What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-10 compared with 2021-03-16 · 1553 added, 1265 removed, 393 unchanged (88% of the section changed)

3 unchanged sentences

to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS (PCAOB ID No.

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS

the Board of Directors and Stockholders of

1 unchanged sentence

& Subsidiaries

(formerly known as Marathon

Patent Group, Inc)

on the Financial Statements

have audited the accompanying consolidated balance sheets of Marathon Digital Holdings, Inc.

& Subsidiaries (the Company)

as of December 31, 2020 and 2019, and the related consolidated statements of operations, stockholders’

cash flows for the two years ended December 31, 2020, and the related notes (collectively referred to as the consolidated

financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial

positions of the Company as of December 31, 2020, and the consolidated results of its operations and its cash flows for

the year ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an

opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered

with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to

the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and

Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but

not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

have audited the accompanying consolidated balance sheet of Marathon Digital Holdings, Inc.

& Subsidiaries (the Company) as of December

31, 2020, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the period in the two

years ended December 31, 2020, and the related notes (collectively referred to as the consolidated financial statements).

In our opinion,

the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December

31, 2020, and the consolidated results of its operations and its cash flows for the period in the two years ended December 31, 2020,

in conformity with accounting principles generally accepted in the United States of America.

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion

on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public

Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance

with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit,

we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to

error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or

fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides

a reasonable basis for our opinion.

Audit Matters:

audit matters are matters arising from the current period audit of the financial statements that were communicated or required

to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements,

and (2) involved our especially challenging, subjective, or complex judgments.

audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be

communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements, and

(2) involved our especially challenging, subjective, or complex judgments.

determined that there are no critical audit matters.

have served as the Company’s auditor since 2017.

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Stockholders and Board of Directors of

Digital Holdings, Inc.

on the Financial Statements

have audited the accompanying consolidated balance sheet of Marathon Digital Holdings, Inc.

(the “Company”) as of December

31, 2021, the related consolidated statements of operations, stockholders’ equity and cash flows for the year then ended, and the

related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present

fairly, in all material respects, the financial position of the Company as of December 31, 2021, and the results of its operations and

its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”),

the Company’s internal control over financial reporting as of December 31, 2021, based on the criteria established in Internal

Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 2013 and our

report dated March 9, 2022 , expressed an adverse opinion on the effectiveness of the Company’s internal control over financial

reporting because of the existence of a material weakness.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent

with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities

and Exchange Commission and the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud,

and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts

and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates

made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a

reasonable basis for our opinion.

Audit Matters

critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated

or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial

statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter

does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit

matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

disclosed in Note 2 of the financial statements, the Company recognizes revenue in accordance with ASC 606, Revenue from Contracts

with Customers .

The Company provides computing power in crypto asset transaction verification services to the blockchain network.

The transaction consideration received by the Company, if any, is a non-cash consideration, which the Company measures at fair value

on the date received.

principal consideration for our determination that performing procedures related to revenue recognition is a critical audit matter is

due to the complexities involved in auditing completeness and occurrence of the revenue recognized by the Company particularly in light

of material weakness identified in the design and effectiveness of certain internal controls over the IT environment for certain financially

relevant systems.

the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial

These procedures included, among others, (i) performing site visitations of the Company’s facility where the mining

hardware is located, which included an observation of the physical and environmental controls and mining equipment inventory, (ii) on

a sample basis testing the hashing power contributed by the Company’s mining hardware, (iii) independently confirming certain financial

and performance data directly with the blockchain network, (iv) performing certain substantive analytical procedures using hashing power

data and electricity consumption data to determine the completeness and occurrence of digital assets rewarded to the Company as consideration

for services rendered, and (v) confirming the digital asset balances directly with the custodian of the Company’s wallets.

have served as the Company’s auditor since 2021 .

MARATHON DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

BALANCE SHEETS

CONSOLIDATED CONDENSED BALANCE SHEETS

Current assets:

1 unchanged sentence

$ 268,522,019

$ 141,322,776

Digital currencies

Digital currencies, restricted

Other receivable

Investment fund

Loan receivable

Prepaid expenses and other current assets

Total current assets

Non-current assets:

Property and equipment, net of accumulated depreciation of $6,480,359

and $3,487,323 for December 31, 2020 and 2019, respectively

Other assets:

Property and equipment, net of accumulated depreciation and impairment charges of $ 21,311,461 and $ 6,480,359 for December 31, 2021 and 2020, respectively

Prepaid service contract

Right-of-use assets

Intangible assets, net of accumulated amortization

of $207,598 and $136,422 for December 31, 2020 and 2019, respectively

Total non-current assets

Deposit, non-current

Investment in SAFE Agreements

Intangible assets, net of accumulated amortization of $ 280,497 and $ 207,598 for December 31, 2021 and 2020, respectively

Total other assets

$ 1,448,244,423

LIABILITIES AND STOCKHOLDERS’

$ 313,251,239

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued expenses

Mining servers payable

Current portion of operating lease liability

Current portion of accrued bond interest

Current portion of lease liability

Warrant liability

3 unchanged sentences

SBA PPP loan payable

Operating lease liability

Deferred tax liabilities

Total long-term liabilities

1 unchanged sentence

Commitments and Contingencies

Stockholders’

Preferred stock, 0.0001 par value, 50,000,000 shares authorized, no shares

issued and outstanding at December 31, 2020 and 2019, respectively

Stockholders’ Equity:

Preferred stock, 0.0001 par value, 50,000,000 shares authorized, no shares issued and outstanding at December 31, 2021 and 2020, respectively

Common stock, 0.0001 par value;

6 unchanged sentences

( 116,055,277 )

Total stockholders’

TOTAL LIABILITIES AND STOCKHOLDERS’

Total stockholders’ equity

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$ 1,448,244,423

$ 313,251,239

accompanying notes are an integral part to these audited consolidated financial statements.

2 unchanged sentences

STATEMENTS OF OPERATIONS

For the Years Ended

For the Years Ended December 31,

Cryptocurrency mining revenue

$ 150,463,770

Total revenues

7 unchanged sentences

General and administrative

Impairment of mined cryptocurrency

Total operating expenses

Operating loss

Income (loss) from operations

( 85,087,730 )

( 9,833,104 )

( 4,239,111 )

Other income (expenses)

3 unchanged sentences

Loss on conversion of note

Realized gain on sale of digital currencies

Change in fair value of investment in NYDIG fund

Realized gain (loss) on sale of digital currencies

Change in fair value of warrant liability

( 1,048,286 )

Change in fair value of mining payable

1 unchanged sentence

Interest expense

( 1,569,731 )

Total other (expenses) income

2 unchanged sentences

$ ( 10,445,371 )

Income tax expense

$ ( 3,517,065 )

Provision for income taxes

( 23,020,721 )

Net loss per share, basic and diluted:

$ ( 36,174,506 )

$ ( 10,447,771 )

$ ( 3,517,065 )

Net income (loss) per share, basic and diluted:

Weighted average shares outstanding, basic and diluted:

3 unchanged sentences

STATEMENTS OF STOCKHOLDERS EQUITY

Preferred Stock

Additional Paid-in

Other Comprehensive

Stockholders’

Total Stockholders’

as of December 31, 2018

1 unchanged sentence

$ ( 102,090,441 )

$ ( 450,719 )

based compensation

value adjustment and additional shares issued due to reverse split

of common stock, net of offering costs/At-the-market offering

stock issued for purchase of mining servers

Common stock issued for note conversion

Common stock issued for note conversion, shares

Common stock issued for long term service contract

Common stock issued for long term service contract, shares

Issue common stock and warrant for cash

Issue common stock and warrant for cash, shares

Options exercised on cashless basis

Options exercised on cashless basis, shares

Warrant exercised for cash

Warrant exercised for cash, shares

Common stock issued for cashless exercise of warrants

Common stock issued for cashless exercise of warrants, shares

Common stock issued for service and license agreements

Common stock issued for service and license agreements, shares

Options exercised for cash

Options exercised for cash, shares

( 3,517,065 )

as of December 31, 2019

$ 109,705,051

$ ( 105,607,506 )

$ ( 450,719 )

Stock based compensation

Par value adjustment

and additional shares issued due to reverse split

Issuance of common stock,

net of offering costs/At-the-market offering

Common stock issued

for purchase of mining servers

Issuance of common stock, net of offering costs/At-the-market offering

Common stock issued for purchase of mining servers

Common stock issued for note conversion

Common stock issued for long term service contract

Issue common stock and warrant for cash

Warrant exercised for cash

Options exercised for cash

( 10,447,771 )

Balance as of December 31, 2020

1 unchanged sentence

$ ( 116,055,277 )

Stock based compensation

Issuance of common stock,

net of offering costs/At-the-market offering

Common stock issued

for purchase of mining servers

Common stock issued

for note conversion

Common stock issued

for long term service contract

Issue common stock and

warrant for cash

Warrant exercised for

Options exercised for

$ ( 450,719 )

$ 311,744,964

as of December 31, 2020

Stock based compensation, net of tax withholding

Issuance of common stock, net of offering costs/At-the-market offering

Options exercised on cashless basis

Warrant exercised for cash

Common stock issued for cashless exercise of warrants

Common stock issued for service and license agreements

( 36,174,506 )

Balance as of December 31, 2021

$ 835,693,610

$ ( 152,229,783 )

$ ( 450,719 )

$ 683,023,381

accompanying notes are an integral part to these audited consolidated financial statements.

2 unchanged sentences

STATEMENTS OF CASH FLOWS

For the Years Ended

For the Years Ended December

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

$ ( 36,174,506 )

$ ( 10,447,771 )

$ ( 3,517,065 )

Adjustments to reconcile net loss to net cash used in operating activities:

Amortization of patents and website

Amortization of leasehold improvements

Deferred tax liability

Loss on conversion of debt

Realized gain on sale of digital currencies

Change in fair value of warrant liability

Change in fair value of mining payable

Impairment of mining equipment

Impairment of leasehold improvements

Realized gain (loss) on sale of digital currencies

Change in fair value of warrant liability

Change in fair value of mining payable

Change in fair value of investment securities

( 73,778,545 )

Gain on PPP loan forgiveness

Impairment of cryptocurrencies

Stock based compensation

Amortization of right-of-use assets

Bad debt allowance

Change in prepaid service contract

1 unchanged sentence

Digital currencies

Operating lease liability

( 150,512,940 )

( 4,357,443 )

( 1,185,227 )

Lease liability

Prepaid expenses and other assets

Accounts payable and accrued expenses

Accrued interest on bond payable

Net cash used in operating activities

( 18,218,560 )

( 7,773,704 )

( 3,318,655 )

CASH FLOWS FROM INVESTING ACTIVITIES

Sale of digital currencies

Interest received from digital currencies, restricted

Loan receivable

( 30,000,000 )

Purchase of investment securities

( 150,000,000 )

Purchase of SAFE investments

( 3,000,000 )

Purchase of property and equipment

( 273,851,299 )

( 17,742,315 )

Deposits for the purchase of mining servers

( 435,065,378 )

Net cash (used in) provided by investing activities

( 65,647,592 )

Net cash provided by (used in) investing activities

( 891,916,677 )

( 81,287,513 )

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds received on SBA PPP notes payable

Proceeds received on issuance of notes payable

Proceeds from issuance of common stock/At-the-market offering

Offering costs for the issuance of common stock/At-the-market offering

( 12,571,668 )

( 7,069,955 )

Proceeds from issuance of convertible debt, net of agent’s discount

Other offering costs

Proceeds from line of credit

Repayment from line of credit

( 77,500,000 )

Value of shares withheld for taxes

( 4,713,652 )

Proceeds from issuance of common stock and warrant, net

Proceeds received on exercise of warrants

Proceeds received on exercise of options and warrants

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents —

beginning of year

Cash and cash equivalents —

1,037,334,480

Net (decrease) increase in cash and cash equivalents

( 1,858,208 )

Cash and cash equivalents — beginning of period

Cash and cash equivalents — end of period

$ 141,322,776

Supplemental schedule of non-cash investing and financing activities:

1 unchanged sentence

Receivable due to share issuance

Common stock issued for long-term service contract

Common stock issued for purchase of mining servers

Reduction of share commitment for purchase of mining

Common stock issued for note conversion

Reduction of share commitment for purchase of mining servers

Options exercised into common stock

Warrants exercised into common shares

Restricted stock issuance

Common stock issued for note conversion

Common stock issued for service and license agreements

accompanying notes are an integral part to these audited consolidated financial statements.

4 unchanged sentences

Digital Holdings, Inc.

(the “Company”) was incorporated in the State of Nevada on February 23, 2010 under the name

Verve Ventures, Inc.

On December 7, 2011, the Company changed its name to American Strategic Minerals Corporation and were engaged

in exploration and potential development of uranium and vanadium minerals business.

In June 2012, the Company discontinued the

minerals business and began to invest in real estate properties in Southern California.

In October 2012, the Company discontinued

its real estate business when the former CEO joined the firm and the Company commenced IP licensing operations, at which time

the Company’s name was changed to Marathon Patent Group, Inc.

On November 1, 2017, the Company entered into a merger agreement

with Global Bit Ventures, Inc.

(“GBV”), which is focused on mining digital assets.

The Company purchased cryptocurrency

mining machines and established a data center in Canada to mine digital assets.

The Company expanded its activities in the mining

of new digital assets, while at the same time harvesting the value of its remaining IP assets.

As of October 2020, the financial

operations were brought in house and are completed by the Company’s accounting team that consists of a Chief Financial Officer,

Chief Operating Officer and bookkeeper.

Subsequent to December 31, 2020, the Company hired a full-time Controller.

moved all of our data mining operations to our new facility in Hardin Montana.

Company’s Board of Directors adopted the reverse stock split approved by its shareholders at its December 2018 Board Meeting.

Upon the effectiveness of the reverse stock split, every four shares of issued and outstanding common stock before the open of

business on April 8, 2019 was combined into one issued and outstanding share of common stock, with no change in par value per

All share and per share values for all periods presented in the accompanying consolidated financial statements have been

retroactively adjusted to reflect the 1:4 Reverse Split.

January 1, 2018, our Board adopted the 2018 Equity Incentive Plan, subsequently approved by the stockholders on March 7, 2018,

pursuant to which up to 625,000 shares of common stock, stock options, restricted stock, preferred stock, stock-based awards and

other awards are reserved for issuance as awards to employees, directors, consultants, advisors and other service providers.

May 21, 2019, the Company received notice from the Nasdaq Capital Market (the “Capital Market”) that the Company has

failed to maintain a minimum of $2,500,000 in stockholders’

equity for continued listing as required under Listing Rule

5550(b)(1) as its Form 10-Q for the period ended March 31, 2019 reported stockholders’

equity of $2,158,192.

2019, we announced Nasdaq approved the Company’s plan to regain compliance, and the Company was required to file its Form

10-Q for the period ending September 30, 2019 with the SEC on or before November 13, 2019, which it did, evidencing compliance

with the stockholders’

equity requirement.

(the “Company”) was incorporated in the State of Nevada on February 23, 2010 under the name Verve

Ventures, Inc.

On December 7, 2011, the Company changed its name to American Strategic Minerals Corporation and were engaged in exploration

and potential development of uranium and vanadium minerals business.

In June 2012, the Company discontinued the minerals business and

began to invest in real estate properties in Southern California.

In October 2012, the Company discontinued its real estate business

and the Company commenced IP licensing operations, at which time the Company’s name was changed to Marathon Patent Group, Inc.

On November 1, 2017, the Company entered into a merger agreement with Global Bit Ventures, Inc.

(“GBV”), which is focused

on mining digital assets.

The Company purchased cryptocurrency mining machines and established a data center in Canada to mine digital

The Company expanded its activities in the mining of new digital assets, while at the same time harvesting the value of its remaining

As of October 2020, the financial operations were brought in house and are completed by the Company’s accounting team

that consists of a Chief Financial Officer, Chief Operating Officer and bookkeeper.

Subsequent to December 31, 2020, the Company hired

a full-time Controller.

We have also moved all of our data mining operations that were operating in Canada prior to 2021 to our new facility

in Hardin, Montana.

Company’s Board of Directors adopted the reverse stock split approved by its shareholders at its December 2018 Board Meeting.

the effectiveness of the reverse stock split, every four shares of issued and outstanding common stock before the open of business on

April 8, 2019 was combined into one issued and outstanding share of common stock, with no change in par value per share.

All share and

per share values for all periods presented in the accompanying consolidated financial statements have been retroactively adjusted to

reflect the 1:4 Reverse Split .

January 1, 2018, our Board adopted the 2018 Equity Incentive Plan, subsequently approved by the stockholders on March 7, 2018, pursuant

to which up to 625,000 shares of common stock, stock options, restricted stock, preferred stock, stock-based awards and other awards

are reserved for issuance as awards to employees, directors, consultants, advisors and other service providers.

May 21, 2019, the Company received notice from the Nasdaq Capital Market (the “Capital Market”) that the Company has failed

to maintain a minimum of $ 2,500,000 in stockholders’ equity for continued listing as required under Listing Rule 5550(b)(1) as

its Form 10-Q for the period ended March 31, 2019 reported stockholders’ equity of $ 2,158,192 .

On July 23, 2019, we announced Nasdaq

approved the Company’s plan to regain compliance, and the Company was required to file its Form 10-Q for the period ending September

30, 2019 with the SEC on or before November 13, 2019, which it did, evidencing compliance with the stockholders’ equity requirement.

DIGITAL HOLDINGS, INC.

1 unchanged sentence

to Consolidated Financial Statements

September 30, 2019, the Company consummated the purchase of 6000 S-9 Bitmain 13.5 TH/s Bitcoin Antminers (“Miners”)

from SelectGreen Blockchain Ltd., a British Columbia corporation, for which the purchase price was $4,086,250 or 2,335,000 shares

of its common stock at a price of $1.75 per share.

As a result of an exchange cap requirement imposed in conjunction with the

Company’s Listing of Additional Shares application filed with Nasdaq to the transaction, the Company issued 1,276,442 shares

of its common stock which represented $2,233,773 of the $4,086,250 (constituting 19.9% of the issued and outstanding shares on

the date of the Asset Purchase Agreement) and upon the receipt of shareholder approval, at the Annual Shareholders Meeting to

be held on November 15, 2019, the Company can issue the balance of the 1,058,558 unregistered common stock shares.

The shareholders

did approve the issuance of the additional shares at the Annual Shareholders Meeting.

The Company has issued an additional 474,808

at $0.90 per share.

The $513,700 set forth on the balance sheet for mining servers payable reflects the fair value of 583,750

shares to be issued at $0.88 per share to conclude the purchase of the Miners at December 31, 2019.

The Company recorded change

in fair value of mining payable of $66,547 and $507,862 during the year ended December 31, 2020 and 2019, respectively..

is no requirement for the Company to make a payment in cash in lieu of issuing the remaining shares.

Subsequent to year end, on

January 14, 2021, the Company sold its inventory of approximately 5,900 S9, 13.5 TH/s miners.

As such, management determined that

those crypto-currency machines were impaired by a total of $871,302 based upon an assessment as of December 31, 2020.

The Company believes

that bitcoin is attractive because it can serve as a store of value, supported by a robust and public open source architecture,

that is untethered to sovereign monetary policy and can therefore serve as a hedge against inflation.

Bitcoin exists entirely

in electronic form, as virtually irreversible public transaction ledger entries on the blockchain, and transactions in bitcoin

are recorded and authenticated not by a central repository, but by a decentralized peer-to-peer network.

This decentralization

avoids certain threats common to centralized computer networks, such as denial of service attacks, and reduces the dependency

of the bitcoin network on any single system.

While the bitcoin network as a whole is decentralized, the private keys used to access

bitcoin balances are not widely distributed and are held on hardware (which can be physically controlled by the holder or by a

third party such as a custodian) or via software programs on third-party servers and loss of such private keys results in an inability

to access, and effective loss of, the corresponding bitcoin.

Consequently, bitcoin holdings are susceptible to all of the risks

inherent in holding any electronic data, such as power failure, data corruption, security breach, communication failure, and user

error, among others.

These risks, in turn, make bitcoin subject to theft, destruction, or loss of value from hackers, corruption,

or technology-specific factors such as viruses that do not affect conventional fiat currency.

In addition, the bitcoin network

relies on open source developers to maintain and improve the bitcoin protocol.

Accordingly, bitcoin may be subject to protocol

design changes, governance disputes such as “forked”

protocols, competing protocols, and other open source-specific

risks that do not affect conventional proprietary software.

The Company believes

that in the context of the economic and public health crisis precipitated by COVID-19 and the unprecedented government financial

stimulus measures adopted around the world, decreasing interest rates, as well as the breakdown of trust in and between political

institutions and political parties in the United States and globally, bitcoin represents a more attractive store of value than

fiat currency, and further that opportunity for appreciation in the value of bitcoin exists in the event that such factors lead

to even more widespread adoption of bitcoin as a treasury reserve alternative.

