What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-08-08 compared with 2023-05-10 · 761 added, 525 removed, 440 unchanged (75% of the section changed)

2 unchanged sentences

AND SUBSIDIARIES

CONDENSED BALANCE SHEET

(in thousands, except share and per share data)

CONSOLIDATED BALANCE SHEETS

thousands, except share and per share data)

Current assets:

5 unchanged sentences

Total current assets

Other assets:

Property and equipment (net of accumulated depreciation of $ 34,356 and $ 16,622 , respectively)

Property and equipment, net

Advances to vendors

3 unchanged sentences

Digital assets, restricted

Total other assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Total long-term assets

LIABILITIES, SERIES A PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

Current liabilities:

8 unchanged sentences

Operating lease liabilities

Deferred tax liabilities

Total long-term liabilities

Series A Preferred Stock , 0.0001

par value, 50,000,000 shares

authorized, 15,000 and no

shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively (outstanding at redemption value)

Stockholders’ Equity:

Preferred stock, 0.0001 par value, 50,000,000 shares authorized, no shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively

Common stock, 0.0001 par value, 200,000,000 shares authorized;

167,259,602 and 145,565,916 issued and outstanding at March 31, 2023 and December 31, 2022, respectively

174,209,038 and 145,565,916 issued and outstanding at June 30, 2023 and December 31, 2022, respectively

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated deficit

Total stockholders’ equity

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

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

TOTAL LIABILITIES, SERIES A PREFERRED STOCK AND STOCKHOLDERS’ EQUITY

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

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

CONDENSED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

CONSOLIDATED STATEMENTS OF OPERATIONS

thousands, except share and per share data)

Three months ended June 30,

Six months ended June 30,

(As Restated)

Total revenues

8 unchanged sentences

Impairment of patents

Realized gains on digital assets and unrealized gains (losses) on digital assets loan receivable

Realized and unrealized gains (losses) on digital assets held within Investment Fund

Gains on digital assets and losses on digital assets loan receivable

Gain on sale of equipment, net of disposals

Losses on digital assets held within investment fund

Total operating expenses

4 unchanged sentences

Loss before income taxes

Income tax benefit (expense)

Net loss per share, basic and diluted:

Weighted average shares outstanding, basic and diluted:

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

Income tax expense

Series A Preferred Stock accretion to redemption value

Net loss attributable to common stockholders

$ ( 212,626 )

$ ( 229,735 )

Net loss attributable to common stockholders per common stock - basic and

Weighted average common stock outstanding - basic and diluted

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

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

the Three Months Ended March 31, 2022

Preferred Stock

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

thousands, except share and per share data)

the Three Months Ended June 30, 2023

Stockholders’

(in thousands, except share and per share data)

Balance as of Balance as of March 31, 2023

$ ( 847,576 )

Stock-based compensation, net of tax withholding

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

Series A Preferred Stock accretion to redemption value

Balance as of June 30, 2023

$ ( 866,709 )

the Six Months Ended June 30, 2023

Stockholders’

Balance as of December 31, 2022

2 unchanged sentences

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

Common stock issued for long term service contract

Balance as of March 31, 2022

Series A Preferred Stock accretion to redemption value

Balance as of June 30, 2023

$ ( 866,709 )

the Three Months Ended March 31, 2023

Preferred Stock

Additional Paid-in

Total Stockholders’

(in thousands, except share and per share data)

the Three Months Ended June 30, 2022

Stockholders’

Balance as of Balance as of March 31, 2022 (As Restated)

$ ( 163,359 )

Stock-based compensation, net of tax withholding

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

Balance as of Balance as of June 30, 2022 (As Restated)

$ ( 375,985 )

the Six Months Ended June 30, 2022

Stockholders’

Balance as of December 31, 2021

$ ( 146,250 )

Stock-based compensation, net of tax withholding

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

Balance as of March 31, 2023

Common stock issued for long term service contract

Balance as of Balance as of June 30, 2022 (As Restated)

$ ( 375,985 )

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

$ ( 375,985 )

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

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

CONDENSED STATEMENTS OF CASH FLOWS

(in thousands)

Three Months Ended March 31,

(in thousands)

CASH FLOWS FROM OPERATING ACTIVITIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

(As Restated)

OPERATING ACTIVITIES

$ ( 229,735 )

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

1 unchanged sentence

Amortization of prepaid service contract

Deferred tax expense (benefit)

Realized and unrealized losses on digital assets held within Investment Fund

Realized (gains) on digital assets and unrealized losses on digital assets loan receivable

Deferred tax expense

Losses on digital assets held within investment fund

Gains on digital assets and losses on digital assets loan receivable

Impairment of digital assets

Gain on sale of equipment, net of disposals

Stock-based compensation

4 unchanged sentences

Changes in operating assets and liabilities:

Digital assets:

Revenues from digital asset production

Proceeds from sale of digital assets

Prepaid expenses and other assets

2 unchanged sentences

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

INVESTING ACTIVITIES

Advances to vendors

Purchase of property and equipment

Sale of property and equipment

Proceeds from sale of digital assets

Investments in joint venture

Purchase of equity investments

Sale of digital currencies in investment fund

Deconsolidation of fund

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

FINANCING ACTIVITIES

Proceeds from issuance of common stock, net of issuance costs

Proceeds from issuance of preferred stock, net of issuance costs

Net change in revolving credit agreement borrowings

Repayment of term loan borrowings

1 unchanged sentence

Net cash provided by financing activities

Net (decrease) increase in cash, cash equivalents and restricted cash

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash — beginning of period

3 unchanged sentences

Supplemental schedule of non-cash investing and financing activities:

Series A Preferred Stock accretion to redemption value

Receivable due to share issuance

2 unchanged sentences

Common stock issued for service and license agreements

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

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

DIGITAL HOLDINGS, INC.

AND SUBSIDIARIES

TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

in thousands, except per share and per bitcoin amounts)

1 – ORGANIZATION AND DESCRIPTION OF BUSINESS

were incorporated in the State of Nevada on February 23, 2010 under the name Verve Ventures, Inc.

In October 2012, we commenced our

Digital Holdings, Inc.

and subsidiaries (the “Company” or “Marathon”) is a digital asset technology company that

produces or “mines” digital assets with a focus on the blockchain ecosystem and the generation of digital assets.

incorporated in the State of Nevada on February 23, 2010 under the name Verve Ventures, Inc.

