What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-09 compared with 2022-05-06 · 652 added, 246 removed, 363 unchanged (71% of the section changed)

6 unchanged sentences

$ 268,522,019

Restricted cash

Digital currencies

Digital currencies, restricted

Investment fund

Digital currencies loaned

Digital currencies held

Loan receivable

2 unchanged sentences

Other assets:

Property and equipment

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

and $ 21,311,461

respectively)

Property and equipment (net

of accumulated depreciation and impairment charges of $ 55,390,407 and $ 21,311,461 , respectively)

Assets held for sale

Advances to vendor

1 unchanged sentence

Right-of-use assets

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

and $ 280,497 ,

respectively)

assets (net of accumulated amortization of $ 280,497

at December 31, 2021)

1,147,385,909

$ 1,509,577,557

$ 1,448,244,423

LIABILITIES AND STOCKHOLDERS’

2 unchanged sentences

Accrued expenses

Short term borrowings -

revolving credit line

Operating lease liabilities

1 unchanged sentence

Long-term liabilities

Notes payable

Convertible notes

Operating lease liabilities

4 unchanged sentences

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

par value, 50,000,000 shares authorized, no shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Common stock, 0.0001 par

200,000,000 shares authorized;

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

113,865,235 and 102,733,273 issued and outstanding at June 30, 2022 and December 31, 2021,

Additional paid-in capital

1,016,722,345

Accumulated other comprehensive

5 unchanged sentences

$ 1,448,244,423

prior period amounts have been reclassified to conform to current period presentation.

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

2 unchanged sentences

CONDENSED STATEMENT OF OPERATIONS

Months Ended March 31,

Digital currency

Months Ended June 30,

Costs and expenses

Cost of revenue

and administrative expenses

Compensation and related

Professional fees

Cost of revenues

Cost of revenues - energy,

hosting and other

( 16,684,759 )

( 4,056,168 )

( 29,201,710 )

( 5,724,646 )

of revenues - depreciation and amortization

( 24,709,797 )

( 2,937,666 )

( 38,586,480 )

( 3,675,603 )

Total Costs and expenses

( 41,394,556 )

( 6,993,834 )

( 67,788,190 )

( 9,400,249 )

General and administrative

Impairment of mined digital

( 12,641,331 )

( 6,831,040 )

( 26,835,089 )

( 60,175,421 )

Impairment of digital currencies

( 127,590,231 )

( 11,078,660 )

( 147,141,486 )

( 11,740,859 )

Impairment of patents

operating and administrative expenses

Operating income (loss)

Total operating expenses

( 140,231,562 )

( 17,909,700 )

Other income (expenses)

Change in fair value of investment fund

( 174,895,938 )

( 71,916,280 )

Other Operating income

Change in fair value of

warrant liability

digital currencies held in fund

( 79,688,590 )

Interest income

( 114,704,596 )

( 85,016,208 )

on sale of equipment

Total Other Operating (income)

( 21,507,074 )

( 114,704,596 )

( 26,834,692 )

Operating income (loss)

( 178,211,376 )

( 110,286,273 )

( 192,879,286 )

( 25,518,736 )

Non-Operating

income (expenses)

Total other (expenses) income

( 3,748,322 )

2 unchanged sentences

$ ( 181,794,418 )

income (loss)

$ ( 108,886,604 )

income (loss) per share, basic:

income (loss) per share, diluted:

Weighted average shares

outstanding, basic:

$ ( 199,047,671 )

$ ( 25,528,392 )

tax (expense) benefit

( 9,852,224 )

( 5,557,560 )

$ ( 191,646,642 )

$ ( 108,884,620 )

$ ( 204,605,231 )

$ ( 25,527,878 )

loss per share, basic and diluted:

Weighted average shares

outstanding, diluted:

outstanding, basic and diluted:

prior period amounts have been reclassified to conform to current period presentation .

