What changed in this filing

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Item 1. Financial Statements

2022-05-06 compared with 2021-11-15 · 362 added, 832 removed, 247 unchanged (83% of the section changed)

3 unchanged sentences

CONDENSED BALANCE SHEETS

September 30,

Current assets:

Cash and cash equivalents

Cash and cash

$ 118,511,331

$ 268,522,019

Digital currencies

Digital currencies, restricted

Other receivable

Investment fund

Prepaid expenses and other current assets

Loan receivable

expenses and other current assets

Total current assets

Other assets:

Property and equipment, net of accumulated depreciation and impairment charges of $ 14,442,777 and $ 6,480,359 for September 30, 2021 and December 31, 2020, respectively

Prepaid service contract

Property and equipment

(net of accumulated depreciation and impairment charges of $ 34,884,957

and $ 21,311,461

respectively)

Advances to vendor

Long term prepaids

Right-of-use assets

Intangible assets, net of accumulated amortization of $ 260,980 and $ 207,598 for September 30, 2021 and December 31, 2020, respectively

Total other assets

assets (net of accumulated amortization and impairment charges of $ 293,049

and $ 280,497 ,

respectively)

$ 1,538,100,247

$ 1,448,244,423

LIABILITIES AND STOCKHOLDERS’ EQUITY

LIABILITIES AND STOCKHOLDERS’

Current liabilities:

Accounts payable and accrued expenses

Current portion of lease liability

Warrant liability

Accounts payable

Accrued expenses

Operating lease liabilities

Total current liabilities

Long-term liabilities

SBA PPP loan payable

Total long-term liabilities

Total liabilities

Notes payable

Operating lease liabilities

tax liabilities

long-term liabilities

Commitments and Contingencies

Stockholders’ Equity:

Preferred stock, 0.0001 par value, 50,000,000 shares authorized, no shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively

Common stock, 0.0001 par value;

Preferred stock, 0.0001

par value, 50,000,000 shares authorized, no shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

Common stock, 0.0001 par

200,000,000 shares authorized;

102,506,558 and 81,974,619 issued and outstanding at September 30, 2021 and December 31, 2020, respectively

106,051,713 and 102,733,273 issued and outstanding at March 31, 2022 and December 31, 2021,

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

Accumulated other comprehensive

( 165,188,372 )

( 152,229,783 )

Total stockholders’ equity

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

Total stockholders’

LIABILITIES AND STOCKHOLDERS’ EQUITY

$ 1,538,100,247

3 unchanged sentences

AND SUBSIDIARIES

CONDENSED STATEMENTS OF OPERATIONS

For the Three Months Ended

For the Nine Months Ended

September 30,

Cryptocurrency mining revenue

Total revenues

Operating costs and expenses

CONDENSED STATEMENT OF OPERATIONS

Months Ended March 31,

Digital currency

Costs and expenses

Cost of revenue

Compensation and related taxes

Consulting fees

and administrative expenses

Compensation and related

Professional fees

General and administrative

Impairment of mined cryptocurrency

Total operating expenses

Income (loss) from operations

Impairment of mined digital

Impairment of patents

operating and administrative expenses

Operating income (loss)

( 9,126,268 )

( 47,055,414 )

Other income (expenses)

Change in fair value of investment fund

( 5,541,642 )

Change in fair value of

warrant liability

( 1,591,895 )

Other income (expenses)

Loss on conversion of note

Change in fair value of investment in NYDIG fund

Realized gain (loss) on sale of digital currencies

Change in fair value of warrant liability

Change in fair value of mining payable

Interest income

Interest expense

income (expenses)

Total other (expenses) income

Loss before income taxes

( 5,315,349 )

( 2,814,036 )

$ ( 47,700,445 )

$ ( 5,213,544 )

Income tax expense

$ ( 22,172,567 )

$ ( 1,994,417 )

Loss before income taxes

$ ( 17,255,653 )

income (loss)

$ ( 12,958,589 )

Net loss per share, basic and diluted:

Weighted average shares outstanding, basic and diluted:

income (loss) per share, basic:

income (loss) per share, diluted:

Weighted average shares

outstanding, basic:

Weighted average shares

outstanding, diluted:

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

2 unchanged sentences

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

the Three Months Ended September 30, 2021

Preferred Stock

Additional Paid-in

Other Comprehensive

Total Stockholders’

Income (Loss)

Balance as of June 30, 2021

$ 722,543,196

$ ( 141,583,155 )

$ ( 450,719 )