In October 2012, the Company commenced its

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

We purchased digital

The Company purchased digital

asset mining machines and established a data center in Canada to mine digital assets in 2017.

The Company ceased operating in Canada

in 2020 and relocated all owned mining rigs to the U.S.

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

internationally.

The Company ceased operations in Canada

in 2020 and consolidated all operations in the U.S.

The Company has since expanded bitcoin mining activities across the

and internationally.

The Company changed its name to Marathon Digital Holdings, Inc.

on March 1, 2021.

As of March 31, 2023, the Company

is solely focused on the mining of bitcoin and ancillary opportunities within the Bitcoin ecosystem.

businesses are those that relate to the Bitcoin ecosystem but may be above and beyond those directly related to the self-mining of bitcoin.

The ancillary businesses most closely related to mining of bitcoin may include, but will not be limited to, management of bitcoin mining

facilities for third party owners, advisory and consulting services to third parties seeking to set up and operate bitcoin mining

facilities and joint ventures for bitcoin mining projects in domestic and international jurisdictions such as our project in Abu Dhabi,

United Arab Emirates.

We will also seek to be involved in Bitcoin related projects including, but not limited to, development of technologies

in immersion, hardware, firmware, mining pools and side chains that use the bitcoin blockchain.

We will also seek to be involved in the

development of projects and technologies for generating electricity from renewable energy sources as well as methane gas capture to power

bitcoin mining projects.

As of June 30, 2023, the

Company is focused on the mining of bitcoin and ancillary opportunities within the Bitcoin ecosystem.

businesses are those that relate to the Bitcoin ecosystem but are not directly related to the self-mining of bitcoin.

The ancillary businesses

that related directly to mining may include, but will not be limited to, management of bitcoin mining facilities for third party owners,

advisory and consulting services to third parties seeking to set up and operate bitcoin mining facilities and joint ventures for bitcoin

mining projects in domestic and international jurisdictions such as the Company’s project in Abu Dhabi, United Arab Emirates.

Company will also seek to be involved in Bitcoin related projects including, but not limited to, development of technologies in immersion,

hardware, firmware, mining pools and side chains that use the blockchain cryptography.

The Company may also become involved in electricity

generation from renewable energy resources or methane gas capture to power bitcoin mining projects.

term “Bitcoin” with a capital “B” is used to denote the Bitcoin protocol which implements a highly available,

1 unchanged sentence

The term “bitcoin” with a lower case “b” is used to denote the token,

NOTE 2 – VOLUNTARY CHANGE IN ACCOUNTING PRINCIPLE

During the quarter ended March 31, 2023 and effective

January 1, 2023, we enacted a voluntary change in accounting principle from last-in-first-out (“LIFO”) to first-in-first-out

(“FIFO”) in order to more accurately reflect the disposition of our digital assets.

The change from LIFO to FIFO increased

the carrying value of digital assets, resulting in additional impairment of digital assets during the quarter ended March 31, 2022.

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

GAAP”), the change has been

reflected in the consolidated statements of operations through retrospective application to the quarter ended March 31, 2022.

The impacts of the voluntary change in accounting

principle from LIFO to FIFO are as follows:

OF VOLUNTARY CHANGE IN ACCOUNTING PRINCIPLE

For the three months ended

March 31, 2022 (unaudited)

Condensed Consolidated Statements of Operation Impact

Impairment of digital assets

Income tax benefit

Net loss impact

For the six months ended

June 30, 2022 (unaudited)

Condensed Consolidated Statements of Operation Impact

Impairment of digital assets

Income tax expense

Net loss impact

March 31, 2022 (unaudited)

Condensed Consolidated Balance Sheet Impact

Digital assets

Deferred tax liabilities

June 30, 2022 (unaudited)

Condensed Consolidated Balance Sheet Impact

Digital assets

Deferred tax liabilities

NOTE 3 – RESTATEMENT OF CONSOLIDATED FINANCIAL

STATEMENTS FOR THE QUARTERS ENDED MARCH 31, 2023 AND MARCH 31, 2022 AND VOLUNTARY CHANGE IN ACCOUNTING PRINCIPLE

Restatement Background

As disclosed in the Current Report

on Form 8-K, dated August 8, 2023, and filed by the Company with the SEC immediately preceding filing of this Quarterly Report, the

Company’s previously filed interim unaudited Consolidated Financial Statements for the three months ended March 31, 2023, as set

forth in the Company’s Quarterly Report on Form 10-Q for the Three Months Ended March 31, 2023 which was filed with the SEC on May

10, 2023, should no longer be relied upon and a restatement is required for the previously issued Consolidated Financial

The Restatement of the financial information and the

prior year period presented was necessary to correct the cash flow presentation for “Proceeds

from sale of digital assets” from operating activities to investing activities.

Cash Flow Presentation

The Company corrected its presentation of “proceeds

from sale of digital assets” by reclassifying from operating activities to investing activities as follows:

OF RECLASSIFICATION FROM OPERATING ACTIVITIES TO INVESTING ACTIVITIES

For the three months ended

March 31, 2023

CASH FLOWS FROM OPERATING ACTIVITIES

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

Depreciation and amortization

Deferred tax expense

Gains on digital assets

Impairment of digital assets

Stock-based compensation

Amortization of debt issuance costs

Loss from extinguishment of debt

Other adjustments from operations, net

Changes in operating assets and liabilities:

Revenues from digital asset production

Proceeds from sale of digital assets

Prepaid expenses and other assets

Accounts payable and accrued expenses

Accrued interest

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Advances to vendors

Purchase of property and equipment

Proceeds from sale of digital assets

Investments in Joint Venture

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of common stock, net of issuance costs

Repayment of term loan borrowings

Value of shares withheld for taxes

Net cash provided by financing activities

Net increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash — beginning of period

Cash and cash equivalents — end of period

Change in Accounting Principle

During the quarter ended March 31,

2023, we made a voluntary change in accounting principle from LIFO to FIFO effective January 1, 2023, to better reflect the

disposition of our digital assets (the “Principle Change”).

The Principle Change increased the carrying value of digital

assets for the quarter ended March 31, 2022, resulting in the recognition of additional impairment of digital assets.

