCIAL MEASURES AND RATIOS (Continued)

C.	Calculation of Direct Cost and Direct Cost per BTC

	Three months ended September 30,												Nine months ended September 30,
(U.S.$ in thousands except where indicated)	2023			2022			$ Change			% Change			2023			2022			$ Change			% Change
Cost of revenues		43,462			37,186			6,276			17	%		123,384			92,789			30,595			33	%
Depreciation and amortization		(21,767	)		(20,720	)		(1,047	)		5	%		(62,995	)		(51,643	)		(11,352	)		22	%
Purchases of electrical components		(890	)		(688	)		(202	)		29	%		(1,830	)		(1,252	)		(578	)		46	%
Electrician salaries and payroll taxes		(409	)		(289	)		(120	)		42	%		(1,220	)		(924	)		(296	)		32	%
Infrastructure		(600	)		(1,060	)		460			(43	)%		(2,303	)		(3,841	)		1,538			(40	)%
Other		—			336			(336	)		(100	)%		82			633			(551	)		(87	)%
Direct Cost		19,796			14,765			5,031			34	%		55,118			35,762			19,356			54	%
Quantity of BTC earned		1,172			1,515			(343	)		(23	)%		3,692			3,733			(41	)		(1	)%
Direct Cost per BTC (in U.S. dollars)		16,900			9,700			7,200			74	%		14,900			9,600			5,300			55	%

D.	Calculation of Total Cash Cost and Total Cash Cost per BTC

	Three months ended September 30,												Nine months ended September 30,
(U.S.$ in thousands except where indicated)	2023			2022			$ Change			% Change			2023			2022			$ Change			% Change
Net loss before income taxes		18,302			89,533			(71,231	)		(80	)%		46,686			239,810			(193,124	)		(81	)%
Revenues		34,596			33,247			1,349			4	%		100,125			115,391			(15,266	)		(13	)%
Depreciation and amortization		(21,767	)		(20,720	)		(1,047	)		5	%		(62,995	)		(51,643	)		(11,352	)		22	%
Purchases of electrical components		(890	)		(688	)		(202	)		29	%		(1,830	)		(1,252	)		(578	)		46	%
Electrician salaries and payroll taxes		(409	)		(289	)		(120	)		42	%		(1,220	)		(924	)		(296	)		32	%
Share-based payment		(2,011	)		(3,961	)		1,950			(49	)%		(7,009	)		(17,993	)		10,984			(61	)%
Realized loss on disposition of digital assets		—			(44,329	)		44,329			100	%		—			(122,243	)		122,243			100	%
(Reversal of) revaluation loss on digital assets		(1,183	)		45,655			(46,838	)		(103	)%		1,512			(21,118	)		22,630			107	%
Loss on disposition of property, plant and equipment		(217	)		(756	)		539			(71	)%		(1,776	)		(1,692	)		(84	)		5	%
Impairment on short-term prepaid deposits, equipment and construction prepayments, property, plant and equipment and right-of-use assets		—			(84,116	)		84,116			100	%		(9,982	)		(84,116	)		74,134			(88	)%
Impairment on goodwill		—			—			—			—	%		—			(17,900	)		17,900			100	%
Net financial income		336			8,251			(7,915	)		(96	)%		12,706			24,191			(11,485	)		(47	)%
Other		(179	)		336			(515	)		(153	)%		(97	)		633			(730	)		(115	)%
Total Cash Cost		26,578			22,163			4,415			20	%		76,120			61,144			14,976			24	%
Quantity of BTC earned		1,172			1,515			(343	)		(23	)%		3,692			3,733			(41	)		(1	)%
Total Cash Cost per BTC (in U.S. dollars)		22,700			14,600			8,100			55	%		20,600			16,400			4,200			26	%

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

10. LIQUIDITY AND CAPITAL RESOURCES

As discussed below, the Company’s current financing strategy involves (a) selling the BTC it earns and the BTC it holds in treasury and (b) utilizing short-term debt, long-term debt and equity instruments to fund its expansion activities, operating expenses and debt service requirements. The Company anticipates requiring additional funds to complete its growth plans discussed in Section 6 - Expansion Projects of this MD&A.

Although the Company operates through its subsidiaries, there are no material legal restrictions and generally no practical restrictions on the ability of the subsidiaries to transfer funds to the Company, except that the Company may be subject to practical limitations on transferring funds from its Argentinian subsidiary. Beginning in the second half of 2019, the Argentine government instituted certain foreign currency exchange controls that could restrict the Company’s Argentinian subsidiary’s access to foreign currency, including the US dollar, for making payments abroad or transferring funds to its parent without prior authorization from the Argentine Central Bank. These regulations have continued to evolve and may become more stringent depending on the Argentine government´s perception of the availability of sufficient national foreign currency reserves. Further, changes in national and provincial leadership may result in changing governmental perceptions and actions surrounding importation policies and the availability of foreign currency reserves for commerce. In late 2023, Argentina is undergoing a presidential election, the results of which, and the implication for economic and monetary policy and its impact on Bitfarms, cannot be ascertained as of the issuance date of this MD&A.

The Company sends funds periodically to its Argentinian subsidiary to fund its expansion based on supplier invoices that are paid by the Argentinian subsidiary. The Argentinian subsidiary provides Mining services for a market-based fee to its Canadian parent which owns and records revenue from the BTC earned in Argentina and, accordingly, the Argentinian subsidiary is not structured or contemplated to generate substantial cash flows above its internal requirements. The Argentinian subsidiary earns a market-based return on the services it provides to its Canadian parent.

A.	Cash Flows

	Nine months ended September 30,
(U.S. $ in thousands except where indicated)	2023			2022			$ Change			% Change
Cash, beginning of the period		30,887			125,595			(94,708	)		(75	)%
Cash flows from (used in):
Operating activities		10,028			3,169			6,859			216	%
Investing activities		(35,373	)		(144,541	)		109,168			(76	)%
Financing activities		41,268			51,542			(10,274	)		(20	)%
Exchange rate differences on currency translation		(35	)		49			(84	)		(171	)%
Cash, end of the period		46,775			35,814			10,961			31	%

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

10. LIQUIDITY AND CAPITAL RESOURCES (Continued)

A.	Cash Flows (Continued)

Cash Flows from Operating Activities

Cash flows from operating activities increased by $6.9 million during YTD Q3 2023 compared to YTD Q3 2022, primarily driven by:

●

A decline in income taxes paid, with $14.9 million paid during YTD Q3 2022, compared to $7.3 million refunded during YTD Q3 2023;

●

Other favorable working capital variances totaling $10.8 million that are explained in Section 11 - Financial Position of this MD&A;

●

Lower interest and financial expenses paid of $6.2 million; and

●

Lower cash G&A expenses of $2.6 million.

The increase was partially offset by:

●

Higher energy and infrastructure costs of $18.4 million that are explained in Section 7B - Financial Performance - Cost of Revenues of this MD&A; and

●

A decrease in proceeds from sale of digital assets earned of $17.3 million as a result of selling less BTC in YTD Q3 2023 compared to YTD Q3 2022.

Cash Flows used in Investing Activities

Cash flows used in investing activities decreased by $109.2 million during YTD Q3 2023 compared to YTD Q3 2022.

The decrease in cash flow used in investing activities is driven primarily by:

●

$40.7 million of net additions of property, plant and equipment (“PPE”) during YTD Q3 2023, compared to $111.4 million for the same period in 2022, primarily due to the acquisition of Miners and infrastructure build-out;

●

The Company making $3.5 million advance payments mainly for the Paraguay expansion during YTD Q3 2023, compared to $54.9 million in advanced payments made on new PPE mainly for the Argentina expansion during YTD Q3 2022; and

●

The Company not purchasing BTC during YTD Q3 2023, compared to acquiring 1,000 BTC for $43.2 million during YTD Q3 2022. Refer to Section 10B - Liquidity and Capital Resources (capital resources - digital asset management program) of this MD&A.

The decrease was partially offset by:

●

$11.2 million of net proceeds received in YTD Q3 2023 from the purchase and disposition of marketable securities to fund the Argentina expansion activities, compared to $44.3 million of net proceeds for the same period in 2022, as described in Note 22 - Additional Details to the Statement of Profit or Loss and Comprehensive Profit or Loss to the Financial Statements; and

●

Proceeds of $20.7 million from the sale of digital assets purchased in YTD Q3 2022, compared to nil in YTD Q3 2023.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

10. LIQUIDITY AND CAPITAL RESOURCES (Continued)

A.	Cash Flows (Continued)

Cash Flows from Financing Activities

Cash flows from financing activities decreased by $10.3 million from $51.5 million for YTD Q3 2022 to $41.3 million for YTD Q3 2023.

YTD Q3 2023

●

The Company raised $68.5 million of net proceeds from its at-the-market equity offering program, which were partially offset by scheduled and one-time payments relating to long-term debt and lease liabilities of approximately $24.6 million and $2.9 million, respectively.

●

The long-term debt repayments included:

◦

The settlement of the BlockFi Loan on February 8, 2023 for cash consideration of $7.8 million, as discussed below;

◦

Capital repayments of $16.4 million towards the NYDIG loan that reduced the outstanding balance to $9.9 million as of September 30, 2023; and

◦

The full repayment of the principal amount of the remaining Foundry Loans #2, #3 and #4, as defined in the Financial Statements, before maturity and without prepayment penalty, for $0.8 million.

●

The lease repayments included:

◦

The Company’s modification in February 2023 of its lease agreement with Reliz Ltd. (where BlockFi was the lender to Reliz Ltd.) in order to settle its outstanding lease liability of $0.4 million for a payment of $0.1 million.

YTD Q3 2022

●

During YTD Q3 2022, the Company raised $67.2 million of net proceeds from long-term debt, received $40.0 million of proceeds from the credit facility (which was fully repaid in the fourth quarter of 2022), and $48.5 million of net proceeds from the Company’s at-the-market equity offering program; and

●

During YTD Q3 2022, these proceeds were partially offset by repayments towards the credit facility, long-term debt, and lease liabilities of $76.9 million, $23.2 million and $4.1 million, respectively.

BlockFi Loan

On February 18, 2022, Bitfarms’ subsidiary, Backbone Mining Solutions Inc. (“Backbone Mining”), entered into a $32.0 million equipment financing facility with BlockFi, which was classified as long-term debt in the statement of financial position. Backbone Mining owns or leases the assets of Bitfarms’ 20-megawatt active crypto Mining facilities in the State of Washington. The BlockFi loan was recourse only against Backbone Mining, and the loan was secured by its Miners and, in the event of default, BTC produced by those Miners.