$ 580,519,285

Stock based compensation, net of withholding taxes

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

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

Common stock issued for purchase of mining servers

Common stock issued for purchase of mining servers, shares

Common stock issued for note conversion

Common stock issued for note conversion, shares

Options exercised on cashless basis

Options exercised on cashless basis, shares

Issue common stock and warrant for cash

Issue common stock and warrant for cash, 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

( 22,172,567 )

Balance as of September 30, 2021

$ 824,612,618

$ ( 163,755,722 )

$ ( 450,719 )

$ 660,416,428

the Three Months Ended September 30, 2020

Preferred Stock

the Three Months Ended March 31, 2022

Comprehensive

Total Stockholders’

Income (Loss)

Balance as of June 30, 2020

$ 118,933,134

$ ( 108,826,633 )

$ ( 450,719 )

Stock based compensation

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

Issue common stock and warrant for cash

Warrant exercised for cash

( 1,994,417 )

Balance as of September 30, 2020

$ 147,554,790

$ ( 110,821,050 )

Stockholders’

Balance as of

December 31, 2021

$ 835,693,610

the Nine Months Ended September 30, 2021

Preferred Stock

Additional Paid-in

Other Comprehensive

Total Stockholders’

Income (Loss)

Balance as of December 31, 2020

$ ( 152,229,783 )

1 unchanged sentence

$ 683,023,381

Stock based compensation

Issuance of common stock, net

of offering costs/At-the-market offering

Common stock issued for long

term service contract

( 12,958,589 )

Stock based compensation, net of withholding taxes

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

( 12,958,589 )

Balance as of March 31, 2022

$ 939,741,806

Balance as of September 30, 2021

$ ( 165,188,372 )

1 unchanged sentence

$ 774,113,320

the Three Months Ended March 31, 2021

Comprehensive

Stockholders’

Balance as of

December 31, 2020

$ 428,242,763

the Nine months Ended September 30, 2020

Preferred Stock

Additional Paid-in

Other Comprehensive

Total Stockholders’

Income (Loss)

Balance as of December 31, 2019

$ ( 116,055,277 )

2 unchanged sentences

Stock based compensation

Stock based compensation, net of tax withholding

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

Issue common stock and warrant for cash

Issuance of common stock, net

of offering costs/At-the-market offering

Options exercised for cash

Warrant exercised for cash

( 5,213,544 )

Net income (loss)

( 5,213,544 )

Balance as of March 31, 2021

$ 716,862,400

Balance as of September 30, 2020

$ ( 32,698,535 )

5 unchanged sentences

CONDENSED STATEMENTS OF CASH FLOWS

For the Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES

Months Ended March 31,

CASH FLOWS FROM OPERATING

Net income (loss)

$ ( 12,958,589 )

Adjustments to reconcile net income (loss)

to net cash used in operating activities:

Depreciation and amortization

Impairment of patents

Deferred tax benefit

( 4,297,064 )

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

Amortization of patents and website

Amortization 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

Change in fair value of

warrant liability

Change in fair value of

investment securities

( 131,822,950 )

Gain on PPP loan forgiveness

Impairment of cryptocurrencies

Impairment of digital currencies

Stock based compensation

Amortization of right-of-use assets

Amortization of bond issuance

Other adjustments from

Changes in operating assets and liabilities:

2 unchanged sentences

( 9,152,816 )

( 6,287,068 )

Lease liability

Prepaid expenses and other assets

Prepaid expenses and other

( 6,210,505 )

Accounts payable and accrued expenses

Net cash used in operating activities

Accounts payable and accrued

( 1,087,007 )

cash used in operating activities

( 26,059,098 )

CASH FLOWS FROM INVESTING ACTIVITIES

Sale of digital currencies

Interest received from digital currencies, restricted

Purchase of investment securities

( 3,083,261 )

Purchase of property and equipment

CASH FLOWS FROM INVESTING

Advances to vendor

( 192,390,625 )

( 63,221,724 )

Deposits for the purchase of mining servers

Purchase of property and

( 6,534,120 )

( 25,456,714 )

Net cash used in investing activities

Purchase of equity

( 10,499,825 )

Purchase of investment

( 150,000,000 )

CASH FLOWS FROM FINANCING ACTIVITIES

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

of digital currencies

cash used in investing activities

( 209,424,570 )

Value of shares withheld for taxes

( 238,662,438 )

Proceeds from issuance of common stock and warrant, net

Proceeds received on exercise of options and warrants

Net cash provided by financing activities

CASH FLOWS FROM FINANCING

Proceeds from issuance

of common stock/At-the-market offering

Offering costs for the

issuance of common stock/At-the-market offering

( 2,654,290 )

