What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-11-14 compared with 2022-08-09 · 808 added, 612 removed, 403 unchanged (78% of the section changed)

3 unchanged sentences

CONDENSED BALANCE SHEETS

Current assets:

Cash and cash

and cash equivalents

$ 268,555,837

Restricted cash

Digital currencies

Digital currencies, restricted

Digital currencies loaned

Digital currencies held

Loan receivable

currencies loaned

currencies held in fund

from sale of equipment

expenses and other current assets

Total current assets

Other assets:

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

Long term prepaids

Right-of-use assets

assets (net of accumulated amortization of $ 280,497

at December 31, 2021)

current assets

and equipment (net of accumulated depreciation of $ 26,809,659

and $ 21,311,461 , respectively)

Digital currencies, restricted

Long term deposits

term prepaids

assets (net of accumulated amortization of $ 280,497 at December 31, 2021)

1,235,670,423

1 unchanged sentence

$ 1,448,415,557

LIABILITIES AND STOCKHOLDERS’

Current liabilities:

Accounts payable

AND STOCKHOLDERS’ EQUITY

Accrued expenses

Short term borrowings -

revolving credit line

Operating lease liabilities

Total current liabilities

Long-term liabilities

Convertible notes

Operating lease liabilities

reserve payable

lease liabilities

Current portion of accrued bond

current liabilities

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 June 30, 2022 and December 31, 2021, respectively

Common stock, 0.0001 par

and Contingencies

Stockholders’

stock, 0.0001 par value, 50,000,000 shares authorized, no shares issued and outstanding at September 30, 2022 and December 31, 2021,

stock, 0.0001 par value;

200,000,000 shares authorized;

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

Additional paid-in capital

116,810,405 and 102,733,273 issued and outstanding at September 30, 2022

and December 31, 2021, respectively

paid-in capital

1,057,798,421

Accumulated other comprehensive

other comprehensive loss

( 432,257,421 )

( 152,229,783 )

Total stockholders’

stockholders’ equity

LIABILITIES AND STOCKHOLDERS’ EQUITY

1 unchanged sentence

$ 1,448,415,557

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.

1 unchanged sentence

AND SUBSIDIARIES

CONDENSED STATEMENT OF OPERATIONS

Months Ended June 30,

Costs and expenses

Cost of revenues

Cost of revenues - energy,

hosting and other

CONDENSED STATEMENTS OF OPERATIONS

Months Ended September 30,

of revenues - energy, hosting and other

( 13,772,555 )

7 unchanged sentences

( 8,015,801 )

Total Costs and expenses

( 41,394,556 )

( 6,993,834 )

( 67,788,190 )

costs and expenses

( 40,067,397 )

General and administrative

( 10,263,009 )

1 unchanged sentence

( 19,663,258 )

and administrative expenses

( 12,352,008 )

Impairment of digital currencies

( 99,235,984 )

2 unchanged sentences

( 24,960,000 )

Impairment of patents

Total operating expenses

( 24,960,000 )

of deposits due to vendor bankruptcy filing

( 7,987,147 )

of digital currencies

( 5,903,891 )

Other Operating income

Change in fair value of

digital currencies held in fund

( 6,731,890 )

1 unchanged sentence

( 18,472,750 )

on sale of equipment

Total Other Operating (income)

and unrealized gains (losses) on digital currencies held in fund

( 85,016,208 )

on sale of equipment, net of disposals

operating expenses

( 19,268,739 )

( 63,880,967 )

Operating income (loss)

( 220,999,368 )

2 unchanged sentences

( 22,436,493 )

Non-Operating

income (expenses)

( 239,524,970 )

( 47,955,229 )

Loss before income taxes

Impairment of loan and investment due to vendor bankruptcy filing

non-operating income

( 3,752,301 )

( 10,314,659 )

before income taxes

$ ( 81,172,679 )

$ ( 22,175,507 )

tax (expense) benefit

$ ( 280,220,350 )

5 unchanged sentences

loss per share, basic and diluted:

Weighted average shares

outstanding, basic and diluted:

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

average shares outstanding, basic and diluted:

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

2 unchanged sentences

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

the Six Months Ended June 30, 2021

the Nine Months Ended September 30, 2021

Other Comprehensive

5 unchanged sentences

$ 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

based compensation, net of tax withholding

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

exercised on a cashless basis

exercised for cash

stock issued for cashless exercise of warrants

stock issued for service and license agreements

( 47,700,445 )

of June 30, 2021

as of September 30, 2021

$ 824,612,618

2 unchanged sentences

$ 660,416,428

Six Months Ended June 30, 2022

the Nine Months Ended September 30, 2022

Other Comprehensive

Stockholders’

Balance as of

December 31, 2021

as of December 31, 2021

$ 835,693,610

2 unchanged sentences

$ 683,023,381

Stock based compensation, net

of tax withholding

Issuance of common stock, net

of offering costs/At-the-market offering

Common stock issued for long

term service contract

based compensation, net of tax withholding

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

stock issued for long term service contract

( 280,027,638 )

Balance as of June 30, 2022

as of September 30, 2022

$ 1,057,798,421

2 unchanged sentences

$ 625,101,962

the Three Months Ended June 30, 2021

the Three Months Ended September 30, 2021

Other Comprehensive

Stockholders’

Balance as of

March 31, 2021

as of June 30, 2021

$ 722,543,196

2 unchanged sentences

$ 580,519,285

Stock based compensation, net

of tax withholding

Common stock issued for cashless

exercise of warrants

Common stock issued for service

and license agreements

based compensation, net of tax withholding

stock issued for service and license agreements

( 22,172,567 )