May 11, 2020, the Company purchased 700 new generation M305+ASIC Miners from MicroBT for approximately $1.3 million.

The 700 miners

produce 80/Th and will generate 56 PH/s (petahash) of hashing power, compared to the Company’s current S-9 production of

These next generation MicroBT ASIC miners are markedly more energy efficient than our existing Bitmain models.

miners were delivered to the Company’s Hosting Facility in June and are producing Bitcoins.

Company purchased 660 latest generation Bitmain S19 Pro Miners on May 12, 2020, 500 units on May 18, 2020 and an additional 500

September 30, 2019, the Company consummated the purchase of 6000 S-9 Bitmain 13.5 TH/s Bitcoin Antminers (“Miners”) from

SelectGreen Blockchain Ltd., a British Columbia corporation, for which the purchase price was $ 4,086,250 or 2,335,000 shares of its common

stock at a price of $ 1.75 per share.

As a result of an exchange cap requirement imposed in conjunction with the Company’s Listing

of Additional Shares application filed with Nasdaq to the transaction, the Company issued 1,276,442 shares of its common stock which

represented $ 2,233,773 of the $ 4,086,250 (constituting 19.9 % of the issued and outstanding shares on the date of the Asset Purchase Agreement)

and upon the receipt of shareholder approval, at the Annual Shareholders Meeting to be held on November 15, 2019, the Company can issue

the balance of the 1,058,558 unregistered common stock shares.

The shareholders did approve the issuance of the additional shares at

the Annual Shareholders Meeting.

The Company has issued an additional 474,808 at $ 0.90 per share.

The $ 513,700 set forth on the balance

sheet for mining servers payable reflects the fair value of 583,750 shares to be issued at $ 0.88 per share to conclude the purchase of

the Miners at December 31, 2020.

The Company recorded change in fair value of mining payable of $ 66,547 and $ 507,862 during the year

ended December 31, 2020 and 2019, respectively.

There is no requirement for the Company to make a payment in cash in lieu of issuing

the remaining shares.

Subsequent to year end, on January 14, 2021, the Company sold its inventory of approximately 5,900 S9, 13.5 TH/s

As such, management determined that those crypto-currency machines were impaired by a total of $ 871,302 based upon an assessment

as of December 31, 2020.

May 11, 2020, the Company purchased 700

new generation M305+ASIC Miners from MicroBT for approximately $1.3 million.

The 700 miners produce 80/Th and will generate 56 PH/s (petahash)

of hashing power, compared to the Company’s current S-9 production of 46 PH/s.

These next generation MicroBT ASIC miners are markedly

more energy efficient than our existing Bitmain models .

These miners were delivered to the Company’s Hosting Facility in June 2020 and are producing Bitcoins.

Company purchased 660

latest generation Bitmain S19 Pro Miners on May

12, 2020, 500

units on May 18, 2020 and an additional 500

units on June 11, 2020.

These miners produce 110 TH/s and will generate 73 PH/s (petahash) of hashing power, compared to the Company’s

S-9 production of 46 PH/s.

The Company made the payments of approximately $4.2 million in the second quarter of 2020 and received

660 of the 1,660 units at its Hosting Facility in August, and its hosting partner, Compute North, had installed them upon their

Of the 1,000 remaining S-19 Pro Miners due to arrive in the 4 th quarter, 500 were received in November and

installed in the Company’s Hosting Facility in Montana, while 500 were received and installed during the remainder of the

4 th quarter.

These miners will produce an additional 110 PH/s increasing the Company to an aggregate Hashpower of 294

July 29, 2020, the Company announced the purchase of 700 next generation M31S+ASIC Miners from MicroBT.

The miners arrived mid-August.

August 13, 2020, the Company entered into a Long Term Purchase Contract with Bitmaintech PTE., LTD (“Bitmain”) for

the purchase of 10,500 next generation Antminer S-19 Pro ASIC Miners.

The purchase price per unit is $2,362 ($2,206 with a 6.62%

discount) for a total gross purchase price of $24,801,000.

The parties confirm that the total hashrate of the Antminers under

this agreement shall not be less than 1,155,000 TH/s.

Subsequent to executing this agreement, due to the additional executed contracts,

Bitmain applied a total net discount of 8.63% to the purchase price adjusting the amount due to $22,660,673.

miners produce 110 TH/s and will generate 73 PH/s (petahash) of hashing power, compared to the Company’s S-9 production of 46 PH/s.

The Company made the payments of approximately $4.2 million in the second quarter of 2020 and received 660 of the 1,660 units at its

Hosting Facility in August 2020, and its hosting partner, Compute North, had installed them upon their arrival.

the 1,000 remaining S-19 Pro Miners due to arrive in the 4th quarter of 2020, 500 were received in November of 2020 and installed in

the Company’s Hosting Facility in Montana, while another 60 miners were received and placed into service in January 2021.

The remaining

440 miners that were anticipated to arrive in the 4 th quarter of 2020 were cancelled and the Company received a refund of

the original purchase price of $ 1.1 million in January 2021.

July 29, 2020, the Company announced the purchase of 700

next generation M31S+ASIC Miners from MicroBT.

The miners arrived mid-August of 2020.

August 13, 2020, the Company entered into a Long Term Purchase Contract with Bitmaintech PTE., LTD (“Bitmain”) for the purchase

of 10,500 next generation Antminer S-19 Pro ASIC Miners.

The purchase price per unit is $ 2,362 ($ 2,206 with a 6.62 % discount) for a total

gross purchase price of $ 24,801,000 .

The parties confirm that the total hashrate of the Antminers under this agreement shall not be less

than 1,155,000 TH/s.

Subsequent to executing this agreement, due to the additional executed contracts, Bitmain applied a total net discount

of 8.63 % to the purchase price adjusting the amount due to $ 22,660,673 .

DIGITAL HOLDINGS, INC.

1 unchanged sentence

to Consolidated Financial Statements

Company shall pay for the Antminers as follows:

percent (20%) of the total purchase price shall be paid as a nonrefundable down payment within forty-eight (48) hours of execution

of the agreement.

Company shall pay the twenty percent (20%) of the total purchase price prior to September 20, 2020.

Company shall pay the ten percent (10%) of the total purchase price prior to October 10, 2020.

Company shall pay the remaining fifty percent (50%) of the total purchase price in equal monthly installments due not less

than fifty-five (55) days prior to the scheduled delivery of the Product(s) as follows:

thirty-three percent (8.33%) no later than 55 days prior to each scheduled delivery period as to the first installment of

products to be shipped to the Company in January 2021.

thirty-three percent (8.33%) no later than 55 days prior to each scheduled delivery period as to the second installment of

the products to be shipped to the Company in February 2021.

thirty-three percent (8.33%) no later than 55 days prior to each scheduled delivery period as to the third installment of

the products to be shipped to the Company in March 2021.

thirty-three percent (8.33%) no later than 55 days prior to each scheduled delivery period as to the fourth installment of

the products to be shipped to the Company in April 2021.

thirty-three percent (8.33%) no later than 55 days prior to each scheduled delivery period as to the fifth installment of

the products to be shipped to the Company in May 2021.

thirty-three percent (8.33%) no later than 55 days prior to each scheduled delivery period as to the sixth installment of

the products to be shipped to the Company in June 2021.

of December 31, 2020, the Company has paid $15,052,648 of the total balance of $22,660,679.

to the timely payment of the purchase price, Bitmain shall deliver products according to the following schedule:

1,500 Units on

or before January 31, 2021;

and 1,800 units on or before each of February 28, 2021;

March 31, 2021;

April 30, 2021, May 31, 2021

and June 30, 2021.

of December 31, 2021, the Company has paid the entire purchase price under this agreement and received all 10,500

units from Bitmain.

October 6, 2020, the Company entered into a series of agreements with affiliates of Beowulf Energy LLC, a Delaware limited liability

company (collectively and as applicable, “Beowulf”) and Two Point One, LLC, a Delaware limited liability company (“2Pl”;

Marathon, Beowulf and 2Pl each a “Party”

and, collectively, the “Parties”).

Beowulf and 2Pl have been

designing and developing a data center facility of up to 100-megawatts (the “Facility”) that will be located next

to, and supplied energy directly from, Beowulf’s power generating station in Hardin, MT (the “Hardin Station”).

The Facility is being developed in two phases to reach its 100 MW capacity, and the Hardin Station will supply the Facility exclusively

with energy to operate Bitcoin mining servers.

projected build out cost for Phase I is approximately $23 million, which is front loaded as the infrastructure is being built

for the full 100 MW project.

company (collectively and as applicable, “Beowulf”) and Two Point One, LLC, a Delaware limited liability company (“2Pl”;

Marathon, Beowulf and 2Pl each a “Party” and, collectively, the “Parties”).

Beowulf and 2Pl have designed

and developed a data center facility of up to 100-megawatts (the “Facility”) that is located next to, and

supplied energy directly from, Beowulf’s power generating station in Hardin, MT (the “Hardin Station”).

was developed in two phases to reach its 100 MW capacity, and the Hardin Station will supply the Facility exclusively with

energy to operate Bitcoin mining servers.

projected build out cost for Phase I is approximately $ 23 million, which is front loaded as the infrastructure is being built for the

full 100 MW project.

Phase I accounts for 70 MW of the 100 MW project.

It entails high voltage equipment to break down

the full 100 MW load from the generating station, and thereafter, the infrastructure cost per MW is a matter of distributing power

at a container level.

Assuming market conditions similar to current, the build out cost for Phase II works out to approximately

$200,000 - $250,000 per MW.

These are all in costs covering all equipment and labor needed starting from the power coming off

the Generating Station distributed down to running the actual miners:

including breakers, transformers, switches, containers,

PDUs, fans, network cables, and the like.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

and Beowulf entered into an exclusive Power Purchase Agreement for the initial supply of 30 MW (Phase I), and up to 100 MW in

the aggregate (Phase II), of energy load to the Facility at a cost of $0.028/kWh.

The initial term of the Power Purchase Agreement

is five years, with up to five additional three-year extensions, as mutually agreed, assuming 75% energy utilization of the initial

30 MW of energy supplied to the Facility.

Marathon purchased certain mining infrastructure and equipment for the Facility from

Beowulf for a purchase price of $750,000, and Marathon has the right, at no additional cost, to construct and access the Facility

on land adjacent to the Hardin Station pursuant to a lease agreement with Beowulf.

After the execution of the contract, the Company

entered into additional miner purchase agreements.

Due to the increased size of the Company’s fleet of miners, Phase I was

increased from the initial 30 MW to 70 MW, while Phase II will encompass the completion of the remaining 30 MW for the project.

It entails high voltage equipment to break down the full 100 MW

load from the generating station, and thereafter, the infrastructure cost per MW is a matter of distributing power at a container level.

Assuming market conditions similar to current, the build out cost for Phase II works out to approximately $ 200,000 - $ 250,000 per MW.

These are all in costs covering all equipment and labor needed starting from the power coming off the Generating Station distributed

down to running the actual miners:

including breakers, transformers, switches, containers, PDUs, fans, network cables, and the like.

and Beowulf entered into an exclusive Power Purchase Agreement for the initial supply of 30 MW (Phase I), and up to 100 MW in the aggregate

(Phase II), of energy load to the Facility at a cost of $ 0.028 /kWh.

The initial term of the Power Purchase Agreement is five years, with

up to five additional three-year extensions, as mutually agreed, assuming 75% energy utilization of the initial 30 MW of energy supplied

to the Facility .

Marathon purchased certain mining infrastructure and equipment for the Facility from Beowulf for a purchase price of

$ 750,000 , and Marathon has the right, at no additional cost, to construct and access the Facility on land adjacent to the Hardin Station

pursuant to a lease agreement with Beowulf.

After the execution of the contract, the Company entered into additional miner purchase agreements.

Due to the increased size of the Company’s fleet of miners, Phase I was increased from the initial 30 MW to 70 MW, while Phase

II will encompass the completion of the remaining 30 MW for the project.

and 2P1 will provide operation and maintenance services for the Facility pursuant to a Data Facility Services Agreement, in exchange

for an initial issuance of 3,000,000 shares of Marathon’s common stock to each of Beowulf and 2Pl valued at the time of

execution at $1.87 per share or $11,220,000 in aggregate.

Upon completion of Phase I, Marathon will issue to Beowulf an additional

150,000 shares of its common stock.

During Phase II, Marathon will issue to Beowulf an additional 350,000 shares of its common

stock –

for an initial issuance of 3,000,000 shares of Marathon’s common stock to each of Beowulf and 2Pl valued at the time of execution

at $ 1.87 per share or $ 11,220,000 in aggregate.

Upon completion of Phase I, Marathon will issue to Beowulf an additional 150,000 shares

of its common stock.

During Phase II, Marathon will issue to Beowulf an additional 350,000 shares of its common stock – 150,000

shares upon reaching 60 MW of Facility load and 200,000 at completion of the full 100 MW of Facility load.

The cost to maintain and run the Facility will be $0.006/kWh.

All shares issued under the Data Facility Services Agreement are

issued pursuant to transactions exempt from registration under Section 4(a)(2) of the Securities Act of 1933.

October 19, 2020, David Lieberman retired as the Company’s Chief Financial Officer, and Simeon Salzman was appointed Chief

Financial Officer.

October 23, 2020, the Company executed a contract with Bitmain to purchase an additional 10,000 next generation Antminer S-19

Pro ASIC Miners.

The 2021 delivery schedule will be 2,500 Units in January, 4,500 Units in February and the final 3,000 Units

in March 2021.The gross purchase price is $23,620,000 with 30% due upon the execution of the contract and the balance paid over

the next 4 months.

Subsequent to executing this agreement, due to the additional executed contracts, Bitmain applied a discount

of 8.63% to the purchase price adjusting the amount due to $21,581,594.

As of December 31, 2020, the Company has paid $13,634,645

of the total balance of $21,581,594.

of the November 12, 2020, the Company sold all shares of our common stock available thereunder for an aggregate

purchase price of $100,000,000 under our 2020 At the Market Offering pursuant to our registration statement on Form S-3 declared

effective by the SEC on August 6, 2020, which was the total amount available for sale thereunder.

December 8, 2020, the Company executed a contract with Bitmain to purchase an additional 10,000 next generation Antminer S-19j

Pro ASIC Miners, with 6,000 units to be delivered in August 2021, and the remaining 4,000 units to be delivered in September 2021.

The gross purchase price is $$23,770,000 with 10% of the purchase price due within 48 hours of execution of the contract, 30%

due on January 14, 2021, 10% due on February 15, 2021, 30% due on June 15, 2021 and 20% due on July 15, 2021.

Subsequent to executing

this agreement, due to the additional executed contracts, Bitmain applied a discount of 8.63% to the purchase price adjusting

The cost to maintain and run

the Facility will be $0.006/kWh.

All shares issued under the Data Facility Services Agreement are issued pursuant to transactions exempt

from registration under Section 4(a)(2) of the Securities Act of 1933.

October 23, 2020, the Company executed a contract with Bitmain to purchase an additional 10,000 next generation Antminer S-19 Pro ASIC

The 2021 delivery schedule will be 2,500 Units in January, 4,500 Units in February and the final 3,000 Units in March 2021.The

gross purchase price is $ 23,620,000 with 30 % due upon the execution of the contract and the balance paid over the next 4 months.

to executing this agreement, due to the additional executed contracts, Bitmain applied a discount of 8.63 % to the purchase price adjusting

the amount due to $ 21,581,594 .

As of December 31, 2020, the Company has paid $2,192,307 of the total balance of $21,718,649.

As of December 31, 2021, the Company has paid the entire purchase price under this agreement and received

all 10,000 units from Bitmain.

of the November 12, 2020, the Company sold all shares of our common stock available thereunder for an aggregate purchase price of $ 100,000,000

under our 2020 At the Market Offering pursuant to our registration statement on Form S-3 declared effective by the SEC on August 6, 2020,

which was the total amount available for sale thereunder.

December 8, 2020, the Company executed a contract with Bitmain to purchase an additional 10,000 next generation Antminer S-19j Pro ASIC

Miners, with 6,000 units to be delivered in August 2021, and the remaining 4,000 units to be delivered in September 2021.

The gross purchase

price is $ 23,770,000 with 10 % of the purchase price due within 48 hours of execution of the contract, 30 % due on January 14, 2021, 10 %

due on February 15, 2021, 30 % due on June 15, 2021 and 20 % due on July 15, 2021 .

Subsequent to executing this agreement, due to the additional

executed contracts, Bitmain applied a discount of 8.63 % to the purchase price adjusting the amount due to $ 21,718,649 .

As of December

31, 2021, the Company has paid the entire purchase price under this agreement and received all 10,000 units from Bitmain.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

December 11, 2020, the Company entered into an At The Market Agreement with HC Wainwright for up to $ 200,000,000 .

On January 12,

2021, the Company also announced that it had successfully completed its previously announced $200 million shelf offering by

utilizing its at-the-market (ATM) facility.

As a result, the Company ended the 2020 fiscal year with $141.3 million in cash and

On January 12, 2021, the Company also announced that it had successfully completed its previously announced $ 200

million shelf offering by utilizing its at-the-market

(ATM) facility.

The Company ended the 2020 fiscal year with $ 141.3

million in cash and 81,974,619

shares outstanding.

December 23, 2020, the Company executed a contract with Bitmain to purchase an additional 70,000 next generation Antminer S-19

ASIC Miners, with 7,000 units to be delivered in July 2021, and the remaining 63,000 units to be delivered in December 2021.

purchase price is $167,763,451.

December 23, 2020, the Company executed a contract with Bitmain to purchase an additional 70,000 next generation Antminer S-19 ASIC Miners,

with 7,000 units to be delivered in July 2021, and the remaining 63,000 units to be delivered in December 2021.

The purchase price is

$ 167,763,451 .

The purchase price for the miners shall be paid as follows:

20% within 48 hours of signing

30% on or before March 1, 2021;

20 % within 48 hours of signing of contract;

30 % on or before

March 1, 2021;

4.75 % on June 15, 2021;

2 unchanged sentences

10.19 % on September 15, 2021;

17.63% on October 15, 2021 and 11.55% on November 15, 2021.

As of December 31, 2020, the Company has paid

$33,552,690 of the total balance of $167,763,452.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

On December 31, 2020, the Company sold

6,632,712 shares of common stock pursuant to the At The Market offering.

Proceeds of $77.1 million net of offering costs of $2.3

17.63 % on October

15, 2021 and 11.55 % on November 15, 2021 .

As of December 31, 2021, the Company has paid the entire purchase price under this agreement

and received approximately 40,000 units from Bitmain.

December 31, 2020, the Company sold 6,632,712

shares of common stock pursuant to the At The

Market offering.

Proceeds of $ 77.1

million net of offering costs of $ 2.3

million were received on January 4, 2021.

Due to the timing of the proceeds received, an other current receivable was recorded

in an amount of $74.8 million.

to the timing of the proceeds received, another current receivable was recorded in an amount of $ 74.8

million as of December 31, 2020.

December 31, 2020, the Board of Directors of the Company ratified the following arrangements approved by its Compensation Committee:

Okamoto, CEO was awarded a cash bonus of $2,000,000 which was paid before year end 2020.

He was also awarded a special bonus of

Okamoto, CEO was awarded a cash bonus of $ 2,000,000

which was paid before year end 2020.

awarded a special bonus of 1,000,000

RSUs with immediate vesting.

He was given a new three-year employment agreement effective January 1, 2021 with the same

salary and bonus as the prior agreement.

He was also granted the following:

award of 1,000,000 RSUs when the company’s market

capitalization reaches and sustains a market capitalization for 30 consecutive days above $500,000,000;

award of 1,000,000 RSUs

priced when the company’s market capitalization reaches and sustains a market capitalization for 30 consecutive days above

$750,000,000;

award of 2,000,000 RSUs priced at lowest closing stock price in past 30 trading days when the company’s market

capitalization reaches and sustains a market capitalization for 30 consecutive days above $1,000,000,000;

He was given a new

three-year employment agreement effective January 1, 2021 with the same salary and bonus as the prior agreement.

He was also granted

the following:

award of 1,000,000

RSUs when the company’s market capitalization

reaches and sustains a market capitalization for 30 consecutive days above $ 500,000,000 ;

award of 1,000,000 RSUs priced when the company’s market capitalization reaches and sustains a market capitalization for 30 consecutive

days above $ 750,000,000 ;

award of 2,000,000

RSUs priced at lowest closing stock price in

past 30 trading days when the company’s market capitalization reaches and sustains a market capitalization for 30 consecutive days

above $ 1,000,000,000 ;

and award of 2,000,000

RSUs when the Company’s market capitalization reaches and sustains a market capitalization for 30 consecutive days above

$2,000,000,000.

As of March 12, 2021, Mr.

Okamoto had earned all bonuses set forth, and as a result of the maximum shares available

under the Company’s 2018 Equity Incentive Plan having been issued, he is owed an additional 2,547,392 RSUs, for which the

Company will, within 15 business days of the date of this report, file a proxy statement on Schedule 14A to hold an annual or

special meeting of shareholders to gain shareholder approval to increase the number of shares available under the Plan in a sufficient

number to cover issuance of these 2,547,392 RSUs.