( 14,906,805 )

received on exercise of options and warrants

cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

( 150,010,688 )

Cash and cash equivalents — beginning of period

Cash and cash equivalents — end of period

Supplemental schedule of non-cash investing and financing activities:

Common stock issued for purchase of mining servers

Reduction of share commitment for purchase of mining servers

Options exercised into common stock

Common stock issued for note conversion

Common stock issued for service and license agreements

Cash and cash equivalents

— beginning of period

Cash and cash equivalents

— end of period

$ 118,511,331

$ 211,934,086

Supplemental schedule of

non-cash investing and financing activities:

exercised into common stock

lease assets obtained in exchange for new operating lease liabilities

due to share issuance

stock issued for service and license agreements

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

6 unchanged sentences

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.

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

exploration and potential development of a minerals business.

In June 2012, the Company discontinued the minerals business and

1 unchanged sentence

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.

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 September 30, 2021, the Company has since terminated the lease in Canada and deployed over 17,300

Hardin, Montana.

the third quarter of 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 .

to the timely payment of the purchase price, Bitmain has delivered products according to the following schedule:

1,500 Units on or before

January 31, 2021;

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

September 30, 2021;

April 30, 2021, May 31, 2021 and September

As of September 30, 2021, the Company has paid the entire purchase price under this agreement and has received 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.

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.

Phase II accounts for 30 MW of the 100 MW project and is anticipated to cost approximately $ 9 million.

The total projected build out

cost for the full 100 MW project is approximately $ 34 million.

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.

As of September 30, 2021, the Company has paid all of the required installments

totaling $ 34 million in actual costs related to the 100 MW build out.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED 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.

and 2P1 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 issued to Beowulf an additional 150,000 shares of its common

During Phase II, Marathon issued 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 have 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 Miners.

The 2021 delivery schedule was for 2,500

units to be delivered in January, 4,500

units to be delivered

in February and the final 3,000

units to be delivered

in March 2021.

The gross purchase price was $ 23,620,000

due upon the execution of the contract and the

balance paid over the next 4 months.

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

a discount of 8.63 %

to the purchase price adjusting the amount due

to $ 21,581,594 .

As of September 30, 2021, the Company has paid the entire purchase price under this agreement and has received 10,000

units from Bitmain.

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

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

The gross purchase

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

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

Subsequent to executing this agreement, due to the additional

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

As of September

30, 2021, the Company has paid the entire purchase price under this agreement.

Subsequent to September 30, 2021, the Company has received

10,000 units from Bitmain.

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:

48 hours of signing of contract;

30 % on or before March 1, 2021;

4.75 % on June 15, 2021;

1.76 % on July 15, 2021;

4.58 % on August 15,

10.19 % on September 15, 2021;

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

As of September 30, 2021, the Company

has paid $ 118,799,091 of the total balance of $ 167,763,452 and has received 6,460 units from Bitmain.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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.

As of September 30, 2021, this amount was received in full.

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 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 ;

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 was owed an additional 2,547,392 RSUs, for which the Company, within 15 business days of the date of this report, filed 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.

The shares underlying these 2,547,392

RSUs were issued on August 23, 2021.

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

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.

We expect 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.

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.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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 September 30, 2021, the Company paid $ 8 million of the $14 million in expedite fees recorded as a

deposit on the balance sheet and loaned Compute North $30 million.

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 installments.

As of September

30, 2021, the Company paid $ 9.1 million of the $ 14.6 million initial deposit recorded as a deposit on the balance sheet.

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.

The 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 15 th

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 15 th of each consecutive month starting November 15, 2021 and then 40% of each of the remaining five batches

due on the 15 th of each consecutive month through April 2022.

As of September 30, 2021, the Company has paid $ 54,775,000

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

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.

August 27, 2021, the Company loaned 300 BTC to NYDIG.

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 CONDENSED FINANCIAL STATEMENTS

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

Since 2018, the Company purchased cryptocurrency mining machines and established a data center in Canada to mine digital assets.

Company has since expanded its activities in the mining of bitcoin.

As of March 31, 2022, the Company no longer holds any

legacy IP assets and is solely focused on the mining of bitcoin and ancillary opportunities within the bitcoin ecosystem.

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

19 unchanged sentences

Actual results could differ from those estimates.

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

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

used to calculate fair value of options granted, realization of long-lived assets, deferred income taxes, unrealized tax

positions and the realization of digital currencies.