Balance as of June 30, 2021

as of September 30, 2021

$ 824,612,618

2 unchanged sentences

$ 660,416,428

the Three Months Ended June 30, 2022

the Three Months Ended September 30, 2022

Other Comprehensive

Stockholders’

Balance as of

March 31, 2022

as of June 30, 2022

$ 1,016,722,345

2 unchanged sentences

$ 659,447,999

Stock based compensation, net

of tax withholding

Issuance of common stock, net

of offering costs/At-the-market offering

Common stock issued for long

term service contract

balance, value

$ 1,016,722,345

$ ( 356,835,014 )

Balance as of June 30, 2022

$ ( 450,719 )

$ 659,447,999

based compensation, net of tax withholding

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

( 75,422,407 )

as of September 30, 2022

$ 1,057,798,421

$ ( 432,257,421 )

$ ( 450,719 )

$ 625,101,962

balance, value

$ 1,057,798,421

$ ( 432,257,421 )

$ ( 450,719 )

$ 625,101,962

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

2 unchanged sentences

CONDENSED STATEMENTS OF CASH FLOWS

Months Ended June 30,

Months Ended September 30,

FLOWS FROM OPERATING ACTIVITIES

Net income (loss)

$ ( 280,027,638 )

$ ( 47,700,445 )

Adjustments to reconcile

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

Depreciation and amortization

Amortization of prepaid

service contract

Gain on sale of assets

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

and amortization

of prepaid service contract

on sale of assets, net of disposals

( 90,115,824 )

Deferred tax expense

Change in fair value of

digital currencies held in fund

and unrealized losses (gains) on digital currencies held in fund

( 59,410,028 )

Impairment of digital currencies

Stock based compensation

Amortization of bond issuance

Impairment of patents

Other adjustments from

operations, net

Changes in operating assets

and liabilities:

Digital currencies

of digital currencies

based compensation

of bond issuance costs

of assets related to vendor bankruptcy filing

adjustments from operations, net

in operating assets and liabilities:

( 89,329,986 )

1 unchanged sentence

( 13,629,429 )

Prepaid expenses and other

expenses and other assets

( 30,583,448 )

Accounts payable and accrued

( 28,700,147 )

payable and accrued expenses

reserve payable

cash used in operating activities

2 unchanged sentences

FLOWS FROM INVESTING ACTIVITIES

Advances to vendor

( 482,097,485 )

( 191,543,484 )

Purchase of property and

of property and equipment

( 19,829,237 )

( 30,737,688 )

Sale of property and equipment

Purchase of digital currencies

of property and equipment

of digital currencies in fund

( 150,000,000 )

Purchase of equity investments

of equity investments

( 43,999,820 )

4 unchanged sentences

FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance

of common stock, net of issuance costs

Net change in revolving

credit agreement borrowings

Value of shares withheld for taxes

from issuance of common stock, net of issuance costs

from term loan borrowings, net of issuance costs

of shares withheld for taxes

( 4,688,065 )

1 unchanged sentence

cash provided by financing activities

Net (decrease) increase

in cash, cash equivalents and restricted cash

decrease in cash, cash equivalents and restricted cash

( 204,416,437 )

( 108,468,684 )

cash equivalents and restricted cash — beginning of period

cash equivalents and restricted cash — end of period

$ 170,615,847

Supplemental cash flow information:

Interest paid

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

currencies transferred from fund

$ 137,843,761

proceeds from sale of property & equipment

Reclassifications

from advances to vendor to property and equipment upon receipt of equipment

$ 260,574,908

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.

DIGITAL HOLDINGS, INC.

MARATHON DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

10 unchanged sentences

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.

2018, the Company began its bitcoin mining operations by purchasing cryptocurrency mining machines and establishing a data center in

Canada to mine digital assets.

The Company ceased operating in Canada in 2020 and relocated all owned mining equipment out of Canada

The Company has since expanded its activities in the mining of bitcoin across the U.S.

The 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.

As of September 30, 2022, the Company is solely focused on the mining of bitcoin and ancillary opportunities within the bitcoin

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2 unchanged sentences

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.

The September 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

Annual Report.

Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 10, 2022.

of Presentation and Principles of Consolidation

1 unchanged sentence

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.

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.

Reclassifications

Certain prior period amounts have been reclassified

to conform to the current period presentation.

These reclassifications have no effect on the reported financial position, results of operations,

or cash flows.

Previously reported compensation and related taxes, consulting fees, and professional fees have now been reclassified within

general and administrative expenses.

In addition, previously reported change in fair value of warrant liability, realized gain on sale

of digital currencies and interest income have now been reclassified as other non-operating income.

of Estimates and Assumptions

6 unchanged sentences

of digital currencies.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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

3 unchanged sentences

SCHEDULE OF RESTRICTED CASH

June 30, 2022

June 30, 2021

Cash and cash equivalents

$ 170,615,847

Restricted cash

and cash equivalents

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.

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

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

exists when the carrying amount exceeds its fair value.

In testing for impairment, the Company has the option to first perform a qualitative

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

If it is determined that it is not more likely

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

If the Company concludes otherwise, it is required

to perform a quantitative impairment test.

To the extent an impairment loss is recognized, the loss establishes the new cost basis of

Digital currencies, and Digital currencies

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

Digital currencies are recorded as indefinite lived

intangibles at cost less impairment in accordance with FASB ASC 350 – Intangibles-Goodwill and Other.