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 March 31, 2022

Comprehensive

the Six Months Ended June 30, 2021

Other Comprehensive

Stockholders’

as of December 31, 2020

$ 428,242,763

$ ( 116,055,277 )

$ ( 450,719 )

$ 311,744,964

compensation, net of tax withholding

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

Options exercised

Warrant exercised

issued for cashless exercise of warrants

issued for service and license agreements

( 25,527,878 )

of June 30, 2021

$ 722,543,196

$ ( 141,583,155 )

$ ( 450,719 )

$ 580,519,285

Six Months Ended June 30, 2022

Other Comprehensive

Stockholders’

Balance as of

4 unchanged sentences

$ 683,023,381

Stock based compensation

Stock based compensation, net

of tax withholding

Issuance of common stock, net

4 unchanged sentences

( 204,605,231 )

Balance as of March 31, 2022

Balance as of June 30, 2022

$ 1,016,722,345

2 unchanged sentences

$ 659,447,999

the Three Months Ended March 31, 2021

Comprehensive

the Three Months Ended June 30, 2021

Other Comprehensive

Stockholders’

Balance as of

December 31, 2020

March 31, 2021

$ 716,862,400

2 unchanged sentences

$ 683,723,083

Stock based compensation

Stock based compensation, net

of tax withholding

Common stock issued for cashless

exercise of warrants

Common stock issued for service

and license agreements

( 108,884,620 )

Balance as of June 30, 2021

$ 722,543,196

$ ( 141,583,155 )

$ ( 450,719 )

$ 580,519,285

the Three Months Ended June 30, 2022

Other Comprehensive

Stockholders’

Balance as of

March 31, 2022

$ 939,741,806

$ ( 165,188,372 )

$ ( 450,719 )

$ 774,113,320

Stock based compensation, net

of tax withholding

Issuance of common stock, net

of offering costs/At-the-market offering

Options exercised for cash

Warrant exercised for cash

Balance as of March 31, 2021

Common stock issued for long

term service contract

( 191,646,642 )

Balance as of June 30, 2022

$ 1,016,722,345

$ ( 356,835,014 )

$ ( 450,719 )

$ 659,447,999

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

2 unchanged sentences

CONDENSED STATEMENTS OF CASH FLOWS

Months Ended March 31,

CASH FLOWS FROM OPERATING

Months Ended June 30,

FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

$ ( 204,605,231 )

Adjustments to reconcile net income (loss)

to net cash used in operating activities:

$ ( 25,527,878 )

Adjustments to reconcile

net income (loss) to net cash used in operating activities:

Depreciation and amortization

Impairment of patents

Deferred tax benefit

Amortization of prepaid

service contract

Gain on sale of assets

( 58,181,516 )

Change in fair value of

warrant liability

Deferred tax expense

Change in fair value of

investment securities

digital currencies held in fund

( 17,323,121 )

1 unchanged sentence

Stock based compensation

Amortization of right-of-use assets

Amortization of bond issuance

Impairment of patents

Other adjustments from

Changes in operating assets and liabilities:

operations, net

Changes in operating assets

and liabilities:

Digital currencies

2 unchanged sentences

( 5,547,923 )

Lease liability

Prepaid expenses and other

5 unchanged sentences

( 6,751,842 )

CASH FLOWS FROM INVESTING

FLOWS FROM INVESTING ACTIVITIES

Advances to vendor

4 unchanged sentences

( 66,566,839 )

Purchase of equity

Sale of property and equipment

Purchase of digital currencies

( 150,000,000 )

Purchase of investment

Purchase of equity investments

( 13,999,823 )

of digital currencies

of digital currencies in investment fund

cash used in investing activities

1 unchanged sentence

( 272,502,112 )

CASH FLOWS FROM FINANCING

FLOWS FROM FINANCING ACTIVITIES

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 )

of common stock, net of issuance costs

Net change in revolving

credit agreement borrowings

Value of shares withheld for taxes

( 3,809,983 )

1 unchanged sentence

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

Net (decrease) increase

in cash, cash equivalents and restricted cash

( 178,860,552 )

cash equivalents and restricted cash — beginning of period

cash equivalents and restricted cash — end of period

$ 170,615,847

Supplemental schedule of

non-cash investing and financing activities:

schedule of non-cash investing and financing activities:

due to share issuance

exercised into common stock

Unpaid advances to vendor

lease assets obtained in exchange for new operating lease liabilities

due to share issuance

stock issued for service and license agreements

prior period amounts have been reclassified to conform to current period presentation.

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

8 unchanged sentences

exploration and potential development of a 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.

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.

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.

Company changed its name to Marathon Digital Holdings, Inc.

on March 1, 2021.

In 2018, the Company began its bitcoin mining

operations by purchasing cryptocurrency mining machines and establishing a data center in Canada to mine digital assets.

ceased operating in Canada in 2020 and relocated all owned mining equipment out of Canada to the US.