The following tables for the Unaudited Interim Consolidated

Condensed Balance Sheet, Consolidated Condensed Statement of Operations, and Consolidated Condensed Statement of Cash Flows present the

impact of the Principle Change for the three months ended March 31, 2022.

OF CHANGE IN ACCOUNTING PRINCIPLE FOR CONDENSED CONSOLIDATED BALANCE SHEET

As of March 31, 2022

Current assets:

Cash and cash equivalents

Restricted cash

Digital assets

Digital assets held in Fund

Other receivable

Prepaid expenses and other current assets

Total current assets

Other assets:

Property and equipment

Advances to vendors

Long term prepaids

Right-of-use assets

Total other assets

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable

Accrued expenses

Operating lease liabilities

Current portion of accrued interest

Total current liabilities

Long-term liabilities:

Notes payable

Operating lease liabilities

Deferred tax liabilities

Total long-term liabilities

Stockholders’ Equity:

Preferred stock

Additional paid-in capital

Accumulated deficit

Total stockholders’ equity

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

OF CHANGE IN ACCOUNTING PRINCIPLE FOR CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

For the three months ended

March 31, 2022

Total revenues

Costs and expenses

Cost of revenues

Cost of revenues - energy, hosting and other

Cost of revenues - depreciation and amortization

Total cost of revenues

Operating expenses

General and administrative expenses

Impairment of digital assets

Impairment of patents

Gains on digital assets and losses on digital assets loan receivable

Losses on digital assets held within Investment Fund

Total operating expenses

Operating loss

Other non-operating income

Interest expense

Loss before income taxes

Income tax benefit

Net loss per share, basic and diluted:

Weighted average shares outstanding, basic and diluted:

OF CHANGE IN ACCOUNTING PRINCIPLE FOR CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the three months ended

March 31, 2022

CASH FLOWS FROM OPERATING ACTIVITIES

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

Depreciation and amortization

Amortization of prepaid service contract

Deferred tax benefit

Losses on digital assets held within Investment Fund

Losses on digital assets loan receivable

Impairment of digital assets

Stock-based compensation

Amortization of debt issuance costs

Impairment of patents

Other adjustments from operations, net

Changes in operating assets and liabilities:

Revenues from digital asset production

Prepaid expenses and other assets

Accounts payable and accrued expenses

Accrued interest

Net cash used in operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Advances to vendors

Purchase of property and equipment

Purchase of equity investments

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of common stock, net of issuance costs

Net cash provided by financing activities

Net decrease in cash, cash equivalents and restricted cash

Cash and cash equivalents — beginning of period

Cash, cash equivalents and restricted cash — end of period

4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

The consolidated condensed balance sheet was derived

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

of Presentation and Principles of Consolidation

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

Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 16, 2023.

accompanying unaudited consolidated condensed financial statements include the accounts of the Company and its wholly owned and controlled

accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned and controlled

subsidiaries.

Intercompany balances and transactions have been eliminated in consolidation.

The consolidated condensed financial statements

have been prepared by the Company pursuant to the rules and regulations of the SEC.

Certain information and disclosures normally included

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

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.

The results of operations

for the interim periods are not necessarily indicative of the results to be expected for any future fiscal periods in 2023 or for the

full year ended December 31, 2023.

The Company has prepared the condensed consolidated

financial statements in accordance with U.S.

and regulations of the U.S.

Securities and Exchange Commission applicable to interim financial information, which permit the omission

of certain disclosure to the extent they have not changed materially since the latest annual financial statements.

These condensed consolidated

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.

The results of operations for the interim periods are not necessarily indicative of the results to be expected for any future fiscal

periods in 2023 or for the full year ending December 31, 2023.

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

Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 16, 2023.

of Estimates and Assumptions

4 unchanged sentences

Actual results could differ from those estimates.

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

fair value of options granted, realization of long-lived assets, deferred income taxes, unrealized tax positions and realization of digital

Reclassifications

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 depreciation and amortization expense has

now been reclassified to “Cost of revenues - depreciation and amortization.” Previously reported compensation and related

taxes, consulting fees, and professional fees have now been reclassified within “General and administrative expenses.” In

addition, previously reported interest income has now been reclassified to “Other non-operating income.”

estimates made by management include, but are not limited to, estimates of the useful lives of property and equipment, realization of

long-lived assets, deferred income taxes, unrealized tax positions and realization of digital assets.

and Cash Equivalents and Restricted Cash

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

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

to be cash equivalents.

The Company maintains cash and cash equivalent balances at financial institutions that are insured by the FDIC.

As of March 31, 2023 and December 31, 2022, the Company’s bank balances with its primary cash management institutions exceeded

the FDIC limit ($ 250 thousand).

In March 2023, the Company began to participate, to the extent practicable, in deposit programs

which “sweep” its deposits across multiple FDIC insured accounts, each with deposits of no more than $ 250 thousand.

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

The following

table provides a reconciliation of the total cash, cash equivalents and restricted cash reported on the consolidated condensed balance

sheet to the corresponding amounts reported on the consolidated condensed statements of cash flows.

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

(in thousands)

As of June 30, 2023, substantially all of the Company’s cash and cash equivalents were FDIC insured.

In March 2023, the Company

began to participate, to the extent practicable, in insured cash sweep programs which “sweep” its deposits across multiple

FDIC insured accounts, each with deposits of no more than $ 250 .

cash as of June 30, 2023, represents the net proceeds held in escrow from the issuance of Series A Preferred Stock (refer to NOTE 11

– STOCKHOLDERS’ EQUITY, Series A Preferred Stock , for further discussion).

Restricted cash as of December 31, 2022, principally

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

During March 2023, the

Company eliminated its outstanding letters of credit.

The following table provides a reconciliation of the total cash, cash equivalents

and restricted cash reported on the condensed consolidated balance sheets to the corresponding amounts reported on the condensed consolidated

statements of cash flows.

OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH

Cash and cash equivalents

2 unchanged sentences

Assets and Digital Assets, Restricted

assets are included in current and other assets in the consolidated condensed balance sheet.

Digital assets are accounted for as indefinite-lived

intangible assets, and are initially measured in accordance with FASB Accounting Standards Codification (“ASC”) Topic 350

– Intangibles-Goodwill and Other (“ASC 350”).

Digital assets, restricted represent collateral for long-term

loans and as such are classified as a non-current asset.

digital assets are not amortized, but are 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 intangible asset is impaired.