Digital currencies,

restricted represent collateral for long-term loans and as such are classified as a non-current asset.

An intangible asset with an indefinite useful

life is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating

that it is more likely than not that the indefinite-lived asset is impaired.

When the exchange-traded price of digital currencies declines

below its carrying value, the Company has determined that it is more likely than not that an impairment exists.

When this occurs, the

amount of impairment to record is determined based on the fair value of digital currencies in accordance with the fair value measurement

framework in FASB ASC 820 – Fair Value Measurement “(ASC 820”).

If the fair value of digital currency is lower than

its carrying amount, the Company will record an impairment in an amount by which the carrying value exceeds the fair value of the digital

Subsequent reversal of impairment losses is not permitted.

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

following table presents the activities of the digital currencies for the nine months ended September 30, 2022:

SCHEDULE OF ACTIVITIES OF DIGITAL CURRENCIES

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

currencies at December 31, 2021*

$ 123,243,264

Additions of digital currencies

Digital currencies transferred from fund

Impairment of digital

of digital currencies

currencies transferred from fund

of digital currency for charitable contribution

of digital currencies

( 153,045,376 )

Digital currencies, Digital currencies, restricted and Digital currencies loaned

at June 30, 2022

currencies at September 30, 2022

$ 197,161,440

* 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):

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

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

a loan 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 September 30,

currencies at December 31, 2020

of digital currencies

( 18,472,750 )

received on digital currencies, restricted

of digital currencies, net

currencies at September 30, 2021

September 30, 2022, the Company held approximately 10,670 bitcoin with a carrying value of $ 197.2 million.

The bitcoin were classified

on the balance sheet as digital currencies ( 6,842 bitcoin or approximately $ 126.4 million carrying value) and digital currencies, restricted

( 3,828 bitcoin or approximately $ 70.8 million carrying value).

At September 30, 2022, the fair market value of the Company’s bitcoin

holdings was approximately $ 207.3 million, including digital currencies and digital currencies, restricted.

Digital currencies, restricted

is comprised of bitcoins held as collateral for term loan and revolving line of credit (“RLOC”) borrowings.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

– 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) bitcoin per block, which decreased from twelve and a half (12.5) bitcoin per block in May 2020.

It is estimated that the number

of bitcoin per block will halve again in May 2024.

Many factors influence the price of bitcoin and potential increases or

decreases in prices in advance of or following a future halving is unknown.

Currencies Held in Fund

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 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.

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

The Company owned 100 % of the limited partnership

interests and consolidated 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

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

Fund qualified and operated 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 the Fund are traded on a number of active markets globally, including the over the counter (“OTC”)

market and digital asset exchanges.

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

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

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

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.

The digital assets held by the Fund were traded on a number of active markets globally, including the over-the-counter market

and digital asset exchanges.

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

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

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

The fair value of the assets within the Fund were measured daily

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

Any changes in the fair value of the

assets were recorded in the Consolidated Statement of Operations under the caption “Realized and unrealized gains (losses) of digital currencies held in fund.”

On June 10, 2022, the Company redeemed 100%

of its limited partnership interest in the Fund in exchange for approximately 4,768.5 bitcoin (with a fair market value of

approximately $ 137.8 million).

This bitcoin was transferred from the Fund’s custodial wallet to the Company’s digital

Upon redemption, the Company no longer had a majority voting interest in the Fund and therefore deconsolidated the Fund in

accordance with ASC 810 – Consolidation.

The Company did not record any gain or loss upon deconsolidation as the digital

assets in the Fund were measured at fair value.

Subsequent to the transfer, the bitcoin transferred to the Company’s digital

wallet has been accounted for at cost less impairment in line with its digital currencies measurement policy as described under Digital

Currencies, Digital currencies, restricted and Digital currencies loaned .

The activity in the Fund for the nine months ended

September 30, 2022 and twelve months ended December 31, 2021 was as follows:

OF DIGITAL CURRENCIES HELD IN FUND

Digital currencies held in fund at December 31, 2021

currencies held in fund at December 31, 2021

$ 223,915,761

Sale of digital currencies

Change in fair value of digital currencies held in fund

of digital currencies

Realized and unrealized losses on digital currencies held in fund

( 85,016,208 )

Management expenses incurred by fund

Digital currencies transferred out of fund

expenses incurred by fund

currencies transferred out of fund

( 137,843,761 )

Digital currencies held in fund at June 30, 2022

currencies held in fund at September 30, 2022

currencies held in fund at December 31, 2020

of digital currencies held in fund

Realized and unrealized gains on digital currencies held in fund

expenses incurred by fund

currencies held in fund at December 31, 2021

$ 223,915,761

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

Investments are recorded at cost and the Company analyzes the value of investments 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

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.

downside risk, the Company may at times enter into equity investments or Simple Agreements for Future Equity (“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 Company.

On December 21, 2021 and December 30, 2021, the

Company entered into two separate SAFE agreements classified on the balance sheet as non-current assets.

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 Securities (“ASC 321”).

DIGITAL HOLDINGS, INC.

1 unchanged sentence

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

February 3, 2022, the Company invested approximately $ 10

million in convertible preferred stock of Compute North Holdings, Inc.

acquisition of convertible preferred stock was accounted for as investments in 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 ASC 321.

This investment was subject to an impairment of $ 10.0

million following Compute North’s Chapter 11 Bankruptcy filing in September 2022 (See Note 6).