The Company has since expanded

its activities in the mining of bitcoin.

As of June 30, 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

accompanying condensed consolidated financial statements are unaudited and have been prepared in accordance with the rules and regulations

They include all adjustments that we consider necessary for a fair statement of the results for the interim periods presented.

Such adjustments consisted only of normal recurring items unless otherwise disclosed.

The June 30, 2022, Condensed Consolidated Balance

Sheet was derived from audited financial statements but does not include all footnote disclosures from the annual financial statements.

financial statements should be read in conjunction with the financial statements and related notes included in the Company’s 2021

Annual Report.

of Presentation and Principles of Consolidation

accompanying unaudited consolidated condensed financial statements, including the accounts of the Company’s subsidiaries, Marathon

Crypto Mining, Inc., Crypto Currency Patent Holding Company and Soems Acquisition Corp., have been prepared by the Company, without audit,

pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).

Certain information and disclosures normally included

in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (U.S.

have been condensed or omitted pursuant to such rules and regulations.

These consolidated condensed financial statements reflect all

adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary to present fairly the

financial position, the results of operations and cash flows of the Company for the periods presented.

It is suggested that these consolidated

condensed financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the

Company’s most recent Annual Report on Form 10-K.

The results of operations for the interim periods are not necessarily indicative

of the results to be expected for the full year ended December 31, 2022.

Crypto Mining, Inc., Crypto Currency Patent Holding Company and Soems Acquisition Corp.

have been prepared by the

Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).

Certain information and

disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United

States of America (GAAP) have been condensed or omitted pursuant to such rules and regulations.

These consolidated condensed financial

statements reflect all adjustments (consisting only of normal recurring adjustments) which, in the opinion of management, are necessary

to present fairly the financial position, the results of operations and cash flows of the Company for the periods presented.

It is suggested

that these consolidated condensed financial statements be read in conjunction with the consolidated financial statements and the notes

thereto included in the Company’s most recent Annual Report on Form 10-K.

The results of operations for the interim periods are

not necessarily indicative of the results to be expected for the full year ended December 31, 2022.

of Estimates and Assumptions

3 unchanged sentences

Actual results could differ from those estimates.

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.

Accounting Policies

have been no material changes to the Company’s significant accounting policies to those previously disclosed in the Company’s

Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

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

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.

cash principally represents those cash balances that support commercial letters of credit and are restricted from withdrawal.

The following

table provides a reconciliation of the total cash, cash equivalents and restricted cash reported on the Condensed Consolidated Balance

Sheets to the corresponding amounts reported on the Condensed Consolidated Statements of Cash Flows.

SCHEDULE OF RESTRICTED CASH

June 30, 2022

June 30, 2021

Cash and cash equivalents

$ 170,615,847

Restricted cash

cash equivalents and restricted cash

$ 170,615,847

Reclassifications and corrections

purposes of comparability, certain prior-period amounts have been reclassified to conform to the current-period presentation, including corrections of immaterial errors in prior periods.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Currencies, Digital currencies, restricted and Digital currencies loaned

currencies, Digital currencies, restricted and Digital currencies loaned are included in current assets in the consolidated balance sheets.

Digital currencies are recorded at cost less impairment.

10 unchanged sentences

Subsequent reversal of impairment losses is not permitted.

– 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.

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:

following table presents the activities of the digital currencies for the six months ended June 30, 2022:

SCHEDULE OF ACTIVITIES OF DIGITAL CURRENCIES

currencies at December 31, 2021

Digital currencies, Digital currencies, restricted and Digital currencies loaned at December

$ 123,243,264

Additions of digital currencies

Impairment of digital currencies

Digital currencies transferred from fund

Impairment of digital

( 147,141,486 )

Interest received on digital

currencies, restricted

Digital currencies

at March 31, 2022

Digital currencies, Digital currencies, restricted and Digital currencies loaned

at June 30, 2022

$ 190,395,175

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.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

* Includes a loan

of digital currencies of 600 bitcoin ($ 20,437,284 ).

On June 14, 2022 the Company terminated the loan and there are no loans of digital

assets outstanding as of June 30, 2022.

June 30, 2022, we held approximately 10,055 bitcoin with a carrying value of $ 190.4 million and carried on the balance sheet as digital

currencies ($ 136.8 million) and digital currencies, restricted ($ 53.6 million).