20 unchanged sentences

occurred on May 12, 2020.

following table presents the activities of the digital currencies for the nine months ended September 30, 2021:

For example, the current fixed reward on the bitcoin network for solving

a new block is six and one quarter (6.25) bitcoins per block, which decreased from twelve and a half (12.5) bitcoins per block

It is estimated that the number of bitcoins per block will halve again in about four (4) years.

Many factors influence

the price of bitcoin and potential increases or decreases in prices in advance of or following a future halving is unknown.

following table presents the activities of the digital currencies for the three months ended March 31, 2022:

SCHEDULE OF ACTIVITIES OF DIGITAL CURRENCIES

Digital currencies at December 31, 2020

currencies at December 31, 2021

$ 123,243,264

Additions of digital currencies

Realized gain on sale of digital currencies

Impairment of cryptocurrencies

Impairment of digital currencies

( 19,551,254 )

Interest received on cryptocurrencies, restricted

Sale of digital currencies

Digital currencies at September 30, 2021

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 and classify the bitcoin loaned out as digital currencies, restricted on the consolidated

condensed balance sheets.

As of September 30, 2021, the Company held an aggregate amount of digital currencies that comprised of restricted

and unrestricted bitcoin of $ 73,931,594 .

Of that amount, $ 9,573,684 and $ 64,357,910 was restricted and unrestricted, respectively.

Interest received on digital

currencies, restricted

Digital currencies

at March 31, 2022

$ 155,560,876

March 31, 2022, we held approximately 4,579

self-mined bitcoin with a carrying value of

million and carried on the balance sheet as digital currencies ($ 135.1

million) and digital currencies, restricted ($ 20.5

The fair market value of the self-mined

bitcoin as of March 31, 2022 was approximately $ 208.8 million.

We also held approximately 4,794 bitcoin in an investment fund,

which was valued at $ 218.2 million as of March 31, 2022.

DIGITAL HOLDINGS, INC.

6 unchanged sentences

whereas the fund purchased 4,812.66 BTC in an aggregate purchase price of $ 150 million.

The Company owns 100 % of the limited partnership

owns 100 % of the limited partnership interest.

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

8 unchanged sentences

measurement date (ASC 820-10-35-6A).

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

assets in the consolidated balance sheets.

Investments are recorded at cost and the Company analyzes these investments value on a quarterly

As part of the Company’s policy to maximize return on strategic investment opportunities, while preserving capital and limiting

downside risk, the Company may at times enter into equity investments or SAFE agreements.

The nature and timing of the Company’s

investments will depend on available capital at any particular time and the investment opportunities identified and available to the

Value of Financial Instruments

20 unchanged sentences

securities and other observable inputs.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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 September 30, 2021 and December

the Company’s estimated level within the fair value hierarchy of those assets and liabilities as of March 31, 2022 and December

31, 2021, respectively:

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

Fair value measured at September 30, 2021

value measured at March 31, 2022

Total carrying

value at September 30,

Quoted prices in active markets

Significant other observable inputs

Significant unobservable inputs

value at March 31,

Quoted prices

in active markets

other observable inputs

unobservable inputs

$ 114,938,284

Investment Fund

1 unchanged sentence

$ 218,236,903

Warrant liability

Fair value measured at December 31, 2020

Total carrying value at December 31,

Quoted prices in active markets

Significant other observable inputs

Significant unobservable inputs

Warrant liability

were no transfers between Level 1, 2 or 3 during the three months ended September 30, 2021.

value of warrant liabilities

September 30, 2021, the Company had an outstanding warrant liability in the amount of $ 549,663

associated with warrants that were issued

in January 2017 and January 2021 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 nine months ended September 30, 2021.

SCHEDULE OF FAIR VALUE OF WARRANT LIABILITIES

Outstanding as of December 31, 2020

Change in fair value of warrants

Outstanding as of September 30, 2021

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, Intangibles – 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 non-recurring 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 September 30, 2021.

The Company had an outstanding carrying balance

of digital assets of approximately $ 74 million, net of impairment losses incurred of $ 18.5 million for the nine month period ended September

As of September 30, 2021, the fair value of the approximate 2,223 bitcoin held as digital currencies is approximately $ 97.2

value measured at December 31, 2021

Total carrying

value at December 31,

Quoted prices

in active markets

other observable inputs

unobservable inputs

$ 266,635,158

Investment Fund

$ 223,778,545

were no transfers among Levels 1, 2 or 3 during the three months ended March 31, 2022.