May 3, 2022, the Company converted $ 2.0 million

from a SAFE investment into preferred stock while purchasing an additional $ 3.5 million

of preferred stock in Auradine, Inc.

along with entering into a commitment to acquire $ 30.0 million of additional shares of

preferred stock.

This forward contract was accounted for under ASC 321 as an equity security.

On September 27, 2022, pursuant to the

forward contract, the Company increased its investment in the preferred stock of Auradine, Inc.

by $ 30.0 million,

bringing its total carrying amount of investment in Auradine, Inc.

preferred stock to $ 35.5 million

with no noted impairments or other adjustments (See Note 11) .

As of September 30, 2022, the Company has one remaining

SAFE investment with a carrying value of $ 1.0 million, with no noted impairments or other adjustments.

Value of Financial Instruments

18 unchanged sentences

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

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

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

securities and other observable inputs.

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

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

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

31, 2021, respectively:

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

value measured at June 30, 2022

Total carrying

Quoted prices

in active markets

value measured at September 30, 2022

carrying value at September 30,

prices in active markets

other observable inputs

unobservable inputs

Market Accounts

value measured at December 31, 2021

Total carrying value at

Quoted prices

in active markets

carrying value at

prices in active markets

other observable inputs

unobservable inputs

Market Accounts

$ 266,635,158

Digital currencies held in fund

currencies held in fund

$ 223,915,761

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.

1 unchanged sentence

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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

June 10, 2022, the Company withdrew approximately 4,769 bitcoin from its investment in NYDIG Digital Assets Fund III, LP 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 an indefinite-lived intangible.

Income and Basic and Diluted Net Income per Share

2 unchanged sentences

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 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.

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

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

For the three and nine months ended September 30, 2022, respectively, the Company incurred a loss position and as such 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.

of potential shares for the diluted earnings (loss) per share calculation at September 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

Convertible notes to exchange

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

of September 30,

to purchase common stock

notes to exchange common stock

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

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

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

loss attributable to common shareholders

$ ( 75,444,407 )

2 unchanged sentences

$ ( 47,700,445 )

Weighted average common shares - basic and diluted

Loss per common share - basic

average common shares - basic and diluted

per common share - basic and diluted

3 – REVENUES FROM CONTRACTS WITH CUSTOMERS

14 unchanged sentences

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).

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).

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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

5 unchanged sentences

consideration

● Constraining

estimates of variable consideration

9 unchanged sentences

as appropriate.

Company’s ongoing major or central operations is to use computing power to solve cryptographic algorithms to record and publish

Bitcoin (“BTC”) transactions to blockchain ledgers or provide BTC transaction verification services to the BTC network (such

activity, collectively, “mining”).

In return for verifying transactions to be added as a new block to the network (i.e.,

successfully ‘solving’ a block), the Company is entitled to receive transaction fees and block rewards in the form of BTCs.

Transaction fees are specified in each block of transactions request and are paid by the requester.

The Bitcoin blockchain protocol itself

currently issues a block reward for each solved block at a current rate of 6.25 BTC per block.

Such reward is expected to be reduced

to half of that in 2024.

The Company also mines in a self-operated private pool, which was open to third-party pool participants from

September 2021 until May 2022.

The third-party pool participants employed the Company’s services as a pool operator in exchange

for a pool fee paid to the Company.

As a private pool operator, the Company facilitated the contribution of hash rate by third-party

pool participants who choose to join or leave the pool at will.

rewards - The inflow of bitcoin as a result of receiving a block reward meets the definition of revenue because it gives the miner

economic benefits from rendering services or carrying out its mining activities.

Therefore, the Company may account for the block reward

Company determined it should recognize block rewards it receives from successfully solving a block as revenue from a contract

with a customer (i.e.

BTC network or pool operators) under FASB ASC 606.

The customers under each type of revenue (Participant vs.

pool participants) are further noted below.

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.

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

Block rewards included in revenues on the statements of operations

were approximately $12.5 million and $50.8 million, respectively for the three months ended September 30, 2022, and September 30, 2021.

Block rewards included in revenues on the statements of operations were approximately $88.1 and $85.6 million for the nine months ended

September 30, 2022 and September 30, 2021.

Fees - The transaction fees are specified in each transaction request and paid by the requester to the miner in exchange for the

successful processing of the transaction.

The requester meets the definition of a customer in FASB ASC 606 and pursuant to AICPA Practice

Guide “Accounting for and Auditing Digital Assets” 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.

fees included in revenues on the statements of operations were approximately $ 0.2 million and $ 0.9 million, for the three

months ended September 30, 2022 and September 30, 2021, respectively.

Transaction fees included in revenues on the statements of operations were approximately

$ 1.2 million and $ 4.6 million for the nine months ended September 30, 2022 and September 30, 2021, respectively.

Fees - Pool fees earned by the Company as an operator of a private pool are recognized as revenue from contracts with customers in

accordance with FASB ASC 606.

Pool fees included in revenues on

the statements of operations were approximately zero and $ 0.05 million, respectively for the three months ended September 30, 2022 and

September 30, 2021.

Pool fees included in revenues on the statements of operations were approximately $ 0.3 million and $ 0.05 million,

respectively for the nine months ended September 30, 2022 and September 30, 2021.

As of May 2022, third party miners were no longer

participating in the Company’s mining pool.

As such, the Company ceased recognizing pool fees.

DIGITAL HOLDINGS, INC.

1 unchanged sentence

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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.