Whenever the exchange-traded

price of digital assets declines below its carrying value, the Company has determined that an impairment exists and records impairment

equal to the amount by which the carrying value exceeds the fair value.

following table presents the activities of the digital assets and digital assets, restricted for the three months ended March 31, 2023:

SCHEDULE OF ACTIVITIES OF DIGITAL CURRENCIES

(in thousands)

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

In addition, digital assets provided as collateral

for long-term loans were reported as Digital assets, restricted at December 31, 2022 and classified as long-term assets in the condensed

consolidated balance sheets.

During the first quarter of 2023, the long-term loan was terminated and the restrictions on digital assets

lapsed (refer to NOTE 12 – DEBT , for further discussion).

Digital assets are accounted for as indefinite-lived intangible assets,

and are initially measured in accordance with FASB Accounting Standards Codification (“ASC”) Topic 350 – Intangibles-Goodwill

The Company measures gains or losses on the disposition of digital assets in accordance with the first-in-first-out

(“FIFO”) method of accounting.

assets are not amortized, but are 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 intangible asset is impaired.

Whenever the exchange-traded price

of digital assets declines below its carrying value, the Company has determined that an impairment exists and records an impairment equal

to the amount by which the carrying value exceeds the fair value.

Refer to NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,

Out-of-Period Adjustment, for a discussion of an adjustment related to impairment of digital assets.

following table presents the activities of digital assets and digital assets, restricted for the six months ended June 30, 2023:

SCHEDULE OF ACTIVITY OF DIGITAL CURRENCIES

Digital assets and digital assets, restricted at December 31, 2022

Revenues from digital asset production

Additions of digital assets

Impairment of digital assets

Proceeds from sale of digital assets

Gain on sale of digital assets

Payment of advisory fee

Digital assets and digital assets, restricted at March 31, 2023

of March 31, 2023, the Company held approximately 11,466 bitcoin, classified on the consolidated condensed balance sheet as “Digital

assets”, with a carrying value of $ 189,087 thousand.

At March 31, 2023, the fair market value of the Company’s bitcoin holdings

was approximately $ 326,487 thousand based on Level 1 inputs.

Impairment of digital assets for the three months ended March 31, 2023 includes

an out of period adjustment of $ 1,221 thousand (refer to NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - OUT OF PERIOD ADJUSTMENTS ,

for further discussion).

As of December 31, 2022, the Company held approximately 12,232 bitcoin, relating to digital assets and digital

assets, restricted, with a carrying value of $ 190,717 thousand and a fair value of $ 202,409 thousand based on Level 1 inputs.

Gains on sale of digital assets

Payment of advisory fees

Digital assets at June 30, 2023

of June 30, 2023, the Company held approximately 12,538

bitcoin, classified on the condensed consolidated

balance sheets as “Digital assets”, with a carrying value of $ 234,412 .

At June 30, 2023, the fair market value of the Company’s bitcoin holdings was approximately $ 381,992

based on Level 1 inputs.

As of December 31, 2022,

the Company held approximately 12,232

bitcoin, relating to digital assets and digital

assets, restricted, with a carrying value of $ 190,717

and a fair value of $ 202,409

based on Level 1 inputs.

assets held in fund

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

pursuant to which the Fund purchased 4,813 bitcoin for an aggregate purchase price of $ 150,000 thousand.

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 condensed balance sheet under the caption “Digital assets held in fund.”

pursuant to which the Fund purchased 4,813 bitcoin for an aggregate purchase price of $ 150,000 .

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 were included

in current assets in the condensed consolidated balance sheets under the caption “Digital assets 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 (“ASC 946”), which requires fair value

measurement of the Fund’s investments in digital assets.

The Company retains the Fund’s investment company specific

accounting principles under ASC 946 upon consolidation.

We recorded any changes in the fair value of the assets in the consolidated

condensed statements of operations under the caption “Realized and unrealized gains (losses) on digital assets held within

Investment Fund.”

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

in digital assets.

The Company retains the Fund’s investment company specific accounting principles under ASC 946 upon consolidation.

The Company recorded changes in the fair value of the assets in the condensed consolidated statements of operations under the caption

“Losses on digital assets held within Investment Fund.”

June 10, 2022, the Company redeemed 100% of its limited partnership interest in the Fund in exchange for approximately 4,769 bitcoin

with a fair market value of approximately $ 137,844 thousand.

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

Company’s digital wallet.

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 (“ASC 810”).

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 was accounted for at cost less impairment in line with its digital assets measurement policy as

described under “Digital Assets and Digital assets, restricted.”

with a fair market value of approximately $ 137,844 .

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

digital wallet.

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

was accounted for at cost less impairment in line with its digital assets measurement policy as described under “Digital Assets

and Digital assets, restricted.”

Company evaluates its financing and service arrangements to determine whether certain arrangements contain features that qualify as embedded

derivatives requiring bifurcation in accordance with ASC 815 - Derivatives and Hedging (“ASC 815”).

Embedded derivatives

that are required to be bifurcated from the host instrument or arrangements are accounted for and valued as separate financial instruments.

For derivatives that are assets or liabilities, the derivative instrument is initially recorded at its fair value and is then remeasured

at each reporting date with changes in the fair value reported in the statements of operations.

The Company classifies derivative assets or liabilities in the consolidated condensed balance sheet as current or non-current based on whether settlement of the instrument could

be required within 12 months of the consolidated condensed balance sheet date.

The Company contracts with service providers for hosting

of its equipment and operational support in data centers where the Company’s equipment is deployed.

These arrangements also call

for advance payments to be made to vendors in conjunction with the contractual obligations associated with these services.

classifies these payments as “Deposits” on the consolidated condensed balance sheet.

derivatives requiring bifurcation in accordance with ASC 815 - Derivatives and Hedging .

Embedded derivatives that are required

to be bifurcated from the host instrument or arrangements are accounted for and valued as separate financial instruments.

For derivatives

that are assets or liabilities, the derivative instrument is initially recorded at its fair value and is then remeasured at each reporting

date with changes in the fair value reported in the statements of operations.

The Company classifies derivative assets or liabilities

in the condensed consolidated balance sheets as current or non-current based on whether settlement of the instrument could be required

within 12 months of the condensed consolidated balance sheet date.