On February 8, 2023, BlockFi and the Company negotiated a settlement of the loan in its entirety for cash consideration of $7.8 million, discharging Backbone Mining of all further obligations and resulting in a gain on extinguishment of long-term debt of $12.6 million. Upon settlement, all of Backbone Mining’s assets, including 6,100 Miners collateralizing the loan, became unencumbered.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

10. LIQUIDITY AND CAPITAL RESOURCES (Continued)

A.	Cash Flows (Continued)

Cash Flows from Financing Activities (Continued)

At-The-Market Equity Offering Program

Bitfarms commenced an at-the-market equity offering program (the “ATM program”) on August 16, 2021, by means of a prospectus supplement dated August 16, 2021, to the Company’s short form base shelf prospectus dated August 12, 2021, and U.S. registration statement on Form-F-10, which includes a prospectus supplement related to the ATM.

The ATM program expired on September 12, 2023. Over the course of the ATM program, the Company issued 105,368,000 common shares in exchange for gross proceeds of $277.0 million at an average share price of approximately $2.63. The Company received net proceeds of $268.3 million after paying commissions of $8.5 million to the sales agent for the ATM program and $0.3 million in other transaction costs.

Q3 2023 v. Q3 2022

During the three months ended September 30, 2023, the Company issued 18,570,000 common shares in the ATM program in exchange for gross proceeds of $31.9 million at an average share price of approximately $1.72. The Company received net proceeds of $30.9 million after paying commissions of $1.0 million to the sales agent for the ATM program. During the three months ended September 30, 2022, the Company issued 9,357,000 common shares in exchange for gross proceeds of $13.0 million at an average share price of approximately $1.39. The Company received net proceeds of $12.6 million after paying commissions of $0.5 million to the sales agent.

YTD Q3 2023 v. YTD Q3 2022

During YTD Q3 2023, the Company issued 52,121,000 common shares in the ATM program in exchange for gross proceeds of $70.8 million at an average share price of approximately $1.36. The Company received net proceeds of $68.5 million after paying commissions of $2.2 million to the sales agent, in addition to $0.1 million of other transaction fees. During YTD Q3 2022, the Company issued 20,835,000 common shares in the ATM program in exchange for gross proceeds of $50.2 million at an average share price of approximately $2.41. The Company received net proceeds of $48.5 million after paying commissions of $1.6 million to the sales agent, in addition to $0.1 million of other transaction fees.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

10. LIQUIDITY AND CAPITAL RESOURCES (Continued)

A.	Cash Flows (Continued)

Cash Flows from Financing Activities (Continued)

Use of Proceeds

The Company has used the proceeds from the ATM equity offering program, that expired on September 12, 2023, to support the growth and development of the Company’s Mining operations, as described in Section 6 - Expansion Projects of this MD&A, as well as for working capital and general corporate purposes. Described below are the actual use of proceeds from the commencement of the ATM equity offering program through September 30, 2023:

(U.S. $ in thousands except where indicated)

Categories	Use of proceeds from August 16, 2021 to September 30, 2023
MicroBT Miners		126,313
Bitmain Miners		29,298
Washington Expansion		27,181
Sherbrooke Expansion (completed in 2022)		22,201
Argentina Expansion, net of gain on disposition of marketable securities		50,898
Cowansville Expansion (completed in 2022)		573
Paraguay Expansion		3,230
Baie-Comeau Expansion		3,988
Paso Pe (Paraguay) Expansion		4,628
		268,310

The Company intends to continue to explore expansion opportunities in new and existing facilities, subject to market conditions and the ability to continue to obtain suitable financing.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

10. LIQUIDITY AND CAPITAL RESOURCES (Continued)

Capital Resources

Bitfarms’ capital management objective is to provide the financial resources that will enable the Company to maximize the return to its shareholders while optimizing its cost of capital. In order to achieve this objective, the Company monitors its capital structure and makes adjustments as required in light of the Company’s funding requirements, changes in economic conditions, the cost of providing financing, and the risks to which the Company is exposed. The Company’s financing strategy is to maintain a flexible capital structure that optimizes the cost of capital at an acceptable level of risk, to preserve its ability to meet financial obligations as they come due, and to ensure the Company has sufficient financial resources to fund its organic and acquisitive growth.

Based on the current capital budget and BTC prices, the Company currently anticipates that additional financing will be required to complete construction of additional facilities in Argentina and to fund expansion activities in Canada and Paraguay beyond those required to achieve its published hashrate targets. In order to achieve its business objectives, the Company may sell or borrow against the BTC that have been accumulated as of the date hereof as well as BTC received from its ongoing operations, which may or may not be possible on commercially attractive terms. Bitfarms intends to continue to manage its capital structure by striving to reduce operating expenses and unnecessary capital spending, disposing of inefficient or underutilized assets, obtaining short-term and long-term debt financing and issuing equity.

Digital Asset Management Program

In early January 2021, the Company implemented a digital asset management program under which it holds BTC for its intrinsic value and as a source of liquidity. The Company has internal controls over the management of its digital assets, which it evaluates and enhances on a quarterly basis. Pursuant to the digital asset management program, the Company added 3,301 BTC to its balance sheet during the year ended December 31, 2021.

In January 2022, the Board of Directors (the “BOD”) authorized management to purchase 1,000 BTC. During the second quarter of 2022, following the BOD approval, the Company sold 3,000 BTC in collateral to repay part of the Credit Facility and 350 BTC in treasury to manage liquidity levels. During the third quarter of 2022, the Company sold 670 BTC in collateral to repay part of the Credit Facility and 1,925 BTC in treasury to maintain sufficient liquidity levels. On August 1, 2022, management received approval from the BOD to sell daily production, in addition to any sale of up to 1,000 BTC from treasury, should market conditions be justified in its discretion. During Q4 2022, the Company sold 1,359 BTC in collateral to repay the remaining balance of the Credit Facility in full and 1,734 BTC in treasury to manage liquidity levels. Since January 2022, the Company has not purchased any BTC.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

10. LIQUIDITY AND CAPITAL RESOURCES (Continued)

Capital Resources (Continued)

Digital Asset Management Program (Continued)

Presented below are the total BTC sold and proceeds per quarter through September 30, 2023, a portion of which was used to repay equipment-related indebtedness, with the remaining portion used to fund operations and expansion plans:

	Three months ended
(U.S. $ in thousands except where indicated)	September 30, 2023		June 30, 2023		March 31, 2023
Quantity of BTC sold		1,018		1,109		1,267
Total proceeds		28,354		30,886		28,483

The purchase and sale of BTC as described above while the Company continued to earn BTC resulted in total holdings of 703 BTC as of September 30, 2023, valued at approximately $19.0 million based on a BTC price of approximately $27,000, as of September 30, 2023.

Custody of digital assets

The Company’s BTC received from the Mining Pool for its computational power is delivered to multi-signature wallets that the Company controls or directs to external third-party custodians. On a regular basis, the Company transfers BTC from its multi-signature wallets to external third-party custodians, Coinbase Custody Trust Company, LLC (“Coinbase Custody”) and Anchorage Digital Bank National Association (“Anchorage Digital”). Coinbase Custody provides custody and related services for clients’ digital assets as a fiduciary pursuant to the New York State Department of Financial Services under Section 100 of the New York Banking Law. Anchorage Digital is the only federally chartered crypto bank in the U.S., serves as a custodian for digital assets, and is licensed and regulated by the Office of the Comptroller of the Currency. Currently, Coinbase Custody and Anchorage Digital provide only custodial services to the Company and do not use a sub-custodian. Coinbase Custody and Anchorage Digital are not related parties to the Company.

The Company has internal controls in place to evaluate its custodians on a quarterly basis. The Company can transfer digital assets between custodians and has its own multi-signature wallets as a contingency plan that would have a minimal impact on the Company’s operations.

As of November 6, 2023, the Company has 777 BTC, valued at $27.3 million on its balance sheet. As of the date of this MD&A, 97% of the Company’s BTC are held in custody with Coinbase Custody and Anchorage Digital or held as collateral within Coinbase Custody on behalf of NYDIG, the counterparty to the Company’s equipment financing, which is classified as long-term debt in the statements of financial position. In addition, 2% of the Company’s BTC are held by third parties to collateralize the Company’s hedging contracts, which will be classified as derivative liabilities in the statements of financial position.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

10. LIQUIDITY AND CAPITAL RESOURCES (Continued)

Capital Resources (Continued)

Custody of Digital assets (Continued)

Coinbase Custody maintains an insurance policy of $320 million for its cold storage and Anchorage Digital maintains an insurance policy of $50 million for its cold and hot storage; however, the Company cannot ensure that the full limits of those policies would be available to the Company or, if available, would be sufficient to make the Company whole for any BTC that are lost or stolen. The Company is unaware of: (i) any security breaches involving Coinbase Custody or Anchorage Digital which have resulted in the Company’s crypto assets being lost or stolen, and (ii) anything with regards to Coinbase Custody’s or Anchorage Digital’s operations that would adversely affect the Company’s ability to obtain an unqualified audit opinion on its audited financial statements. The Company’s crypto assets held in custody with Coinbase or Anchorage Digital may not be recoverable in the event of bankruptcy by Coinbase, Anchorage Digital or their affiliates. In Coinbase’s quarterly report, on Form 10-Q, filed with the U.S. Securities Exchange Commission on November 2, 2023, Coinbase disclosed that, in the event of a bankruptcy, custodially held crypto assets could be considered to be the property of the bankruptcy estate and that the crypto assets held in custody could be subject to bankruptcy proceedings with Coinbase Custody’s customers being treated as general unsecured creditors. Further, regardless of efforts made by the Company to securely store and safeguard assets, there can be no assurance that the Company’s cryptocurrency assets will not be defalcated through hacking or other forms of theft.

Hedging program of digital assets

The Company’s hedging strategy aims to reduce the risk associated with the variability of future cash flows resulting from future disposals of digital assets and in consideration of the volatility and adverse price movements of the digital assets in the prior months. In March 2023, the BOD approved a hedging program and authorized Management, through a risk management committee specifically created for this purpose, to implement hedges using BTC option contracts up to 20% of the Company’s BTC compensation per month and up to three months of future BTC compensation. In April 2023, the BOD authorized Management to increase the BTC option contracts up to 50% of the Company’s BTC compensation per month and up to six months of expected future BTC compensation. As of November 6, 2023, the risk management committee has not engaged in hedging to the full extent permitted by the BOD. The Company has a hedge in place of 180 BTC of expected future BTC compensation.