The Company earns revenues as:

a participant in a third-party operated mining pool (“Participant”)

a participant in a privately operated mining pool (“Private pool participant”)

the operator of a private pool (“Operator”)

Company has entered into contracts with third-party mining pool operators, whom the Company considers its customer under FASB ASC

The Company provides a service of computing power (i.e., generated hash rate) that is an output of the Company’s ordinary

activities in exchange for consideration.

These contracts are terminable at any time by either party and the Company’s

enforceable right to compensation only begins when the Company provides computing power to the mining pool operator.

In exchange for

providing computing power, the Company is entitled to consideration equal to a fractional share of the BTC reward (non-cash

consideration, less any pool fees paid to the mining pool operator which are recorded as contra-revenues), for successfully adding

a block to the blockchain.

The Company’s fractional share of the block reward is based on the proportion of the

Company’s contributed hash rate to the total computing power contributed by all mining pool participants in solving the

current algorithm as calculated and determined by the pool operator, net of any pool fees.

provision of computing power is the only performance obligation under our arrangements with the third-party mining pool operators.

The transaction consideration the Company receives, is non-cash and variable in that the amount that it receives is dependent on the

success of the mining pool regardless of whether any hash rate is contributed by the Company (the pool being the first to solve an

The non-cash consideration is measured at the estimated fair value of the contract inception.

However, because it is not

probable that a significant reversal of revenue will not occur, as the Company does not have visibility to exactly when a block is

won and the pro rata share to which it is entitled (as it does when the Company is a participant in a privately operated pool where

the Company is also the pool operator) all consideration is constrained until the Company receives confirmation of the consideration

it earned, usually via the settlement of the block reward in the Company’s digital wallet, at which time revenue is

The Company measures the non-cash consideration at the fair value on the date the block reward is received in the

Company’s digital wallet when the contingency constraint on the transaction consideration is resolved, which is not

materially different than the fair value at contract inception or the time the Company has earned the awards from the third-party

mining pools.

There is no significant financing component in these transactions.

1 unchanged sentence

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.

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

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

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

pool participant

Company operates as a participant in its privately operated pool (“Marapool”).

From September 2021 until May 2022, the

Company operated as a participant in Marapool alongside third-party pool participants.

The Company views the transaction requestor and the blockchain network as its customers under FASB ASC 606.

The Company provides a

service (successful mining) that is an output of the Company’s ordinary activities in exchange for consideration from the

requester and the blockchain network (transaction fee and block reward, respectively).

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.

performance obligation has been satisfied (i.e., earned) in accordance with FASB ASC 606-10-25-30.

Specifically, the inception of

the contract and the point in time at which the consideration in that same contract is earned occurs simultaneously.

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.

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).

occurs in conjunction with the inception of the contract and the fulfillment of the performance obligation (i.e.

successfully solving

a block) and therefore, there is no risk of collectability.

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

at that point in time, which is the same point in time as contract inception.

The transaction consideration the Company receives, is

non-cash consideration paid in BTC, and is comprised of transaction fees and block rewards.

The transaction consideration is variable

in that the amount of block reward earned is based on the pro rata share of the computing power the Company contributes in relation to

the total computing power contributed by the pool.

The 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.

The Company is able to apply an estimate to the variable transaction

consideration without risk of significant revenue reversal as the Company has visibility to the computing power it provides for a given

transaction, and the exact timing of when its privately operated pool successfully solves for a block (as compared to when the Company

is a participant in a third-party operated pool as discussed above).

As the Company can estimate its pro rata share of block rewards

and transaction fees prior to the receipt of the rewards in their digital wallet, the Company measures the non-cash consideration at

the fair value when block reward and transaction fee are earned, which is the same point in time as contract inception.

DIGITAL HOLDINGS, INC.

1 unchanged sentence

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.

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 the block reward and transaction fees are earned, which is not materially different than the fair value at contract inception,

or the time the Company has earned the award from the requester and network.

There is no significant financing component in these transactions.

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

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

September 2021 until May 2022, the Company entered into pool service contracts with third-party mining pool participants, whom the

Company considered to be a customer under FASB ASC 606.

In these contracts, the Company provided a facilitator service to connect

miners to the blockchain network and to track hash rate generated by each pool participant in exchange for non-cash consideration

equal to a percentage of the block reward and transaction fee earned by the individual pool participants as pool fees.

These contracts were terminable at any time by either party and the Company’s enforceable right to compensation only began

when the Company provided the facilitator services and access to the pool’s software licenses to the pool

participants.

Company’s performance obligations under the arrangement with third-party pool participants were to provide access to the

pool’s software license and track the hash rate generated by each pool participant to enable calculation of the pro rata block

reward and transaction fee payment to each pool participant.

The transaction consideration the Company received is non-cash and

variable in that the pool fees earned is based on the block reward and transaction fees earned by pool participants.

consideration is measured at the estimated fair value of the contract inception, which occurs simultaneously to when the Company has

earned the pool fees (i.e., upon successful mining of a block).

The Company is able to estimate variable consideration at the point

in time it has earned the fees without risk of significant revenue reversal as the Company has visibility to the exact timing of

when the pool successfully solves for a block as pool operator (as compared to when the Company is a participant in a third-party

operated pool) and the block rewards and transaction fees each pool participant is entitled to base on contributed hash rate.

Company can estimate the amount of pool fees prior to the receipt of the fees in the pool’s digital wallet, the Company

measures the non-cash consideration at the fair value on the date the pool fees are earned (using the stated convention below),

which occurs simultaneously to contract inception.