Company contracts with service providers for hosting of its equipment and operational support in data centers where the Company’s

equipment is deployed.

These arrangements require advance payments to vendors in conjunction with the contractual obligations associated

with these services.

The Company classifies these payments as “Long-term deposits” on the condensed consolidated balance

and Equipment

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method over the estimated useful lives of the assets.

The Company’s property and equipment is primarily composed of bitcoin miners

which are largely homogeneous and have approximately the same useful lives.

Accordingly, the Company utilizes the group method of depreciation

for its bitcoin miners.

The Company will update the estimated useful lives of its bitcoin mining server group periodically as information

on the operations of the mining equipment indicates changes are required.

The Company will assess and adjust the estimated useful lives

of its mining equipment when there are indicators that the productivity of the mining assets is higher or lower than the assigned estimated

useful lives.

The Company’s property and equipment is primarily composed of bitcoin mining

rigs which are largely homogeneous and have approximately the same useful lives.

Accordingly, the Company utilizes the group method of

depreciation for its bitcoin mining rigs.

The Company will update the estimated useful lives of its bitcoin mining server group periodically

as information on the operations of the mining equipment indicates changes are required.

The Company will assess and adjust the estimated

useful lives of its mining equipment when there are indicators that the productivity of the mining assets is longer or shorter than the

assigned estimated useful lives.

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 condensed balance sheet.

assets in the condensed consolidated balance sheets.

Investments without a readily determinable fair value are recorded at cost minus

impairment, plus or minus changes from observable price changes in orderly transactions for identical or similar investments of the same

issuer, in accordance with the measurement alternative described in ASC 321 - Investments – Equity Securities (“ASC

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 Simple Agreements for Future Equity (“SAFE”)

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.

February 3, 2022, the Company purchased approximately $ 10,000 thousand of convertible preferred stock of Compute North Holdings, Inc.

The 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

issuer, in accordance with the measurement alternative described in ASC 321 - Investments – Equity Securities .

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 simple agreements for future equity (“SAFE”).

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.

February 3, 2022, the Company purchased convertible preferred stock of Compute North Holdings, Inc.

with a purchase price of approximately

The 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 issuer, pursuant to ASC 321.

This investment was subject to an impairment of $ 10,000 thousand following Compute North’s

Chapter 11 Bankruptcy filing in September 2022 (See NOTE 8 – COMPUTE NORTH BANKRUPTCY ).

May 3, 2022, the Company converted $ 2,000 thousand from a SAFE investment into preferred stock while purchasing an additional $ 3,500

thousand of preferred stock in Auradine, Inc.

along with entering into a commitment to acquire $ 30,000 thousand of additional shares

of preferred stock.

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

September 27, 2022, the Company purchased an additional $ 30,000

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

preferred stock to $ 35,500

thousand, with no noted impairments or other adjustments.

The Company accounts for the preferred stock as

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

price changes in orderly transactions for identical or similar investments from the same issuer, pursuant to ASC 321 (See NOTE 13

– RELATED PARTY TRANSACTIONS ).

of the three months ended March 31, 2023 and year ended December 31, 2022, the Company has one remaining SAFE investment with a carrying

value of $ 1,000 thousand, with no noted impairments or other adjustments.

The Company impaired this investment by approximately $ 10,000 following Compute North’s

Chapter 11 Bankruptcy filing during September 2022 (See NOTE 10 – COMPUTE NORTH BANKRUPTCY ).

May 3, 2022, the Company converted $ 2,000 from its prior Auradine, Inc.

SAFE investment into preferred stock while purchasing additional

Auradine preferred stock with a purchase price of $ 3,500 .

At the same time, the Company entered into a commitment to acquire additional

shares of Auradine preferred stock with a purchase price of $ 30,000 .

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

September 27, 2022, the Company purchased additional shares of Auradine preferred stock with a purchase price of $ 30,000 , bringing its

total carrying amount of investment in Auradine, Inc.

preferred stock to $ 35,500 , with no noted impairments or other adjustments.

preferred stock is accounted for as investments in equity securities without a readily determinable fair value at cost minus impairment,

as adjusted for observable price changes in orderly transactions for identical or similar investments from the same issuer, pursuant

to ASC 321 (refer to NOTE 15 – RELATED PARTY TRANSACTIONS ).

of the six months ended June 30, 2023 and year ended December 31, 2022, the Company has one remaining SAFE investment with a carrying

value of $ 1,000 , with no noted impairments or other adjustments.

Method Investments

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influence, but not control, over the investee using the equity method of accounting in accordance with ASC 323 - Equity Method Investments

and Joint Ventures (“ASC 323”).

Under the equity method, an investor initially records an investment in the stock of

an investee at cost and adjusts the carrying amount of the investment to recognize the investor’s share of the earnings or losses

of the investee after the date of acquisition.

January 27, 2023, the Company and FS Innovation, LLC (“FSI”) entered into a Shareholders’ Agreement regarding the

formation of an Abu Dhabi Global Markets company (the “ADGM Entity”).

For the three months ended March 31, 2023, the

ADGM Entity did not have any earnings or losses.

As of March 31, 2023, the carrying value of the Company’s 20 %

ownership in the ADGM Entity was $ 43,194

The equity method investment is included in non-current assets in the consolidated condensed balance sheet under

“Investments.”

and Joint Ventures .

Under the equity method, an investor initially records an investment in the stock of an investee at cost and

adjusts the carrying amount of the investment to recognize the investor’s share of the earnings or losses of the investee after

the date of acquisition.

January 27, 2023, the Company and FS Innovation, LLC (“FSI”) entered into a Shareholders’ Agreement regarding the formation

of an Abu Dhabi Global Markets company (the “ADGM Entity”).

The ADGM Entity did not start mining operations during the six months ended June 30, 2023, and did not

have significant earnings or losses.

As of June 30, 2023, the carrying value of the Company’s 20 % ownership in the ADGM Entity was $ 62,918 .

The equity method investment is included in non-current assets in the condensed consolidated balance sheets under “Investments.”

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

value of the awards and forfeiture rates.

value of the awards.

of Long-lived Assets

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From Contracts with Customers

Company recognizes revenue under ASC 606 – Revenue from Contracts with Customers (“ASC 606”).

The core principle

of the revenue standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers

in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

effective tax rate (“ETR”) from continuing operations was ( 1.06 )% for the three months ended March 31, 2023, and 24.91 % for

the three months ended March 31, 2022, respectively.