Salzman, CFO, was granted a bonus payment of $40,000 in cash;

and a bonus of 91,324 RSUs with immediate vesting.

RSUs when the Company’s market capitalization

reaches and sustains a market capitalization for 30 consecutive days above $ 2,000,000,000 .

As of December 31, 2021, Mr.

Okamoto had earned all bonuses set forth.

Salzman, CFO, was granted a bonus payment of $ 40,000

and a bonus of 91,324

RSUs with immediate vesting.

James Crawford,

COO, was granted a bonus payment of $127,308 in cash and a stock bonus of 57,990 RSUs with immediate vesting.

COO, was granted a bonus payment of $ 127,308

in cash and a stock bonus of 57,990

RSUs with immediate vesting.

Furthermore, per

his employment agreement, his base salary for the 2021 will be increased by 3%.

for directors of the board for 2021 as follows:

his employment agreement, his base salary for the 2021 was increased by 3%.

for directors of the board for 2021 was as follows:

(i) cash compensation of $60,000 per year for each director, plus an additional

3 unchanged sentences

and (iii) for newly elected directors, a one-time grant of 91,324 RSUs, vesting 25% each calendar quarter during 2021 .

For clarification, new directors will also receive the same annual compensation as existing directors in addition to their

one time grant.

For clarification, new directors will also receive the same annual compensation as existing directors in addition to their one time grant.

January 12, 2021, the Company, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain purchasers

named therein (the “Purchasers”), pursuant to which the Company agreed to issue and sell, in a registered direct offering

(the “Offering”), 12,500,000 shares of its common stock (the “Securities”) at an offering

of $ 20.00 per share.

Purchase Agreement contains customary representations and warranties and agreements of the Company and the Purchasers and customary indemnification

rights and obligations of the parties.

The closing of the Offering occurred on January 15, 2021.

The Company received gross proceeds

of $ 250,000,000 in connection with the Offering, before deducting placement agent fees and related offering expenses.

January 25, 2021, the Company announced that it has purchased 4,812.66

BTC in an aggregate purchase price of $ 150

million through an

investment fund of one managed by NYDIG as the general partner, while the Company retains 100% of the limited partner interests.

to purchase additional bitcoin held by NYDIG Digital Assets Fund III, LP, the investment fund in future periods, though we may also sell

bitcoin in future periods as needed to generate Cash Assets for treasury management purposes.

DIGITAL HOLDINGS, INC.

1 unchanged sentence

to Consolidated Financial Statements

February 11, 2021, the Company issued 4,701,442 shares of common stock pursuant to the 2018 Equity Incentive Plan.

March 1, 2021, the Company changed its name to Marathon Digital Holdings, Inc.

March 7, 2021, the Company entered into a termination agreement with the 9349-0001 Quebec Inc., to agree to terminate the outstanding

As of that date, the Company was fully released and discharged from any and all obligations under the Lease Agreement.

2017, the Company assumed a lease in connection with the mining operations in Quebec, Canada.

May 21, 2021, Marathon

Digital Holdings, Inc.

(the “Company”) entered into a binding letter of intent with Compute North, LLC to host 73,000

Bitcoin Miners over a staged in implementation between October 2021 and March 2022.

The hosting cost is $0.50 per machine per month

and the hosting rate will be $0.044 per kWh.

In order to build out the infrastructure without paying for the capital expenditure,

the Company will provide an 18 month bridge loan to Compute North of up to $ 67

million dollars, in tranches, based upon specified requirements being met.

The terms of the contract are limited to three years with

increases thereafter capped at three percent per year thereafter.

The Company has also agreed to pay up to $ 14

million in expedite fees for construction/electrical and supply chain expediting activities.

As of December 31, 2021, the Company

million of the $ 14

million in expedite fees recorded as a deposit on the balance sheet and loaned Compute North $ 30

On September 3, 2021, the Company entered into a master agreement with Compute North, LLC whereas the Company will pay an

initial deposit of $ 14.6

million in aggregate over five instalments.

As of December 31, 2021, the Company paid the full $ 14.6

million initial deposit recorded as advances to vendor on the balance sheet.

July 30, 2021, Marathon Digital Holdings, Inc.

(the “Company”) entered into a fully executed contract with Bitmain to

purchase an additional 30,000

S-19j Pro ASIC Miners, with 5,000

units scheduled to be delivered in each of January 2022, February 2022, March 2022, April 2022, May 2022, and June 2022.

purchase price is $126,000,000 with (i) 25% of the purchase price due paid within one day of execution of the contract, (ii) 35% of

the purchase price of each batch due in consecutive months with 35% of the January 2022 batch due immediately, and then 35% of each

of the remaining five batches due on the 15th of each consecutive month starting August 15, 2021, through December 15, 2021 and

(iii) the remaining 40% of the purchase price of each batch due on the 15th of each consecutive month starting November 15, 2021 and

then 40% of each of the remaining five batches due on the 15th of each consecutive month through April 2022.

As of December 31,

2021, the Company has paid $ 92,015,375

of the total balance of $ 120,711,500 .

The amounts paid are classified as advances to vendor on the balance sheet.

August 27, 2021, Marathon Digital Holdings, Inc.

(the “Company”) entered into a Master Securities Loan Agreement (the “Agreement”)

with NYDIG Funding, LLC (“NYDIG”).

Pursuant to the Agreement, the Company will loan its bitcoin (“BTC”) to NYDIG

with an interest rate of three percent (3%) per annum.

Interest accrues daily and is payable on a monthly basis.

The Agreement provides

that the Company may recall its BTC at any time.

NYDIG shall, prior to or concurrently with the transfer of the of the BTC to NYDIG,

but in no case later than the close of business on the day of such transfer, transfer to the Company collateral with a market value at

least equal to 100% of the market value of the loaned BTC, and the Company is granted a first priority lien on such collateral.

December 31, 2021, the Company loaned 300 BTC to NYDIG.

This balance is classified as digital currencies, restricted on the balance sheet.

On December 21, 2021

and December 30, 2021, the Company entered into two separate Simple Agreement for Future Equity (“SAFE”) agreements classified

on the balance sheet as non-current assets.

Pursuant to ASC 323, Equity

Method of Accounting for Investments , an investment in another company

is recorded as an asset on the balance sheet at cost.

An equity method investment is valued as of a specific reporting date with any

activity related to the investment recorded through the income statement.

Investments are typically current assets if the Company intends

to sell them within a year, however as SAFEs have no expiration date, the Company intends to classify these types of investments as a

noncurrent asset due to the indefinite life of the conversion.

This balance is classified as investment in SAFE agreements on the balance

December 22, 2021, Marathon Digital Holdings, Inc.

(the “Company”) entered into another Master Securities Loan Agreement

(the “Agreement”) with NYDIG Funding, LLC (“NYDIG”).

Pursuant to the Agreement, the Company will loan its bitcoin

(“BTC”) to0 NYDIG with an interest rate of two and a quarter percent (2.25%) per annum.

Interest accrues daily and is payable

on a monthly basis.

The Agreement provides that the Company may recall its BTC at any time.

NYDIG shall, prior to or concurrently with

the transfer of the of the BTC to NYDIG, but in no case later than the close of business on the day of such transfer, transfer to the

Company collateral with a market value at least equal to 100% of the market value of the loaned BTC, and the Company is granted a first

priority lien on such collateral.

As of December 31, 2021, the Company loaned an additional 300 BTC for a total amount of 600 BTC to

This balance is classified as digital currencies, restricted on the balance sheet.

and Uncertainties

impact of the worldwide spread of a novel strain of coronavirus (“COVID 19”) has been and continues to be unprecedented and

unpredictable, but based on the Company’s current assessment, the Company does not expect any material impact on its long-term

strategic plans, operations and its liquidity due to the worldwide spread of COVID-19.

However, the Company is continuing to assess the

effect on its operations by monitoring the spread of COVID-19 and the actions implemented to combat the virus throughout the world and

its assessment of the impact of COVID-19 may change.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

of Presentation and Principles of Consolidation

accompanying consolidated financial statements include the accounts of the Company’s subsidiaries, Marathon Crypto Mining,

Inc., Crypto Currency Patent Holding Company and Soems Acquisition Corp, all of which are dormant as of December 31, 2020.

consolidated entities where the Company owns less than 100% of the subsidiary, the Company records net loss attributable to non-controlling

interests in its consolidated statements of operations equal to the percentage of the economic or ownership interest retained

in such entities by the respective non-controlling parties.

Company’s consolidated financial statements include the accounts of the Company and its subsidiaries.

accompanying consolidated financial statements include the accounts of the Company’s subsidiaries, Marathon Crypto Mining, Inc.,

MARA Pool, LLC, Crypto Currency Patent Holding Company and Soems Acquisition Corp, all of which are dormant as of December 31,

For consolidated entities where the

Company owns less than 100% of the subsidiary, the Company records net loss attributable to non-controlling interests in its consolidated

statements of operations equal to the percentage of the economic or ownership interest retained in such entities by the respective non-controlling

Company’s consolidated financial statements include the accounts of the Company and its subsidiaries.

All intercompany balances

1 unchanged sentence

of Estimates and Assumptions

preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect

the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial

statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from those

Significant estimates made by management include, but are not limited to, estimating the useful lives of patent assets

and fixed assets, the assumptions used to calculate fair value of warrants and options granted, realization of long-lived assets,

deferred income taxes, unrealized tax positions and the realization of digital currencies.

The preparation of financial statements in conformity

with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure

of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during

the reporting period.

Actual results could differ from those estimates.

Significant estimates made by management include, but are not

limited to, realization of long-lived assets, deferred income taxes, unrealized tax positions, the realization of digital currencies

and stock-based compensation expense.

and Cash Equivalents

Company considers all highly liquid debt instruments and other short-term investments with maturity of three months or less, when

purchased, to be cash equivalents.

The Company maintains cash and cash equivalent balances at one financial institution that is

insured by the Federal Deposit Insurance Corporation.

The Company’s accounts at this institution are insured, up to $250,000,

by the Federal Deposit Insurance Corporation (“FDIC”).

For the years ended December 31, 2020 and 2019, the Company’s

bank balances exceeded the FDIC insurance limit in an amount of $140.3 million and $0.2 million, respectively.

To reduce its risk

associated with the failure of such financial institution, the Company evaluates at least annually the rating of the financial

institution in which it holds deposits.

As of December 31, 2020 and 2019, the Company did not have any cash equivalents.

segments are defined as components of an enterprise about which separate financial information is available that is evaluated

regularly by the chief operating decision maker, or decision–making group in deciding how to allocate resources and in assessing

Our chief operating decision–making group (“CODM”) is composed of the chief executive officer and

chief financial officer.

Company considers all highly liquid debt instruments and other short-term investments with maturity of three months or less, when purchased,

to be cash equivalents.

The Company maintains cash and cash equivalent balances at one financial institution that is insured by the Federal

Deposit Insurance Corporation.

The Company’s accounts at this institution are insured, up to $ 250,000 ,

by the Federal Deposit Insurance Corporation (“FDIC”).

For the years ended December 31, 2021 and 2020, the Company’s

bank balances exceeded the FDIC insurance limit in an amount of $ 267.8

million and $ 140.3

million, respectively.

To reduce its risk associated

with the failure of such financial institution, the Company evaluates at least annually the rating of the financial institution in which

it holds deposits.

As of December 31, 2021 and 2020, the Company had cash equivalents of $ 266.6

million and $ 129.8

million, respectively.

segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly

by the chief operating decision maker, or decision–making group in deciding how to allocate resources and in assessing performance.

Our chief operating decision–making group (“CODM”) is composed of the chief executive officer and chief financial officer.

The Company currently operates in the Digital Currency Blockchain segment.

The Company’s Crypto-currency

Machines are located in the United States, and the Company has employees only in the United States and views its operations as

one operating segment as the CODM reviews financial information on a consolidated basis in making decisions regarding resource

allocations and assessing performance.

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

Digital currencies are recorded at cost less impairment.

The Company’s Crypto-currency Machines are located in

the United States, and the Company has employees only in the United States and views its operations as one operating segment as the CODM

reviews financial information on a consolidated basis in making decisions regarding resource allocations and assessing performance.

Digital currencies

are included in current assets in the consolidated balance sheets as an indefinite lived intangible asset.

Digital currencies are recorded

at cost less impairment.

In performing the quantitative impairment test of the

mined BTC balances as well as recordation of daily revenues,as described in ASC 350-30-35-19,

the Company utilizes the pricing of BTC on a nightly

basis from Coindesk.com ( https://www.coindesk.com/price/bitcoin/ ).

The CoinDesk Bitcoin Price Index (XBX) is the world’s leading reference for the price of bitcoin, used by the largest institutions

active in crypto assets.

It is the crypto market standard, benchmarking billions of dollars in registered financial products and pricing

hundreds of millions in daily over-the-counter transactions.

Built for replicability and reliability, in continuous operation since 2014,

the “XBX” is relied upon by asset allocators, asset managers, market participants and exchanges Bitcoin, ether and gold prices

are taken at approximately 4pm New York time 1 .

Bitcoin is the CoinDesk Bitcoin Price Index (XBX);

Ether is the CoinDesk

Ether Price Index (ETX);

Gold is the COMEX spot price.

Information about CoinDesk Indices can be found at coindesk.com/indices.

https://www.coindesk.com/indices/xbx/

DIGITAL HOLDINGS, INC.

1 unchanged sentence

to Consolidated Financial Statements

intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently,

when events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is

intangible asset with an indefinite useful life is not amortized but assessed for impairment annually, or more frequently, when

events or changes in circumstances occur indicating that it is more likely than not that the indefinite-lived asset is impaired.

Impairment exists when the carrying amount exceeds its fair value.

In testing for impairment, the Company has the

option to first perform a qualitative assessment to determine whether it is more likely than not that an impairment exists.

If it is determined that it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary.

If the Company concludes otherwise, it is required to perform a quantitative impairment test.

To the extent an impairment

loss is recognized, the loss establishes the new cost basis of the asset.

Subsequent reversal of impairment losses is not

The reward for a bitcoin miner changes roughly every four years, or after every 210,000 blocks are mined and gets

reduced by half each time, this whole process is called bitcoin halving.

The last halving occurred on May 11, 2020 and reduced

the reward per block to 6.25 BTC.

In testing for impairment, the Company has the option to first

perform a qualitative assessment to determine whether it is more likely than not that an impairment exists.

If it is determined that

it is not more likely than not that an impairment exists, a quantitative impairment test is not necessary.

If the Company concludes

otherwise, it is required to perform a quantitative impairment test.

To the extent an impairment loss is recognized, the loss

establishes the new cost basis of the asset.

Subsequent reversal of impairment losses is not permitted.

reward for a bitcoin miner changes roughly every four years, or after every 210,000 blocks are mined and gets reduced by half each time,

this whole process is called bitcoin halving.

The last halving occurred on May 11, 2020 and reduced the reward per block to 6.25 BTC.

following table presents the activities of the digital currencies for the years ended December 31, 2021 and 2020:

SCHEDULE OF ACTIVITIES OF DIGITAL CURRENCIES

Digital currencies at December 31, 2019

2 unchanged sentences

Sale of digital currencies

( 2,102,394 )

Digital currencies at December 31, 2020

1 unchanged sentence

Realized gain on sale of digital currencies

Sale of digital currencies

Impairment of cryptocurrencies

( 29,552,991 )

Interest received on cryptocurrencies, restricted

Disposition of digital currencies

Digital currencies at December 31, 2021

Crypto-currency

has assessed the basis of depreciation of the Company’s Crypto-currency Machines used to verify digital currency transactions

and generate digital currencies and believes they should be depreciated over a 2 year period.

The rate at which the Company generates

digital assets and, therefore, consumes the economic benefits of its transaction verification servers are influenced by a number

of factors including the following:

complexity of the transaction verification process which is driven by the algorithms contained within the bitcoin open source

general availability of appropriate computer processing capacity on a global basis (commonly referred to in the industry as

hashing capacity which is measured in Petahash units);

technological

obsolescence reflecting rapid development in the transaction verification server industry such that more recently developed

hardware is more economically efficient to run in terms of digital assets generated as a function of operating costs, primarily

power costs i.e.

the speed of hardware evolution in the industry is such that later hardware models generally have faster

processing capacity combined with lower operating costs and a lower cost of purchase.

Company operates in an emerging industry for which limited data is available to make estimates of the useful economic lives of

specialized equipment.

Property and equipment are stated at cost, net of accumulated depreciation.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets.

Subsequent to December

31, 2020, management has determined that the expected useful life of transaction verification servers would be five years.

$ 123,243,264

Loan Receivable

On May 21, 2021, Marathon Digital Holdings, Inc.

(the “Company”)

entered into a binding letter of intent with Compute North, LLC to host 73,000 Bitcoin Miners over a staged in implementation between

October 2021 and March 2022.

The hosting cost is $0.50 per machine per month and the hosting rate will be $0.044 per kWh.

build out the infrastructure without paying for the capital expenditure, the Company will provide an eighteen-month bridge loan to Compute

North of up to $ 67 million dollars, in tranches, based upon specified requirements being met.

The loan receivable is structured as an

interest-only loan with no pre-payment penalty.

The interest rate shall be 0% for the initial twelve-month period and 12% for the last

As of December 31, 2021, the Company paid $ 30 million dollars and is classified as a loan receivable on the balance sheet.

The Company expects the loan receivable to be repaid during 2022.

Property and Equipment

and equipment are stated at cost, net of accumulated depreciation.

Depreciation is computed using the straight-line method over the estimated

useful lives of the assets.

The Company operates in an emerging industry for which limited data is available to make estimates of the

useful economic lives of specialized equipment.

Subsequent to December 31, 2020, management has determined that the expected useful

life of transaction verification servers would be five

Prior to December 31, 2020, management depreciated these servers over two years.

This assessment takes into consideration the

availability of historical data and management’s expectations regarding the direction of the industry including potential

changes in technology.

Management will review this estimate annually and will revise such estimates as and when data comes available.

the extent that any of the assumptions underlying management’s estimate of useful life of its transaction verification servers

are subject to revision in a future reporting period either as a result of changes in circumstances or through the availability

of greater quantities of data then the estimated useful life could change and have a prospective impact on depreciation expense

and the carrying amounts of these assets.

assets include the Crypto Currency Patent with original estimated useful life of 17 years.

The Company amortize the cost of the

intangible assets over their estimated useful lives on a straight-line basis.

This assessment takes into consideration

the availability of historical data and management’s expectations regarding the direction of the industry including potential changes

in technology.

Management reviews this estimate annually and will revise such estimates as and when data comes available.

the extent that any of the assumptions underlying management’s estimate of useful life of its transaction verification servers

are subject to revision in a future reporting period either as a result of changes in circumstances or through the availability of greater

quantities of data then the estimated useful life could change and have a prospective impact on depreciation expense and the carrying

amounts of these assets.

assets include the Crypto Currency Patent with original estimated useful life of 17

The Company amortizes the cost

of the intangible assets over their estimated useful lives on a straight-line basis.

Costs incurred to acquire patents, including legal

costs, are also capitalized as long-lived assets and amortized on a straight-line basis with the associated patent.

Company monitors the carrying value of long-lived assets for potential impairment and tests the recoverability of such assets whenever

events or changes in circumstances indicate that the carrying amounts may not be recoverable.

If a change in circumstance occurs, the

Company will perform a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted expected

future cash flows.

If cash flows cannot be separately and independently identified for a single asset, the Company will determine whether

impairment has occurred for the group of assets for which we can identify the projected cash flows.

If the carrying values are in excess

of undiscounted expected future cash flows, the Company will measure any impairment by comparing the fair value of the asset or asset

group to its carrying value.

During the year ended December 31, 2021 and 2020, there was no impairment to the intangible assets.

of Long-lived Assets

reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may

not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted

future cash flows expected to be generated by the asset.

If such assets are considered to be impaired, the impairment to be recognized

is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

On January 14, 2021, the Company

sold its inventory of approximately 5,900 S9, 13.5 TH/s miners for $ 616,236 .

As of December 31, 2020, these assets had a net book value

of $1,487,538.

As such, management determined that those crypto-currency machines were impaired by a total of $ 871,302 based upon an

assessment as of December 31, 2020.

During the year ended December 31, 2021 and 2020, the Company’s leasehold improvements were

impaired by $ 0 and $ 0 , respectively.

DIGITAL HOLDINGS, INC.

1 unchanged sentence

to Consolidated Financial Statements

Company monitors the carrying value of long-lived assets for potential impairment and tests the recoverability of such assets

whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable.

If a change in circumstance

occurs, the Company will perform a test of recoverability by comparing the carrying value of the asset or asset group to its undiscounted

expected future cash flows.