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 the pool fees are earned, which is not materially different than the fair value at contract inception which occurs simultaneously

to the time the pool participants have earned the award from the requester and network.

There is no significant financing component in

these transactions.

associated with the licensed software used in the operation of the private pool are recorded as cost of revenues.

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.

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 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.

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

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

within several days of execution of a specific contract and periodically thereafter with final payments due prior to each shipment date.

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

of September 30, 2022 and December 31, 2021, such advances totaled approximately $ 687.8 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

3 unchanged sentences

We classify these payments as Deposits on the balance sheet.

NOTE 5 – PROPERTY AND EQUIPMENT

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

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

5 – PROPERTY AND EQUIPMENT

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

SCHEDULE OF COMPONENTS OF PROPERTY, EQUIPMENT

Mining equipment

Construction in Progress

Mining patent

Gross property, equipment and intangible assets

Accumulated depreciation

and amortization

( 55,390,407 )

( 21,591,958 )

property and equipment, net

Accumulated depreciation and amortization

equipment and intangible assets, net

$ 314,257,284

$ 277,174,020

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.

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

2021 was $ 26.3 million and $ 4.3 million, respectively.

The Company’s depreciation expense related to property and equipment for

the nine months ended September 30, 2022 and September 30, 2021 was $ 64.9 million and $ 8.0 million, respectively.

expense for the three months ended September 30, 2022 and September 30, 2021 was $ 11 thousand and $ 18 thousand, respectively.

expense for the nine months ended September 30, 2022 and September 30, 2021 was $ 32 thousand and $ 54 thousand, respectively.

6 – COMPUTE NORTH BANKRUPTCY

On September 22, 2022, Compute North Holdings,

(along with its affiliated debtors, collectively, “Compute North”), filed for chapter 11 bankruptcy protection in

Bankruptcy Court for the Southern District of Texas under Chapter 11 of the U.S.

Bankruptcy Code (11 U.S.

Code section 101 et

Marathon’s financial exposure to Compute North at the time of the bankruptcy filing included:

- Approximately

$ 10 million in Convertible Preferred Stock of Compute North Holdings, Inc.

- Approximately

$ 21 million related to an unsecured Senior Promissory note with Compute North LLC.

- Approximately

$ 50 million in operating deposits with Compute North primarily related to the King Mountain

and Wolf Hollow hosting facilities.

The Company assessed this financial exposure and recorded an impairment

of the Convertible Preferred Stock, the unsecured Senior Promissory note and certain deposits totaling $39 million during the three months

ended September 30, 2022.

The ultimate outcome of the bankruptcy process, and its impact on the remaining deposits held by the Company,

remains to be determined.

The Company has engaged creditor’s counsel and is vigorously defending and protecting its various assets

at the Compute North facilities as well as minimizing its long-term financial exposure with regard to Compute North.

7 – LEGAL RESERVES

the three months ended September 30, 2022, the Company recorded a $ 25

million legal reserve related to the fair value

of certain stock grants used for personal income tax reporting purposes during 2021.

The majority of this reserve was related to a claim

made by the Company’s former Chairman and CEO.

In working on this initial claim, the Company discovered that five other individuals

were also impacted by the same issue, including one current board member and the current Chairman and CEO.

The total amount of this portion

of the reserve amounted to less than $ 1

Legal settlements that were accrued

but remained unpaid as of September 30, 2022 were classified as “legal reserve payable”.

All of these legal settlements were

finalized and paid as of October 15, 2022.

8 – STOCKHOLDERS’ EQUITY

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 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.

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

Wainwright & Co.,

LLC (“Wainwright”) relating to shares of its common stock.

In accordance with the terms of the sales agreement, the

Company may offer and sell shares of our common stock having an aggregate offering price of up to $ 750

million from time to time through Wainwright acting as its sales agent.

As of September 30, 2022, the Company had sold 13,459,752

shares of common stock for an aggregate purchase price of $ 198.7

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

DIGITAL HOLDINGS, INC.

2 unchanged sentences

B Convertible Preferred Stock

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

of September 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.

As of September 30, 2022, there

were no shares of Series E Convertible Preferred Stock outstanding.

Stock Warrants

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 the Company’s issued and outstanding stock warrants and changes during the nine months ended September

30, 2022 is as follows:

SUMMARY OF OUTSTANDING STOCK WARRANTS

1 unchanged sentence

Average Remaining Contractual Life

Outstanding as of December 31,

Outstanding as of June 30, 2022

Warrants exercisable as of June 30, 2022

The aggregate intrinsic value of warrants outstanding

and exercisable at June 30, 2022 was

as of December 31, 2021

as of September 30, 2022

exercisable as of September 30, 2022

aggregate intrinsic value of warrants outstanding and exercisable at September 30, 2022 was

Stock Options

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

of September 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 nine months ended September 30,

2022, as follows:

SUMMARY OF RESTRICTED STOCK AWARD ACTIVITY

Average Grant Date Fair Value

Nonvested at December 31,

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.

at December 31, 2021

at September 30, 2022

the third 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 $ 2.1

DIGITAL HOLDINGS, INC.

1 unchanged sentence

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

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 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 ”).

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 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.

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.

Bank 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

million principal amount of Notes.

was exercised and an additional $ 97.5

million principal amount of Notes were issued

on November 23, 2021.

As of September 30, 2022 and December 31, 2021, notes outstanding, net of unamortized discounts of approximately

million and $ 19.1

million, respectively, were $ 731.3

million and $ 728.4

million, respectively.