During the three and nine months ended September 30, 2023, the Company secured BTC option contracts to sell digital assets which resulted in a loss of nil and $0.2 million, respectively, mainly related to premiums paid for the option contracts hedging the potential risk of the BTC price decreasing and protecting the Company’s margins. Refer to Note 18 to the Financial Statements for more details.

Synthetic HODL program of digital assets

Alongside the hedging program, and with the intent to manage a more capital-efficient portfolio, in June 2023, the BOD approved a HODL strategy, referred to as a synthetic HODL strategy, which allows up to 20% of the Company’s BTC exposure to be replicated using BTC call options. In October 2023, the Company initiated its Synthetic HODL strategy with the purchase of long-dated BTC call options. The primary objective of the Synthetic HODL is to allow the Company to accumulate BTC in treasury and increase BTC exposure in a manner that is risk-managed and capital efficient. As of November 6, 2023, the Company has active call option contracts providing the right to buy up to 35 BTC. It remains within the risk management committee’s discretion to dynamically adjust Bitfarms’ hedge and synthetic HODL ratios within the risk limits approved by the BOD to more adequately respond to market factors that are beyond the Company’s operational control.

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BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

10. LIQUIDITY AND CAPITAL RESOURCES (Continued)

C.	Contractual obligations

The following are the contractual maturities of financial liabilities and gross lease liabilities (non-financial liabilities) with estimated future interest payments as of September 30, 2023:

(U.S. $ in thousands)	2023		2024		2025		2026		2027 and thereafter		Total
Trade accounts payable and accrued liabilities		7,621		—		—		—		—		7,621
Long-term debt		6,128		4,085		—		—		—		10,213
Lease liabilities		1,076		4,021		2,921		2,765		10,399		21,182
		14,825		8,106		2,921		2,765		10,399		39,016

D.	Commitments

As of September 30, 2023, the Company had no commitments.

Contingent liability

During the three months ended September 30, 2023, the Company has obtained documentary evidence of the Miners’ manufacture outside of China, and has sent the supporting documentation to the U.S. Customs and Border Protection in defense of its position that Miners were manufactured outside China and the related custom duties, in the amount of $9.4 million 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 September 30, 2023.

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BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

11. FINANCIAL POSITION

Working Capital

	As of September 30,		As of December 31,
(U.S. $ in thousands)	2023		2022		$ Change			% Change
Total Current Assets		83,733		69,088		14,645			21	%
Total Current Liabilities		29,686		67,244		(37,558	)		(56	)%
Working Capital		54,047		1,844		52,203			2831	%

With the next halving event currently anticipated to occur in April 2024, the Company places, and continues to place, importance on maintaining sufficient liquidity to manage the uncertainty and capitalize upon suitable opportunities the halving event presents. As of September 30, 2023, Bitfarms had working capital of $54.0 million, compared to $1.8 million as of December 31, 2022. The increase in working capital was mostly due to:

●

The extinguishment of the BlockFi loan in Q1 2023, which had an outstanding balance of $20.0 million on December 31, 2022, for a payment of $7.8 million, resulting in an increase of $12.2 million in working capital. Refer to section 10A - Liquidity and Capital Resources for details on the extinguishment of the BlockFi loan.

●

Scheduled capital repayments of $16.4 million towards the NYDIG loan. The effect on working capital is nil as the repayments decreased the cash balance and the loan balance by corresponding amounts.

●

A $12.3 million increase in total digital assets, including the digital assets pledged as collateral, resulting from the increase of the Company’s treasury by 298 BTC and the appreciation of the BTC price during YTD Q3 2023.

●

A $15.9 million increase in cash, mainly related to the issuance of 52,121,000 common shares from the ATM program, for total proceeds of $68.5 million, which were partially used for expansion projects during YTD Q3 2023 and with the remainder intended for payments for future expansion projects.

These increases were partially offset by:

●

A decrease in short-term prepaid deposits of $8.7 million, mainly related to the impairment loss on short-term prepaid deposits of $7.0 million during YTD Q3 2023. Refer to section 7E - Financial Performance (Impairment).

●

A decrease in taxes receivable of $7.8 million following the receipt of tax refunds for the three and nine months ended September 30, 2023.

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BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

11. FINANCIAL POSITION (Continued)

Property, plant and equipment

	As of September 30,		As of December 31,
(U.S. $ in thousands)	2023		2022		$ Change			% Change
Canada		111,051		142,654		(31,603	)		(22	)%
USA		23,527		32,664		(9,137	)		(28	)%
Argentina		58,507		31,927		26,580			83	%
Paraguay		10,367		12,183		(1,816	)		(15	)%
		203,452		219,428		(15,976	)		(7	)%

As of September 30, 2023, Bitfarms had PPE of $203.5 million, compared to $219.4 million as of December 31, 2022. The decrease of $16.0 million, or 7%, was primarily due to the $31.6 million decrease of PPE in Canada, mainly relating to depreciation expense. PPE in the USA and Paraguay decreased by $9.1 million and $1.8 million, respectively, mostly due to depreciation expense incurred on Miners. These decreases were partially offset by the $26.6 million increase in Argentina PPE primarily due to the delivery of approximately 12,600 Miners in YTD Q3 2023.

Intangible assets

As of September 30, 2023, Bitfarms had intangible assets of $3.8 million, compared to $33,000 as of December 31, 2022. The $3.8 million increase is mainly due to the Company’s three acquisitions of groups of assets in Quebec and Paraguay during the three and nine months ended September 30, 2023. Each of those acquisitions of groups of assets resulted in contractual access rights to hydro power electricity.

The following table summarizes those access rights:

(U.S.$ in thousands except where indicated)	Additions to intangibles		Additional capacity	Term of contractual access rights	Amortization method and period
Baie-Comeau, Quebec		2,315	22 MW	No termination date	Straight-line over the lease term of the facility
Villarrica, Paraguay		1,065	50 MW	Ending in December 31, 2027	Straight-line over the access rights period
Yguazu, Paraguay		421	100 MW	Ending in December 31, 2027	Straight-line over the access rights period
		3,801	172 MW

Refer to Notes 5 and 10 to the Financial Statements for more details.

12. FINANCIAL INSTRUMENTS

The Company discloses information on the classification and fair value of its financial instruments, as well as on the nature and extent of risks arising from financial instruments, and related risk management in Note 18 to the Financial Statements and Note 22 to the 2022 Annual Financial Statements. Risks are related to foreign currency, credit, counterparty, liquidity, and concentration.

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BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

13. RELATED PARTY TRANSACTIONS

The Company discloses information on its related party transactions, as defined in IAS 24, Related Party Disclosures, in Note 19 to the Financial Statements.

14. INTERNAL CONTROLS OVER FINANCIAL REPORTING

Disclosure Controls and Procedures

Management, under the supervision of the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) of the Company, has designed or caused to be designed under their supervision, disclosure controls and procedures (“DC&P”) to provide reasonable assurance that:

i) material information relating to the Company is made known to them by others, particularly during the period in which the annual filings are being prepared; and

ii) information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or submitted by the Company under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation.

Internal control over financial reporting

Management, under the supervision of the CEO and CFO, is also responsible for establishing and maintaining adequate internal controls over financial reporting (“ICFR”). Management, under the supervision of the CEO and CFO, has designed ICFR, or caused them to be designed under their supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.

Changes in internal control over financial reporting

There have been no changes in the Company’s ICFR that have materially affected, or are reasonably likely to materially affect, the Company’s ICFR during the period beginning on July 1, 2023 and ended September 30, 2023.

Limitation of DC&P and ICFR

All control systems contain inherent limitations, no matter how well designed. As a result, the Company’s management acknowledges that its internal control over financial reporting will not prevent or detect all misstatements due to error or fraud. In addition, management’s evaluation of controls can provide only reasonable, not absolute, assurance that all control issues that may result in material misstatements, if any, have been detected.

15. SHARE CAPITAL

As of the date of this MD&A, the Company has 277,684,000 common shares outstanding, 9,974,000 vested and 9,026,000 unvested stock options, 19,153,000 warrants outstanding and 258,000 restricted stock units. There are no preferred shares or any other classes of shares outstanding.

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BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

16. RISK FACTORS

The Company is subject to a number of risks and uncertainties and is affected by several factors which could have a material adverse effect on the Company’s business, financial condition, operating results, and/or future prospects. These risks should be considered when evaluating an investment in the Company and may, among other things, cause a decline in the price of the Corporation’s shares.

The risks and uncertainties that Management considers as the most material to the Company’s business are described in the section entitled Risk Factors of the Company’s Management’s Discussion and Analysis for the year ended December 31, 2022, dated March 20, 2023. These risks and uncertainties have not materially changed in the nine months ended September 30, 2023, other than the risk described below, and hereby incorporated by reference.

Hedges

The Company actively engages in hedging practices with respect to its cryptocurrency holdings to lessen the impact of BTC volatility on the Company’s results of operations and financial condition and to optimize cryptocurrency monetization. Although hedging activities are undertaken on a risk adjusted basis, there can be no certainty that such activities will be profitable and these activities could result in significant losses. Hedging operates as a complement to BTC Mining, and to BTC holding through its Digital Asset Management Program. The effectiveness of the hedging relationship should be evaluated alongside the Company’s Mining performance. In addition, hedging practices involve transactions with third parties. Any settlement delay or failure, security breach, incurred cost or loss of digital assets associated with the use of a counterparty could materially and adversely affect the execution of hedging strategies and result in significant losses. Although the Company maintains rigorous controls on the implementation and monitoring of hedging strategies, including its involvement with counterparties, there can be no assurance that such controls will be effective or timely or sufficient in operation to avoid or even reduce losses.

Emerging markets

Investing in a company with operations in emerging markets entails certain inherit risks

The Company conducts Mining operations in various jurisdictions, including in Argentina and Paraguay, which are emerging markets. Investing in a company with operations in emerging markets involves inherent risks, which may include: (i) expropriation or nationalization of property; (ii) changes in laws or policies or increasing legal and regulatory requirements of particular countries, including those relating to taxation, imports, exports, duties, currency, or other claims by government entities, including retroactive claims and/or changes in the administration of laws, policies and practices; (iii) uncertain political and economic environments, war, terrorism, sabotage and civil disturbances; (iv) lack of certainty with respect to legal systems, corruption and other factors that are inconsistent with the rule of law; (v) delays in obtaining or the inability to obtain or maintain necessary governmental permits or to operate in accordance with such permits or regulatory requirements; (vi) import and export regulations, including restrictions on the import of miners and other equipment relevant to the Company’s Mining operations; (vii) limitations on the repatriation of earnings and other forms of currency controls, monetary restrictions and limitations under economic policies; (viii) underdeveloped industrial or economic infrastructure; (ix) internal security issues; (x) increased financing costs; (xi) renegotiation, cancellation or forced modification of existing contracts; and (xii) risk of loss due to disease, and other potential medical endemic or pandemic issues, as a result of the potential related impact to employees, disruption to operations, supply chain delays, trade restrictions and impact on economic activity in affected countries or regions.