If cash flows cannot be separately and independently identified for a single asset, the Company will

determine whether impairment has occurred for the group of assets for which we can identify the projected cash flows.

If the carrying

values are in excess of undiscounted expected future cash flows, the Company will measure any impairment by comparing the fair

value of the asset or asset group to its carrying value.

During the year ended December 31, 2020 and 2019, there was no impairment

to the intangible assets.

2016, the FASB issued Accounting Standards Update (ASU) 2016-01, Financial Instruments — Overall (Subtopic 825-10):

and Measurement of Financial Assets and Financial Liabilities, that requires entities to generally measure investments in equity

securities at fair value and recognize changes in fair value in net income.

January 25, 2021, the Company entered into a limited partnership agreement with NYDIG Digital Assets Fund III, LP

(“Fund”) whereas the Fund purchased 4,812.66 BTC in an aggregate purchase price of $ 150 million.

The Company owns 100 %

of the limited partnership interest.

The investment fund is included in current assets in the consolidated balance

The Fund qualifies and operates as an investment

company for accounting purposes pursuant to the accounting and reporting guidance under ASC 946, Financial Services – Investment

Companies, which requires fair value measurement of the Fund’s investments in digital assets.

The digital assets held by the

Fund are traded on a number of active markets globally, including the over-the-counter (“OTC”) market and digital asset

A fair value measurement under ASC 820 for an asset assumes that the asset is exchanged in an orderly transaction between

market participants either in the principal market for the asset or, in the absence of a principal market, the most advantageous market

for the asset (ASC 820-10-35-5).

An entity must have access to the principal (or most advantageous) market at the measurement date (ASC

820-10-35-6A).

Pursuant to a management agreement, the Fund paid the

Investment Manager a management fee (the “Management Fee”), payable monthly, computed at a rate of 0.50 % per annum of the

net asset value of such limited partner’s capital account, according to the opening NAV of the first day of each calendar month

with such opening NAV being equal to the NAV as of 4pm ET on the last day of each preceding calendar month (taking into account expenses

of the Fund charged to the Fund but without taking into account any withdrawal occurring on such date).

Effective March 25, 2021, the

rate was reduced to 0.30 % per annum.

In the event of an additional capital contribution, a withdrawal of a limited partner’s capital

account or the termination of the Fund as of a date other that the first day of a calendar month, the Management Fee payable will be

prorated based on the number of days elapsed in that calendar month.

Payment of the Management Fee may be deferred in the General Partner’s

The Fund’s bitcoin may be liquidated by the Investment Manager as needed in order to pay the Management Fee or other

operating expenses of the Fund.

Company recognizes revenue under ASC 606, Revenue from Contracts with Customers.

The core principle of the new revenue standard

is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that

reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

The following

five steps are applied to achieve that core principle:

The core principle of the new revenue standard is that

a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration

to which the company expects to be entitled in exchange for those goods or services.

The following five steps are applied to achieve

that core principle:

Identify the contract with the customer

3 unchanged sentences

Recognize revenue when the Company satisfies a performance obligation

order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services

in the contract and identify each promised good or service that is distinct.

A performance obligation meets ASC 606’s definition

of a “distinct”

good or service (or bundle of goods or services) if both of the following criteria are met:

can benefit from the good or service either on its own or together with other resources that are readily available to the customer

(i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the

customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is

distinct within the context of the contract).

a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods

or services is identified that is distinct.

transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised

goods or services to a customer.

The consideration promised in a contract with a customer may include fixed amounts, variable

amounts, or both.

order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in

the contract and identify each promised good or service that is distinct.

A performance obligation meets ASC 606’s definition of

a “distinct” good or service (or bundle of goods or services) if both of the following criteria are met:

The customer can

benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e.,

the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is

separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the

context of the contract).

a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services

is identified that is distinct.

transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods

or services to a customer.

The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both.

When determining the transaction price, an entity must consider the effects of all of the following:

5 unchanged sentences

payable to a customer

consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount

of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently

consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of

cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

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

2 unchanged sentences

to Consolidated Financial Statements

transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point

in time or over time as appropriate.

computing power in crypto asset transaction verification services is an output of the Company’s ordinary activities.

provision of computing power is the only performance obligation in the Company’s contracts with third party pool operators.

The transaction consideration the Company receives, if any, is noncash consideration, which the Company measures at fair value

on the date received, which is not materially different than the fair value at contract inception.

transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in

time or over time as appropriate.

computing power in crypto asset transaction verification services to the network is the only performance obligation under our arrangements

with the network.

The transaction consideration the Company receives, if any, is noncash consideration, which the Company measures

at fair value on the date received, which is not materially different than the fair value at the time the Company has earned the award.

The consideration is all variable.

Because it is not probable that a significant reversal of cumulative revenue will not occur, the consideration is constrained

until the Company successfully places a block (by being the first to solve an algorithm) and the Company receives confirmation

of the consideration it will receive, at which time revenue is recognized.

There is no significant financing component in these

transactions.

Because it is not probable that a significant reversal of cumulative revenue will not occur, the

consideration is constrained until the Company successfully places a block (by being the first to solve an algorithm) and the Company

receives confirmation of the consideration it will receive, at which time revenue is recognized.

There is no significant financing component

in these transactions.

value of the digital asset award received is determined using the average U.S.

dollar spot rate of the related digital currency

at the time of receipt.

dollar spot rate of the related digital currency at the

time of receipt.

associated with running the digital currency mining business, such as rent and electricity cost are also recorded as cost of revenues.

1 unchanged sentence

Party Transactions

are considered related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are

controlled by, or are under common control with the Company.

Related parties also include principal owners of the Company, its

management, members of the immediate families of principal owners of the Company and its management and other parties with which

the Company may deal if one party controls or can significantly influence the management or operating policies of the other to

an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

The Company discloses

all related party transactions.

October 11, 2018, the Company entered into a 2-year Employment Agreement, subject to successive 1 year extension, with Merrick

Okamoto, pursuant to which Mr.

are considered related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled

by, or are under common control with the Company.

Related parties also include principal owners of the Company, its management, members

of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if

one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting

parties might be prevented from fully pursuing its own separate interests.

The Company discloses all related party transactions.

October 11, 2018, the Company entered into a 2-year Employment Agreement, subject to successive 1 year extension , with Merrick Okamoto,

pursuant to which Mr.

Okamoto will serve as the Executive Chairman and Chief Executive Officer of the Company.

to the terms of the Agreement, Mr.

Okamoto shall receive a base salary at an annual base salary of $350,000 (subject to annual

3% cost of living increase) and an annual bonus up to 100% of base salary as determined by the Compensation Committee or the Board.

As further consideration for Mr.

Okamoto’s services, the Company agreed to issue Mr.

Okamoto 10-year stock options to purchase

1,250,000 shares of Common Stock, with a strike price of $2.32 per share, vesting 50% on the date of grant and 25% on each 6 months

Pursuant to the terms

of the Agreement, Mr.

Okamoto shall receive a base salary at an annual base salary of $ 350,000 (subject to annual 3 % cost of living increase)

and an annual bonus up to 100 % of base salary as determined by the Compensation Committee or the Board.

As further consideration for

Okamoto’s services, the Company agreed to issue Mr.

Okamoto 10 -year stock options to purchase 1,250,000 shares of Common Stock,

with a strike price of $ 2.32 per share, vesting 50 % on the date of grant and 25 % on each 6 months anniversary of the date of grant.

December 31, 2021 Mr.

Okamoto retired from the Company and as such as of December 31, 2021 no bonus has been accrued.

July 22, 2019, the Company granted David Lieberman, James Crawford and other three board directors 5 -year stock options to purchase total

of 200,000 shares of common stock, with an exercise price of $ 2.04 per share, vesting 50 % on the date of grant and 25 % on each 6 months

anniversary of the date of grant.

As of December 31, 2020 and 2019, no bonus has been accrued.

July 22, 2019, the Company granted David Lieberman, James Crawford and other three board directors 5-year stock options to purchase

total of 200,000 shares of common stock, with an exercise price of $2.04 per share, vesting 50% on the date of grant and 25% on

each 6 months anniversary of the date of grant.

On October 19, 2020, David Lieberman retired and at that time, his shares of common

stock fully vested.

Note 1 for a description of bonuses and restricted stock unit awards to related parties ratified by the Board of Directors as

of December 31, 2020.

On October 19, 2020, David Lieberman retired and at that time, his shares of common stock fully vested.

Note 1 for a description of bonuses and restricted stock unit awards to related parties ratified by the Board of Directors as of December

Value of Financial Instruments

Company measures at fair value certain of its financial and non-financial assets and liabilities by using a fair value hierarchy

that prioritizes the inputs to valuation techniques used to measure fair value.

Fair value is the price that would be received

to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date,

essentially an exit price, based on the highest and best use of the asset or liability.

The levels of the fair value hierarchy

Company measures at fair value certain of its financial and non-financial assets and liabilities by using a fair value hierarchy that

prioritizes the inputs to valuation techniques used to measure fair value.

Fair value is the price that would be received to sell an

asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit

price, based on the highest and best use of the asset or liability.

The levels of the fair value hierarchy are:

inputs such as quoted market prices in active markets for identical assets or liabilities

market-based inputs or unobservable inputs that are corroborated by market data

inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

DIGITAL HOLDINGS, INC.

1 unchanged sentence

to Consolidated Financial Statements

carrying amounts reported in the consolidated balance sheet for cash, accounts receivable, accounts payable, and accrued expenses,

approximate their estimated fair market value based on the short-term maturity of these instruments.

The carrying value of notes

payable and other long-term liabilities approximate fair value as the related interest rates approximate rates currently available

to the Company.

assets and liabilities are classified in their entirety within the fair value hierarchy based on the lowest level of input that

is significant to their fair value measurement.

The Company measures the fair value of its marketable securities by taking into

consideration valuations obtained from third-party pricing sources.

The pricing services utilize industry standard valuation models,

including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly,

to estimate fair value.

These inputs included reported trades of and broker-dealer quotes on the same or similar securities, issuer

credit spreads, benchmark securities and other observable inputs.

following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis

and the Company’s estimated level within the fair value hierarchy of those assets and liabilities as of December 31, 2020

and 2019, respectively:

carrying amounts reported in the consolidated balance sheet for cash, accounts receivable, accounts payable, and accrued expenses, approximate

their estimated fair market value based on the short-term maturity of these instruments.

The carrying value of notes payable and other

long-term liabilities approximate fair value as the related interest rates approximate rates currently available to the Company.

assets and liabilities are classified in their entirety within the fair value hierarchy based on the lowest level of input that is significant

to their fair value measurement.

The Company measures the fair value of its marketable securities by taking into consideration valuations

obtained from third-party pricing sources.

The pricing services utilize industry standard valuation models, including both income and

market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value.

inputs included reported trades of and broker-dealer quotes on the same or similar securities, issuer credit spreads, benchmark securities

and other observable inputs.

following tables present information about the Company’s assets and liabilities measured at fair value on a recurring basis and

the Company’s estimated level within the fair value hierarchy of those assets and liabilities as of December 31, 2021 and 2020,

respectively:

SCHEDULE OF ASSETS AND LIABILITIES MEASURED AT FAIR VALUE ON RECURRING BASIS

Fair value measured at December 31, 2021

Total carrying

Quoted prices in

active markets

Significant other

observable inputs

Money Market Accounts

$ 266,635,158

Investment Fund

$ 223,778,545

Warrant liability

7 unchanged sentences

were no transfers between Level 1, 2 or 3 during the years ended December 31, 2021 and 2020.

December 31, 2020, the Company had an outstanding warrant liability in the amount of $322,437 associated with warrants that were

issued in January 2017 and warrants issued related to the Convertible Notes issued in August and September of 2017.

The following

table rolls forward the fair value of the Company’s warrant liability, the fair value of which is determined by Level 3

inputs for the year ended December 31, 2020.

December 31, 2021, the Company had an outstanding warrant liability in the amount of $ 0 associated with warrants that were issued in

January 2017 and warrants issued related to the Convertible Notes issued in August and September of 2017.

The following table rolls forward

the fair value of the Company’s warrant liability, the fair value of which is determined by Level 3 inputs for the year ended December

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

of warrant liabilities

SCHEDULE OF FAIR VALUE OF WARRANT LIABILITIES

Outstanding as of December 31, 2019

1 unchanged sentence

Outstanding as of December 31, 2020

Cashless exercise of warrants

( 1,370,723 )

Change in fair value of warrants

Outstanding as of December 31, 2021

The fair value of the warrant liabilities

are marked-to-market each reporting period and changes in fair value are recorded as a non-operating gain or loss in our statement

of operations, until they are completely exercised.

The fair value is determined each reporting period using the Black-Scholes

option pricing model and is affected by changes in inputs to that model including our stock price, expected stock price volatility,

dividends, interest rates and expected term.

The assumptions used in valuing the warrant liability as of the year ended December

31, 2020 were exercise price of $4.80 per share;

implied stock price of $10.44;

expected volatility of 44.47%;

expected dividend

risk free interest rate of 1.70%;

and expiration date of 2.17 years.

Company accounts for income taxes pursuant to the provision of Accounting Standards Codification (“ASC”) 740-10, “Accounting

for Income Taxes”

which requires, among other things, an asset and liability approach to calculating deferred income taxes.

The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences

fair value of the warrant liabilities are marked-to-market each reporting period and changes in fair value are recorded as a non-operating

gain or loss in our statement of operations, until they are completely exercised.

The fair value is determined each reporting period

using the Black-Scholes option pricing model and is affected by changes in inputs to that model including our stock price, expected stock

price volatility, dividends, interest rates and expected term.

Non-recurring

measurement of Fair Value

Company accounts for its digital currencies as indefinite-lived intangible assets in accordance with Accounting Standards Codification

(“ASC”) 350, I ntangibles – Goodwill and Other .

The Company’s digital currencies are initially recorded

at fair value upon receipt (or “carrying value”).

On a quarterly basis, they are measured at carrying value, net of any impairment

losses incurred since receipt.

Pursuant to guidance from ASC 820, Fair Value Measurement, the Company is required to determine

the nonrecurring fair value measurement used to determine impairment of the digital currencies held on the balance sheet.

will record impairment losses as the fair value falls below the carrying value of the digital currencies.

The digital currencies can

only be marked down when impaired and not marked up when their value increases.

The resulting carrying value represents the fair value

of the asset.

The last impairment date for the digital currencies was December 31, 2021.

The Company had an outstanding carrying balance

of digital assets of approximately $ 123.2 million, net of impairment losses incurred of $ 29.6 million for the year ended December 31,

As of December 31, 2021, the fair value of the approximate 3,321 bitcoin held as digital currencies is approximately $ 152.8 million.

Company accounts for income taxes pursuant to the provision of Accounting Standards Codification (“ASC”) 740-10, “Accounting

for Income Taxes” which requires, among other things, an asset and liability approach to calculating deferred income taxes.

asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences

of temporary differences between the carrying amounts and the tax bases of assets and liabilities.

A valuation allowance is provided

to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will

not be realized.

to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be

Company follows the provision of the ASC 740-10 related to Accounting for Uncertain Income Tax Position.

When tax returns are filed,

it is more likely than not that some positions taken would be sustained upon examination by the taxing authorities, while others are

subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained.

In accordance

with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which,

based on all available evidence, management believes it is most likely that not that the position will be sustained upon examination,

including the resolution of appeals or litigation processes, if any.

Tax positions taken are not offset or aggregated with other positions.

Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained

on examination by the taxing authorities, based on the technical merits of the position.

The tax benefits recognized in the consolidated

financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being

realized upon settlement with the applicable taxing authority.

The portion of the benefits associated with the tax positions taken that

exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance

sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

DIGITAL HOLDINGS, INC.

1 unchanged sentence

to Consolidated Financial Statements

Company follows the provision of the ASC 740-10 related to Accounting for Uncertain Income Tax Position.

When tax returns are

filed, it is more likely than not that some positions taken would be sustained upon examination by the taxing authorities, while

others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately

In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements

in the period during which, based on all available evidence, management believes it is most likely that not that the position

will be sustained upon examination, including the resolution of appeals or litigation processes, if any.

Tax positions taken are

not offset or aggregated with other positions.

positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more

than 50% likely of being realized upon settlement with the applicable taxing authority.

The portion of the benefits associated

with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain

tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing

authorities upon examination.

The Company believes its tax positions will more likely than not be upheld upon examination.

such, the Company has not recorded a liability for uncertain tax benefits.

and Diluted Net Loss per Share

loss per common share is calculated in accordance with ASC Topic 260:

Earnings Per Share (“ASC 260”).

Basic loss per

share is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.

The computation of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares

outstanding, as they would be anti-dilutive.

that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share

at December 31, 2020 and 2019 are as follows:

Earnings Per Share (“ASC 260”).

Basic loss per share

is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.

The computation

of diluted net loss per share does not include dilutive common stock equivalents in the weighted average shares outstanding, as they

would be anti-dilutive.

that could potentially dilute loss per share in the future that were not included in the computation of diluted loss per share at December

31, 2021 and 2020 are as follows:

SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE

As of December 31,

Warrants to purchase common stock

Restricted stock

Conversion of convertible notes

Options to purchase common stock

Convertible notes to exchange common stock

following table sets forth the computation of basic and diluted loss per share:

SCHEDULE OF COMPUTATION OF BASIC AND DILUTED LOSS PER SHARE

For the Years Ended December 31,

2 unchanged sentences

$ ( 10,447,771 )

Weighted average common shares - basic and diluted

Loss per common share - basic and diluted

of Long-lived Assets

reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset

may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an

asset to undiscounted future cash flows expected to be generated by the asset.

If such assets are considered to be impaired, the

impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the

Subsequent to year end, on January 14, 2021, the Company sold its inventory of approximately 5,900 S9, 13.5 TH/s miners

for $616,236.

As of December 31, 2020, these assets had a net book value of $1,487,538.

As such, management determined that those

crypto-currency machines were impaired by a total of $871,302 based upon an assessment as of December 31, 2020.

During the year

ended December 31, 2020 and 2019, the Company’s leasehold improvements were impaired by $0 and $447,776, respectively.

Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the estimated

grant-date fair value of the awards and forfeiture rates.

The Company estimates the fair value of stock option grants using the

Black-Scholes option pricing model and the assumptions used in calculating the fair value of stock-based awards represent management’s

best estimates and involve inherent uncertainties and the application of management’s judgment.

These assumptions are the

expected stock volatility, the risk–free interest rate, the expected life of the option, the dividend yield on the underlying

stock and the expected forfeiture rate.

Expected volatility is calculated based on the historical volatility of the Company’s

common stock over the expected term of the option.

Risk–free interest rates are calculated based on continuously compounded

risk–free rates for the appropriate term.

$ ( 3,517,065 )

Weighted average common shares - basic

Weighted average common shares - diluted

Loss per common share - basic

Loss per common share - diluted

Company expenses stock-based compensation to employees and non-employees over the requisite service period based on the estimated grant-date

fair value of the awards and forfeiture rates.

The Company estimates the fair value of stock option grants using the Black-Scholes option

pricing model and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates

and involve inherent uncertainties and the application of management’s judgment.

These assumptions are the expected stock volatility,

the risk–free interest rate, the expected life of the option, the dividend yield on the underlying stock and the expected forfeiture

Expected volatility is calculated based on the historical volatility of the Company’s common stock over the expected term

of the option.

Risk–free interest rates are calculated based on continuously compounded risk–free rates for the appropriate

DIGITAL HOLDINGS, INC.

1 unchanged sentence

to Consolidated Financial Statements

January 1, 2019, the Company accounts for its leases under ASC 842, Leases.

Under this guidance, arrangements meeting the definition

of a lease are classified as operating or financing leases and are recorded on the consolidated balance sheet as both a right

of use asset and lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the

lease or the Company’s incremental borrowing rate.

Lease liabilities are increased by interest and reduced by payments each

period, and the right of use asset is amortized over the lease term.

For operating leases, interest on the lease liability and

the amortization of the right of use asset result in straight-line rent expense over the lease term.

Variable lease expenses,

if any, are recorded when incurred.

Company accounts for its leases under ASC 842, Leases.

Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases and are recorded

on the consolidated balance sheet as both a right of use asset and lease liability, calculated by discounting fixed lease payments over

the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate.

Lease liabilities are increased by

interest and reduced by payments each period, and the right of use asset is amortized over the lease term.

For operating leases, interest

on the lease liability and the amortization of the right of use asset result in straight-line rent expense over the lease term.

lease expenses, if any, are recorded when incurred.

calculating the right of use asset and lease liability, the Company elected to combine lease and non-lease components.

excluded short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election and

recognizes rent expense on a straight-line basis over the lease term.

Company continues to account for leases in the prior period financial statements under ASC Topic 840.

The Company excluded

short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election and recognizes rent

expense on a straight-line basis over the lease term.