The difference between the US statutory tax rate of 21 % was primarily due to the

change in valuation allowance as a result of current year activity.

The following item caused the quarterly ETR to be significantly different

from our historic annual ETR:

the year ended December 31, 2022, the Company concluded, based upon all available evidence,

it was more likely than not that it would not have sufficient future taxable income to realize

the Company’s federal and state deferred tax assets.

As a result, the Company established

a valuation allowance against deferred tax assets that were not supported by reversing deferred

tax liabilities.

No events occurred in the three months ended March 31, 2023 impacting this

determination.

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

The core principle of the revenue standard

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

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

Refer to NOTE 5 – REVENUE FROM CONTRACTS WITH CUSTOMERS , for further discussion.

effective tax rate (“ETR”) from continuing operations was 1.07 % and 1.07 % for the three and six months ended June 30, 2023,

respectively, and 5.38 % and 2.31 % for the three and six months ended June 30, 2022, respectively.

The difference between the US statutory

tax rate of 21 % was primarily due to the change in valuation allowance as a result of current year activity.

Tax in Interim Periods

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Company does not currently expect any of its remaining unrecognized tax benefits to be recognized in the next twelve months.

Out-of-Period

the three months ended March 31, 2023, the Company recorded an out-of-period adjustment as a result of applying the quoted price in an

active market to the digital assets in accordance with ASC 820.

The adjustment resulted in increased impairment of digital assets reflected

in the current period consolidated condensed statement of operations of $ 1,221 thousand.

The Company evaluated the quantitative and qualitative

aspects of this out of period adjustment and determined that the adjustment did not have a material impact to any previously reported

quarterly or annual financial statements.

Refer to NOTE 6 - FAIR VALUE MEASUREMENT for further discussion.

Accounting Pronouncements

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pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequences of the change

to its consolidated condensed financial statements and assures that there are proper controls in place to ascertain that the Company’s

consolidated condensed financial statements properly reflect the change.

have been no material changes to our recent accounting pronouncements that were disclosed in our Annual Report on Form 10-K, which was

filed with the SEC on March 16, 2023.

to its condensed consolidated financial statements and assures that there are proper controls in place to ascertain that the Company’s

condensed consolidated financial statements properly reflect the change.

Recently Issued Accounting Pronouncements

Not Yet Adopted

On March 28, 2023, the Financial Accounting

Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2023-01, Leases (Topic 842):

Control Arrangements .

The amendments in ASU 2023-01 improve current GAAP by clarifying the accounting for leasehold improvements associated

with common control leases, thereby reducing diversity in practice.

Additionally, the amendments provide investors and other allocators

of capital with financial information that better reflects the economics of those transactions.

The new standard is effective for the

Company for its fiscal year beginning January 1, 2024, with early adoption permitted.

The Company is currently evaluating the impact of

adopting the standard.

On June 30, 2022, FASB issued ASU No.

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.

ASU 2022-03 clarifies that a contractual

sale restriction prohibiting the sale of an equity security is a characteristic of the reporting entity holding the equity security and

is not included in the equity security’s unit of account.

The new standard is effective for the Company for its fiscal year beginning

January 1, 2024, with early adoption permitted.

The Company is currently evaluating the impact of adopting the standard.

5 – REVENUE FROM CONTRACTS WITH CUSTOMERS

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of the five-step model to the Company’s mining operations

The Company’s ongoing major or central operation is to provide bitcoin transaction verification services to

the bitcoin network through a Company-operated mining pool as the operator and a participant in a private pool (“Operator”)

(such activity as Participant and Operator, collectively, “mining”) and to provide computing power to collectives of third-party bitcoin miners (such collectives, “mining

pools”) as a participant (“Participant”).

The Company currently mines in a self-operated pool,

which was previously open to third-party pool participants from September 2021 until May 2022.

The following table presents revenue of the Company disaggregated for those arrangements in which the Company is the Operator and Participant:

Company’s ongoing major or central operation is to provide bitcoin transaction verification services to the bitcoin network through

a Company-operated mining pool as the operator and a participant in a private pool (“Operator”) (such activity as Participant

and Operator, collectively, “mining”) and to provide computing power to collectives of third-party bitcoin miners (such collectives,

“mining pools”) as a participant (“Participant”).

The Company currently mines in a self-operated pool, which

was previously open to third-party pool participants from September 2021 until May 2022.

following table presents the Company’s revenues disaggregated for those arrangements in which the Company is the Operator and Participant:

SCHEDULE OF DISAGGREGATION OF REVENUE

(in thousands)

Three Months Ended March 31,

(in thousands)

Three Months Ended

Six Months Ended

Revenues from contracts with customers

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Operator - Block rewards

Total revenue

Total revenues

Operator, the Company provides transaction verification services.

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the performance obligation to validate the requested transaction has been satisfied and a contract is deemed to exist as follows:

transaction requester, the bitcoin network, and the Company have approved the contract and have evidenced they are committed to the transaction

at the point of successfully validating and adding the transaction to the distributed ledger.

transaction requester, the bitcoin network, and the Company have approved the contract and

have evidenced they are committed to the transaction at the point of successfully validating

and adding the transaction to the distributed ledger.

The parties’ rights, the consideration

to be transferred, and the payment terms are clear.

The transaction has commercial substance and collection of the block reward and transaction

fees to which the Company is entitled is probable because they are transferred to the Company as part of closing a successful block.

successfully mining a block, the Company satisfies its lone performance obligation of providing transaction verification services and,

thus, earns revenue at that point in time.

The amount to which the Company is entitled for successfully validating a block of transactions

is fixed at the point in time the contract is deemed to exist and the performance obligation is satisfied.

Thus, there is no variable

consideration.

The Company engaged unrelated third-party mining enterprises (“pool

participants”) to contribute computing power, and in exchange, remitted transaction fees and block rewards to pool participants

on a pro rata basis according to each respective pool participant’s contributed computing power (“hash rate”).

wallet (owned by the Company as Operator) is recorded on the distributed ledger as the winner of proof of work block rewards and assignee

of all validations and, therefore, the transaction verifier of record.

The pool participants entered into contracts with the Company as

they did not directly enter into contracts with the network or the requester and were not known verifiers of the transactions

assigned to the pool.