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BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

16. RISK FACTORS (Continued)

Emerging markets (Continued)

Investing in a company with operations in emerging market entails certain inherit risks (Continued)

There can be no guarantee that one or more of the events described above will not occur in the future and the impact of such event or events on the Company’s operations cannot be accurately predicted at this time. The occurrence of one or more such events may have a material adverse effect on the Company’s operations in the affected jurisdiction or jurisdictions, including, but not limited to, disruptions to its operations, the loss of property, unprofitability of its operations, protracted legal and regulatory proceedings, and other penalties or sanctions.

Argentina and/or Paraguay may experience economic volatility and other challenges that could affect the Company’s business, financial condition and result of operations

The profitability of the Company’s Mining operations in Argentina and Paraguay and the Company’s ability to continue such operations depend in part upon local economic, social and/or political conditions, which, in turn, may affect the Company’s business, financial position and results of operations. Adverse external economic factors; inconsistent fiscal and monetary policies; dependence of governments on external financing; changes in governmental economic policies; high levels of inflation; abrupt changes in currency values; high interest rates; volatility of exchange rates; political and social tensions; exchange controls; wage and price controls; the imposition of trade barriers; and trade shock are examples of economic and social conditions over which the Company has no control and which may have an adverse effect on the Company’s operations in those geographies and, given the materiality to the Company of such operations, may adversely affect the Company’s business, financial condition, results of operations, cash flows and prospects.

The economies of Argentina and Paraguay are vulnerable to external shocks caused by significant economic difficulties of their respective trading partners or by more general “contagion” effects

Weak, flat or negative economic growth or changes in international trade policy of the major trading partners of Argentina and Paraguay could adversely affect its balance of payments and, consequently, its economic growth.

Argentina in particular has experienced significant political and social economic instability in the past and may experience further instability in the future. For instance, in 2001 and 2002, Argentina suffered a major political, economic and social crisis, which resulted in institutional instability and a severe contraction of the economy with significant increases in unemployment and poverty rates. Among other consequences, the crisis caused a large currency devaluation and led to the government of Argentina defaulting on its external debt. In response, the government of Argentina implemented a series of emergency measures, including strict foreign exchange restrictions and monthly limits on bank withdrawals, which affected public companies and other sectors of Argentina’s economy. Despite a brief recovery from that crisis, since 2008, Argentina has struggled to curb strong inflationary pressures and growth stagnated starting in 2012.

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BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

16. RISK FACTORS (Continued)

Emerging markets (Continued)

The economies in Argentina and Paraguay are vulnerable to external shocks caused by significant economic difficulties of their respective trading partners or by more general “contagion” effects (Continued)

The economic conditions of Argentina and Paraguay are dependent on a variety of factors, including, but not limited to, the following: (i) international demand for Argentina’s and Paraguay’s principal exports; (ii) international prices for Argentina’s and Paraguay’s principal commodity exports; (iii) stability and competitiveness of the currencies of Argentina and Paraguay with respect to foreign currencies; competitiveness and efficiency of domestic industries and services; (iv) levels of domestic consumption and foreign and domestic investment and financing; and (v) the rate of inflation. Any difficulties faced by the economies or financial condition of Argentina and Paraguay could have a material adverse effect on companies operating in Argentina and Paraguay, including the Company.

The Company conducts operations in countries known to experience high levels of corruption, and any violation of anti-corruption laws could subject us to penalties and other adverse consequences

The Company is subject to anti-corruption, anti-bribery, anti-money laundering and other international laws and regulations and is required to comply with the applicable laws and regulations of each jurisdiction in which the Company operates. In general, these laws prohibit improper payments or offers of payments to governments and their officials, political parties, state-owned or controlled enterprises, and/or private entities and individuals for the purpose of obtaining or retaining business. In addition, the Company is subject to economic sanctions regulations that restrict its dealings with certain sanctioned countries, individuals and entities.

Certain of the Company’s operations are located in Argentina and Paraguay, which are jurisdictions perceived as having relatively high levels of corruption. The Company’s activities in these countries increase the risk of, or potential for, unauthorized payments or offers of payments by one of the Company’s employees, contractors, or agents that could be in violation of various laws, including anti-bribery laws applicable to the Company. In addition, the Company’s ability to secure permits, renewals or other government approvals required to maintain its operations could be negatively impacted by corruption in one or more governmental institutions in Argentina and Paraguay.

The Company has adopted various measures that mandate compliance with applicable anti-corruption, anti-bribery, and anti-money laundering laws, and has implemented training programs, compliance controls and procedures, and reviews and audits to ensure compliance with such laws; however, there can be no assurance that the Company’s internal controls and procedures will be sufficient to prevent or detect all inappropriate practices, fraud or violations of such laws, regulations and requirements by the Company’s affiliates, employees, directors, officers, partners, agents and service providers, or that any such persons will not take actions in violation of the Company’s policies and procedures, for which the Company may be ultimately responsible.

Any violations of anti-bribery and anti-corruption laws or sanctions regulations by the Company or on its behalf could have a material adverse effect on its business, reputation, results of operations and financial condition. The Company cannot predict the nature, scope or effect of future anti-corruption regulatory requirements to which its operations might be subject, the manner in which existing laws might be administered or interpreted or the impact on the Company of any violation of the same.

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BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

16. RISK FACTORS (Continued)

Emerging markets (Continued)

The Company’s operations in Argentina are subject to frequent and unpredictable changes in tax rates, capital controls, and foreign exchange restrictions, which may restrict or affect the profitability of the Company’s operations

The imposition and application of federal, provincial and other local taxation to which businesses located in Argentina are subject may change frequently and without notice. If any taxation authority takes a position or adopts an interpretation that differs from those adopted by the Company, the Company could become subject to unanticipated tax liabilities and cost increases, which could negatively affect its financial condition and results of operations.

For instance, in 2018, the government of Argentina introduced a decree imposing a temporary tax on all exports from Argentina. The tax was introduced as an emergency measure due to the significant devaluation of the Argentinean peso during 2018. In December 2019, the government of Argentina approved a law delaying a scheduled corporate tax rate decrease from 30% to 25% to the end of 2020, after that the government submitted a bill in order to maintain the 30% rate until the end of 2021, and extending the temporary export tax introduced in September 2018 to the end of 2021. Furthermore, the decree suspended the increase in the dividend withholding tax from 7% to 13% until January 2021. In June 2021, the National Government passed an amendment to the corporate income tax rate, increasing it from a flat rate of 25% to a progressive scale, with a maximum rate of 35% for certain types of companies.

Changes in taxes, capital controls, and foreign exchange regulations in Argentina and the other jurisdictions in which the Company operates are beyond the Company’s control. Increased tax rates, or the imposition of stricter capital controls or foreign exchange regulations, could increase the operating costs at the Company’s Mining facilities, prevent or restrict development and production at new or contemplated facilities, and constrain the Company’s ability to receive distributions from its subsidiaries in those jurisdictions.

Insolvency, Bankruptcy, or Cessation of Operations of Mining Pool Operator

Over the past five years, Bitfarms has both mined independently and has been a member of multiple third-party Mining Pools; however, as of the date hereof, it participates in only one Mining Pool, being Foundry Pool. Foundry Pool is owned indirectly by Digital Currency Group, which also owns Genesis Global Capital (“Genesis”). On January 19, 2023, Genesis filed for U.S. bankruptcy protection. The Issuer believes that its risk exposure to relying on a single Mining Pool is minimal at this time. In the event that Foundry Pool (or some other such Mining Pool or Mining Pools, as applicable) ceases making payment to Bitfarms for whatever reason, including bankruptcy, insolvency, or cessation of its operations, it is expected that Bitfarms would immediately cease contributing its Hash power to such Mining Pool and either: (i) commence mining independently; or (ii) join a different Mining Pool. The Company estimates that such a switch would take approximately one day in either scenario. Given that Foundry Pool pays the Company on a daily basis, the cost of switching is expected to be the lost revenues the Company would have earned had it been Mining during that approximately one day period (and one additional day in the case Foundry Pool failed to pay the Company for its work, causing the decision to leave the Mining Pool).

In the event that the Company is unable to effect a switch of its operations in a timely manner and experience significant down time from mining operations, it may experience a material adverse change.

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BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

16. RISK FACTORS (Continued)

Independent Mining Risks

In the even the Company decides to cease participating in a Mining Pool and conduct Mining operations independently, it may be exposed to certain risks; however, it may achieve marginally greater revenues by doing so. Refer to Section 2 - Company Overview. The primary risk of conducting independent Mining is that the Company could experience a protracted period of failing to solve any blocks, causing a disruption in its revenue stream. In such a circumstance, the Company may need to borrow capital to continue operations.

In addition, in June 2022, the Company entered into a master equipment finance agreement (the “NYDIG Loan”) between the Company and NYDIG ABL LLC (“NYDIG”), pursuant to which NYDIG agreed to provide funding to the Company of $36.9 million at an interest rate of 12% per annum, collateralized by 10,395 MicroBT WhatsMiner M30S Miners. As part of the NYDIG Loan, the Company must maintain in an identified wallet an approximate quantity of Bitcoin whose value equates to one month of interest and principal payments on the outstanding loan. In the event that the Issuer ceases participation in a Mining Pool and conducts Mining operations independently, the Issuer may need to secure additional financing to ensure that such wallet maintains the requisite value of Bitcoin. This could occur, for instance, if the price of Bitcoin were to decrease and the Company was unsuccessful in solving blocks.

In either case, there can be no guarantee that the Company could obtain any such financing on commercially attractive terms, or at all, and consequently the Company could experience a material adverse change.

Indemnification of Mining Pool

Pursuant to the terms and conditions of Foundry Pool to which the Company is subject, the Company has agreed to release, indemnify and hold Foundry Pool harmless from any and all losses, damages, expenses, including reasonable attorneys’ fees, rights, claims, actions of any kind and injury (including death) arising out of or relating to the Company’s participation in Foundry Pool. In the event of such losses, the Company may experience a material adverse change.