Accounting Pronouncements

December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)

2019-12, “

December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2019-12, “ Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”)”

which is intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to

the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

This guidance

is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption

The Company is currently evaluating the impact of this standard on its consolidated financial statements and related

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging

(Topic 815), and Leases (Topic 842):

Effective Dates , which, among other items, allows public business entities that qualify

as smaller reporting companies for SEC reporting purposes additional time to implement the guidance related to FASB ASC 326 .

Under ASU 2019-10, the effective date for such entities is deferred to fiscal years, and interim periods within those fiscal years,

beginning after December 15, 2022.

Earlier application is still allowed for fiscal years beginning after December 15, 2018, including

interim periods within those fiscal years.

The Company is currently evaluating the impact of this standard on its consolidated

Simplifying the Accounting for Income Taxes (“ASU 2019-12”)” , which

is intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general

principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

This guidance is effective

for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted.

Company has adopted this pronouncement and has determined there has been no material impact of this standard on its consolidated

financial statements and related disclosures.

June 2018, the FASB issued ASU 2018-07, “

Improvements to Nonemployee Share-Based Payment Accounting ”, which

simplifies the accounting for share-based payments granted to nonemployees for goods and services.

Under the ASU, most of the

guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees.

The changes take effect for public companies for fiscal years starting after December 15, 2018, including interim periods within

that fiscal year.

For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and

interim periods within fiscal years beginning after December 15, 2020.

Early adoption is permitted, but no earlier than an entity’s

adoption date of Topic 606.

On January 1, 2019, the Company adopted this ASU and the adoption did not have a material impact on

the Company’s consolidated financial statements.

July 2017, the FASB issued ASU 2017-11, “

Earnings Per Share (Topic 260) Distinguishing Liabilities from Equity (Topic

480) Derivatives and Hedging (Topic 815) ,”

which addresses the complexity of accounting for certain financial instruments

with down round features.

Down round features are features of certain equity-linked instruments (or embedded features) that result

in the strike price being reduced on the basis of the pricing of future equity offerings.

Current accounting guidance creates

cost and complexity for entities that issue financial instruments (such as warrants and convertible instruments) with down round

features that require fair value measurement of the entire instrument or conversion option.

For public business entities, the

amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after

December 15, 2018 with early adoption permitted.

On January 1, 2019, the Company adopted this ASU and the adoption did not have

a material impact on the Company’s consolidated financial statements.

February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) in order to increase transparency and comparability among

organizations by, among other provisions, recognizing lease assets and lease liabilities on the balance sheet for those leases

classified as operating leases under previous GAAP.

For public companies, ASU 2016-02 is effective for fiscal years beginning

after December 15, 2018 (including interim periods within those periods) using a modified retrospective approach and early adoption

is permitted.

In transition, entities may also elect a package of practical expedients that must be applied in its entirety to

all leases commencing before the adoption date, unless the lease is modified, and permits entities to not reassess (a) the existence

of a lease, (b) lease classification or (c) determination of initial direct costs, as of the adoption date, which effectively

allows entities to carryforward accounting conclusions under previous U.S.

In July 2018, the FASB issued ASU 2018-11, Leases

Targeted Improvements, which provides entities an optional transition method to apply the guidance under Topic 842

as of the adoption date, rather than as of the earliest period presented.

The Company adopted Topic 842 on January 1, 2019, using

the optional transition method to apply the new guidance as of January 1, 2019, rather than as of the earliest period presented,

and elected the package of practical expedients described above.

Based on the analysis, on January 1, 2019, the Company recorded

right of use assets of approximately $388,425, lease liability of approximately $289,283 and eliminated deferred rent of approximately

new accounting standards, not disclosed above, that have been issued or proposed by FASB that do not require adoption until a

future date are not expected to have a material impact on the consolidated financial statements upon adoption.

In 2020, the Financial Accounting Standards Board

issued Accounting Standards Update (ASU) 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives

and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an

Entity’s Own Equity , to address the complexity in accounting for certain financial instruments with characteristics of liabilities

Amongst other provisions, the amendments in this ASU significantly change the guidance on the issuer’s accounting for

convertible instruments and the guidance on the derivative scope exception for contracts in an entity’s own equity such that fewer

conversion features will require separate recognition, and fewer freestanding instruments, like warrants, will require liability treatment.

This guidance is effective for fiscal years beginning after December 15, 2021, with early adoption permitted.

The Company adopted ASU

2020-06 early as of January 1, 2021.

Such adoption did not result in any material changes to its financial position, results of operations

or cash flows.

new accounting standards, not disclosed above, that have been issued or proposed by FASB that do not require adoption until a future

date are not expected to have a material impact on the consolidated financial statements upon adoption.

DIGITAL HOLDINGS, INC.

1 unchanged sentence

to Consolidated Financial Statements

PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

September 30, 2019, the Company consummated the purchase of 6000 S-9 Bitmain 13.5 TH/s Bitcoin Antminers (“Miners”)

from SelectGreen Blockchain Ltd., a British Columbia corporation, for which the purchase price was $4,086,250 or 2,335,000 shares

of its common stock at a price of $1.75 per share.

As a result of an exchange cap requirement imposed in conjunction with the

Company’s Listing of Additional Shares application filed with Nasdaq to the transaction, the Company issued 1,276,442 shares

of its common stock which represented $2,233,773 of the $4,086,250 (constituting 19.9% of the issued and outstanding shares on

the date of the Asset Purchase Agreement) and upon the receipt of shareholder approval, at the Annual Shareholders Meeting to

be held on November 15, 2019, the Company can issue the balance of the 1,058,558 unregistered common stock shares.

The shareholders

did approve the issuance of the additional shares at the Annual Shareholders Meeting.

The Company has issued an additional 474,808

at $0.90 per share.

The $513,700 set forth on the balance sheet for mining servers payable reflects the fair value of 583,750

shares to be issued at $0.88 per share to conclude the purchase of the Miners at December 31, 2019.

The Company recorded change

in fair value of mining payable of $66,547 and $507,862 during the year ended December 31, 2020 and 2019, respectively.

There is no requirement for the Company to make a payment in cash in lieu of issuing the remaining shares.

3 – DEPOSIT, PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

September 30, 2019, the Company consummated the purchase of 6000 S-9 Bitmain 13.5 TH/s Bitcoin Antminers (“Miners”) from

SelectGreen Blockchain Ltd., a British Columbia corporation, for which the purchase price was $ 4,086,250 or 2,335,000 shares of its common

stock at a price of $ 1.75 per share.

As a result of an exchange cap requirement imposed in conjunction with the Company’s Listing

of Additional Shares application filed with Nasdaq to the transaction, the Company issued 1,276,442 shares of its common stock which

represented $ 2,233,773 of the $ 4,086,250 (constituting 19.9 % of the issued and outstanding shares on the date of the Asset Purchase Agreement)

and upon the receipt of shareholder approval, at the Annual Shareholders Meeting to be held on November 15, 2019, the Company can issue

the balance of the 1,058,558 unregistered common stock shares.

The shareholders did approve the issuance of the additional shares at

the Annual Shareholders Meeting.

The Company has issued an additional 474,808 at $ 0.90 per share.

The $ 513,700 set forth on the balance

sheet for mining servers payable reflects the fair value of 583,750 shares to be issued at $ 0.88 per share to conclude the purchase of

the Miners at December 31, 2020.

The Company recorded change in fair value of mining payable of $0 and $ 66,547 during the year ended

December 31, 2021 and 2020, respectively.

There is no requirement for the Company to make a payment in cash in lieu of issuing the remaining

May 11, 2020, the Company signed a Contract Addendum with Compute North, to pause and suspend services under its Colocation Agreement.

This will suspend all production of Bitcoin using our S-9 miners.

May 11, 2020, the Company purchased 700 new generation M305+ASIC Miners from MicroBT for approximately $1.3 million.

The 700 miners

produce 80/Th and will generate 56 PH/s (petahash) of hashing power, compared to the Company’s current S-9 production of

These next generation MicroBT ASIC miners are markedly more energy efficient than our existing Bitmain models.

miners were delivered to the Company’s Hosting Facility in June 2020 and are producing Bitcoins.

Company purchased 660 latest generation Bitmain S19 Pro Miners on May 12, 2020, 500 units on May 18, 2020 and an additional 500

May 11, 2020, the Company purchased 700 new generation M305+ASIC Miners from MicroBT for approximately $ 1.3

700 miners produce 80/Th and will generate 56 PH/s (petahash) of hashing power, compared to the Company’s current S-9 production

These next generation MicroBT ASIC miners were markedly more energy efficient than the Bitmain S-9 models.

These miners were delivered to the Company’s

Hosting Facility in June 2020 and are producing Bitcoins.

Company purchased 660

latest generation Bitmain S19 Pro Miners on May

12, 2020, 500

units on May 18, 2020 and an additional 500

units on June 11, 2020.

These miners produce 110 TH/s and will generate 73 PH/s (petahash) of hashing power, compared to the Company’s

S-9 production of 46 PH/s.

The Company made the payments of approximately $4.2 million in the second quarter of 2020 and received

660 of the 1,660 units at its Hosting Facility in August, and its hosting partner, Compute North, had installed them upon their

Of the 1,000 remaining S-19 Pro Miners due to arrive in the 4th quarter, 500 were received in November and installed

in the Company’s Hosting Facility in Montana, while 500 are anticipated to be received and installed during the remainder

of the 4th quarter.

These miners will produce an additional 110 PH/s increasing the Company to an aggregate Hashpower of 294 PH/s.

July 29, 2020, the Company announced the purchase of 700 next generation M31S+ASIC Miners from MicroBT.

The miners arrived mid-August.

On August 13, 2020, the Company entered into a Long Term Purchase Contract with Bitmaintech PTE., LTD (“Bitmain”)

for the purchase of 10,500 next generation Antminer S-19 Pro ASIC Miners.

purchase price per unit is $2,362 ($2,206 with a 6.62% discount) for a total purchase price of $24,801,000 (with a 6.62% discount

for a discounted price of $23,159,174).

The parties confirm that the total hashrate of the Antminers under this agreement shall

not be less than 1,155,000 TH/s.

These miners produce

110 TH/s and will generate 73 PH/s (petahash) of hashing power, compared to the Company’s S-9 production of 46 PH/s.

made the payments of approximately $ 4.2

million in the second quarter of 2020 and received 660 of the

1,660 units at its Hosting Facility in August of 2020, and its hosting partner, Compute North, had installed them upon their arrival.

Of the 1,000 remaining S-19 Pro Miners due to arrive in the 4th quarter of 2020, 500 were received in November of 2020

and installed in the Company’s Hosting Facility in Montana, while another 60 miners were received and placed into service in

January 2021.

The remaining 440 miners that were anticipated to arrive in the 4 th quarter of 2020 were cancelled and the Company

received a refund of the original purchase price of $ 1.1 million in January 2021.

July 29, 2020, the Company announced the purchase of 700

next generation M31S+ASIC Miners from MicroBT.

The miners arrived mid-August of 2020.

On August 13, 2020, the Company entered into a Long Term Purchase Contract with Bitmaintech

PTE., LTD (“Bitmain”) for the purchase of 10,500

next generation Antminer S-19 Pro ASIC Miners.

purchase price per unit is $ 2,362 ($ 2,206 with a 6.62% discount) for a total purchase price of $24,801,000 (with a 6.62% discount for

a discounted price of $23,159,174).

The parties confirm that the total hashrate of the Antminers under this agreement shall not be less

than 1,155,000 TH/s.

to executing this agreement, due to the additional executed contracts, Bitmain applied a total net discount of 8.63 % to the purchase

1 unchanged sentence

to the timely payment of the purchase price, Bitmain shall deliver products according to the following schedule:

1,500 Units on

or before January 31, 2021;

1,500 Units on or before

January 31, 2021;

and 1,800 units on or before each of February 28, 2021;

March 31, 2021;

April 30, 2021, May 31, 2021

and June 30, 2021.

As of December 31, 2020, the Company has paid $15,052,648 of the total balance of $22,660,673.

October 23, 2020, the Company executed a contract with Bitmain to purchase an additional 10,000 next generation Antminer S-19

Pro ASIC Miners.

The 2021 delivery schedule will be 2,500 Units in January, 4,500 Units in February and the final 3,000 Units

in March 2021.The gross purchase price is $23,620,000 with 30% due upon the execution of the contract and the balance paid

over the next 4 months.

Subsequent to executing this agreement, due to the additional executed contracts, Bitmain applied a discount

of 8.63% to the purchase price adjusting the amount due to $21,581,594.

As of December 31, 2020, the Company has paid $13,634,645 of the total balance of $21,581,594.

December 8, 2020, the Company executed a contract with Bitmain to purchase an additional 10,000 next generation Antminer S-19j

Pro ASIC Miners, with 6,000 units to be delivered in August 2021, and the remaining 4,000 units to be delivered in September 2021.

The gross purchase price is $23,770,000 with 10% of the purchase price due within 48 hours of execution of the contract, 30%

due on January 14, 2021, 10% due on February 15, 2021, 30% due on June 15, 2021 and 20% due on July 15, 2021.

Subsequent to executing

this agreement, due to the additional executed contracts, Bitmain applied a discount of 8.63% to the purchase price adjusting

the amount due to $21,718,649.

As of December 31, 2020, the Company has paid $2,192,307 of the total balance of $21,718,649.

December 23, 2020, the Company executed a contract with Bitmain to purchase an additional 70,000 next generation Antminer S-19

ASIC Miners, with 7,000 units to be delivered in July 2021, and the remaining 63,000 units to be delivered in December 2021.

purchase price is $167,763,451.

April 30, 2021, May 31, 2021 and June 30, 2021.

As of December 31, 2021, the Company has paid the entire purchase price under this agreement and has received 10,500 units from Bitmain.

October 23, 2020, the Company executed a contract with Bitmain to purchase an additional 10,000 next generation Antminer S-19 Pro ASIC

The 2021 delivery schedule was for 2,500 units to be delivered in January, 4,500 units to be delivered in February and the final

3,000 units to be delivered in March 2021.The gross purchase price was $23,620,000 with 30% due upon the execution of the contract and

the balance paid over the next 4 months.

Subsequent to executing this agreement, due to the additional executed contracts, Bitmain applied

a discount of 8.63% to the purchase price adjusting the amount due to $ 21,581,594 .

As of December 31, 2021, the Company has paid the

entire purchase price under this agreement and has received 10,000 units from Bitmain.

December 8, 2020, the Company executed a contract with Bitmain to purchase an additional 10,000 next generation Antminer S-19j Pro ASIC

Miners, with 6,000 units to be delivered in August 2021, and the remaining 4,000 units to be delivered in September 2021.

The gross purchase

price is $23,770,000 with 10% of the purchase price due within 48 hours of execution of the contract, 30% due on January 14, 2021, 10%

due on February 15, 2021, 30% due on June 15, 2021 and 20% due on July 15, 2021.

Subsequent to executing this agreement, due to the additional

executed contracts, Bitmain applied a discount of 8.63% to the purchase price adjusting the amount due to $ 21,718,649 .

As of December

31, 2021, the Company has paid the entire purchase price under this agreement and has received 10,000 units from Bitmain.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

December 23, 2020, the Company executed a contract with Bitmain to purchase an additional 70,000 next generation Antminer S-19 ASIC Miners,

with 7,000 units to be delivered by August 2021, 2,100 units to be delivered by September 2021, 6,500 units to be delivered by October

31, 2021, 14,700 units to be delivered by November 30, 2021, 24,500 units to be delivered by December 31, 2021 and 15,200 units to be

delivered by January 31, 2022.

The purchase price is $167,763,451.

The purchase price for the miners shall be paid as follows:

20% within 48 hours of signing

48 hours of signing of contract;

30% on or before March 1, 2021;

4 unchanged sentences

17.63% on October 15, 2021 and 11.55% on November 15, 2021.

As of December 31, 2021, the Company

has paid the entire purchase price under this agreement and has received 40,000 units from Bitmain.

February 1, 2021, Marathon announced that Bitmain had shipped approximately 4,000 S-19 Pro ASIC miners to the Company’s mining

facility in Hardin, MT, all of which were delivered as scheduled.

addition to the initial 4,000 miners delivered to the Hardin facility in February, Bitmain has shipped another 26,050 miners to Hardin.

Marathon has received over 30,050 miners as of December 31, 2021 and subsequent to year end increased its active mining fleet to approximately

32,710 miners generating approximately 3.6 EH/s.

December 21, 2021, the Company executed a contract with Bitmain to purchase an additional 78,000 next generation Antminer S-19 XP Miners,

with 13,000 units being delivered in each of July 2022, August 2022, September 2022, October 2022, November 2022 and December 2022.

purchase price is $ 879,060,000 .

The purchase price for the miners shall be paid as follows:

35% of the total amount within two days of

execution of the purchase contract, 35% of each single shipment price at least six months prior to each such shipment, and the remaining

30% of each single shipment price at least one month prior to each such shipment .

As of December 31, 2021, the Company has paid $ 307,671,000

$33,552,690 of the total balance of $167,763,451.

February 1, 2021, Marathon announced that Bitmain had shipped approximately 4,000 S-19 Pro ASIC miners to the Company’s

mining facility in Hardin, MT, all of which were delivered as scheduled.

addition to the initial 4,000 miners delivered to the Hardin facility in February, Bitmain recently shipped another 6,300 miners

A portion of this new shipment has already been received and installations are progressing.

Marathon expects all 10,300

miners to be installed by the end of March, at which point the Company’s mining fleet will consist of 12,920 miners generating

approximately 1.4 EH/s.

of the purchase price.

As of December 31, 2021, approximately $ 466.3

million cash paid for miners was recorded as a deposit on the balance sheet.

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

SCHEDULE OF COMPONENTS OF PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS

Useful life (Years)

3 unchanged sentences

Construction in Progress

Right to mining patent

Mining patent

Gross property, equipment and intangible assets

Accumulated depreciation and amortization

( 21,591,958 )

( 6,687,957 )

Property, equipment and intangible assets, net

$ 277,174,020

of December 31, 2021, intangible assets amortization are as follows:

OF INTANGIIBLE ASSETS AMORTIZATION

As of December 31, 2020, intangible assets amortization

are as follows:

DIGITAL HOLDINGS, INC.

1 unchanged sentence

to Consolidated Financial Statements

4 - STOCKHOLDERS’

4 - STOCKHOLDERS’ EQUITY

are authorized to issue 200,000,000 shares of common stock and 50,000,000 shares of preferred stock, at $ .0001 par value per share.

As of December 31, 2020, we have 81,974,619 shares of our common stock and no shares of our preferred stock issued and outstanding.

of December 31, 2021, we have 102,733,273 shares of our common stock and no shares of our preferred stock issued and outstanding.

The Market Offering Agreement

July 19, 2019, we entered into an At The Market Offering Agreement (the “Agreement”) with H.C.

Wainwright & Co.,

LLC (“H.C.

Wainwright”) which establishes an at-the-market equity program pursuant to which we may offer and sell

shares of our common stock, par value $0.0001 per share (“Common Stock”), from time to time as set forth in the Agreement.

The Agreement provides for the sale of shares of our Common Stock (“Shares”) having an aggregate offering price of

up to $7,472,417.

July 19, 2019, we entered into an At The Market Offering Agreement (the “Agreement”) with H.C.

Wainwright & Co., LLC

Wainwright”) which establishes an at-the-market equity program pursuant to which we may offer and sell shares of our

common stock, par value $ 0.0001 per share (“Common Stock”), from time to time as set forth in the Agreement.

The Agreement

provides for the sale of shares of our Common Stock (“Shares”) having an aggregate offering price of up to $ 7,472,417 .

to the terms and conditions set forth in the Agreement, H.C.

Wainwright will use its commercially reasonable efforts consistent

with its normal trading and sales practices to sell the Shares from time to time, based upon our instructions.

We have provided

Wainwright with customary indemnification rights, and H.C.

Wainwright will be entitled to a commission at a fixed rate equal

to three percent (3.0%) of the gross proceeds per Share sold.

In addition, we have agreed to pay certain expenses incurred by

Wainwright in connection with the Agreement, including up to $25,000 of the fees and disbursements of their counsel.

Agreement will terminate upon the earlier of sale of all of the Shares under the Agreement or July 19, 2022 unless terminated

earlier by either party as permitted under the Agreement.

of the Shares, if any, under the Agreement shall be made in transactions that are deemed to be “at the market offerings”

as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), including sales made by

means of ordinary brokers’

transactions, including on the Nasdaq Capital Market, at market prices or as otherwise agreed

We have no obligation to sell any of the Shares, and, at any time, we may suspend offers under the Agreement

or terminate the Agreement.

Wainwright will use its commercially reasonable efforts consistent with

its normal trading and sales practices to sell the Shares from time to time, based upon our instructions.

We have provided H.C.

with customary indemnification rights, and H.C.

Wainwright will be entitled to a commission at a fixed rate equal to three percent (3.0%)

of the gross proceeds per Share sold.

In addition, we have agreed to pay certain expenses incurred by H.C.

Wainwright in connection with

the Agreement, including up to $ 25,000 of the fees and disbursements of their counsel.