As Operator, the Company delegated mining work to the pool participants utilizing software that algorithmically

assigned work to each individual miner.

By virtue of its selection and operation of the software, the Company as Operator controlled delegation

of work to the pool participants.

This indicated that the Company directed the mining pool participants to contribute their hash rate

to solve in areas that the Company designates.

Therefore, the Company determined that it controlled the service of providing transaction

verification services to the network and requester.

Accordingly, the Company recorded all of the transaction fees and block rewards earned

from transactions assigned to MaraPool as revenue, and the portion of the transaction fees and block rewards remitted to MaraPool participants

as cost of revenues.

The Company operated a mining pool that engaged third-party pool participants from September 2021 until May 2022.

606-10-32-21 requires entities to measure the estimated fair value of noncash consideration at contract inception, which is the same

time the block reward and transaction fee is earned and the performance obligation to the requester and the network is fulfilled by successfully

validating the applicable block of transactions.

For reasons of operational practicality, the Company applies an accounting convention

to use the daily quoted closing U.S.

dollar spot rate of bitcoin each day to determine the fair value of bitcoin earned as transaction

fees and block rewards in the Company’s wallet during that day.

This accounting convention does not result in materially different

revenue recognition from using the fair value of the bitcoin earned at contract inception (i.e., the moment a block is solved) and has

been consistently applied in all periods presented.

The transaction has commercial substance

and collection of the block reward and transaction fees to which the Company is entitled

is probable because they are transferred to the Company as part of closing a successful block.

successfully mining a block, the Company satisfies its lone performance obligation of providing

transaction verification services and, thus, earns revenue at that point in time.

to which the Company is entitled for successfully validating a block of transactions is fixed

at the point in time the contract is deemed to exist and the performance obligation is satisfied.

Thus, there is no variable consideration.

Company engaged unrelated third-party mining enterprises (“pool participants”) to contribute computing power, and in exchange,

remitted transaction fees and block rewards to pool participants on a pro rata basis according to each respective pool participant’s

contributed computing power (“hash rate”).

The MaraPool wallet (owned by the Company as Operator) is recorded on the distributed

ledger as the winner of proof of work block rewards and assignee of all validations and, therefore, the transaction verifier of record.

The pool participants entered into contracts with the Company as Operator;

they did not directly enter into contracts with the network

or the requester and were not known verifiers of the transactions assigned to the pool.

As Operator, the Company delegated mining work

to the pool participants utilizing software that algorithmically assigned work to each individual miner.

By virtue of its selection and

operation of the software, the Company as Operator controlled delegation of work to the pool participants.

This indicated that the Company

directed the mining pool participants to contribute their hash rate to solve in areas that the Company designates.

Therefore, the Company

determined that it controlled the service of providing transaction verification services to the network and requester.

Accordingly, the

Company recorded all of the transaction fees and block rewards earned from transactions assigned to MaraPool as revenue, and the portion

of the transaction fees and block rewards remitted to MaraPool participants as cost of revenues.

The Company operated a mining pool that

engaged third-party pool participants from September 2021 until May 2022.

During the three months ended June 30,

2023, the Company changed its operator accounting policy from measuring the block reward and transaction fees using the end of day spot

rate for bitcoin to the quoted spot rate at the time the block reward and transaction fees are earned.

accordance with ASC 606-10-32-21, the Company measures the estimated fair value of noncash consideration at contract inception, which

is the same time the block reward and transaction fee is earned and the performance obligation to the requester and the network is fulfilled

by successfully validating the applicable block of transactions.

The Company applies the quoted spot rate for bitcoin determined using

the Company’s primary trading platform for bitcoin at the time the block reward and transaction fee is earned to measure revenues.

associated with providing the bitcoin transaction verification services to the customers, such as rent, electricity cost, and transaction

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cost of revenues.

During the three months ended June 30,

2023, the Company changed its participant accounting policy from measuring the block reward and transaction fees upon receipt of the reward

in the Company’s wallet measured at the end of day spot rate for bitcoin to the policy described below.

Company participates in multiple third-party operated mining pools only when our Company-operated mining pool is not available.

methodologies differ depending on the payout third-party operated mining pool.

Pay-Per-Share (PPS) and Full-Pay-Per-Share (FPPS) pools

pay rewards based on a contractual formula, which primarily calculates the hash rate provided by the Company to the mining pool as a

percentage of total network hash rate, and other inputs.

For PPS and FPPS pools, the Company is entitled to consideration even if a block

is not successfully placed by the mining pool operator.

The Company also participates in third-party mining pools that pay rewards only

when the pool successfully mines a block.

For these pools, the Company only earns a reward when the third-party pool successfully mines

a block and its reward is the fractional share of the successfully mined block and transaction fee based on the proportion of computing

power the Company contributed to the mining pool operator to the total computing power contributed by all mining pool participants in

solving the algorithm.

the Company is a Participant in a third-party operated mining pool, the Company provides hash rate that is an output of the Company’s

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These contracts are period-to-period contracts because they are terminable at any time by either party without compensation.

contract is determined to exist each period (i.e., second, minute, hour) that neither the Company, nor the pool operator, terminates

contract is determined to exist each period (e.g., second, minute, hour) that neither the Company, nor the pool operator, terminates

the arrangement.

consideration to which the Company is entitled is a fractional share of the block award and transaction fees;

the amount of which

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, usually through usage of a mining software, net of

any pool fees due to the pool operator.

The Company receives the consideration in aggregate typically within 24 hours of winning the

block, and any disputes to the consideration to which the Company is entitled can be made by notifying and resolving the issues with

the pool operators.

However, there have not been any subsequent adjustments to the fees received, therefore the Company concludes that

it is probable that a significant reversal of revenue recognized will not occur upon settlement.

computing power on rigs to solve complex cryptographic algorithms in support of blockchain mining (in a process known as “solving

a block”) is the primary output of the Company’s ordinary activities.

The provision of computing power is the only performance

obligation under our arrangements with third-party mining pool operators.

The transaction consideration the Company receives is non-cash

(i.e., bitcoin) and entirely variable as it is unknown at each contract inception whether the Company will earn any consideration during

the period, and if it does become entitled to consideration, how much consideration to which it will be entitled.

the Company participates in PPS and FPPS pools, which pay rewards based on a contractual formula, the Company recognizes revenue based

on the daily contributed hash rate and other inputs measured at the average daily spot rate of bitcoin determined using the Company’s

primary trading platform for bitcoin.