Income and Basic and Diluted Net Income per Share

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

Earnings Per Share (“ASC 260”).

Basic income per

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

For the three month period ending March 31, 2022, the Company incurred a loss position and as such the computation of diluted net income

(loss) per share does not include dilutive common stock equivalents in the weighted average shares outstanding, as they would be anti-dilutive.

DIGITAL HOLDINGS, INC.

1 unchanged sentence

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Income (Loss) and Basic and Diluted Net Income (Loss) per Share

loss for the three and nine months ended September 30, 2021 is ($ 22,172,567 )

and ($ 47,700,445 ) .

Net income (loss) per common share is calculated in accordance with ASC Topic 260:

Earnings Per Share (“ASC 260”).

income (loss) per share is computed by dividing net income (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.

dilutive securities that are not included in the calculation of diluted net loss per share because their effect is anti-dilutive are

of potential shares for the diluted earning (loss) per share calculation at March 31, 2022 and 2021 are as follows:

SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE

As of September 30,

Warrants to purchase common stock

Restricted stock

Options to purchase common stock

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

Convertible notes to exchange

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

SCHEDULE OF COMPUTATION OF BASIC AND DILUTED LOSS PER SHARE

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Net loss attributable to common shareholders

$ ( 22,172,567 )

$ ( 1,994,417 )

$ ( 47,700,445 )

the Three Months Ended March 31,

Net income (loss) attributable

to common shareholders

$ ( 12,958,589 )

Weighted average common shares - basic and diluted

Income (loss) per common share - basic and diluted

Accounting Pronouncements

Company adopted Accounting Standards Update (“ASU”) No.

2019-12, “ Income Taxes (Topic 740):

Simplifying the Accounting

for Income Taxes (“ASU 2019-12”)” effective as of January 1, 2021, 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.

The Company believes that its income tax positions

and deductions would be sustained on audit and does not anticipate any adjustments that would result in material changes to its financial

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):

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 and equity.

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 financial statements upon adoption.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

3 – DEPOSIT, PROPERTY AND EQUIPMENT AND INTANGIBLE ASSETS

May 11, 2020, the Company signed a Contract Addendum with Compute North, to pause and suspend services under its Colocation Agreement.

This suspended all production of Bitcoin using our S-9 miners.

– The bitcoin blockchain and the cryptocurrency reward for solving a block is subject to periodic incremental halving.

is a process designed to control the overall supply and reduce the risk of inflation in cryptocurrencies using a Proof-of-Work consensus

At a predetermined block, the mining reward is cut in half, hence the term “Halving”.

The last halving for bitcoin

occurred on May 12, 2020.

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.

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 arrival.

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

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

4 th quarter.

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

As of September 30, 2021, these miners were received and installed.

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.

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 the timely payment of the purchase price, Bitmain is and has been scheduled deliver products according to the following schedule:

1,500 Units on or before January 31, 2021;

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

September 30, 2021;

April 30, 2021,

May 31, 2021 and September 30, 2021.

As of September 30, 2021, the Company has paid the entire purchase price under this agreement and

has received 10,500 units from Bitmain.

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.

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

the amount due to $ 21,581,594 .

As of September 30, 2021, the Company has paid the entire purchase price under this agreement and has received 10,000

units from Bitmain.

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

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

The gross purchase

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

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

Subsequent to executing this agreement, due to the additional

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

As of September

30, 2021, the Company has paid the entire purchase price under this agreement.

Subsequent to September 30, 2021, the Company has received

10,000 units from Bitmain.

Weighted average common shares - basic

Weighted average common shares - diluted

Income (loss) per common share - basic

Income (loss) per common share - diluted

DIGITAL HOLDINGS, INC.

1 unchanged sentence

TO CONSOLIDATED CONDENSED 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:

48 hours of signing of contract;

30% on or before March 1, 2021;

4.75% on June 15, 2021;

1.76% on July 15, 2021;

4.58% on August 15,

10.19% on September 15, 2021;

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

As of September 30, 2021, the Company

has paid $ 118,799,091 of the total balance of $ 167,763,451 and has received 6,460 units from Bitmain.

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 22,960 miners

Marathon has received over 26,900 miners as of September 30, 2021 and subsequent to quarter end increased its active

mining fleet to approximately 25,272 miners, generating approximately 2.74 EH/s.

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

May 21, 2021, the Company entered into a binding letter of intent with Compute North, LLC to host 73,000 Bitcoin Miners over a staged

in implementation between October 2021 and March 2022.