The Agreement will terminate upon the earlier

of sale of all of the Shares under the Agreement or July 19, 2022 unless terminated earlier by either party as permitted under the Agreement.

of the Shares, if any, under the Agreement shall be made in transactions that are deemed to be “at the market offerings”

as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), including sales made by means

of ordinary brokers’ transactions, including on the Nasdaq Capital Market, at market prices or as otherwise agreed with H.C.

We have no obligation to sell any of the Shares, and, at any time, we may suspend offers under the Agreement or terminate the Agreement.

July 23, 2020, the Company entered into an underwriting agreement with H.C.

The Company agreed to sell H.C.

Wainwright 7,666,666

shares of its common stock, including the exercise in full by H.C.

Wainwright of the option to purchase an additional

999,999 shares of common stock, at a public offering price of $0.90 per share.

The gross proceeds of this offering, which closed

on July 28, 2020, were approximately $6.9 million, and proceeds, net of underwriting discount and expenses of $0.6 million, were

$6.3 million.

Additionally, representative’s warrant to purchase 536,667 shares of our common stock with a five year term

and an exercise price of $1.125 per share were issued.

Wainwright of the option to purchase an additional 999,999 shares

of common stock, at a public offering price of $ 0.90 per share.

The gross proceeds of this offering, which closed on July 28, 2020, were

approximately $ 6.9 million, and proceeds, net of underwriting discount and expenses of $ 0.6 million, were $ 6.3 million.

Additionally,

representative’s warrant to purchase 536,667 shares of our common stock with a five year term and an exercise price of $ 1.125 per

share were issued.

Registration Statements on Form S-3 and At The Market Offering Agreements

August 13, 2020, the Company’s Shelf Registration Statement on Form S-3, filed on August 6, 2020, was declared effective

by the SEC, along with the Company’s At The Market Offering Agreement, entered into by the Company and H.C.

Co., LLC, as Exhibit 1.1 to the Form S-3 (the “2020 At The Market Agreement”).

This 2020 At the Market Agreement establishes

an at-the-market equity program pursuant to which the Company may offer and sell shares of its common stock, par value $0.0001

per share, with an aggregate offering price of up to $100 million, from time to time as set forth in the agreement.

December 22, 2020, the Company’s Shelf Registration Statement on Form S-3, filed on December 11, 2020, was declared effective

by the SEC, along with the Company’s At The Market Offering Agreement, entered into by the Company and H.C.

Co., LLC, as Exhibit 1.1 to the Form S-3 (the “2020 At The Market Agreement”).

This 2020 At the Market Agreement establishes

an at-the-market equity program pursuant to which the Company may offer and sell shares of its common stock, par value $0.0001

per share, with an aggregate offering price of up to $200 million, from time to time as set forth in the agreement.

the year ended December 31, 2020, 54,301,698 shares of common stock were issued under the Company’s 2020 At The Market Agreements

for total proceeds of approximately $307.1 million, net of offering costs, of $9.4 million, and the Company has sold all shares

possible under the Agreements.

the year ended December 31, 2019, 172,126 of common stock were issued under the Company’s 2019 At The Market Agreements

for total proceeds of approximately $0.3 million, net of offering costs, of $0.01 million, and the Company has sold all shares

possible under the Agreements.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

Purchase Agreement

September 30, 2019, the Company consummated the purchase of 6000 S-9 Bitmain 13.5 TH/s Bitcoin Antminers (“Miners”)

from SelectGreen Blockchain Ltd., a British Columbia corporation, for which the purchase price was $4,086,250 or 2,335,000 shares

of its common stock at a price of $1.75 per share.

As a result of an exchange cap requirement imposed in conjunction with the

Company’s Listing of Additional Shares application filed with Nasdaq to the transaction, the Company issued 1,276,442 shares

of its common stock which represented $2,233,773 of the $4,086,250 (constituting 19.9% of the issued and outstanding shares on

the date of the Asset Purchase Agreement) and upon the receipt of shareholder approval, at the Annual Shareholders Meeting to

be held on November 15, 2019, the Company can issue the balance of the 1,058,558 unregistered common stock shares.

The shareholders

did approve the issuance of the additional shares at the Annual Shareholders Meeting.

The Company has issued an additional 474,808

at $0.90 per share.

The $513,700 set forth on the balance sheet for mining servers payable reflects the fair value of 583,750

shares to be issued at $0.88 per share to conclude the purchase of the Miners at December 31, 2019.

The Company recorded change

in fair value of mining payable of $66,547 and $507,862 during the year ended December 31, 2020 and 2019, respectively..

is no requirement for the Company to make a payment in cash in lieu of issuing the remaining shares.

with Beowulf Energy

October 6, 2020, the Company entered into a series of agreements with affiliates of Beowulf Energy LLC, a Delaware limited liability

company (collectively and as applicable, “Beowulf”) and Two Point One, LLC, a Delaware limited liability company (“2Pl”;

Marathon, Beowulf and 2Pl each a “Party”

and, collectively, the “Parties”).

Beowulf and 2Pl have been

designing and developing a data center facility of up to 100-megawatts (the “Facility”) that will be located next

to, and supplied energy directly from, Beowulf’s power generating station in Hardin, MT (the “Hardin Station”).

The Facility is being developed in two phases to reach its 100 MW capacity, and the Hardin Station will supply the Facility exclusively

with energy to operate Bitcoin mining servers.

projected build out cost for Phase I is approximately $14 million, which is front loaded as the infrastructure is being built

for the full 100 MW project.

It entails high voltage equipment to break down the full 100 MW load from the generating station,

and thereafter, the infrastructure cost per MW is a matter of distributing power at a container level.

Assuming market conditions

similar to current, the build out cost for Phase II works out to approximately $200,000 - $250,000 per MW.

These are all in costs

covering all equipment and labor needed starting from the power coming off the Generating Station distributed down to running

the actual miners:

including breakers, transformers, switches, containers, PDUs, fans, network cables, and the like.

and Beowulf entered into an exclusive Power Purchase Agreement for the initial supply of 30 MW (Phase I), and up to 100 MW in

the aggregate (Phase II), of energy load to the Facility at a cost of $0.028/kWh.

The initial term of the Power Purchase Agreement

is five years, with up to five additional three-year extensions, as mutually agreed, assuming 75% energy utilization of the initial

30 MW of energy supplied to the Facility.

Marathon purchased certain mining infrastructure and equipment for the Facility from

Beowulf for a purchase price of $750,000, and Marathon has the right, at no additional cost, to construct and access the Facility

on land adjacent to the Hardin Station pursuant to a lease agreement with Beowulf.

and 2P1 will provide operation and maintenance services for the Facility pursuant to a Data Facility Services Agreement, in exchange

for an initial issuance of 3,000,000 shares of Marathon’s common stock to each of Beowulf and 2Pl valued at the time of

execution or $1.87 per share.

Upon completion of Phase I, Marathon will issue to Beowulf an additional 150,000 shares of its common

During Phase II, Marathon will issue to Beowulf an additional 350,000 shares of its common stock –

150,000 shares

upon reaching 60 MW of Facility load and 200,000 at completion of the full 100 MW of Facility load.

The cost to maintain and run

the Facility will be $0.006/kWh.

All shares issued under the Data Facility Services Agreement are issued pursuant to transactions

exempt from registration under Section 4(a)(2) of the Securities Act of 1933.

August 13, 2020, the Company’s Shelf Registration Statement on Form S-3, filed on August 6, 2020, was declared effective by the

SEC, along with the Company’s At The Market Offering Agreement, entered into by the Company and H.C.

Wainwright & Co., LLC,

as Exhibit 1.1 to the Form S-3 (the “2020 At The Market Agreement”).

This 2020 At the Market Agreement establishes an at-the-market

equity program pursuant to which the Company may offer and sell shares of its common stock, par value $ 0.0001 per share, with an aggregate

offering price of up to $ 100 million, from time to time as set forth in the agreement.

December 22, 2020, the Company’s Shelf Registration Statement on Form S-3, filed on December 11, 2020, was declared effective by

the SEC, along with the Company’s At The Market Offering Agreement, entered into by the Company and H.C.

Wainwright & Co.,

LLC, as Exhibit 1.1 to the Form S-3 (the “2020 At The Market Agreement”).

This 2020 At the Market Agreement establishes an

at-the-market equity program pursuant to which the Company may offer and sell shares of its common stock, par value $ 0.0001 per share,

with an aggregate offering price of up to $ 200 million, from time to time as set forth in the agreement.

On January 12, 2020, the Company, entered into

a Securities Purchase Agreement (the “Purchase Agreement”) with certain purchasers named therein (the “Purchasers”),

pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “Offering”), 12,500,000 shares

of its common stock (the “Securities”) at an offering price of $ 20.00 per share.

The Purchase Agreement contains customary

representations and warranties and agreements of the Company and the Purchasers and customary indemnification rights and obligations

of the parties.

The closing of the Offering occurred on January 15, 2021.

The Company received gross proceeds of $ 250,000,000 in connection

with the Offering, before deducting placement agent fees and related offering expenses.

Pursuant to a letter agreement, dated August 2020

(the “Engagement Letter”), the Company engaged H.C.

Wainwright & Co., LLC (the “Placement Agent”) as placement

agent in connection with the Offering.

The Placement Agent agreed to use its reasonable best efforts to arrange for the sale of the Securities.

The Company agreed to pay to the Placement Agent a cash fee of 5.0 % of the aggregate gross proceeds raised in the Offering.

also issued to designees of the Placement Agent warrants to purchase up to 3.0 % of the aggregate number of shares of Common Stock sold

in the transactions, or warrants to purchase up to 375,000 shares of Common Stock (the “Placement Agent Warrants”).

The Placement

Agent Warrants have an exercise price equal to 125 % of the offering price per share (or $ 25.00 per share).

The Company also agreed to

pay the Placement Agent $ 50,000 for accountable expenses, to reimburse an investor’s legal fees in an amount up to $ 7,500 and to

pay $ 12,900 for the Placement Agent’s clearing fees.

Pursuant to the terms of the Engagement Letter, the Placement Agent has the

right, for a period of twelve months following the closing of the Offerings, to act (i) as financial advisor in connection with any merger,

consolidation or similar business combination by the Company and (ii) as sole book-running manager, sole underwriter or sole placement

agent in connection with certain debt and equity financing transactions by the Company.

As of December 31, 2021, warrants to purchase

up to 324,375 shares of Common Stock related to the Securities Purchase Agreement remain outstanding.

the year ended December 31, 2020, 54,301,698 shares of common stock were issued under the Company’s 2020 At The Market Agreements

for total proceeds of approximately $ 307.1 million, net of offering costs, of $ 9.4 million, and the Company has sold all shares possible

under the Agreements.

the year ended December 31, 2019, 172,126 of common stock were issued under the Company’s 2019 At The Market Agreements for total

proceeds of approximately $ 0.3 million, net of offering costs, of $ 0.01 million, and the Company has sold all shares possible under the

DIGITAL HOLDINGS, INC.

2 unchanged sentences

2020 Common Stock Activity

the month of January 2020, the Company issued 118,524 shares of common stock under the At The Market Offering for the total proceeds

of $131,215, net of offering cost of $5,045.

the month of February 2020, the Company issued 186,211 shares of common stock under the At The Market Offering for the total proceeds

of $220,802, net of offering cost of $8,687.

the month of March 2020, the Company issued 98,340 shares of common stock under the At The Market Offering for the total proceeds

of $49,874, net of offering cost of $3,042.

During 2020, the Company issued 54,301,698 shares

of common stock under the At The Market Offering for the total proceeds of $ 307,064,401 , net of offering cost of $ 9,405,129 .

March 30, 2020, the Company issued 350,250 shares of common stock in exchange for S9 miners with a fair market value of $ 612,938 .

the month of April 2020, the Company issued 3,016,385 shares of common stock under the At The Market Offering for the total proceeds

of $1,514,969, net of offering cost of $58,532.

the month of May 2020, the Company issued 5,987,723 shares of common stock under the At The Market Offering for the total proceeds

of $3,607,398, net of offering cost of $127,765.

the month of June 2020, the Company issued 1,540,710 shares of common stock under the At The Market Offering for the total proceeds

of $1,537,346, net of offering cost of $51,526.

June 1, 2020, the Company issued 2,023,739 shares of common stock in exchange for the conversion and extinguishment of the note

payable outstanding in an amount of $999,106.

the month of August 2020, the Company issued 5,820,761 shares of common stock under the At The Market Offering for the total proceeds

of $20,178,935, net of offering cost of $630,283.

the month of September 2020, the Company issued 943,981 shares of common stock under the At The Market Offering for the total

proceeds of $2,516,199, net of offering cost of $78,874.

the month of October 2020, the Company issued 7,813,218 shares of common stock under the At The Market Offering for the total

proceeds of $21,320,409, net of offering cost of $665,773.

October 6, 2020, the Company issued 6,000,000 shares of common stock in exchange for five years of services pursuant to the Power

Purchase Agreement and Data Facility Services Agreement for the total proceeds of $0, net of offering cost of $0 valued at the

time of execution at $1.87 per share or $11,220,000 in aggregate.

the month of November 2020, the Company issued 5,851,295 shares of common stock under the At The Market Offering for the total

proceeds of $16,685,649, net of offering cost of $519,992.

the month of December 2020, the Company issued 22,924,550 shares of common stock under the At The Market Offering for the total

proceeds of $239,301,605, net of offering cost of $7,255,610.

June 1, 2020, the Company issued 2,023,739 shares of common stock in exchange for the conversion and extinguishment of the note payable

outstanding in an amount of $ 999,106 .

October 6, 2020, the Company issued 6,000,000 shares of common stock in exchange for five years of services pursuant to the Power Purchase

Agreement and Data Facility Services Agreement for the total proceeds of $ 0 , net of offering cost of $ 0 valued at the time of execution

at $ 1.87 per share or $ 11,220,000 in aggregate.

DIGITAL HOLDINGS, INC.

2 unchanged sentences

Common Stock Activity

During 2019, the Company issued 172,126 shares

of common stock under the At The Market Offering for the total proceeds of $ 255,893 , net of offering cost of $ 10,442 .

October 1, 2019, the Company issued 150,000 shares of its common stock to a consultant.

1 unchanged sentence

Stock Warrants

summary of the status of the Company’s outstanding stock warrants and changes during year ended is as follows:

SUMMARY OF OUTSTANDING STOCK WARRANTS

Number of Warrants

Weighted Average

Exercise Price

Weighted Average

Contractual Life

Average Remaining Contractual Life

Outstanding as of December 31, 2019

2 unchanged sentences

Warrants exercisable as of December 31, 2021

The aggregate intrinsic value of options

outstanding and exercisable at December 31, 2020 was $1,395,921.

aggregate intrinsic value of options outstanding and exercisable at December 31, 2021 was $ 2,549,588 .

July 23, 2020, the Company entered into an underwriting agreement with H.C.

The Company agreed to sell H.C.

Wainwright 7,666,666

shares of its common stock, including the exercise in full by H.C.

Wainwright of the option to purchase an additional

999,999 shares of common stock, at a public offering price of $0.90 per share.

The gross proceeds of this offering, which closed

on July 28, 2020, were approximately $6.9 million, and proceeds, net of underwriting discount and expenses of $0.6 million, were

$6.3 million.

Additionally, representative’s warrant to purchase 536,667 shares of our common stock with a five year term

and an exercise price of $1.125 per share were issued.

Wainwright of the option to purchase an additional 999,999 shares

of common stock, at a public offering price of $ 0.90 per share.

The gross proceeds of this offering, which closed on July 28, 2020, were

approximately $ 6.9 million, and proceeds, net of underwriting discount and expenses of $ 0.6 million, were $ 6.3 million.

Additionally,

representative’s warrant to purchase 536,667 shares of our common stock with a five year term and an exercise price of $ 1.125 per

share were issued.

Pursuant to a letter agreement, dated August 2020

(the “Engagement Letter”), the Company engaged H.C.

Wainwright & Co., LLC (the “Placement Agent”) as placement

agent in connection with the Offering.

The Placement Agent agreed to use its reasonable best efforts to arrange for the sale of the Securities.

The Company agreed to pay to the Placement Agent a cash fee of 5.0 % of the aggregate gross proceeds raised in the Offering.

also issued to designees of the Placement Agent warrants to purchase up to 3.0 % of the aggregate number of shares of Common Stock sold

in the transactions, or warrants to purchase up to 375,000 shares of Common Stock (the “Placement Agent Warrants”).

The Placement

Agent Warrants have an exercise price equal to 125 % of the offering price per share (or $ 25.00 per share).

The Company also agreed to

pay the Placement Agent $ 50,000 for accountable expenses, to reimburse an investor’s legal fees in an amount up to $ 7,500 and to

pay $ 12,900 for the Placement Agent’s clearing fees.

Pursuant to the terms of the Engagement Letter, the Placement Agent has the

right, for a period of twelve months following the closing of the Offerings, to act (i) as financial advisor in connection with any merger,

consolidation or similar business combination by the Company and (ii) as sole book-running manager, sole underwriter or sole placement

agent in connection with certain debt and equity financing transactions by the Company.

As of December 31, 2021, warrants to purchase

up to 324,375 shares of Common Stock related to the Securities Purchase Agreement remain outstanding.

Stock Options

July 22, 2019, the Company’s board has approved to issue 275,000 shares of option to purchase the Company’s common

stock to 8 employees and consultants for the service they provided.

The options have a five-year term with an exercise price of

$2.04, vesting 50% on the date of grant and 25% on each 6 months anniversary of the date of grant.

The options were valued based

on the Black-Scholes model, using the strike of $2.04 per share, an average expected term of 2.69 years, volatility of 39.46%

based on the average volatility of comparable companies over the comparable prior period.

May 5, 2020, the Compensation Committee of the Board of Directors held a meeting and approved bonuses and stock option grants

for Directors and Officers for their contributions to the growth of Marathon Patent Group, Inc., for the year ended December 31,

Total awards to be granted amounted to 1,158,138 restricted stock units at a price of $0.43 per unit with a term of one

year, vesting quarterly in equal amounts, and (ii) cash award of $105,000 to Merrick Okamoto and $54,000 to David Lieberman.

addition, the Compensation Committee agreed to cancel 1,587,500 existing stock options for Directors, Officers and outside legal

counsel, and replace them with 1,587,500 restricted stock units at a price of $0.43 per unit with a term of one year, vesting

quarterly in equal amounts.

to the conversion of stock options to restricted stock options during 2020, the grant date fair value of stock options granted

to employees during the years ended December 31, 2020 and 2019 were $0 and $163,165, respectively.

Estimated future stock-based

compensation expense relating to unvested stock options is approximately $0 as of December 31, 2020.

July 22, 2019, the Company’s board has approved to issue 275,000 shares of option to purchase the Company’s common stock

to 8 employees and consultants for the service they provided.

The options have a five -year term with an exercise price of $ 2.04 , vesting

50% on the date of grant and 25% on each 6 months anniversary of the date of grant .

The options were valued based on the Black-Scholes

model, using the strike of $ 2.04 per share, an average expected term of 2.69 years, volatility of 39.46 % based on the average volatility

of comparable companies over the comparable prior period.

May 5, 2020, the Compensation Committee of the Board of Directors held a meeting and approved bonuses and stock option grants for Directors

and Officers for their contributions to the growth of Marathon Patent Group, Inc., for the year ended December 31, 2020.

to be granted amounted to 1,158,138 restricted stock units at a price of $ 0.43 per unit with a term of one year, vesting quarterly in

equal amounts, and (ii) cash award of $ 105,000 to Merrick Okamoto and $ 54,000 to David Lieberman.

In addition, the Compensation Committee

agreed to cancel 1,587,500 existing stock options for Directors, Officers and outside legal counsel, and replace them with 1,587,500

restricted stock units at a price of $ 0.43 per unit with a term of one year, vesting quarterly in equal amounts.

to the conversion of stock options to restricted stock options during 2020, the grant date fair value of stock options granted to employees

during the years ended December 31, 2021 and 2020 were $ 0 and $ 0 , respectively.

Estimated future stock-based compensation expense relating

to unvested stock options is approximately $ 0 as of December 31, 2021.

DIGITAL HOLDINGS, INC.