Reliance on Foreign Mining Pool Operator

Bitfarms participates in a single Mining Pool, being Foundry Pool. Consequently, the Company’s operations are substantially reliant on Foundry Pool and the terms of services and other terms and conditions that govern its relationship with Foundry Pool. Foundry has the right the right to unilaterally modify the service agreement between it and the Company at any time without notice. This includes the right to modify the payout methodology or Mining Pool fees. In the event that any such modifications are unattractive to the Company, it may: (i) commence mining independently; or (ii) join a different Mining Pool, either of which may cause a material adverse change. See risk factor Insolvency, Bankruptcy, or Cessation of Operations of Mining Pool Operator above.

As a control measure, on a monthly basis, the Company calculates the revenues it should earn based on its theoretical Hashrate and compares it to the payments received from Foundry. As of the date hereof, the Company has not identified any material discrepancies between its calculations and payments actually received from Foundry. In the event that the Company identifies a material difference, the Company may have to engage in litigation or cease its relationship with Foundry Pool, which may have a material adverse effect on the Company.

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BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

16. RISK FACTORS (Continued)

Mining Pool Agreements Governed by Foreign Laws

The agreements between the Company and Foundry Pool are governed by the laws of the State of New York. Furthermore, the Company is subject to an arbitration provision such that any dispute arising out of or relating to the Company’s agreements with Foundry Pool, or the breach thereof, shall be finally resolved by arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, or such arbitration body as required by law, rule or regulation, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. Any such arbitration will be conducted in the English language before a single arbitrator in the City of New York, New York. The Company may be required to expend significant costs in order to undertake and complete any such arbitration, and there can be no guarantee of any successful outcome of such arbitration. In such a case, the Company may experience a material adverse change.

Reliance on Manufacturing in Foreign Countries and the Importation of Equipment to the Jurisdictions in Which the Company Operates

The Company relies in part on third party manufacturers in foreign jurisdictions for its Miners. As a result, the Company’s business is subject to risks associated with doing business in such foreign jurisdictions including, but not limited to: trade protection measures such as the imposition of or increase in tariffs, import and export licensing and control requirements; potentially negative consequences from changes in tax laws (both foreign and domestic); difficulties associated with transacting business with parties in a foreign jurisdiction including increased costs and uncertainties associated with enforcing contractual obligations; and unexpected or unfavorable changes in other regulations and applicable regulatory requirements.

To illustrate, in 2018 and 2019, the U.S. enacted tariffs (or increased existing tariffs) on certain items imported from other countries. Since their enactment, the tariffs sparked an international trade war in which other countries enacted tariffs on imports of U.S. goods. Subsequently, the U.S. and various countries subject to those tariffs have engaged in trade negotiations and, in some instances, agreed to suspend or terminate certain tariffs. It is uncertain whether treaties or other trade policies like those will be enacted or modified by the U.S. or any other government or trade organization in the future. Future changes to trade or investment policies, treaties and tariffs, fluctuations in exchange rates, or the perception that these changes could occur could adversely affect third party manufacturers on which the Company relies, as well as the future of the Company’s relationships with those third party manufacturers, which could have an adverse impact on the Company’s financial condition and results of operations. In addition, actions by foreign markets to implement further trade policy changes, including limiting foreign investment or trade, increasing regulatory scrutiny or taking other actions which could apply to the jurisdictions in which the Company operates, could negatively impact the Company’s business.

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BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

17. SIGNIFICANT ACCOUNTING ESTIMATES

The Company’s significant accounting judgments, estimates and assumptions are summarized in Note 4 to the Company’s 2022 Annual Financial Statements.

18. SIGNIFICANT ACCOUNTING POLICIES AND NEW ACCOUNTING POLICIES

Refer to Note 3 to the 2022 Annual Financial Statements and Note 3 to the Financial Statements for more information regarding the Company’s significant accounting policies.

19. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This MD&A contains forward-looking statements about the Company’s objectives, plans, goals, aspirations, strategies, financial condition, results of operations, cash flows, performance, prospects, opportunities and legal and regulatory matters. Specific forward-looking statements in this MD&A include, but are not limited to, statements with respect to the Company’s anticipated future results, events and plans, strategic initiatives, future liquidity, and planned capital investments. Forward-looking statements are typically identified by words such as “expect”, “anticipate”, “believe”, “foresee”, “could”, “estimate”, “goal”, “intend”, “plan”, “seek”, “strive”, “will”, “may”, “maintain”, “achieve”, “grow”, “should” and similar expressions, as they relate to the Company and its management.

Forward-looking statements reflect the Company’s current estimates, beliefs and assumptions, which are based on management’s perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate under the circumstances. The Company’s expectation of operating and financial performance is based on certain assumptions including assumptions about operational growth, anticipated cost savings, operating efficiencies, anticipated benefits from strategic initiatives, future liquidity, and planned capital investments. The Company’s estimates, beliefs and assumptions are inherently subject to significant business, economic, competitive and other uncertainties and contingencies regarding future events and as such, are subject to change. The Company can give no assurance that such estimates, beliefs and assumptions will prove to be correct.

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BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

19. CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS (Continued)

Numerous risks and uncertainties could cause the Company’s actual results to differ materially from those expressed, implied or projected in the forward-looking statements. Such risks and uncertainties include:

●

BTC Halving event;

●

Counterparty risk;

●

the availability of financing opportunities and risks associated with economic conditions, including BTC price and BTC network difficulty;

●

the speculative and competitive nature of the technology sector;

●

dependency on continued growth in blockchain and cryptocurrency usage;

●

reliance on manufacturing in foreign countries and the importation of equipment to the jurisdictions in which the company operates;

●

limited operating history and share price fluctuations;

●

cybersecurity threats and hacking;

●

controlling shareholder risk;

●

risk related to technological obsolescence and difficulty in obtaining hardware;

●

economic dependence on regulated terms of service and electricity rates;

●

increases in commodity prices or reductions in the availability of such commodities could adversely impact the Company’s results of operations;

●

permits and licenses;

●

server failures;

●

global financial conditions;

●

tax consequences;

●

environmental regulations and liability;

●

erroneous transactions and human error;

●

facility developments;

●

non-availability of insurance;

●

loss of key employees;

●

lawsuits and other legal proceedings and challenges;

●

conflict of interests with directors and management;

●

political and regulatory risk;

●

adoption of environmental, social, and governance practices and the impacts of climate change;

●

third-party supplier risks;

●

COVID-19 pandemic; and

●

other factors beyond the Company’s control.

The above is not an exhaustive list of the factors that may affect the Company’s forward-looking statements. For a more comprehensive discussion of factors that could affect the Company, refer to the risk factors discussed above and those contained in the section “Risk Factors” of the Annual Information Form of the Company dated March 20, 2023. Other risks and uncertainties not presently known to the Company or that the Company presently believes are not material could also cause actual results or events to differ materially from those expressed, implied or projected in its forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect the Company’s expectations only as of the date of this MD&A. Except as required by law, the Company does not undertake to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

20. CAUTIONARY NOTE REGARDING NON-IFRS AND OTHER FINANCIAL MEASURES AND RATIOS

This MD&A makes reference to certain measures that are not recognized under IFRS and do not have a standardized meaning prescribed by IFRS. They are therefore unlikely to be comparable to similar measures presented by other companies. The Company uses non-IFRS and other financial measures and ratios including “EBITDA,” “EBITDA margin,” “Adjusted EBITDA,” “Adjusted EBITDA margin,” “Gross Mining profit,” “Gross Mining margin,” “Gross margin”, “Operating margin”, “Direct Cost”, “Direct Cost per BTC”, “Total Cash Cost” and “Total Cash Cost per BTC” as additional information to complement IFRS measures by providing further understanding of the Company’s results of operations from management’s perspective. Refer to Section 9 - Non-IFRS and Other Financial Measures and Ratios of the MD&A for more details.

These measures are provided as additional information to complement IFRS measures by providing further understanding of the Company’s results of operations from management’s perspective. Accordingly, they should not be considered in isolation nor as a substitute for analysis of the Company’s financial information reported under IFRS. Reconciliations from IFRS measures to non-IFRS measures are included throughout this MD&A.

21. ADDITIONAL INFORMATION

Additional information and other publicly filed documents relating to the Company, including the Company’s Annual Information Form, are available through the internet on SEDAR at www.sedarplus.ca and on EDGAR at www.sec.gov/edgar.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

22. GLOSSARY OF TERMS

Terms	Definition
ASIC	ASIC stands for Application Specific Integrated Circuit and refers primarily to specific computer devices designed to solve the SHA-256 algorithm.
Bitcoin (BTC)	BTC is a decentralized digital currency that is not controlled by any centralized authority (e.g. a government, financial institution or regulatory organization) that can be sent from user to user on the BTC network without the need for intermediaries to clear transactions. Transactions are verified through the process of Mining and recorded in a public ledger known as the Blockchain. BTC is created when the BTC network issues Block Rewards through the Mining process.
Block Reward	A BTC block reward refers to the new BTC that are awarded by the Blockchain network to eligible cryptocurrency Miners for each block they successfully mine. The current block reward is 6.25 BTC per block.
Blockchain	A Blockchain is a cloud-based public ledger that exists on computers that participate on the network globally. The Blockchain grows as new sets of data, or ‘blocks’, are added to it through Mining. Each block contains a timestamp and a link to the previous block, such that the series of blocks form a continuous chain. Given that each block has a separate hash and each hash requires information from the previous block, altering information an established block would require recalculating all the hashes on the Blockchain which would require an enormous and impracticable amount of computing power. As a result, once a block is added to the Blockchain it is very difficult to edit and impossible to delete.
Exahash	One quintillion (1,000,000,000,000,000,000) hashes per second or one million Terahash.
Hash	A hash is a function that converts or maps an input of letters and numbers into an encrypted output of a fixed length, which outputs are often referred to as hashes. A hash is created using an algorithm. The algorithm used in the validation of BTC transactions is the SHA-256 algorithm.
Hashrate	Hashrate refers to the number of hash operations performed per second and is a measure of computing power in Mining cryptocurrency.
Megawatt	A megawatt is 1,000 kilowatts of electricity and, in the industry of cryptocurrency Mining, is typically a reference to the number of megawatts of electricity per hour that is available for use.
Miners	ASICs used by the Company to perform Mining.
Mining	Mining refers to the process of using specialized computer hardware, and in the case of the Company, ASICs, to perform mathematical calculations to confirm transactions and increase security for the BTC Blockchain. As a reward for their services, BTC Miners collect transaction fees for the transactions they confirm, along with newly created BTC as Block Rewards.
Mining Pool	A Mining pool is a group of cryptocurrency Miners who pool their computational resources, or hashrate, in order to increase the probability of finding a block on the BTC Blockchain. Mining pools administer regular payouts to mitigate the risk of Miners operating for a prolonged period of time without finding a block.