July 28, 2022, the Company entered into a Revolving Credit and Security Agreement (the “Agreement” or “RLOC”)

with Silvergate Bank (the “Bank”) pursuant to which Silvergate has agreed to loan the Company up to $ 100 million on a revolving

basis pursuant to the terms of the Agreement.

This facility refinanced and replaced an existing $ 100 million facility the Company had

in place with the Bank.

On the same date the Company also entered into a $ 100 million principal term loan facility (the “Term Loan”).

The terms of the facilities set forth in the RLOC and the Term Loan are as follows:

is on August 5, 2024 .

of the facilities:

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.

Company may borrow up to $ 100 million on the term loan, with $ 50 million to be made as of the Closing Date (the “Initial Draw”),

and $ 50 million 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.

0.35 % of the Loan Commitment to the Bank (or $ 350 thousand);

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

for more than one year).

An origination fee of $ 150 thousand and a contingent draw fee in the amount of $ 250 thousand (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.

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

the facilities:

Interest 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:

and one-quarter percent (5.25%) for any days during an Interest Period the Loan to Value (“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

(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 forty (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%).

Interest, 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.

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

for the facilities:

RLOC and term loan facilities are 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.

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

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

The Company bears the risk of loss from market value declines of its collateral

pursuant to its obligation to pledge additional bitcoin if its market value declines such that outstanding borrowings under the RLOC are

undercollateralized.

The Company may also withdraw its collateral from the Collateral Account if market value of bitcoin increases and

outstanding borrowings under the RLOC are overcollateralized or if such borrowings are repaid in whole or in part.

Advance Rates

the facilities:

origination, the Company must ensure the Collateral Account balance has sufficient bitcoin to cause the LTV ratio to equal 65 % (or

less) (“Minimum Advance Rate”) on the unpaid principal balance of the facilities.

If at any time the LTV ratio exceeds

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

for the facilities:

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

The Company must maintain a minimum liquidity of $ 25 million.

10 – LEASES, COMMITMENTS AND CONTINGENCIES

February 2016, the FASB issued ASU No.

13 unchanged sentences

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.

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

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

3 unchanged sentences

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

Effective September 21, 2022, the Company rented warehouse space located at 512 N.

Douglas Ave., Oklahoma City, OK, 73106, for a term

of 36 months.

of September 30, 2022, the Company’s right-of-use (“ROU”) assets and total lease liabilities were $ 1.4 million and

$ 1.1 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.

The Company has made payments and amortized the right-of-use assets totaling $ 29 thousand and $ 48 thousand, respectively, for

the three- and nine-month periods ending September 30, 2022.

DIGITAL HOLDINGS, INC.

4 unchanged sentences

the following:

SCHEDULE OF COMPONENTS OF LEASE COST

the Six Months Ended

Operating leases

Operating lease expense

OF COMPONENTS OF LEASE COST

the Nine Months Ended

lease expense

lease rent expense

the Three Months Ended

Operating leases

Operating lease expense

Short-term lease rent

Total rent expense

lease expense

lease rent expense

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

SUMMARY OF MINIMUM LEASE PAYMENTS

the Six Months Ended

Operating cash flows from operating

Weighted-average remaining lease term –

operating leases

Weighted-average discount rate – operating

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 the Company and 10 Doe Defendants.

The Complaint alleges

six causes of action against the Company, (1) Breach of Written Contract;

OF MINIMUM LEASE PAYMENTS

the Nine Months Ended

cash flows from operating leases

Weighted-average

remaining lease term – operating leases

Weighted-average

discount rate – operating leases

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

OF CONTRACTUAL MINIMUM LEASE

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

January 14, 2021, Plaintiff Michael Ho (“Plaintiff” or “Ho”) filed a Civil Complaint for Damages and

Restitution (“Complaint”) against 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;

Intentional Interference with Prospective Economic Relations;

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 (6) Negligent Interference with Prospective Economic Relations,

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

The claims 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,

22, 2021, the Company responded to Mr.

Ho’s Complaint with a general denial and the assertion of applicable affirmative defenses.

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.

Ho’s Complaint with a general denial and the assertion of applicable affirmative

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 Company 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.

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

On February 11, 2022, the Court granted the motion and dismissed Ho’s 2nd, 5th and 6th causes of action.

substantially closed.

The Court held a pre-trial conference on February 24, 2022, where it vacated the March 3, 2022 trial date and

ordered the parties to meet and confer on a new trial date.

The Court discussed the various theories of damages maintained by the

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 providers.

Trial is set to begin in February 2023.

2 unchanged sentences

In conjunction therewith, the Company filed a Current Report on Form 8-K on October 13, 2020.

The 8-K discloses that,

The 8-K disclosed that,

pursuant to a Data Facility Services Agreement, the Company issued 6,000,000 shares of restricted Common Stock, in transactions exempt

12 unchanged sentences

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

September 12, 2022, the court appointed Carlos Marina as lead plaintiff.

On October 21, 2022, lead plaintiff voluntarily dismissed the

complaint without prejudice.

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

12 unchanged sentences

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

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.

The consolidated

complaint has not yet been filed.

the opinion of management, after consulting legal counsel, the ultimate disposition of these 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

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.

North Bankruptcy

September 22, 2022, Compute North filed

for chapter 11 bankruptcy protection.

Compute North provides operating services to the Company and hosts our equipment in multiple facilities.

We deliver miners to Compute North, which then installs the equipment in several facilities, operates and maintains the equipment, and

provides energy to keep the miners operating.