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

In order to build out the infrastructure without paying for the capital expenditure, the Company will provide an 18 month bridge

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

The terms of the contract

are limited to three years with increases thereafter capped at three percent per year thereafter.

The Company has also agreed to pay

up to $ 14 million in expedite fees for construction/electrical and supply chain expediting activities.

As of September 30, 2021, the

Company paid $ 8 million of the $ 14 million in expedite fees recorded as a deposit on the balance sheet.

On September 3, 2021, the

Company entered into a master agreement with Compute North, LLC pursuant to which the Company is paying an initial deposit of $ 14.6 million

in the aggregate over five installments.

As of September 30, 2021, the Company paid $ 9.1 million of the $ 14.6 million initial deposit

recorded as a deposit on the balance sheet.

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

SCHEDULE OF COMPONENTS OF PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS

September 30, 2021

3 – ADVANCES TO VENDORS AND PROPERTY AND EQUIPMENT

Company contracts with bitcoin mining server manufacturers in procuring equipment necessary for the operation of its bitcoin mining operations.

A typical agreement calls for a certain percentage of the total order to be paid in advance at specific intervals, usually (1) within

several days of execution of a specific contract (2) approximately six months before each shipment date and (3) approximately one month

before each shipment date.

We account for these payments as Advances

to vendor on the balance sheet.

of March 31, 2022 and December 31, 2021, such advances totaled approximately $ 594.2 million and $ 466.3 million, respectively.

addition, the Company contracts with other service providers for hosting of its equipment and operational support in data centers where

the company’s equipment is deployed.

These arrangements also call for advance payments to be made to vendors in conjunction with

the contractual obligations associated with these services.

We classify these payments as deposits on the balance sheet.

components of property and equipment as of March 31, 2022 and December 31, 2021 are:

OF COMPONENTS OF PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS

Useful life (Years)

March 31, 2022

December 31, 2021

7 unchanged sentences

Property, equipment and intangible assets, net

Company’s depreciation expense for the three months ended September 30, 2021 and 2020 were $ 4.3 million and $ 787,689 , and amortization

expense were $ 18,483 and $ 17,794 for the three months ended September 30, 2021 and 2020, respectively.

The Company’s depreciation

expense for the nine months ended September 30, 2021 and 2020 were $ 8.0 million and $ 1.8 million, and amortization expense were $ 54,071

and $ 53,382 for the nine months ended September 30, 2021 and 2020, respectively.

$ 333,317,458

$ 277,174,020

Company’s depreciation expense related to property and equipment for the three months ended March 31, 2022 and March 31,

2021 was $ 13,864,132 and

respectively.

Amortization expense for the three months ended March 31, 2022 and March 31, 2021 was $ 12,552

and $ 17,794 ,

respectively.

4 - STOCKHOLDERS’ EQUITY

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.

In August 2021, the Plan

was increased by an additional 7.5 million shares which were registered pursuant to a Registration Statement on Form S-8.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Direct Offering

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

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

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.

Registration Statements on Form S-3 and At The Market Offering Agreements

February 11, 2022, we entered into an At The Market Offering Agreement, or sales agreement, with H.C.

Wainwright & Co., LLC relating to shares of our common stock.

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 March 31, 2022, the Company had sold 2,999,644 shares of common stock for an aggregate purchase price

of $ 90.2 million net of offering costs pursuant to this At The Market Offering Agreement.

B Convertible Preferred Stock

of September 30, 2021, there were no shares of Series B Convertible Preferred Stock outstanding.

of March 31, 2022, there were no shares of Series B Convertible Preferred Stock outstanding.

E Preferred Stock

was no Series E Convertible Preferred Stock outstanding as of September 30, 2021.

Stock Warrants

summary of the status of the Company’s outstanding stock warrants and changes during the nine months ended September 30, 2021 is

SUMMARY OF OUTSTANDING STOCK WARRANTS

Number of Warrants

Average Exercise Price

Contractual Life

Outstanding as of December 31, 2020

Outstanding as of September 30, 2021

Warrants exercisable as of September 30, 2021

The aggregate intrinsic value of warrants outstanding and exercisable at September 30, 2021 was

was no Series E Convertible Preferred Stock outstanding as of March 31, 2022.

DIGITAL HOLDINGS, INC.