Page

BITFARMS LTD.

Management’s Discussion & Analysis

(In U.S. dollars, except where otherwise indicated)

22. GLOSSARY OF TERMS (Continued)

Terms	Definition
Network Difficulty	Network difficulty is a unitless measure of how difficult it is to find a hash below a given target. The BTC network protocol automatically adjusts Network Difficulty by changing the target every 2,016 blocks hashed based on the time it took for the total computing power used in BTC Mining to solve the previous 2,016 blocks such that the average time to solve each block is ten minutes.
Network Hashrate	Network hashrate refers to the total global hashrate (and related computing power) used in Mining for a given cryptocurrency.
Petahash	One quadrillion (1,000,000,000,000,000) hashes per second or one thousand Terahash.
SHA-256	SHA stands for Secure Hash Algorithm. The SHA-256 algorithm was designed by the US National Security Agency and is the cryptographic hash function used within the BTC network to validate transactions on the BTC Blockchain.
Synthetic HODL	Synthetic HODL is the use of financial instruments to create BTC-equivalent exposure.
Terahash	One trillion (1,000,000,000,000) hashes per second.

Page

Exhibit 99.3

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

I, Geoffrey Morphy, Chief Executive Officer of Bitfarms Ltd., certify the following:

Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Bitfarms Ltd. (the “issuer”) for the interim period ended September 30, 2023.

No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.

Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

Responsibility: The issuer’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as those terms are defined in National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, for the issuer.

Design: Subject to the limitations, if any, described in paragraphs 5.2 and 5.3, the issuer’s other certifying officer(s) and I have, as at the end of the period covered by the interim filings:

(a)

designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that:

(i)

material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii)

information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

(b)

designed ICFR, or caused it to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.

5.1

Control framework: The control framework the issuer’s other certifying officer(s) and I used to design the issuer’s ICFR is the Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

5.2

ICFR - material weakness relating to design: N/A

5.3

Limitation on scope of design: N/A

Reporting changes in ICFR: The issuer has disclosed in its interim MD&A any change in the issuer’s ICFR that occurred during the period beginning on July 1, 2023, and ended on September 30, 2023, that has materially affected, or is reasonably likely to materially affect, the issuer’s ICFR.

Date: November 7, 2023

(signed) “Geoffrey Morphy”
Geoffrey Morphy
Chief Executive Officer

Exhibit 99.4

FORM 52-109F2

CERTIFICATION OF INTERIM FILINGS

FULL CERTIFICATE

I, Jeffrey Lucas, Chief Financial Officer of Bitfarms Ltd., certify the following:

Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of Bitfarms Ltd. (the “issuer”) for the interim period ended September 30, 2023.

(a)

designed DC&P, or caused it to be designed under our supervision, to provide reasonable assurance that:

(i)

material information relating to the issuer is made known to us by others, particularly during the period in which the interim filings are being prepared; and

(ii)

(b)

5.1

5.2

ICFR - material weakness relating to design: N/A

5.3

Limitation on scope of design: N/A

Date: November 7, 2023

(signed) “Jeffrey Lucas”
Jeffrey Lucas
Chief Financial Officer

Exhibit 99.5

FORM 51-102F3

MATERIAL CHANGE REPORT

Item 1

Name and Address of Company

Bitfarms Ltd. (“Bitfarms” or the “Company”)

110 Yonge Street, Suite 1601

Toronto, Ontario M5C 1T4

Item 2

Date of Material Change

November 7, 2023.

Item 3

News Release

The press release attached as Schedule “A” was released on November 7, 2023 by a newswire company in Canada.

Item 4

Summary of Material Change

The material change is described in the press release attached as Schedule “A”.

Item 5

Full Description of Material Change

The material change is described in the press release attached as Schedule “A”.

Item 6

Reliance of subsection 7.1(2) of National Instrument 51-102

Not applicable.

Item 7

Omitted Information

Not applicable.

Item 8

Executive Officer

Geoffrey Morphy

President & Chief Executive Officer

Bitfarms Ltd.

[email protected]

Item 9

Date of Report

November 7, 2023.

Schedule “A”

Bitfarms Reports Third Quarter 2023 Results

- Earns 1,172 BTC and grows treasury by 154 BTC to 703 BTC in Q3 2023 -

- Increases hashrate to 6.1 EH/s at September 30, 2023 and 6.3 EH/s at October 31, 2023 -

- Developing operating capacity to 290 MW in Q1 2024, up 24% from Q3 2023 -

Toronto, Ontario and Brossard, Québec (November 7, 2023) - (GLOBE NEWSWIRE) — Bitfarms Ltd. (NASDAQ: BITF // TSX: BITF), a vertically integrated Bitcoin mining company, reported its financial results for the third quarter ended September 30, 2023, with revenue of $35 million, net loss of $19 million, and Adjusted EBITDA* of $7 million. All financial references are in U.S. dollars.

“During the third quarter of 2023, we increased operating capacity by 27 MW to 234 MW and by another 6 MW to 240 MW in October 2023. We executed plans to opportunistically expand farms with low-cost hydro power in Québec and Latin America, while we continued to prudently strengthen balance sheet liquidity preparing for the next BTC Halving,” said Geoff Morphy, CEO of Bitfarms. “We remain committed to investing in new facilities and miner upgrades at pricing with attractive returns. Now, with the introduction of higher efficiency, lower-priced miners, we plan to move aggressively to capitalize on more competitive pricing for equipment upgrades.

“Our geographic diversification continues to deliver competitive advantages. In Québec, where we utilize 100% renewable power, we purchased, energized, and then increased our Baie-Comeau farm to 11 MW. In LATAM, we’ve achieved operational success and are benefitting from exceptionally low-cost energy in the region. In Rio Cuarto, Argentina, we employed creative miner racking to extend beyond our original design of 50 MW to 54 MW. In Paso Pe, Paraguay, we acquired power purchase agreements as the foundation of a transformative expansion and began construction at our 50 MW facility. With the Paso Pe addition, we are on track to increase our Q3 2023 operating capacity by 24% to 290 MW in Q1 2024. With our international development experience spanning four countries in two continents, we are well-positioned to continue our expansion and reduce production costs as we approach the Halving and capture market share consolidation opportunities that will likely arise after-Halving,” Morphy concluded.

Financial Highlights for the Quarter ended September 30, 2023

●

Total revenue of $35 million, compared to $35 million in Q2 2023.

●

Gross mining profit* and gross mining margin* of $13 million and 38%, respectively, compared to $14 million and 42% in Q2 2023, respectively.

●

General and administrative (“G&A”) expenses of $8 million, including non-cash share-based compensation of $2 million, down 9% from Q2 2023.

●

Operating loss of $19 million, including $1 million of revaluation loss on digital assets, compared to an operating loss of $25 million in Q2 2023, which included $10 million of impairment charges.

●

Net loss of $19 million, or $(0.07) per basic and diluted share, compared to $25 million, or $(0.10) per basic and diluted share, in Q2 2023.

●

Non-IFRS Adjusted EBITDA* of $7 million, or 20% of revenue, compared to $8 million, or 22% of revenue, in Q2 2023.

●

Earned 1,172 BTC at an average direct cost per BTC* of $16,900, compared to $15,700 in Q2 2023.

●

Total cash cost, including G&A expenses, per BTC* were $22,700 in Q3 2023, up from $21,800 in Q2 2023.

Liquidity**

The Company held $47 million in cash and 703 BTC valued at approximately $19 million based upon a BTC price of approximately $27,000 as of September 30, 2023.

“In October, we initiated our Synthetic HODL^™ strategy to increase our upside exposure to the price of BTC with the purchase of 35 long-dated BTC call options,” commented Jeff Lucas, CFO of Bitfarms. “This augments our October month-end BTC holdings in treasury, which increased by 57 BTC to 760 BTC valued at $26 million at October 31, 2023, based on a BTC price of $34,200.”

Q3 2023 Financing Activities

●

Sold 1,018 BTC at an average price of $27,900 per BTC for total proceeds of $28 million, a portion of which was used to repay equipment-related indebtedness.

●

Paid down $6 million in equipment-related indebtedness, reducing the total outstanding balance to $10 million as of September 30, 2023.

●

Fully utilized remaining Miner manufacturer credits of $19 million with the purchase of hydro containers and Miners.

●

Raised $31 million in net proceeds through the Company’s at-the-market equity offering program, which expired on September 12, 2023.

Financing Activities Subsequent to Q3 2023

●

Sold 341 BTC of the 398 BTC earned during October 2023, generating proceeds of $10 million.

●

Added 57 BTC to treasury in October 2023, increasing BTC in custody to 760 BTC, representing a total value of $26 million based on a BTC price of $34,200, on October 31, 2023.

Q3 2023 and Recent Operating Highlights

●

Operations

●

Reached 6.1 EH/s corporate hashrate as of September 30, 2023.

●

Averaged 12.7 BTC per day in daily production for Q3 2023.

●

Earned 398 BTC in October 2023.

●

Powered additional 6 MW at Baie-Comeau in October 2023, fully energizing its initial 11 MW phase.

●

Miners

●

Fully utilized remaining Miner manufacturer credits of $19 million for the purchase of nine MicroBT hydro containers, with a total capacity of 20 MW, and approximately 2,000 MicroBT M53S+ hydro Miners to be deployed in Paraguay and Quebec.

●

Installed approximately 2,500 Miners in Baie-Comeau, Quebec that were redeployed from Magog, Quebec.

●

Expansion Strategy

●

Purchased Baie-Comeau facility and initiated production.

●

Acquired two power purchase agreements for up to 150 MW of hydro power capacity in Paraguay and initiated deployment plan in August for a new 50 MW facility at Paso Pe. The Paso Pe location is comprised of 20 MW of next generation hydro miners and related containers, which are ordered and planned to energize and contribute 700 PH in Q1 2024, and a 30 MW air-cooled warehouse slated for next generation miners.