The fair market value of the bitcoin as of June 30, 2022

was approximately $ 198.9 million.

Halving – The bitcoin blockchain and the cryptocurrency

reward for solving a block is subject to periodic incremental halving.

Halving is a process designed to control the overall supply and

reduce the risk of inflation in cryptocurrencies using a Proof-of-Work consensus algorithm.

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.

For example, the current

fixed reward on the bitcoin network for solving a new block is six and one quarter (6.25) bitcoins per block, which decreased from twelve

and a half (12.5) bitcoins per block in May 2020.

It is estimated that the number of bitcoins per block will halve again in about four

Many factors influence the price of bitcoin and potential increases or decreases in prices in advance of or following a future

halving is unknown.

Digital Currencies Held in Fund

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

2 unchanged sentences

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.

owns 100 % of the limited partnership interest.

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

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

The Company owns 100 % of the limited partnership

interest and consolidates the Fund under a voting interest model.

The consolidated assets in the investment fund are included in current

assets in the consolidated balance sheets under the caption “Digital currencies held in investment fund.

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

ASC 946, Financial Services – Investment Companies, which requires fair value measurement of the Fund’s investments in digital

The digital assets held by each Fund are traded on a number of active markets globally, including the over-the-counter (“OTC”)

The digital assets held by the Fund are traded on a number of active markets globally, including the over the counter (“OTC”)

market and digital asset exchanges.

2 unchanged sentences

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).

The fair value of the assets within the Fund are determined at the end of each reporting

period based on pricing obtained from CoinDesk Bitcoin Price Index at approximately 4pm New York time.

Any changes in the fair value

of the assets are recorded in the Consolidated Statement of Operations under the caption “Change in fair value of investment in

NYDIG fund.” The Company transferred all of its bitcoin holdings from the Fund to its own account on June 10, 2022.

OF DIGITAL CURRENCIES HELD IN FUND

Digital currencies held in fund at December 31, 2021

$ 223,778,545

Sale of digital currencies

Change in fair value of digital currencies held in fund

( 85,016,208 )

Management expenses incurred by fund

Digital currencies transferred out of fund

( 137,843,761 )

Digital currencies held in fund at June 30, 2022

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

5 unchanged sentences

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

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.

The SAFE agreements are accounted for as

equity securities without readily determinable fair value at cost minus impairment, as adjusted for observable price changes in

orderly transactions for identical or similar investment of the same issue pursuant to Topic 321 Investments – Equity

The investment in SAFE agreements is presented on the balance sheet at June 30, 2022 and December 31, 2021 as a

component of the-caption “Investments” at a collective carrying value of $ 6.5

million $ 3.0 million, equal to their

purchased amounts with no noted impairments or adjustments.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Value of Financial Instruments

21 unchanged sentences

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 March 31, 2022 and December

the Company’s estimated level within the fair value hierarchy of those assets and liabilities as of June 30, 2022 and December

31, 2021, respectively:

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

value measured at March 31, 2022

value measured at June 30, 2022

Total carrying

value at March 31,

Quoted prices

2 unchanged sentences

unobservable inputs

$ 114,938,284

Investment Fund

$ 218,236,903

value measured at December 31, 2021

Total carrying

value at December 31,

Total carrying value at

Quoted prices

4 unchanged sentences

$ 266,635,158

Investment Fund

Digital currencies held in fund

$ 223,778,545

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

were no transfers among Levels 1, 2 or 3 during the three and six months ended June 30, 2022.

June 10, 2022 the company withdrew approximately 4,769 bitcoin from its investment in NYDIG Digital Assets Fund III, LP, the (“Investment

Fund”) and transferred the bitcoin directly into the Company’s account.

As a result, the Company will no longer receive “mark-to-market”

accounting for the bitcoin formerly held in the Investment Fund and the 4,769 bitcoin will now be classified as “Digital currencies”

on the balance sheet and subject to impairment analysis as a indefinite-lived intangible.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Income and Basic and Diluted Net Income per Share

3 unchanged sentences

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

For the six month period ending June 30, 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.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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

of potential shares for the diluted earnings (loss) per share calculation at June 30, 2022 and 2021 are as follows:

SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE

Warrants to purchase common stock

Restricted stock

Options to purchase common stock

1 unchanged sentence

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

SCHEDULE OF COMPUTATION OF BASIC AND DILUTED LOSS PER SHARE

the Three Months Ended March 31,

Net income (loss) attributable

OF COMPUTATION OF BASIC AND DILUTED LOSS PER SHARE

the Three Months Ended June 30,

the Six Months Ended June 30,

Net loss attributable

to common shareholders

$ ( 191,646,642 )

Weighted average common shares - basic

Weighted average common shares - diluted

Income (loss) per common share - basic

Income (loss) per common share - diluted

$ ( 108,884,620 )

$ ( 204,605,231 )

$ ( 25,527,878 )

Weighted average common shares - basic and diluted

Loss per common share - basic

3 – REVENUES FROM CONTRACTS WITH CUSTOMERS

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

The core principle of the revenue standard is that a

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

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

The following five steps are applied to achieve

that core principle:

Identify the contract with the customer

Identify the performance obligations in the contract

Determine the transaction price

Allocate the transaction price to the performance obligations in the contract

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:

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

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:

consideration

● Constraining

estimates of variable consideration

existence of a significant financing component in the contract

consideration

● Consideration

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 resolved.

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

The 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.

DIGITAL HOLDINGS, INC.

1 unchanged sentence

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

3 – ADVANCES TO VENDORS AND PROPERTY AND EQUIPMENT

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

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 of contract inception.

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.

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

dollar spot rate of the related digital currency

on the date of receipt.

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

Depreciation on digital currency mining equipment is recorded as a component of cost of revenues.

rewards earned by a bitcoin miner are recognized as revenue, but the evaluation is required to determine if the block rewards earned

should be recognized as revenue from contracts with customers under FASB ASC 606 or as other revenue.

Company evaluated whether its mining activities represent a contract with a customer to provide services and, determined it should recognize

block rewards it receives from the network as revenue from a customer under FASB ASC 606.

All relevant facts and circumstances, including

the network’s protocols, were considered in determining (1) whether the Company has a contract with a customer under FASB ASC 606-10-25-2

and (2) whether its mining activities on the network meet all the criteria in FASB ASC 606-10-25-1.

inflow of bitcoin as a result of the block reward would meet the definition of revenue because it gives rise to economic benefits to

the miner from rendering services or carrying out activities.

the Company may account for the block reward as revenue.

rewards are the Company’s most significant source of revenue.

Block rewards included in revenues on the statements of operations

were approximately $ 24.5 million and $ 26.6 million, respectively for the three months ended June 30, 2022 and June 30, 2021.

Block rewards

included in revenues on the statements of operations were approximately and $ 75.6 and $ 34.8 million for the six months ended June 30,

2022 and June 30, 2021.

fees earned by the Company are recognized as revenue from customers in accordance with FASB ASC 606 and pursuant to AICPA Practice Guide

“Accounting for and Auditing Digital Assets”.

The transaction fees are specified in each transaction request and paid by

the requester to the Company, acting as the successful miner, in exchange for the successful processing of the transaction.

requester meets the definition of a customer in FASB ASC 606 because it has contracted with the miner to obtain a service (successful

mining) that is an output of the miner’s ordinary activities in exchange for consideration.

A contract with a customer exists at

the point when the miner successfully validates a requesting customer’s transaction to the distributed ledger.

At this point, the

performance obligation has been satisfied in accordance with FASB ASC 606-10-25-30.

Because of this, the additional criteria in FASB

ASC 606-10-25-1 would be met as follows:

the requester (a customer) and the miner have approved the contract and are committed to

the transaction at the point of successfully validating and adding the transaction to the

distributed ledger.

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

transaction has commercial substance (that is, the risk, timing, or amount of the miner’s

future cash flows is expected to change as a result of the contract).

of the fees is probable because it is completed as part of closing a successful block.

successfully mining a block, the miner satisfies its performance obligation to the requester and, thus, should recognize revenue at that

point in time.

payment of transaction fees in bitcoin constitutes non-cash consideration under FASB ASC 606-10-32-21.

This non-cash consideration is measured

at its estimated fair value at contract inception - that is, the date that the criteria in FASB ASC 606-10-25-1 are met.

If fair value

cannot be reasonably estimated in accordance with FASB ASC 606-10-32-22, the consideration should be measured indirectly by reference

to the stand-alone selling price of the miner’s services.

fees were approximately $ 1.0 million and $ 0.3 million for the six and three months ended June 30, 2022, respectively and $ 3.6 million

and $ 2.7 million for the six and three months ended June 30, 2021, respectively.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

Company is a pool operator and acts as an agent, and not as a principal.