In chapter 11, Compute North is currently seeking to sell substantially all of its assets,

including its direct and indirect ownership interests in the facilities that house the Company’s miners.

Compute North may also

seek to assume and assign the Compute North agreements to which the Company is party to one or more third-party purchasers of Compute

North’s assets or it may seek to reject such agreements.

Accordingly, Compute North’s chapter 11 cases could cause a disruption

in services provided by Compute North to us and, therefore, could have an adverse effect on our operations in the facilities managed

by Compute North.

DIGITAL HOLDINGS, INC.

1 unchanged sentence

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 .

this stage of Compute North’s chapter 11 cases, it is difficult to predict whether Marathon will receive any meaningful recovery

on account of its claims.

11 – RELATED PARTY MATTERS

September 23, 2022, the Company made an incremental $ 30

million investment in Auradine, Inc.,

bringing its total holdings in Auradine to $ 35.5

million based upon a previously issued and disclosed

SAFE instrument.

Said Ouissal, a director of the Company, owns approximately 10 %

of the issued and outstanding shares of Auradine, and Fred Thiel, the Company’s Chairman and CEO, sits on Auradine’s Board

of Directors.

On November 3, 2022, the Company’s Board met and determined that Said Ouissal is no longer deemed to be an independent

director of the Company.

As a result, Mr.

Ouissal stepped down from the Audit and Compensation Committees.

12 – REVISION OF CERTAIN PRIOR PERIOD AMOUNTS

We have revised amounts reported in previously issued financial statements

for the periods presented in this Quarterly report on Form 10-Q related to an immaterial error.

The error relates to the non-consolidation

of an investment fund as described below.

We evaluated the aggregate effects of the errors to our previously issued financial statements in accordance

with SEC Staff Accounting Bulletins No.

108 and, based upon quantitative and qualitative factors, determined that the errors

were not material to the previously issued financial statements and disclosures included in our Annual Reports on Form 10-K for the years

ended December 31, 2021, or for any quarterly periods included therein or through our Quarterly Report on Form 10-Q for the quarterly

period ended March 31, 2022.

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

(“Fund”) whereas the Fund purchased approximately 4,812.66

bitcoin at an aggregate purchase price of $ 150

On June 10, 2022 the company withdrew approximately 4,768.5

bitcoin from the investment fund and the Fund was subsequently terminated.

During the period of time when the company held its

investment in the Fund, it accounted for the results of the Fund, in their entirety, as a single line item on the balance sheet

(“Digital currencies held in fund”), statements of operations and statements of cash flows (“Change in fair value

of digital currencies held in fund”).

Subsequent to the termination of the Fund, the Company concluded that this accounting

was incorrect and that it must consolidate the Fund, showing any assets, liabilities and expenses of the Fund as separate components

of its financial statements.

correction of this error has resulted in revisions to certain line items on the balance sheet as of December 31, 2021, the

statements of operations for the three and nine months ended September 30, 2021, and the statement of cash flows for the nine-month

period ended September 30, 2021.

A reconciliation of the various financial statement captions that have been revised from the

previous period presentation follows:

OF RESTATEMENTS AND RECLASSIFICATIONS

Sheet as of December 31, 2021

Cash and cash equivalents

currencies held in fund

Investment fund

( 223,778,545 )

Prepaid expenses and other current assets

Accrued expenses

of Operations

months ended September 30, 2021

reported / reclassified (1)

and administrative expenses

( 98,996,339 )

( 99,235,984 )

( 158,763,196 )

( 159,411,404 )

Change in fair value of investment in NYDIG fund

( 41,850,203 )

( 58,765,274 )

Realized and unrealized gains (losses) on digital currencies held in fund

( 64,283,755 )

( 22,436,493 )

( 106,717,049 )

( 47,955,229 )

of Cash Flows

months ended September 30, 2021

and unrealized gains on digital currencies held in fund

( 59,410,028 )

Change in fair value of investment securities

( 58,765,274 )

payable and accrued expenses

Net cash used in operating activities

( 43,914,493 )

( 44,357,170 )

Sale of digital currencies in investment fund

Net cash used in investing activities

( 372,223,134 )

( 371,780,457 )

(1) See reclassifications in Note 2

13 – SUBSEQUENT EVENTS

During October 2022, the Company borrowed an additional $ 50 million under its RLOC facility for general corporate purposes

and provided an additional 3,993 bitcoin as collateral for this borrowing.

This increased the Company’s collateral balance to 7,821

On November 9, 2022, bitcoin prices declined to a new yearly low on concerns of financial instability in the crypto industry.

As a result, the Company was required to provide an additional 1,669 bitcoin (valued

at $16,212.50 per bitcoin) as collateral for its $ 50 million RLOC and $ 50 million term loan borrowings, bringing its total collateral

balance to 9,490 bitcoin (approximately $ 153.9 million).

The Company’s total bitcoin holdings as of November 9, 2022, are approximately

11,440 bitcoin, of which 1,950 (approximately $ 31.6 million) are unrestricted.

Given the uncertainty around bitcoin prices in the near-term,

the Company has decided to delay previously announced plans to refinance the RLOC with a term loan during the month of November.

enables the Company to retain the optionality to repay the RLOC borrowings in the near-term versus committing to a two-year term loan

borrowing which would carry prepayment penalties.

The Company retains an option to draw an additional $50 million on the term loan through

April of 2023.

The Company has evaluated other 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 except as disclosed above and in Note 6 – Compute North Bankruptcy, Note

7 – Legal Reserves and Note 11 – Related Party matters.

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