2 unchanged sentences

summary of the stock options as of December 31, 2021 and changes during the year ended is as follows:

Weighted Average

SUMMARY OF STOCK OPTIONS

Exercise Price

Weighted Average

Contractual Life

Average Remaining Contractual Life

Outstanding as of December 31, 2020

3 unchanged sentences

aggregate intrinsic value of options outstanding and exercisable at December 31, 2021 was $ 0 .

summary of the stock options as of December 31, 2019 and changes during the year ended is as follows:

Exercise Price

Weighted Average

Contractual Life

Outstanding as of December 31, 2018

Outstanding as of December 31, 2019

Options vested and expected to vest as of December 31, 2019

Options vested and exercisable as of December 31, 2019

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

summary of the RSUs as of December 31, 2021 and 2020, respectively and changes during the period are presented below:

Weighted Average

Grant Date Fair

Nonvested at December 31, 2018

Nonvested at December 31, 2019

Nonvested at December 31, 2020

Weighted Average

Grant Date Fair

SUMMARY OF RESTRICTED STOCK AWARD ACTIVITY

Weighted Average Grant Date Fair Value

Nonvested at December 31, 2020

( 8,237,595 )

Nonvested at December 31, 2021

Number of Units

Weighted Average

Grant Date Fair

Anticipated Vesting

March 31, 2021

5 – DEBT, COMMITMENTS AND CONTINGENCIES

Included in the Accounts payable and accrued

expenses amount of approximately $1.0 million, $0.4 million relates to trade accounts payable incurred in the ordinary course

of business while $0.6 million relates to accrued expenses.

consists of the following:

Convertible Note

$ 747,500,000

debt discount

Total convertible notes, net of discount

$ 728,405,922

current portion

Long term portion

$ 728,405,922

DIGITAL HOLDINGS, INC.

1 unchanged sentence

to Consolidated Financial Statements

August 14, 2017, the Company entered into a unit purchase agreement (the “Unit Purchase Agreement”) with certain accredited

investors providing for the sale of up to $5,500,000 of 5% secured convertible promissory notes (the “Convertible Notes”),

which are convertible into shares of the Corporation’s common stock, and the issuance of warrants to purchase 1,718,750

shares of the Company’s Common Stock (the “Warrants”).

The Convertible Notes are convertible into shares of

the Company’s Common Stock at the lesser of (i) $0.80 per share or (ii) the closing bid price of the Company’s common

stock on the day prior to conversion of the Convertible Note;

provided that such conversion price may not be less than $0.40 per

The Warrants have an exercise price of $4.80 per share.

In two closings of the Unit Purchase Agreement, the Company issued

$5,500,000 in Convertible Notes to the investors.

The remaining balance of the Convertible Notes were due to mature on May 31,

On February 10, 2020, the investor agreed to extend the maturity date to September 1, 2021, and the conversion price will

be changed to the lower of, the closing price on the previous days close prior to the conversion request or a maximum conversion

price of $1.00 and a floor of $0.80.

The note bears interest at the rate of 5% per annum and accrues but is not paid in cash.

the year ended December 31, 2020, $999,106 remaining balance of the Convertible Notes and $215,136 of accrued and unpaid interest

were converted into 2,023,739 shares of the Company’s Common Stock, and the Company recorded $364,833 of expenses pursuant

to the inducement of the conversion terms.

of convertible debt that has fallen “out of the money”

(the conversion price is more than the applicable stock price)

sometimes want to encourage conversion of the debt into its equity securities anyhow.

To do that, they can provide an incentive,

lasting for a brief period, for holders of the debt to exercise their conversion privilege.

Frequently, this inducement will take

the form of a temporary lessening of the conversion price (and consequent increase in the “conversion ratio,”

determines how many shares can be converted from each bond).

Less often, the issuer may transfer cash or other property to those

holders who can be persuaded to exercise the conversion privilege.

Statement of Financial Accounting Standards No.

Conversions of Convertible Debt, addresses the financial-accounting ramifications of such arrangements.

The statement applies

only to conversions that comply with two conditions.

They must conform to changed conversion privileges that are exercisable for

only a limited period.

Further, they must include the issuance of all stock that can be issued in accordance with conversion privileges

included in the terms of the debt at issuance.

the year ended December 31, 2020 and 2019, there was no amortization of debt discount.

Interest expenses were $20,984 and $49,954

for the years ended December 31, 2020 and 2019, respectively.

the year ended December 31, 2021 and 2020, there was amortization of debt discount of $ 0.3 million and $ 0 , respectively.

Interest expenses

were $ 1.6 million and $ 22,815 for the years ended December 31, 2021 and 2020, respectively.

Convertible Note

On November 18, 2021,

the Company issued $ 650,000,000 principal amount of its 1.00 % Convertible Senior Notes due 2026 (the “ Notes ”).

Notes were issued pursuant to, and are governed by, an indenture (the “ Indenture ”), dated as of November 18, 2021,

between the Company and U.S.

Bank National Association, as trustee (the “ Trustee ”).

Pursuant to the purchase agreement

between the Company and the initial purchasers of the Notes, the Company also granted the initial purchasers an option, for settlement

within a period of 13 days from, and including, November 18, 2021 to purchase up to an additional $ 97,500,000 principal amount of Notes,

which additional Notes were purchased on November 23, 2021, for an aggregate principal amount of Notes purchased of $ 747,500,000 .

references in this disclosure to “Notes” includes the Notes issued on both November 18, 2021 and November 23, 2021..

The Notes will be the

Company’s senior, unsecured obligations and will be (i) equal in right of payment with the Company’s existing and future

senior, unsecured indebtedness;

(ii) senior in right of payment to the Company’s existing and future indebtedness that is expressly

subordinated to the Notes;

(iii) effectively subordinated to the Company’s existing and future secured indebtedness, to the extent

of the value of the collateral securing that indebtedness;

and (iv) structurally subordinated to all existing and future indebtedness

and other liabilities, including trade payables, and (to the extent the Company is not a holder thereof) preferred equity, if any, of

the Company’s subsidiaries.

The Notes will accrue

interest at a rate of 1.00 % per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning on June 1, 2022.

The Notes will mature on December 1, 2026, unless earlier repurchased, redeemed or converted.

Before the close of business on the business

day immediately before June 1, 2026, noteholders will have the right to convert their Notes only upon the occurrence of certain events .

From and after June 1, 2026, noteholders may convert their Notes at any time at their election until the close of business on the second

scheduled trading day immediately before the maturity date.

The Company will settle conversions by paying or delivering, as applicable,

cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election.

conversion rate is 13.1277 shares of common stock per $ 1,000 principal amount of Notes, which represents an initial conversion price

of approximately $ 76.17 per share of common stock.

The conversion rate and conversion price will be subject to customary adjustments

upon the occurrence of certain events.

In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change”

(as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of

The Notes will be redeemable,

in whole or in part (subject to certain limitations described below), at the Company’s option at any time, and from time to time,

on or after December 6, 2024 and on or before the 21st scheduled trading day immediately before the maturity date, at a cash redemption

price equal to the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, if any, to, but excluding, the redemption

date, but only if the last reported sale price per share of the Company’s common stock exceeds 130% of the conversion price on

(1) each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and including, the

trading day immediately before the date the Company sends the related redemption notice;

and (2) the trading day immediately before the

date the Company sends such notice.

However, the Company may not redeem less than all of the outstanding Notes unless at least $ 100.0

million aggregate principal amount of Notes are outstanding and not called for redemption as of the time the Company sends the related

redemption notice.

In addition, calling any Note for redemption will constitute a Make-Whole Fundamental Change with respect to that

Note, in which case the conversion rate applicable to the conversion of that Note will be increased in certain circumstances if it is

converted during the related redemption conversion period.

If certain corporate

events that constitute a “Fundamental Change” (as defined in the Indenture) occur, then, subject to a limited exception for

certain cash mergers, noteholders may require the Company to repurchase their Notes at a cash repurchase price equal to the principal

amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, to, but excluding, the fundamental change repurchase

The definition of Fundamental Change includes certain business combination transactions involving the Company and certain de-listing

events with respect to the Company’s common stock.

The Notes will have customary

provisions relating to the occurrence of “Events of Default” (as defined in the Indenture), which include the following:

(i) certain payment defaults on the Notes (which, in the case of a default in the payment of interest on the Notes, will be subject to

a 30-day cure period);

(ii) the Company’s failure to send certain notices under the Indenture within specified periods of time;

(iii) the Company’s failure to comply with certain covenants in the Indenture relating to the Company’s ability to consolidate

with or merge with or into, or sell, lease or otherwise transfer, in one transaction or a series of transactions, all or substantially

all of the assets of the Company and its subsidiaries, taken as a whole, to another person;

(iv) a default by the Company in its other

obligations or agreements under the Indenture or the Notes if such default is not cured or waived within 60 days after notice is given

in accordance with the Indenture;

(v) certain defaults by the Company or any of its subsidiaries with respect to indebtedness for borrowed

money of at least $ 50,000,000 ;

and (vi) certain events of bankruptcy, insolvency and reorganization involving the Company or any of its

significant subsidiaries.

If an Event of Default

involving bankruptcy, insolvency or reorganization events with respect to the Company (and not solely with respect to a significant subsidiary

of the Company) occurs, then the principal amount of, and all accrued and unpaid interest on, all of the Notes then outstanding will

immediately become due and payable without any further action or notice by any person.

If any other Event of Default occurs and is continuing,

then, the Trustee, by notice to the Company, or noteholders of at least 25% of the aggregate principal amount of Notes then outstanding,

by notice to the Company and the Trustee, may declare the principal amount of, and all accrued and unpaid interest on, all of the Notes

then outstanding to become due and payable immediately.

However, notwithstanding the foregoing, the Company may elect, at its option,

that the sole remedy for an Event of Default relating to certain failures by the Company to comply with certain reporting covenants in

the Indenture consists exclusively of the right of the noteholders to receive special interest on the Notes for up to 270 days at a specified

rate per annum not exceeding 0.50% on the principal amount of the Notes.

Revolving Credit Line

On October 1, 2021, Marathon

Digital Holdings, Inc.

(the “Company”) entered into a Revolving Credit and Security Agreement (the “Agreement”)

with Silvergate Bank (the “Bank”) pursuant to which Silvergate has agreed to loan the Company up to $ 100,000,000 on a revolving

basis pursuant to the terms of the Agreement and the $ 100,000,000 principal amount revolving credit note issued by the Company in favor

of the Bank under the Agreement (“Note”).

The terms of the facility (“RLOC”) set forth in the Agreement and Note

are as follows:

Availability:

RLOC shall be made available from time to time to the Company for periodic draws (provided no event of default then exists) from

its closing date up to and including the one- year anniversary of the loan date.

of the Loan Commitment to the Bank (or $ 250,000 );

due at RLOC closing.

Unused Commitment Fee:

per annum of the portion of the unused Loan Commitment, payable monthly in arrears.

The RLOC may be renewed annually by agreement

between the Bank and the Company, subject to (without limitation):

(i) Company makes a request for renewal, in writing, no less than

sixty (60) days prior to the then current maturity date, (ii) no event of default then exists, (iii) Company provides all necessary

documentation to extend the RLOC, (iv) Company has paid all applicable fees related to the loan renewal, and (v) the Bank has approved

such extension request according to its internal credit policies as determined by the Bank in its sole and absolute discretion.

If the Bank approves a request by Company

to renew the RLOC upon any maturity, then a Renewal Fee of 0.25 % of the Loan Commitment (or $ 250,000 ) shall be due and payable upon

extension of the Loan Commitment.

Interest only

to be paid monthly, with principal all due at maturity.

The RLOC will be secured

by a pledge of a sufficient amount of Company’s right, title and interest in and to bitcoin and/or U.S.

Dollar (“USD”)

stored in a custody account for the benefit of the Bank (the “Collateral Account”).

the Bank will establish a Collateral

Account with a regulated custodial entity (the “Custodian”) that has been approved by the Bank.

the Bank and Custodian

will have a custodial agreement to perfect the security interest in the pledged Collateral Account which, among other things, allows

for 1) the Bank to monitor the balance of the Collateral Account and 2) allows the Bank to have exclusive control over the Collateral

Account including liquidation of the collateral in the event of Company’s default under the terms of the RLOC.

also file a UCC financing statement on the pledged collateral.

Minimum Advance Rate:

At origination, the Company

must ensure the Collateral Account balance has sufficient bitcoin (and/or US$) to cause a Loan to Value (the “LTV”) ratio

of 65 % (or less) (“Minimum Advance Rate”) on the unpaid principal balance of the RLOC.

The Company must maintain

a minimum debt to equity ratio of 0.5:1.

The Company must maintain a minimum liquidity of $ 25,000,000 .

On November 9, 2021,

the Company received a waiver letter from Silvergate Bank whereas Silvergate Bank has waived its default rights with respect to noncompliance

of Section VII.

Negative Covenants 7.3 Indebtedness and Section VI.

Affirmative Covenants 6.5.

Financial Covenants.

Silvergate Bank accepts

and acknowledges convertible notes in the aggregate principal amount up to $ 650,000,000 , plus an option to purchase an additional $ 97,500,000

principal amount of Convertible Notes shall not constitute “Indebtedness” for purpose of Section 7.3 of the Revolving Credit

and Security Agreement.

Further the maximum debt-to-equity ratio in Section 6.5 shall be revised to be 1.50:1.00 .

May 6, 2020, the Company entered into a Paycheck Protection Program Promissory Note agreement with a bank which is providing $ 62,500

1 unchanged sentence

The note accrues interest at a rate of 1 % per annum and matures on May 6, 2022 .

The Company will apply for 100%

forgiveness when the forgiveness portal is opened for submission by the bank.

June 1, 2018, the Company rented its corporate office at 1180 North Town Center Drive, Suite 100, Las Vegas, Nevada 89144, on

a month to month basis.

The Company applied and received 100 %

loan forgiveness in 2021.

June 1, 2018, the Company rented its corporate office at 1180 North Town Center Drive, Suite 100, Las Vegas, Nevada 89144, on a month

to month basis.

The monthly rent is $ 1,997 .

1 unchanged sentence

Company also assumed a lease in connection with the mining operations in Quebec, Canada.

Operating leases are included in operating

lease right-of-use assets, operating lease liabilities, and noncurrent operating lease liabilities on the balance sheets.

to December 31, 2020, the Company entered into a termination agreement with the Lessor to agree to terminate the lease as of March

As of that date, the Company was fully released and discharged from any and all obligations under the Lease Agreement.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

Operating leases are included in operating lease

right-of-use assets, operating lease liabilities, and noncurrent operating lease liabilities on the balance sheets.

entered into a termination agreement with the Lessor to agree to terminate the lease as of March 7, 2021.

As of that date, the Company

was fully released and discharged from any and all obligations under the Lease Agreement.

lease costs are recorded on a straight-line basis within operating expenses.

The Company’s total lease expense is comprised

of the following:

The Company’s total lease expense is comprised of

the following:

OF COMPONENTS OF LEASE COST

For the Year Ended

December 31, 2021

December 31, 2020

Operating leases

3 unchanged sentences

Total rent expense

information regarding the Company’s leasing activities as a lessee is as follow:

OF MINIMUM LEASE PAYMENTS

For the Year Ended

December 31, 2021

December 31, 2020

Operating cash flows from operating leases

Weighted-average remaining lease term –

operating leases

Weighted-average discount rate –

operating leases

Weighted-average remaining lease term – operating leases

Weighted-average discount rate – operating leases

Less present value discount

1 unchanged sentence

Non-current operating lease liabilities

Jeffrey Feinberg v.

Marathon Patent

Group, Inc., Doug Croxall, and Francis Knuettel II, Superior Court of the State of California, County of Los Angeles, Case

Number BC673128;

August 21, 2017

On August 21, 2017,

plaintiff Jeffrey Feinberg filed his Complaint against the Company and its Chief Executive Officer and Chief Financial Officer,

purporting to state claims under Sections 11, 12(a)(2) and 15 of the federal Securities Act of 1933, and to state common law claims

for “actual fraud and fraudulent concealment,”

constructive fraud, and negligent misrepresentation.

Feinberg sought

unspecified money damages, as well as costs and attorneys’

fees, and equitable or injunctive relief, all based on allegations

that he purchased Company securities and was induced to continue holding shares of the Company’s common stock through his

reliance on a series of purported misstatements and omissions concerning the Company’s financial performance and future

On October 10, 2017,

all defendants filed a motion to dismiss or to stay the action, contending that Feinberg’s claims were encompassed by various

written contracts in which he had agreed that any disputes he had with the Company should be litigated exclusively in the courts

in New York City.

While that motion was pending, on November 14, 2017, Feinberg voluntarily dismissed his complaint, in its entirety,

without prejudice.

On March 27, 2018,

Feinberg, purportedly joined by the Jeffrey L.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

March 27, 2018, Jeffrey Feinberg, purportedly joined by the Jeffrey L.

Feinberg Personal Trust and the Jeffrey L.

Feinberg Family Trust, refiled the alleged

claims described above in a lawsuit filed in the Supreme Court of the State of New York, County of New York.

The new lawsuit is

entitled Jeffrey Feinberg, Jeffrey L.

Feinberg Personal Trust, and Jeffrey L.

Feinberg Family Trust v.

Marathon Patent Group,

Inc., Doug Croxall, and Francis Knuettel II , Index No.

651463/2018 (the “NY Action”).

The plaintiffs purported

to state claims under Sections 11, 12(a)(2) and 15 of the federal Securities Act of 1933, and to state common law claims for “actual

fraud and fraudulent concealment,”

constructive fraud, and negligent misrepresentation.

The plaintiffs sought unspecified

money damages (including punitive damages), as well as costs and attorneys’

fees, and equitable or injunctive relief, all

based on allegations that over a period extending from approximately May 2015 through May 2017 they purchased Company securities

and were induced to continue holding shares of the Company’s stock through their reliance on a series of purported misstatements

and omissions concerning the Company’s financial performance and future prospects.

On June 15, 2018, all

defendants filed a motion to dismiss the complaint in the NY Action asserting, among other arguments, that the Jeffrey L.

Personal Trust and the Jeffrey L.

Feinberg Family Trust lack capacity to sue, that the purported state law “holder”

claims are barred as a matter of law, and that plaintiffs otherwise failed to state facts sufficient to state a claim.

opposed the motion.

After the motion was fully briefed, the court conducted an oral argument on January 16, 2019.

At the conclusion

of the argument, the court granted the motion to dismiss, allowing plaintiff Feinberg 30 days’

time to replead.

In addition, concurrent

with filing their motion to dismiss, the defendants filed a motion to stay discovery pursuant to the mandatory stay provisions

of the Private Securities Litigation Reform Act of 1995 and local state rules.

The plaintiffs filed a statement of non-opposition

to the motion to stay discovery, and on January 9, 2019, the court granted that motion.

On February 15, 2019,

Feinberg, in his individual capacity and purportedly as trustee of the Jeffrey L.

Feinberg Family Trust,

filed a complaint against the Company and certain of its former officers and directors.

The complaint was filed in the Supreme Court

of the State of New York, County of New York.

The plaintiffs purported to state claims under Sections 11, 12(a)(2) and 15 of the federal

Securities Act of 1933 and common law claims for “actual fraud and fraudulent concealment,” constructive fraud, and negligent

misrepresentation, seeking unspecified money damages (including punitive damages), as well as costs and attorneys’ fees, and equitable

or injunctive relief.

On June 15, 2018, the defendants filed a motion to dismiss all claims asserted in the complaint and, on July 27,

2018, the plaintiffs filed an opposition to that motion.

The court heard argument on the motion and, on January 15, 2019, the court granted

the motion to dismiss, allowing 30 days for the filing of an amended complaint.

On February 15, 2019, Jeffrey Feinberg, individually

and as trustee of the Jeffrey L.

Feinberg Personal Trust, and Terrence K.

purportedly as trustee of the Jeffrey L.

Feinberg Family Trust, filed what they styled as an “Amended Complaint.”

These plaintiffs purport to state claims against the Company, Doug Croxall and Francis Knuettel II under Sections 11, 12(a)(2)

and 15 of the federal Securities Act of 1933, and to state common law claims for “actual fraud and fraudulent concealment,”

constructive fraud, and negligent misrepresentation.

In the Amended Complaint, the plaintiffs seek unspecified money damages (including

punitive damages), as well as costs and attorneys’

fees, and equitable or injunctive relief, all based on allegations that

over a period extending from approximately May 2015 through May 2017 they purchased Company securities and were induced to continue

holding shares of the Company’s stock through their reliance on a series of purported misstatements and omissions concerning

the Company’s financial performance and future prospects.

Ankner, as trustee of the Jeffrey L.

Feinberg Family Trust,

filed an amended complaint that purports to state the same claims and seeks the same relief sought in the original complaint.

7 and 22, 2019, defendants filed motions to dismiss the amended complaint and on April 5, 2019, plaintiffs filed an opposition to those

The court heard oral argument on the motions to dismiss on July 9, 2019, and at the conclusion of the argument the court took

the motions under submission.

On March 13, 2020, the court issued its Decision in which it granted the motions to dismiss in full and

ordered that the case be dismissed with prejudice.

On or about May 4, 2020, the plaintiffs filed a notice of appeal.

Plaintiffs filed

their opening appellate brief on January 4, 2021, and defendants filed their responsive appellate briefs on February 3, 2021.

Oral argument

on the appeal was conducted on April 1, 2021.

On April 22, 2021, the court’s Appellate Division issued its Decision and Order affirming

the dismissal of the case.

On January 14, 2021, Plaintiff Michael Ho

(“Plaintiff” or “Ho”) filed a Civil Complaint for Damages and Restitution (“Complaint”) against

Marathon Patent Group, Inc., now known as Marathon Digital Holdings, Inc.