The Company did not have control over any third party contributing

hashrate to its pool.

It merely facilitated the contribution of hash rate by third party pool participants who could choose to

join or leave a pool as they wish.

As the pool operator, the Company recognized 100 % of all pool fees generated by such pool as

fee revenue and not mining revenue.

The Company therefore concluded that in its capacity as the pool operator it was an agent,

and not a principal.

May 2021 until April 30, 2022, the Company operated a mining pool that included certain third parties.

Pool fees included in

revenues on the statements of operations were approximately $ 76

thousand and $ 89

thousand , respectively for the three months ended June 30, 2022 and June 30, 2021.

Pool fees included in revenues on the

statements of operations were approximately $ 331

thousand and $ 89 thousand ,

respectively for the six months ended June 30, 2022 and June 30, 2021.

As of April 30, 2022, third party miners were no longer

participating in the Company’s mining pool.

As such, the Company will no longer recognize pool fees.

4 – ADVANCES TO VENDORS AND DEPOSITS

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

2 unchanged sentences

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.

We account for these payments as Advances to vendor on the balance sheet.

of June 30, 2022 and December 31, 2021, such advances totalled approximately $ 800.2

million and $ 466.3

million, respectively.

At June 30, 2022, the company had a payable of $ 46.6 million related to the accrual of an advance to a vendor that was subsequently approved for payment and paid in early July.

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

3 unchanged sentences

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

NOTE 5 – PROPERTY AND EQUIPMENT

components of property and equipment as of June 30, 2022 and December 31, 2021 are:

SCHEDULE OF COMPONENTS OF PROPERTY, EQUIPMENT

Mining equipment

2 unchanged sentences

Gross property, equipment and intangible assets

Accumulated depreciation and amortization

Accumulated depreciation

and amortization

( 55,390,407 )

( 21,591,958 )

Property, equipment and intangible assets, net

equipment and intangible assets, net

$ 314,257,284

$ 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.

Company’s depreciation expense related to property and equipment for the three and six months ended June 30, 2022 and June 30,

2021 was $ 24,701,111 and $ 38,565,242 , and $ 2,937,666 and $ 3,675,603 , respectively.

Amortization expense for the three and six months

ended June 30, 2022 and June 30, 2021 was $ 8,686 and $ 21,238 , and $ 17,794 and $ 35,588 , respectively.

NOTE 6 – ASSETS HELD FOR SALE

On December 2, 2021, we entered into an agreement

with DCRBN Ventures Development and Acquisition LLC (“DCRBN”) in which the Company agreed to sell certain equipment to DCRBN

starting in April 2022, in conjunction with the development of commercial activities at the King Mountain wind farm in McCamey, TX.

the three months ended June 30, 2022, the Company sold equipment for cash proceeds totalling $ 87.2 million and realized a pre-tax gain

on the sale of such assets of $ 58.2 million.

There were no such sales in the prior-year period.

As of June 30, 2022, the third and final

batch of equipment was to be sold subsequent to quarter end and as such, classified as assets held for sale on the balance sheet.

7 - STOCKHOLDERS’ EQUITY

1 unchanged sentence

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 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 March 31, 2022.

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 June 30,

2022, the Company had sold 10,556,232 shares of common stock for an aggregate purchase price of $ 161.0 million net of offering costs

pursuant to this At The Market Offering Agreement.

DIGITAL HOLDINGS, INC.

1 unchanged sentence

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

B Convertible Preferred Stock

of June 30, 2022, there were no shares of Series B Convertible Preferred Stock outstanding.

E Preferred Stock

shares of Series E Convertible Preferred Stock outstanding as of June 30, 2022.

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 the status of the Company’s outstanding stock warrants and changes during the six months ended June 30, 2022 is as follows:

SUMMARY OF OUTSTANDING STOCK WARRANTS

2 unchanged sentences

Outstanding as of December 31,

Outstanding as of March 31, 2022

Warrants exercisable as of March 31, 2022

Outstanding as of June 30, 2022

Warrants exercisable as of June 30, 2022

The aggregate intrinsic value of warrants outstanding

and exercisable at March 31, 2022 was

and exercisable at June 30, 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

of June 30, 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 six months ended June 30, 2022 as

SUMMARY OF RESTRICTED STOCK AWARD ACTIVITY

1 unchanged sentence

Nonvested at December 31,

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

Nonvested at June 30, 2022

the second 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 $ 20.5 million.