1 unchanged sentence

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Stock Options

summary of the stock options as of September 30, 2021 and changes during the period are presented below:

SUMMARY OF STOCK OPTIONS

Stock Warrants

summary of the status of the Company’s outstanding stock warrants and changes during the three months ended March 31, 2022 is as

SUMMARY OF OUTSTANDING STOCK WARRANTS

Exercise Price

1 unchanged sentence

Outstanding as of December 31,

Outstanding as of September 30, 2021

Options vested and expected to vest as of September 30, 2021

Options vested and exercisable as of September 30, 2021

The aggregate intrinsic value of options outstanding and exercisable at September 30, 2021 was

January 6, 2021, the Company issued 566,279 shares pursuant to the 2018 Equity Incentive Plan for shares that vested as of December 31,

Subsequent to year end, the Company issued 172,948 and 23,500 shares of common stock pursuant to warrant and option exercises,

respectively .

summary of the restricted stock award activity for the nine months ended September 30, 2021 as follows:

Outstanding as of March 31, 2022

Warrants exercisable as of March 31, 2022

The aggregate intrinsic value of warrants outstanding

and exercisable at March 31, 2022 was

Stock Options

of March 31, 2022 and December 31, 2021, there were no stock options outstanding.

summary of the restricted stock award activity (represented by restricted stock units (RSUs) for the three months ended March 31, 2022

SUMMARY OF RESTRICTED STOCK AWARD ACTIVITY

Number of Units

Weighted Average Grant Date Fair

Average Grant Date Fair Value

Nonvested at December 31,

( 8,089,677 )

Nonvested at September 30, 2021

The Company anticipates incurring non-cash stock

based compensation expense of $ 642,789 , $ 232,241 and $ 2,533 on December 31, 2021, March 31, 2022 and June 30, 2022, respectively related

to the 95,179 nonvested shares.

Nonvested at March 31, 2022

the first quarter of 2022, the Compensation Committee issued grants that will vest over the next four years and result in total stock

compensation expense of approximately $ 16.3 million.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

5 - DEBT, COMMITMENTS AND CONTINGENCIES

October 1, 2021, the Company entered into a Revolving Credit and Security Agreement (the “Agreement”) with Silvergate Bank

pursuant to which Silvergate has agreed to loan the Company up to $ 100 million on a revolving basis.

At March 31, 2022 and December 31,

2021 there were no amounts outstanding under this facility.

November 18, 2021, the Company issued $ 650 million principal amount of its 1.00 % Convertible Senior Notes due 2026 (the “ Notes ”).

The Notes were issued pursuant to, and are governed by, an indenture dated as of November 18, 2021, between the Company and U.S.

National Association, as 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 to purchase up to an additional $ 97,500,000 principal amount of Notes.

was exercised and an additional $ 97,500,000 principal amount of Notes were issued on November 23, 2021.

of March 31, 2022 and December 31, 2021, notes outstanding, net of unamortized discounts of approximately $ 18.1 million and

$ 19.1 million, respectively, were $ 729.4 million and $ 728.4 million, respectively.

February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842), and has since issued amendments thereto, related to the accounting

for leases (collectively referred to as “ASC 842”).

ASC 842 establishes a right-of-use, or ROU, model that requires a lessee

to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.

Leases will be classified

as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

Effective January

1, 2019, the Company adopted ASU 842.

The Company determines if an arrangement contains a lease at inception based on whether or not

the Company has the right to control the asset during the contract period and other facts and circumstances.

Company leases office space in the United States under operating lease agreements.

Office space is the Company’s only material

underlying asset class under operating lease agreements.

The Company has no material finance leases.

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 .

A security deposit of $ 3,815 has been paid.

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.

On March 7, 2021,

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

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

Due to the lease termination,

the Company incurred a loss on cancellation in an amount of approximately $ 81,000 .

lease costs are recorded on a straight-line basis within operating expenses.

The Company’s total lease expense is comprised of

the following:

February 14, 2022, the Company rented an office located at Tower 101, 101 NE Third Avenue, Fort Lauderdale, Florida, 33301, for a term

of 63 months.

March 1, 2022, the Company rented an office located at 300 Spectrum Center Drive, Irvine CA, 92618, for a term of 24 months.

of March 31, 2022, the Company’s right-of-use (“ROU”) assets and total lease liabilities were $ 1.3

million and $ 1.3

million, respectively for leases in the United

As of December 31, 2021, the Company’s ROU assets and total lease liabilities were nil .

The Company has made payments and amortized the right-of-use assets totalling $ 16,704

and $ 26,132 ,

respectively, for the three month period ending

March 31, 2022.

DIGITAL HOLDINGS, INC.