Quarterly Operating Performance

	Q3 2023		Q2 2023		Q3 2022
Total BTC earned		1,172		1,223		1,515
Average Watts/average TH efficiency***		36		37		38
BTC sold		1,018		1,109		2,595

	At September 30,		At June 30,		At September 30,
	2023		2023		2022
Period-end operating EH/s		6.1		5.3		4.2
Period-end operating capacity (MW)		234		207		176
Hydro power (MW)		183		178		166

Quarterly Average Revenue**** and Cost per BTC*

	Q3 2023		Q2 2023		Q1 2023		Q4 2022		Q3 2022
Average revenue/BTC****	$	28,100	$	28,000	$	22,500	$	18,100	$	21,300
Direct cost/BTC*	$	16,900	$	15,700	$	12,500	$	11,100	$	9,700
Total cash cost/BTC*	$	22,700	$	21,800	$	17,600	$	16,800	$	14,600

Conference Call

Management will host a conference call and live webcast with an accompanying presentation today, Tuesday, November 7, 2023, at 11 a.m. ET to review the Company’s financial results and quarterly activity. Following management’s formal remarks there will be a live question-and-answer session, which may include pre-submitted questions.

Participants are asked to preregister for the call through the following link:

Q3 2023 Conference Call

Please note that registered participants will receive their dial in number upon registration and will dial directly into the call without delay. Those without internet access or who are unable to preregister may dial in by calling: 1-866-777-2509 (domestic), 1-412-317-5413 (international). All callers should dial in approximately 10 minutes prior to the scheduled start time and ask to be joined into the Bitfarms call.

The conference call will also be available through a live webcast found here:

Live Webcast

A webcast replay of the call will be available approximately one hour after the end of the call and will be available for one year, at the above webcast link. A telephonic replay of the call will be available through November 14, 2023 and may be accessed by calling 1-877-344-7529 (domestic) or 1-412-317-0088 (international) or Canada (toll free) 855-669-9658 and using access code 2148933. A presentation of the Q3 2023 results will be accessible on Tuesday, November 7, 2023, under the “Investors” section of Bitfarms’ website.

* Gross mining profit, gross mining margin, Adjusted EBITDA, Adjusted EBITDA margin, direct cost per BTC and total cash cost per BTC are non-IFRS financial measures or ratios and should be read in conjunction with and should not be viewed as alternatives to or replacements of measures of operating results and liquidity presented in accordance with IFRS. Readers are referred to the reconciliations of non-IFRS measures included in the Company’s MD&A and at the end of this press release.

** Liquidity represents cash and balance of digital assets including digital assets pledged as collateral.

*** Average Watts represents the energy consumption of Miners.

**** Average revenue per BTC is for mining operations only and excludes Volta revenue.

About Bitfarms Ltd.

Founded in 2017, Bitfarms is a global, publicly traded (NASDAQ/TSX: BITF) Bitcoin mining company that contributes its computational power to one or more mining pools from which it receives payment in Bitcoin. Bitfarms develops, owns, and operates vertically integrated mining farms with in-house management and company-owned electrical engineering, installation service, and multiple onsite technical repair centers. The Company’s proprietary data analytics system delivers best-in-class operational performance and uptime.

Bitfarms currently has 11 farms, which are located in four countries: Canada, the United States, Paraguay, and Argentina. Powered by predominantly environmentally friendly hydro-electric and long-term power contracts, Bitfarms is committed to using sustainable, locally based, and often underutilized energy infrastructure.

To learn more about Bitfarms’ events, developments, and online communities:

Website: www.bitfarms.com

https://www.facebook.com/bitfarms/
https://twitter.com/Bitfarms_io
https://www.instagram.com/bitfarms/
https://www.linkedin.com/company/bitfarms/

Glossary of Terms

●

BTC BTC/day = Bitcoin or Bitcoin per day

●

EH or EH/s = Exahash or exahash per second

●

MW or MWh = Megawatts or megawatt hour

●

PH or PH/s = Petahash or petahash per second

●

TH or TH/s = Terahash or terahash per second

●

w/TH = Watts per Terahash

●

KWh = Kilowatt per hour

●

Synthetic HODL™ = the capital-efficient use of financial instruments to create BTC-equivalent exposure

Cautionary Statement

Trading in the securities of the Company should be considered highly speculative. No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein. Neither the Toronto Stock Exchange, Nasdaq, or any other securities exchange or regulatory authority accepts responsibility for the adequacy or accuracy of this release.

Forward-Looking Statements

This news release contains certain “forward-looking information” and “forward-looking statements” (collectively, “forward-looking information”) that are based on expectations, estimates and projections as at the date of this news release and are covered by safe harbors under Canadian and United States securities laws. The statements and information in this release regarding projected growth, target hashrate, opportunities relating to the Company’s geographical diversification and expansion in Paraguay, Argentina, and Quebec, upgrading and deployment of miners as well as the timing therefor, improved financial performance and balance sheet liquidity, other growth opportunities and prospects, and other statements regarding future growth, plans and objectives of the Company are forward-looking information. Other forward-looking information includes, but is not limited to, information concerning: the intentions, plans and future actions of the Company, as well as Bitfarms’ ability to successfully earn digital currency, revenue increasing as currently anticipated, the ability to profitably liquidate current and future digital currency inventory, volatility of network difficulty and digital currency prices and the potential resulting significant negative impact on the Company’s operations, the construction and operation of expanded blockchain infrastructure as currently planned, and the regulatory environment for cryptocurrency in the applicable jurisdictions.

Any statements that involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as “expects”, or “does not expect”, “is expected”, “anticipates” or “does not anticipate”, “plans”, “budget”, “scheduled”, “forecasts”, “estimates”, “believes” or “intends” or variations of such words and phrases or stating that certain actions, events or results “may” or “could”, “should”, “would”, “might” or “will” be taken to occur or be achieved) are not statements of historical fact and may be forward-looking information and are intended to identify forward-looking information.

This forward-looking information is based on assumptions and estimates of management of the Company at the time they were made, and involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance, or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. Such factors include, among others, risks relating to: the availability of financing opportunities, risks associated with economic conditions, dependence on management and conflicts of interest, the ability to service debt obligations and maintain flexibility in respect of debt covenants; economic dependence on regulated terms of service and electricity rates; the speculative and competitive nature of the technology sector; dependency on continued growth in blockchain and cryptocurrency usage; lawsuits and other legal proceedings and challenges; conflict of interests with directors and management; government regulations and approvals; the global economic climate; dilution; the Company’s limited operating history; future capital needs and uncertainty of additional financing, including the Company’s ability to utilize the Company’s at-the-market equity offering program (the “ATM Program”) and the prices at which the Company may sell Common Shares in the ATM Program, as well as capital market conditions in general; risks relating to the strategy of maintaining and increasing Bitcoin holdings and the impact of depreciating Bitcoin prices on working capital; the competitive nature of the industry; currency exchange risks; the need for the Company to manage its planned growth and expansion; the effects of product development and need for continued technology change; the ability to maintain reliable and economical sources of power to run its cryptocurrency mining assets; the impact of energy curtailment or regulatory changes in the energy regimes in the jurisdictions in which the Company operates; protection of proprietary rights; the effect of government regulation and compliance on the Company and the industry; network security risks; the ability of the Company to maintain properly working systems; reliance on key personnel; global economic and financial market deterioration impeding access to capital or increasing the cost of capital; share dilution resulting from the ATM Program and from other equity issuances; and volatile securities markets impacting security pricing unrelated to operating performance. In addition, particular factors that could impact future results of the business of Bitfarms include, but are not limited to: the construction and operation of facilities may not occur as currently planned, or at all; expansion may not materialize as currently anticipated, or at all; the digital currency market; the ability to successfully earn digital currency; revenue may not increase as currently anticipated, or at all; it may not be possible to profitably liquidate the current digital currency inventory, or at all; a decline in digital currency prices may have a significant negative impact on operations; an increase in network difficulty may have a significant negative impact on operations; the volatility of digital currency prices; the anticipated growth and sustainability of hydroelectricity for the purposes of cryptocurrency mining in the applicable jurisdictions; the inability to maintain reliable and economical sources of power for the Company to operate cryptocurrency mining assets; the risks of an increase in the Company’s electricity costs, cost of natural gas, changes in currency exchange rates, energy curtailment or regulatory changes in the energy regimes in the jurisdictions in which the Company operates and the adverse impact on the Company’s profitability; the ability to complete current and future financings, any regulations or laws that will prevent Bitfarms from operating its business; historical prices of digital currencies and the ability to earn digital currencies that will be consistent with historical prices; an inability to predict and counteract the effects of COVID-19 on the business of the Company, including but not limited to the effects of COVID-19 on the price of digital currencies, capital market conditions, restriction on labour and international travel and supply chains; and, the adoption or expansion of any regulation or law that will prevent Bitfarms from operating its business, or make it more costly to do so. For further information concerning these and other risks and uncertainties, refer to the Company’s filings on www.sedarplus.ca (which are also available on the website of the U.S. Securities and Exchange Commission at www.sec.gov), including the annual information form for the year-ended December 31, 2022, filed on March 21, 2023 and the MD&A for three-month period ended September 30, 2023. The Company has also assumed that no significant events occur outside of Bitfarms’ normal course of business. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those expressed in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on any forward-looking information. The Company undertakes no obligation to revise or update any forward-looking information other than as required by law.