3 unchanged sentences

8 - 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.

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 June 30, 2022 and December 31, 2021 there were amounts of $ 35,000,000

outstanding under this facility.

This facility was refinanced on July 28, 2022 (see Note 9 - Subsequent Events).

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

4 unchanged sentences

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.

of June 30, 2022 and December 31, 2021, notes outstanding, net of unamortized discounts of approximately $ 17.2 million and $ 19.1 million,

respectively, were $ 730.3 million and $ 728.4 million, respectively.

February 2016, the FASB issued ASU No.

18 unchanged sentences

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.

May 1, 2022, the Company rented warehouse space located at 3306 5 th Street SE, East Wenatchee, Washington, 98802, for a term

of 24 months.

of June 30, 2022, the Company’s right-of-use (“ROU”) assets and total lease liabilities were $ 1.2 million and $ 1.2

million, respectively for leases in the United States.

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

The Company has made payments and amortized the right-of-use assets totalling $ 28,790 and $ 47,555 , respectively, for the three

and six month periods ending June 30, 2022.

DIGITAL HOLDINGS, INC.

4 unchanged sentences

the following:

OF COMPONENTS OF LEASE COST

SCHEDULE OF COMPONENTS OF LEASE COST

the Six Months Ended

Operating leases

Operating lease expense

lease rent expense

the Three Months Ended

4 unchanged sentences

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

OF MINIMUM LEASE PAYMENTS

the Three Months Ended

SUMMARY OF MINIMUM LEASE PAYMENTS

the Six Months Ended

Operating cash flows from operating

2 unchanged sentences

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

of June 30, 2022, contractual minimum lease payments are as follows for the next five years.

SCHEDULE 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 Digital Holdings, Inc.

(the “Company”) and 10 Doe Defendants.

(“Complaint”) against the Company and 10 Doe Defendants.

The Complaint alleges

12 unchanged sentences

the action remains pending.

Marathon filed a motion for summary judgment/adjudication of all causes of action.

The Company filed a motion for summary judgment/adjudication of all causes of action.

On February 11, 2022,

4 unchanged sentences

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.

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.

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 in February 2023.

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

10 unchanged sentences

We are cooperating with the SEC.

Class Action Complaint

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

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.

alleged shareholders have moved for appointment as lead plaintiff.

Those motions remain pending before the Court.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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 class action complaint, related to the Company’s 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.

On March 4, 2022, the complaint was served on the Company.

4, 2022, the defendants moved to dismiss the complaint.

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 second shareholder derivative complaint

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

On May 11, 2022, the

defendants moved to dismiss the second shareholder derivative complaint.

June 1, 2022, the Court entered an order consolidating the two derivative actions.

A June 13, 2022 scheduling order provides for

plaintiffs to file a consolidated complaint and for renewed motions to dismiss the consolidated shareholder derivative complaint.

consolidated complaint has not yet been filed.

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.

9 – SUBSEQUENT EVENTS

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 .

July 5, 2022, the Company expanded certain hosting arrangements to include an additional 42 megawatts of hosting capacity at a

facility near Granbury, Texas.

The Company expects to have an additional 14,000

miners installed at this facility, bringing the total number of miners installed near Granbury to 26,000

or approximately 3.6 EH/s.

Based on current construction schedules these miners are expected to be installed before the end of

July 12, 2022, the Company entered into an agreement to secure approximately 200 megawatts of hosting capacity for the Company’s

previously purchased miners, including 90 megawatts of hosting capacity in Texas and at least 110 megawatts of hosting capacity

in North Dakota.

The Company expects to have 66,000 miners, representing approximately 9.2 EH/s, hosted across these facilities.

on current construction schedules, installations of the Company’s miners are expected to begin at these facilities during the fourth

quarter of 2022 with all miners installed by approximately mid-year 2023.

As part of this agreement, the Company has an option to increase

hosting capabilities utilizing up to an additional 70 megawatts in North Dakota.

The Company also secured an additional 12 megawatts

of hosting capacity with a variety of other providers and expects to install approximately 4,000 miners, representing approximately 0.8

EH/s, with these hosting providers, starting in August 2022.