1 unchanged sentence

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

information regarding the Company’s leasing activities as a lessee is as follow:

SCHEDULE OF COMPONENTS OF LEASE COST

September 30, 2021

September 30, 2020

For the Three Months Ended

September 30, 2021

September 30, 2020

Operating leases

Operating lease cost

Operating lease expense

Short-term lease rent expense

Total rent expense

September 30, 2021

September 30, 2020

For the Nine months Ended

September 30, 2021

September 30, 2020

lease costs are recorded on a straight-line basis within operating expenses.

The Company’s total lease expense is comprised of

the following:

OF COMPONENTS OF LEASE COST

the Three Months Ended

Operating leases

Operating lease cost

Operating lease expense

Short-term lease rent expense

Short-term lease rent

Total rent expense

information regarding the Company’s leasing activities as a lessee is as follow:

SCHEDULE OF LEASING ACTIVITIES

For the Nine months Ended

September 30, 2021

September 30, 2020

Operating cash flows from operating leases

Weighted-average remaining lease term – operating leases

Weighted-average discount rate – operating leases

of September 30, 2021, contractual minimal lease payments are nil.

March 27, 2018, Jeffrey Feinberg, purportedly joined by the Jeffrey L.

Feinberg Personal Trust and 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.

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.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

OF MINIMUM LEASE PAYMENTS

the Three Months Ended

Operating cash flows from operating

Weighted-average remaining lease term –

operating leases

Weighted-average discount rate – operating

of March 31, 2022, contractual minimum lease payments are as follows for the next five years.

OF CONTRACTUAL MINIMUM LEASE

2022 (remaining)

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”)

and 10 Doe Defendants 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;

(“Complaint”) against Marathon Digital Holdings, Inc.

(the “Company”) and 10 Doe Defendants.

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.

Claims 5 and 6 are pled against “all Defendants” and may involve later named defendants.

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.

On February 22, 2021, the Company responded to

and (6) Negligent Interference with Prospective Economic

Relations, which is the one plead against “all Defendants” and is most likely to involve later named defendants.

arise from the same set of facts, Ho alleges that the Company profited from commercially-sensitive information he shared with the Company

and then it refused to compensate him for his role in securing the acquisition of a supplier of energy for the Company.

On 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.

The parties are currently engaged in discovery, including written discovery and depositions.

The Company will move to have Plaintiff’s

claims dismissed before trial .

Trial is set to begin on March 3, 2022.

Due to outstanding issues of fact

and law, it is impossible to predict the outcome at this time;

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.

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.

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 action.

On February 11, 2022,

the Court granted the motion and dismissed Ho’s 2nd, 5th and 6th 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

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 time;

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

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.

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

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.

December 17, 2021, a putative class action complaint was filed in the United States District Court for the District of Nevada, against

the Company and present and former senior management.

The Complaint alleges securities fraud related to the disclosure of an SEC

investigation previously made by the Company on November 15, 2021.

Plaintiff Tad Schlatre served the Complaint on the Company

on March 1, 2022.

February 18, 2022, a shareholder derivative complaint was filed in the United States District Court for the District of Nevada,

against current and former members of the Company’s board of directors and senior management.

The complaint is based on

allegations substantially similar to the allegations in the December 2021 putative securities class action complaint, related to the

Company’s disclosure of an SEC investigation previously made by the Company on November 15, 2021.

On March 4, 2022, the

Complaint was served on the Company.

On April 4, 2022, the defendants moved to dismiss the Complaint.

On May 5, 2022, a second shareholder derivative complaint was filed

in the United States District Court for the District of Nevada, against current and former members of the Company’s board of directors

and senior management.

The complaint is based on allegations substantially similar to the allegations in the February 18, 2022

derivative complaint.

In the opinion of management, after consulting legal counsel, the ultimate disposition of these five matters will

not have a material adverse effect on the Company and its related entities combined financial position, results of operations, or liquidity.

6 – Subsequent Events

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.

Commitment Fee:

per annum of the portion of the unused Loan Commitment, payable monthly in arrears.

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.

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.

only to be paid monthly, with principal all due at maturity.

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”).

will establish a Collateral Account with a regulated custodial entity (the “Custodian”) that has been approved by the

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

the Bank may also file a UCC financing statement on the pledged collateral.

Advance Rate:

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.

Company must maintain a minimum debt to equity ratio of 0.5:1.

The Company must maintain a minimum liquidity of $25,000,000.

Company has evaluated subsequent events through the date 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 below.

to March 31, 2022, the Company has drawn down on the revolving line of credit in an amount of $ 70,000,000 .

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-Q

Item 1. Financial Statements