Contacts:

LHA Investor Relations
David Barnard

+1 415-433-3777

[email protected]

Actual Agency

Noor Dar

+ 1 516-270-4009

[email protected]

Québec Media: Tact

Louis-Martin Leclerc

+1 418-693-2425

[email protected]

Bitfarms Ltd. Consolidated Financial & Operational Results

	Three months ended September 30,												Nine months ended September 30,
(U.S.$ in thousands except where indicated)	2023			2022			$ Change			% Change			2023			2022			$ Change			% Change

Revenues		34,596			33,247			1,349			4	%		100,125			115,391			(15,266	)		(13	)%
Cost of revenues		43,462			37,186			6,276			17	%		123,384			92,789			30,595			33	%
Gross (loss) profit		(8,866	)		(3,939	)		(4,927	)		125	%		(23,259	)		22,602			(45,861	)		(203	)%
Gross margin ⁽¹⁾		(26	)%		(12	)%		—			—			(23	)%		20	%		—			—

Operating expenses
General and administrative expenses		8,372			10,299			(1,927	)		(19	)%		25,887			39,534			(13,647	)		(35	)%
Realized loss on disposition of digital assets		—			44,329			(44,329	)		(100	)%		—			122,243			(122,243	)		(100	)%
(Reversal of) revaluation loss on digital assets		1,183			(45,655	)		46,838			103	%		(1,512	)		21,118			(22,630	)		(107	)%
Loss on disposition of property, plant and equipment		217			756			(539	)		(71	)%		1,776			1,692			84			5	%
Impairment on short-term prepaid deposits, equipment and construction prepayments, property, plant and equipment and right-of-use assets		—			84,116			(84,116	)		(100	)%		9,982			84,116			(74,134	)		(88	)%
Impairment on goodwill		—			—			—			—	%		—			17,900			(17,900	)		(100	)%
Operating loss		(18,638	)		(97,784	)		79,146			(81	)%		(59,392	)		(264,001	)		204,609			(78	)%
Operating margin ⁽¹⁾		(54	)%		(294	)%		—			—			(59	)%		(229	)%		—			—

Net financial income		(336	)		(8,251	)		7,915			(96	)%		(12,706	)		(24,191	)		11,485			(47	)%
Net loss before income taxes		(18,302	)		(89,533	)		71,231			(80	)%		(46,686	)		(239,810	)		193,124			(81	)%

Income tax expense (recovery)		401			(4,725	)		5,126			108	%		(23	)		(17,603	)		17,580			(100	)%
Net loss		(18,703	)		(84,808	)		66,105			(78	)%		(46,663	)		(222,207	)		175,544			(79	)%

Basic and diluted loss per share (in U.S. dollars)		(0.07	)		(0.40	)		—			—			(0.19	)		(1.09	)		—			—
Change in revaluation surplus - digital assets, net of tax		(824	)		—			(824	)		(100	)%		1,567			—			1,567			100	%
Total comprehensive loss, net of tax		(19,527	)		(84,808	)		65,281			(77	)%		(45,096	)		(222,207	)		177,111			(80	)%

Gross Mining profit ⁽²⁾		12,505			16,789			(4,284	)		(26	)%		39,017			74,089			(35,072	)		(47	)%
Gross Mining margin ⁽²⁾		38	%		52	%		—			—			40	%		66	%		—			—
EBITDA ⁽²⁾		4,280			(65,419	)		69,699			107	%		19,767			(177,217	)		196,984			111	%
EBITDA margin ⁽²⁾		12	%		(197	)%		—			—			20	%		(154	)%		—			—
Adjusted EBITDA ⁽²⁾		6,866			10,325			(3,459	)		(34	)%		21,107			52,326			(31,219	)		(60	)%
Adjusted EBITDA margin ⁽²⁾		20	%		31	%		—			—			21	%		45	%		—			—

nm: not meaningful

(1)

Gross margin and Operating margin are supplemental financial ratios; refer to section 9 - Non-IFRS and Other Financial Measures and Ratios of the Company’s MD&A.

(2)

Gross Mining profit, Gross Mining margin, EBITDA, EBITDA margin, Adjusted EBITDA and Adjusted EBITDA margin are non-IFRS measures or ratios; refer to section 9 - Non-IFRS and Other Financial Measures and Ratios of the Company’s MD&A.

Bitfarms Ltd. Reconciliation of Consolidated Net Income (loss) to EBITDA and Adjusted EBITDA

	Three months ended September 30,												Nine months ended September 30,
(U.S.$ in thousands except where indicated)	2023			2022			$ Change			% Change			2023			2022			$ Change			% Change

Revenues		34,596			33,247			1,349			4	%		100,125			115,391			(15,266	)		(13	)%

Net loss before income taxes		(18,302	)		(89,533	)		71,231			(80	)%		(46,686	)		(239,810	)		193,124			(81	)%
Interest expense		815			3,394			(2,579	)		(76	)%		3,458			10,950			(7,492	)		(68	)%
Depreciation and amortization		21,767			20,720			1,047			5	%		62,995			51,643			11,352			22	%
EBITDA		4,280			(65,419	)		69,699			107	%		19,767			(177,217	)		196,984			111	%
EBITDA margin		12	%		(197	)%		—			—			20	%		(154	)%		—			—
Share-based payment		2,011			3,961			(1,950	)		(49	)%		7,009			17,993			(10,984	)		(61	)%
Realized loss on disposition of digital assets		—			44,329			(44,329	)		(100	)%		—			122,243			(122,243	)		(100	)%
Impairment on short-term prepaid deposits, equipment and construction prepayments, property, plant and equipment and right-of-use assets		—			84,116			(84,116	)		(100	)%		9,982			84,116			(74,134	)		(88	)%
(Reversal of) revaluation loss on digital assets		1,183			(45,655	)		46,838			103	%		(1,512	)		21,118			(22,630	)		(107	)%
Impairment on goodwill		—			—			—			—	%		—			17,900			(17,900	)		(100	)%
Gain on extinguishment of long-term debt and lease liabilities		—			—			—			—	%		(12,835	)		—			(12,835	)		(100	)%
Gain on disposition of marketable securities		(4,120	)		(13,690	)		9,570			(70	)%		(11,246	)		(44,332	)		33,086			(75	)%
Net financial expenses and other		3,512			2,683			829			31	%		9,942			10,505			(563	)		(5	)%
Adjusted EBITDA		6,866			10,325			(3,459	)		(34	)%		21,107			52,326			(31,219	)		(60	)%
Adjusted EBITDA margin		20	%		31	%		—			—	%		21	%		45	%		—			—	%

nm: not meaningful

Bitfarms Ltd. Calculation of Gross Mining Profit and Gross Mining Margin

	Three months ended September 30,												Nine months ended September 30,
(U.S.$ in thousands except where indicated)	2023			2022			$ Change			% Change			2023			2022			$ Change			% Change
Gross (loss) profit		(8,866	)		(3,939	)		(4,927	)		125	%		(23,259	)		22,602			(45,861	)		(203	)%
Non-Mining revenues ⁽¹⁾		(1,697	)		(971	)		(726	)		75	%		(3,775	)		(2,342	)		(1,433	)		61	%
Depreciation and amortization		21,767			20,720			1,047			5	%		62,995			51,643			11,352			22	%
Purchases of electrical components and other		892			690			202			29	%		1,836			1,262			574			45	%
Electrician salaries and payroll taxes		409			289			120			42	%		1,220			924			296			32	%
Gross Mining profit		12,505			16,789			(4,284	)		(26	)%		39,017			74,089			(35,072	)		(47	)%
Gross Mining margin		38	%		52	%		—			—			40	%		66	%		—			—

(1)

Non-Mining revenues reconciliation:

	Three months ended September 30,												Nine months ended September 30,
(U.S.$ in thousands except where indicated)	2023			2022			$ Change			% Change			2023			2022			$ Change			% Change
Revenues		34,596			33,247			1,349			4	%		100,125			115,391			(15,266	)		(13	)%
Less Mining related revenues for the purpose of calculating gross Mining margin:
Mining revenues		(32,899	)		(32,276	)		(623	)		2	%		(96,350	)		(113,049	)		16,699			(15	)%
Non-Mining revenues		1,697			971			726			75	%		3,775			2,342			1,433			61	%

Bitfarms Ltd. Calculation of Direct Cost and Direct Cost per BTC

	Three months ended September 30,												Nine months ended September 30,
(U.S.$ in thousands except where indicated)	2023			2022			$ Change			% Change			2023			2022			$ Change			% Change
Cost of revenues		43,462			37,186			6,276			17	%		123,384			92,789			30,595			33	%
Depreciation and amortization		(21,767	)		(20,720	)		(1,047	)		5	%		(62,995	)		(51,643	)		(11,352	)		22	%
Purchases of electrical components		(890	)		(688	)		(202	)		29	%		(1,830	)		(1,252	)		(578	)		46	%
Electrician salaries and payroll taxes		(409	)		(289	)		(120	)		42	%		(1,220	)		(924	)		(296	)		32	%
Infrastructure		(600	)		(1,060	)		460			(43	)%		(2,303	)		(3,841	)		1,538			(40	)%
Other		—			336			(336	)		(100	)%		82			633			(551	)		(87	)%
Direct Cost		19,796			14,765			5,031			34	%		55,118			35,762			19,356			54	%
Quantity of BTC earned		1,172			1,515			(343	)		(23	)%		3,692			3,733			(41	)		(1	)%
Direct Cost per BTC (in U.S. dollars)		16,900			9,700			7,200			74	%		14,900			9,600			5,300			55	%

Bitfarms Ltd. Calculation of Total Cash Cost and Total Cash Cost per BTC

	Three months ended September 30,												Nine months ended September 30,
(U.S.$ in thousands except where indicated)	2023			2022			$ Change			% Change			2023			2022			$ Change			% Change
Net loss before income taxes		18,302			89,533			(71,231	)		(80	)%		46,686			239,810			(193,124	)		(81	)%
Revenues		34,596			33,247			1,349			4	%		100,125			115,391			(15,266	)		(13	)%
Depreciation and amortization		(21,767	)		(20,720	)		(1,047	)		5	%		(62,995	)		(51,643	)		(11,352	)		22	%
Purchases of electrical components		(890	)		(688	)		(202	)		29	%		(1,830	)		(1,252	)		(578	)		46	%
Electrician salaries and payroll taxes		(409	)		(289	)		(120	)		42	%		(1,220	)		(924	)		(296	)		32	%
Share-based payment		(2,011	)		(3,961	)		1,950			(49	)%		(7,009	)		(17,993	)		10,984			(61	)%
Realized loss on disposition of digital assets		—			(44,329	)		44,329			100	%		—			(122,243	)		122,243			100	%
(Reversal of) revaluation loss on digital assets		(1,183	)		45,655			(46,838	)		(103	)%		1,512			(21,118	)		22,630			107	%
Loss on disposition of property, plant and equipment		(217	)		(756	)		539			(71	)%		(1,776	)		(1,692	)		(84	)		5	%
Impairment on short-term prepaid deposits, equipment and construction prepayments, property, plant and equipment and right-of-use assets		—			(84,116	)		84,116			100	%		(9,982	)		(84,116	)		74,134			(88	)%
Impairment on goodwill		—			—			—			—	%		—			(17,900	)		17,900			100	%
Net financial income		336			8,251			(7,915	)		(96	)%		12,706			24,191			(11,485	)		(47	)%
Other		(179	)		336			(515	)		(153	)%		(97	)		633			(730	)		(115	)%
Total Cash Cost		26,578			22,163			4,415			20	%		76,120			61,144			14,976			24	%
Quantity of BTC earned		1,172			1,515			(343	)		(23	)%		3,692			3,733			(41	)		(1	)%
Total Cash Cost per BTC (in U.S. dollars)		22,700			14,600			8,100			55	%		20,600			16,400			4,200			26	%