(the “Company”) in the Superior Court of the

State of California for the County of Riverside.

The Complaint alleges six causes of action against the Company, (1) Breach of

Written Contract;

(2) Breach of Implied Contract;

(3) Quasi-Contract;

(4) Services Rendered;

(5) Intentional Interference with

Prospective Economic Relations;

and (6) Negligent Interference with Prospective Economic Relations.

The Complaint seeks

damages, restitution, punitive damages, and costs of suit.

The claims arise from the same set of facts.

Ho alleges that the Company

profited from commercially-sensitive information he shared with the Company, purportedly under a mutual non-disclosure agreement,

and that the Company failed to compensate him for his role in securing the acquisition of a supplier of energy for the Company.

February 22, 2021, the Company responded to Mr.

Ho’s Complaint with a general denial and the assertion of applicable

affirmative defenses.

Then, on February 25, 2021, the Company removed the action to the United States District Court in the Central

District of California, where the action remains pending.

Marathon filed a motion for summary judgment/adjudication of all causes of

On February 11, 2022, the Court granted the motion and dismissed Ho’s 2 nd , 5 th and

6 th causes of action.

Discovery is closed.

The Court held a pre-trial conference on February 24, 2022, where

it vacated the March 3, 2022 trial date and ordered the parties to meet and confer on a new trial date, which will likely be after

June 2022, given the Court’s current backlog as a result of Covid.

The Court discussed the various theories of damages

maintained by the parties.

In its ruling on the summary judgment motion and at the pre-trial conference on February 24, 2022,

the Court noted that a jury is more likely to accept $ 150,000

as an appropriate damages amount if liability is found, as opposed to the various theories espoused by Ho that result in

multi-million dollar recoveries.

Due to outstanding issues of fact and law, it is impossible to predict the outcome at this

however, after consulting legal counsel, the Company is confident that it will prevail in this litigation, since it did not

have a contract with Mr.

Ho and he did not disclose any commercially-sensitive information under any mutual nondisclosure agreement

that was used to structure any joint venture with energy providers.

Trial is set to begin on May 26, 2022.

October 6, 2020, the Company entered into a series of agreements with multiple parties to design and build a data center for up to 100-megawatts

in Hardin, MT.

In conjunction therewith, the Company filed a Current Report on Form 8-K on October 13, 2020.

The 8-K discloses that,

pursuant to a Data Facility Services Agreement, the Company issued 6,000,000 shares of restricted Common Stock, in transactions exempt

from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.

During the quarter ended September 30, 2021, the Company

and certain of its executives received a subpoena to produce documents and communications concerning the Hardin, Montana data center

facility described in our Form 8-K dated October 13, 2020.

We understand that the SEC may be investigating whether or not there may have

been any violations of the federal securities law.

We are cooperating with the SEC.

DIGITAL HOLDINGS, INC.

1 unchanged sentence

to Consolidated Financial Statements

On March 7, 2019, defendants

Marathon Patent Group, Inc.

and Doug Croxall filed a motion to dismiss the Amended Complaint, and on March 22, 2019, defendant

Francis Knuettel II filed a motion to dismiss the Amended Complaint.

On April 5, 2019, plaintiffs filed an opposition to defendants’

motions to dismiss, and on April 17, 2019 defendants filed reply papers in support of the motions to dismiss.

On July 9, 2019,

the court heard the parties’

oral arguments and, at the conclusion of those arguments, took the motions to dismiss under

On March 13, 2020, the court issued its Decision in which it granted the motions to dismiss in full and ordered that

the case be dismissed with prejudice.

On or about May 4, 2020, the plaintiffs filed a notice of appeal.

Plaintiffs filed their

opening appellate brief on January 4, 2021, and defendants filed their responsive appellate briefs on February 3, 2021.

are now awaiting oral argument on the appeal.

part of the cancellation of certain indebtedness owed to Fortress Investment Group, LLC, we transferred ownership of various patents,

including U.S.

7,177,798, commonly referred to as “Patent 798.”

Fortress created a new Special Purpose

Entity, CF Dynamic Advances LLC, in which we own a 30% interest.

In May 2018, Rensselaer Polytechnic Institute and CF Dynamic

Advances LLC filed a complaint against Amazon.com, Inc.

in the United States District Court for the Northern District of New York,

which alleges, among other things, that “Alexa Voice Software and Alexa enabled devices”

infringe U.S.

7,177,798, entitled “Natural Language Interface Using Constrained Intermediate Dictionary of Results.”

The complaint

seeks an injunction, monetary damages, an ongoing royalty, pre- and post-judgment interest, attorneys’

fees, and costs.

If plaintiffs are successful, and if the recoveries or settlement proceeds are sufficient following litigation expenses and recovery

of amounts due in connection with the cancelled loan, the special purpose entity could be entitled to a portion of the net proceeds.

There can be no assurance that the plaintiff will be successful or that any recoveries will exceed amounts due under the debt

settlement arrangements or that our 30% interest in the special purpose entity will have any value even if the plaintiffs are

successful in their case against Amazon.

6 - INCOME TAXES

Company accounts for income taxes under ASC Topic 740:

Income Taxes, which requires the recognition of deferred tax assets and

liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities,

and for the expected future tax benefit to be derived from tax losses and tax credit carry-forwards.

ASC Topic 740 additionally

requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets.

table below summarizes the differences between the Companies’

effective tax rate and the statutory federal rate as follows

for the years ended December 31, 2020 and 2019:

federal statutory income tax rate

State and local income taxes, net of federal benefit

Non-Deductible Expenses

Income Taxes, which requires the recognition of deferred tax assets and liabilities

for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the

expected future tax benefit to be derived from tax losses and tax credit carry-forwards.

ASC Topic 740 additionally requires the establishment

of a valuation allowance to reflect the likelihood of realization of deferred tax assets.

tax expense attributable to income from continuing operations was $ 23,020,721 and

the years ended December 31, 2021 and 2020, respectively, and differed from the amounts computed by applying the U.S.

federal income

tax rate of 21 %

to pretax income from continuing operations as a result of the following:

OF PRETAX INCOME FROM CONTINUING OPERATIONS

Federal income tax expense (benefit) at the statutory rate

$ ( 2,762,295 )

$ ( 2,229,606 )

State income taxes, net of federal tax expense

Executive Compensation Deduction Limitation

Excess Tax Benefit Related to Share-Based Compensation

( 1,909,197 )

Nondeductible Other Expenses

Change in Valuation Allowance

Effective tax rate

The components of the provision for income

taxes are as follows:

( 14,477,083 )

Change in Expected Utilization of Tax Attributes

Income tax expense (benefit) from continuing operations

components of the provision for income taxes are as follows:

OF PROVISION FOR INCOME TAXES

Current income tax expense (benefit)

Total Current Income Tax Expense

Deferred expense

Total Deferred Tax Expense

Change in Valuation Allowance

( 14,477,083 )

( 9,079,841 )

Net Deferred Tax Expense after Valuation Allowance

Income Tax Provision

Company has a deferred tax asset, which is summarized as follows at December 31:

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at

December 31, 2021 and 2020 are presented below.

OF DEFERRED TAX ASSETS AND LIABILITIES

Deferred tax assets:

Total deferred tax assets

Total deferred tax liabilities

valuation allowance

Tax Credit carryforwards

Net Operating Loss carryforwards

Capital Loss carryforwards

Intangible assets

Stock Compensation

Accruals, reserves and other

Digital Currencies

Total gross deferred tax assets

Less Valuation Allowance

( 14,477,083 )

Net deferred tax assets

Deferred tax liabilities:

Unrealized Gains

( 18,294,723 )

Net deferred tax asset

Company does not have any taxable income in carryback years in which net operating losses (“NOLs”) can be carried

At December 31, 2020, the Company did not have any taxable temporary differences that will reverse and generate taxable

income and was still in a cumulative loss position.

Based on all the available information, including tax planning strategies

and future forecast, the Company does not believe that it is more likely than not that the net deferred tax assets will be realized;

therefore, a full valuation allowance has been recorded against its net deferred tax assets.

of December 31, 2020 and 2019, the Company had NOL carry-forwards for federal and state purposes of approximately $45.6

million and $27.2 million, respectively, which will begin to expire in 2034 (Estimated).

The utilization of NOL and credit

carry-forwards may be limited under the provisions of the Internal Revenue Code (“IRC”) Section 382, as amended, and

similar state provisions.

IRC Section 382 generally imposes an annual limitation on the amount of NOL carry-forwards that may

be used to offset taxable income where a corporation has undergone significant changes in stock ownership.

Prepaid service contracts

( 4,395,095 )

Property and equipment

( 34,942,699 )

( 1,310,586 )

Total gross deferred liabilities

( 57,632,517 )

( 1,310,586 )

Net deferred tax liability

( 23,019,121 )

valuation allowance for deferred tax assets as of December 31, 2021 and 2020 was $ 0 and

$ 14,477,083 ,

respectively.

The net change in the total valuation allowance was a decrease of $ 14,477,083 in

year ended December 31, 2021, the Company concluded, based upon all available evidence, it was more likely than not that it would have

sufficient future taxable income to realize the Company’s federal and state deferred tax assets.

As a result, the Company released

$ 14.5 million of

valuation allowance associated with deferred tax assets and recognized a corresponding benefit from income taxes in the consolidated

statement of operations for the year ended December 31, 2021.

The Company’s conclusion regarding the realizability of such deferred

tax assets was based on the scheduled reversal of existing deferred tax liabilities.

December 31, 2021, the Company has net operating loss carryforwards for federal income tax purposes of $ 109,130,270 ,

which are available to offset future taxable income.

The Company has net operating loss carryforwards for state income tax purposes

of $ 54,106,348 which

are available to offset future state taxable income.

OF NET OPERATING LOSS CARRYFORWARDS

Federal Net Operating Loss Carryforwards

Federal Net Operating Loss Carryforwards - Indefinite Life

State Net Operating Loss carryforwards

382 and Section 383 of the Internal Revenue Code limit the utilization of U.S.

tax attribute carryforwards following a change of

Based on the Company’s analysis under Section 382, approximately $ 76.2 million of tax attributes is limited by Section 382/383 as of December 31, 2021.

The Section 382/383 limitation in conjunction with the twenty-year

carryforward limitation caused $ 37.8 million of attributes to be deemed worthless, which resulted in a write-off of the

deferred asset .

addition, the Company has the following attributes and credit carryforwards as follows:

OF ATTRIBUTES AND CREDIT CARRYFORWARDS

Federal R&D Tax Credit Carryforwards

State alternative minimum tax credit carryforwards

reconciliation of the beginning and ending amount of total unrecognized tax benefits for the tax years ended December 31, 2021, and 2020

is as follows:

OF UNRECOGNIZED TAX BENEFITS ROLL FORWARD

Balance, beginning of year

Increase related to prior year tax positions

Decrease related to prior year tax positions

Increase related to current year tax positions

Lapse of statute of limitation

Change in tax rate

Balance, end of year

tax benefits that reduce a net operating loss, similar tax loss or tax credits carryforward are presented as a reduction to deferred

income taxes.

company has established a reserve against its federal R&D tax credits generated in 2021.

As of December 31, 2021, the total amount of unrecognized

tax benefits was $ 43,750 , all of which was offset against deferred tax assets.

If the unrecognized tax benefits were recognized as of

December 31, 2021, there would be a $ 43,750 favorable impact that would affect the effective rate on income from continuing operations.

The Company also accrues for interest and penalties on its uncertain tax positions and includes such charges in its income tax provision

in the Consolidated Statement of Operations.

Interest and penalty expense amounted to nil and nil, respectively, in 2021.

Total accrued

interest and penalties were nil and nil, respectively, in 2021.

The Company does not currently expect any of its remaining unrecognized

tax benefits to be recognized in the next twelve months.

The Company files federal and state income tax

The 2018-2020 tax years generally remain subject to examination by the IRS and various state taxing authorities, although the

Company is not currently under examination in any jurisdiction.

DIGITAL HOLDINGS, INC.

1 unchanged sentence

to Consolidated Financial Statements

of December 31, 2020 and 2019, the Company has not recorded liability for unrecognized tax benefit.

As of December 31, 2020 and

2019 the Company did not increase or decrease penalties or interest in connection with liability for unrecognized tax benefit.

The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months.

The Company files U.S.

and state income tax returns with varying statutes of limitations.

The 2016 through 2020 tax years generally remain subject to

examination by federal and state tax authorities.

2018, the company dissolved those subsidiaries that were required to file tax returns that had no tax due for 2018.

1 unchanged sentence

Holdings, Inc.

moved its headquarters to Las Vegas, Nevada on June 1, 2018 so it is required to file a final tax return with the

state of California for 2018.

The company believes there will be no tax due the state of California other than the $800 Minimum

Franchise fee all companies are required to pay.

does not believe there are any material tax liabilities owed with respect to its operations in Canada, since Management believes

there is a loss from the Canadian operations.

moved its headquarters to Las Vegas, Nevada on June 1, 2018 so it is required to file a final tax return with the state

of California for 2018.

The company believes there will be no tax due in the state of California other than the $ 800

Minimum Franchise fee that all companies

are required to pay.

does not believe there are any material tax liabilities owed with respect to its operations in Canada, since Management believes there

is a loss from the Canadian operations.

Such operations have been outsourced.

(See NOTE 1 - ORGANIZATION AND DESCRIPTION

OF BUSINESS, for details)

Company believes that bitcoin is attractive because it can serve as a store of value, supported by a robust and public open source

architecture, that is untethered to sovereign monetary policy and can therefore serve as a hedge against inflation.

Bitcoin exists

entirely in electronic form, as virtually irreversible public transaction ledger entries on the blockchain, and transactions in

bitcoin are recorded and authenticated not by a central repository, but by a decentralized peer-to-peer network.

This decentralization

avoids certain threats common to centralized computer networks, such as denial of service attacks, and reduces the dependency

of the bitcoin network on any single system.

While the bitcoin network as a whole is decentralized, the private keys used to access

bitcoin balances are not widely distributed and are held on hardware (which can be physically controlled by the holder or by a

third party such as a custodian) or via software programs on third-party servers and loss of such private keys results in an inability

to access, and effective loss of, the corresponding bitcoin.

Consequently, bitcoin holdings are susceptible to all of the risks

inherent in holding any electronic data, such as power failure, data corruption, security breach, communication failure, and user

error, among others.

These risks, in turn, make bitcoin subject to theft, destruction, or loss of value from hackers, corruption,

or technology-specific factors such as viruses that do not affect conventional fiat currency.

In addition, the bitcoin network

relies on open source developers to maintain and improve the bitcoin protocol.

Accordingly, bitcoin may be subject to protocol

design changes, governance disputes such as “forked”

protocols, competing protocols, and other open source-specific

risks that do not affect conventional proprietary software.

Company believes that in the context of the economic and public health crisis precipitated by COVID-19 and the unprecedented government

financial stimulus measures adopted around the world, decreasing interest rates, as well as the breakdown of trust in and between

political institutions and political parties in the United States and globally, bitcoin represents a more attractive store of

value than fiat currency, and further that opportunity for appreciation in the value of bitcoin exists in the event that such

factors lead to even more widespread adoption of bitcoin as a treasury reserve alternative.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

to Consolidated Financial Statements

(See NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS,

Coronavirus Aid, Relief, and Economic Security (CARES) Act, was enacted March 27, 2020.

Among the business provisions, the CARES Act

provided for various payroll tax incentives, changes to net operating loss carryback and carryforward rules, business interest expense

limitation increases, and bonus depreciation on qualified improvement property.

Additionally, the Consolidated Appropriations Act of

2021 was signed on December 27, 2020 which provided additional COVID relief provisions for businesses.

The Company has evaluated the

impact of both the Acts and has determined that any impact is not material to its financial statements.

7 – Subsequent Events

On January 6, 2021, the Company issued

566,279 shares pursuant to the 2018 Equity Incentive Plan for shares that vested as of December 31, 2020.

Subsequent to year end,

the Company issued 170,904 and 23,500 shares of common stock pursuant to warrant and option exercises, respectively.

January 12, 2021, the Company also announced that it had successfully

completed its previously announced $200 million shelf offering by utilizing its at-the-market (ATM) facility.

Pursuant to the

terms of the offering 12,500,000 shares of common stock were issued at a value of $20 per share.

As a result, the Company ended

the 2020 fiscal year with $141.3 million in cash and 81,974,619 shares outstanding.

January 15, 2021, the Company, held an annual meeting of stockholders (the “Meeting”).

As of the record date for the

Meeting, 51,403,280 shares of common stock were issued and outstanding.

A total of 33,981,556 shares of common stock, constituting

a quorum, were present and accounted for at the Meeting.

At the Meeting, the Company’s stockholders approved the following

Common shares

Increase in Shares

Incentive Plan by 5

Election of Merrick

Ratification of

Advisory Vote

Broker Non-Vote

January 12, 2021, the Company, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with

certain purchasers named therein (the “Purchasers”), pursuant to which the Company agreed to issue and sell, in a

registered direct offering (the “Offering”), 12,500,000 shares of its common stock (the “Securities”)

at an offering price of $20.00 per share.

Purchase Agreement contains customary representations and warranties and agreements of the Company and the Purchasers and customary

indemnification rights and obligations of the parties.

The closing of the Offering occurred on January 15, 2021.

The Company received

gross proceeds of $250,000,000 in connection with the Offering, before deducting placement agent fees and related offering expenses.

to a letter agreement, dated August 2020 (the “Engagement Letter”), the Company engaged H.C.

Wainwright & Co.,

LLC (the “Placement Agent”) as placement agent in connection with the Offering.

The Placement Agent agreed to use

its reasonable best efforts to arrange for the sale of the Securities.

The Company agreed to pay to the Placement Agent a cash

fee of 5.0% of the aggregate gross proceeds raised in the Offering.

Company also issued to designees of the Placement Agent warrants to purchase up to 3.0% of the aggregate number of shares of Common

Stock sold in the transactions, or warrants to purchase up to 375,000 shares of Common Stock (the “Placement Agent Warrants”).

The Placement Agent Warrants have an exercise price equal to 125% of the offering price per share (or $25.00 per share).

also agreed to pay the Placement Agent $50,000 for accountable expenses, to reimburse an investor’s legal fees in an amount

up to $7,500 and to pay $12,900 for the Placement Agent’s clearing fees.

to the terms of the Engagement Letter, the Placement Agent has the right, for a period of twelve months following the closing

of the Offerings, to act (i) as financial advisor in connection with any merger, consolidation or similar business combination

by the Company and (ii) as sole book-running manager, sole underwriter or sole placement agent in connection with certain debt

and equity financing transactions by the Company.

January 19, 2021, David Lieberman resigned as a director of the Company.

On the same date, the Company’s Board appointed

Kevin DeNuccio as a director to fill the vacancy created by Mr.

Lieberman’s resignation.

DeNuccio is the Founder and General Partner of Wild West Capital LLC since 2012 where he focused on angel investments, primarily

in SAAS software start-ups.

brings to Marathon more than 25 years of experience as a chief executive, global sales leader, public and private board member,

and more than a dozen angel investments, managing and growing leading technology businesses.

He served in senior executive positions

with Verizon, Cisco Systems, Ericsson, Redback Networks, Wang Laboratories and Unisys Corporation.

January 25, 2021, the Company announced that it has purchased 4,812.66 BTC in an aggregate

purchase price of $150 million.

February 11, 2021, the Company issued 4,701,442 shares of common stock pursuant to the 2018

Equity Incentive Plan.

March 1, 2021, the Company changed its name to Marathon Digital Holdings, Inc.

March 7, 2021, the Company entered into a termination agreement with the 9349-0001 Quebec Inc., to agree to terminate the outstanding

As of that date, the Company was fully released and discharged from any and all obligations under the Lease Agreement.

In November 2017, the Company assumed a lease in connection with the mining operations in Quebec, Canada.

Company has evaluated subsequent events through the date of the consolidated financial statements were available to be issued

and has concluded that no such events or transactions took place that would require disclosure herein except as stated directly

2022, we entered into an At The Market Offering

Agreement, or sales agreement, with H.C.

Wainwright & Co., LLC, or Wainwright, relating to shares of our common stock offered by

this prospectus supplement.

In accordance with the terms of the sales agreement, we may offer and sell shares of our common stock having

an aggregate offering price of up to $ 750,000,000 from time to time through Wainwright acting as our sales agent.

As of December 31, 2021, the market price of

bitcoin was approximately $ 46,306

per Yahoo Finance.

Subsequent to year end, the price of bitcoin decreased to approximately $ 35,030

on January 22, 2022.

Pursuant to ASC 350, the Company anticipates recording an impairment charge on its mined bitcoin of

approximately $ 21

million for the decrease in the market price of bitcoin during January 2022.

Company has evaluated subsequent events through the date of the consolidated financial statements were available to be issued and has

concluded that no such events or transactions took place that would require disclosure herein except as stated directly above.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data