On July 15, 2022 the Federal Energy

Regulatory Commission found that King Mountain Upton Wind, LLC (King Mountain) would retain its status as an exempt wholesale

generator notwithstanding a proposal to share ownership of the Interconnection Facilities as tenants-in-common with a retail energy

This action enabled the energization of a modular data center adjacent to the Generating Facility.

Approximately 69,000

of the Company’s bitcoin mining machines are located at this data center and energization enabled this equipment to come

online starting on August 5, 2022.

July 19, 2022, the Company sold its final shipment of equipment in accordance with its April agreement with DCRBN.

The equipment was

sold to DCRBN in conjunction with the development of commercial activities at the King Mountain wind farm in McCamey, TX.

recorded cash proceeds totalling $ 43.6 million and realized a pre-tax gain on the sale of such assets of $ 28.8 million during the month

of July 2022.

July 28, 2022 the Company terminated its power purchase agreements and commenced the acceleration of its exit from Hardin.

the Company further accelerated the cost of a prepaid service contract ($ 7.2 million in cost of revenue – Energy, hosting and other)

and the remaining depreciation ($ 13.1 million in cost of revenue – depreciation and amortization) related to the infrastructure

assets at Hardin during the month of July.

The data center infrastructure assets and the prepaid service contract have therefore been

fully depreciated or amortized as of July 31, 2022.

The bitcoin mining servers that are on site are in the process of being inventoried

and removed from the facility and will be sold or redeployed to other locations in the near future.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

July 28, 2022, 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:

is on August 5, 2024 .

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 termination date of the Agreement.

of the Loan Commitment to the Bank (or $ 350,000 );

due at RLOC closing (and on each anniversary if the RLOC continues for more than

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.

Rate and Payments:

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

The interest rate is defined as the higher of (i) the Floor Rate and

(ii) Prime Rate plus the Applicable Margin.

“Floor Rate” shall mean, as of any date of determination:

(a) five and one-quarter

percent (5.25%) for any days during an Interest Period the LTV Ratio is less than forty percent (40%), (b) six percent (6.00%) for

any days during an Interest Period the LTV Ratio is greater than or equal to forty percent (40%) and less than fifty-five percent

(55%), and (c) six and three-quarter percent (6.75%) for any day.

The Applicable Margin means at any time:

(a) one and one-quarter

percent (1.25%) for any days during an Interest Period the LTV Ratio is less than forty (40%), (b) two percent (2.00%) for any days

during an Interest Period the LTV Ratio is greater than or equal to 40% and less than fifty-five percent (55%), and (c) two and three-quarter

percent (2.75%) for any days during an Interest Period the LTV Ratio is greater than or equal to fifty-five percent (55%).

RLOC will be secured by a pledge of a sufficient amount of Company’s right, title and interest in and to bitcoin 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.

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 to cause a Loan to Value (the “LTV”)

ratio of 65 % (or less) (“Minimum Advance Rate”) on the unpaid principal balance of the RLOC.

If at any time the LTV ratio

exceeds 75 %, the Company must bring the rate of advance to the Minimum Advance Rate.

Company must maintain a minimum adjusted net worth of $ 350,000,000 .

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

that same date, the Company entered into a Term Credit and Security Agreement (“Term Loan Agreement”) and Term Credit Note

with the Bank with the following terms:

is on August 5, 2024 .

Availability:

to $ 100,000,000 .00 with $ 50,000,000 .00 to be made as of the Closing Date (the “Initial Draw”), and $ 50,000,000 .00 to

be made, at Borrower’s request, on or before April 25, 2023 (the “Delayed Draw”), and subject to satisfaction of

the conditions set forth in the Term Loan Agreement.

origination fee of $ 150,000 .00 and a contingent draw fee in the amount of $ 250,000 .00 (the, “Contingent Draw Fee”) upon

the execution of the Term Loan Agreement.

This Contingent Draw Fee will be refunded to the Company if it borrows the Delayed Draw

by no later than November 25, 2022.

Rate and Payments:

which shall be due on the principal amount of the loan, at the higher of 5.75 % and the Prime Rate plus 1.75 %, only to be paid monthly,

with principal all due at maturity.

Term Loan will be secured by a pledge of a sufficient amount of Company’s right, title and interest in and to bitcoin 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 Term Loan.

the Bank may also

file a UCC financing statement on the pledged collateral.

Company must maintain a minimum adjusted net worth of $ 350,000,000 .

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

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