The Company participates in third-party operated pools only when our Company-operated mining pool

is not available, therefore, the duration of contributed hash rate will fluctuate during any given day.

Accordingly, we measure the reward

for PPS and FPPS pools based on the daily average spot rate to match the contribution of hash rate which can occur throughout the day.

the Company participates in third-party pools that pay rewards only when the pool successfully mines a block, the Company recognizes

its fractional share of the block and transaction fees using the spot rate of bitcoin at the time that the block is successfully mined.

computing power on mining rigs to solve complex cryptographic algorithms in support of blockchain mining (in a process known as

“solving a block”) is the primary output of the Company’s ordinary activities.

The provision of computing power is

the only performance obligation under the Company’s arrangements with third-party mining pool operators.

The transaction

consideration the Company receives is non-cash (i.e., bitcoin) and entirely variable as it is unknown at each contract inception

whether the Company will earn any consideration during the period, and if it does become entitled to consideration, how much

consideration to which it will be entitled.

Company satisfies its performance obligation to provide computing power to the pool operator over time as described in FASB ASC 606-10-25-27(a)

1 unchanged sentence

continuously as an input to the pool’s efforts to solve a block.

accordance with FASB ASC 606-10-32-11 and 32-12, the Company constrains the variable consideration to which it is entitled and does not

recognize revenue for such amounts until it receives confirmation of the amount, usually via the settlement of the fractional share of

block reward and transaction fees in the Company’s digital wallet.

Since the Company does not have visibility on its contributed

computing power relative to the pool’s total computing power, which is one of the key inputs that determine the fractional block

reward and transaction fees share to which it is entitled;

therefore, it only knows the amount of non-cash consideration to which

it is entitled upon settlement of the Company’s earned fractional share into its digital wallet.

Because of this and the fact that

the Company’s fractional share substantively varies from block to block, it is not probable that a significant reversal of revenue

will not occur until the uncertainty related to the Bitcoin to which the Company is entitled ultimately resolves at settlement.

At settlement,

the total block reward and transaction fees consideration earned by the pool operator are allocated and distributed (with no provision

for, or risk of, clawback) by the pool operator to each participant based on each participant’s contribution of computing power.

Consequently, at that point in time, the risk of significant revenue reversal abates such that consideration should be added to the transaction

price (and revenue recognized accordingly).

Settlement of consideration typically occurs within 24 hours of when a block is won unless

such block is won over a weekend or holiday, in which case settlement can take up to 72 hours.

Company uses its accounting convention to measure revenue based upon the daily quoted closing U.S.

dollar spot rate of bitcoin on the day

the transaction fees and block rewards are settled in the Company’s wallet.

This accounting convention does not result in materially

different revenue recognition from using the fair value of the bitcoin earned at contract inception and has been consistently applied

in all periods presented.

associated with providing computing power services to third-party operated mining pools, such as rent and electricity costs, are recorded

5 unchanged sentences

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

The Company accounts for these payments as “Advances to vendors” on the consolidated condensed balance sheet.

of March 31, 2023 and December 31, 2022, such advances totaled approximately $ 57,511 thousand and $ 488,299 thousand, respectively.

The Company accounts for these payments as “Advances to vendors” on the condensed consolidated balance sheets.

of June 30, 2023 and December 31, 2022, such advances totaled approximately $ 7,351 and $ 488,299 , respectively.

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

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with the contractual obligations associated with these services.

We classify these payments as “Deposits” on the consolidated

condensed balance sheet.

The Company classifies these payments as “Long-term deposits”

on the condensed consolidated balance sheets.

7 – PROPERTY AND EQUIPMENT

components of property and equipment as of March 31, 2023 and December 31, 2022 are:

components of property and equipment as of June 30, 2023 and December 31, 2022 are:

OF COMPONENTS OF PROPERTY AND EQUIPMENT

(in thousands, except useful life)

Useful life (Years)

March 31, 2023

December 31, 2022

Website and leasehold improvements

Construction in progress

Gross property, equipment

Total gross property, equipment

Accumulated depreciation

Property and equipment, net

Company’s depreciation expense related to property and equipment for the three months ended March 31, 2023 and 2022 was $ 17,733

thousand and $ 13,877 thousand, respectively.

Company’s depreciation expense related to property and equipment for the three months ended June 30, 2023 and 2022 was $ 37,275

and $ 24,710 , respectively.

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

2023 and 2022 was $ 55,008 and $ 38,587 , respectively.

8 – FAIR VALUE MEASUREMENT

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

carrying amounts reported in the consolidated condensed balance sheet for cash and cash equivalents, other receivable, deposits, prepaid

expenses and other current assets, property and equipment, advances to vendors, accounts payable, accrued expenses, and legal reserve

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

carrying amounts reported in the condensed consolidated balance sheets for cash and cash equivalents, restricted cash, other receivable,

deposits, prepaid expenses and other current assets, property and equipment, advances to vendors, accounts payable, accrued expenses,

and legal reserve payable, approximate their estimated fair market value based on the short-term maturity of these instruments.

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

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measurement of fair value

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

the Company’s estimated level within the fair value hierarchy of those assets and liabilities as of March 31, 2023 and December

31, 2022, respectively:

of June 30, 2023, the Company’s cash and cash equivalents was $ 113,675 , none of which represented money market accounts.

The following

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

estimated level within the fair value hierarchy of those assets and liabilities as of December 31, 2022, respectively:

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

Recurring fair value measured at March 31, 2023

(in thousands)

Total carrying value at March 31, 2023

Quoted prices in active markets

Significant other observable inputs

Significant unobservable inputs

Cash and cash equivalents (1)

Recurring fair value measured at December 31, 2022

(in thousands)

Total carrying value at December 31, 2022

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market accounts.

Excludes $ 124,729 thousand and $ 11,661 thousand of cash and cash equivalents.

were no transfers among Levels 1, 2 or 3 during the three months ended March 31, 2023.

Excludes $ 11,661 of cash and cash equivalents as of December 31, 2022.

were no transfers among Levels 1, 2 or 3 during the six months ended June 30, 2023.

Non-recurring

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The Company’s estimated level within the fair value hierarchy

of those assets and liabilities as of March 31, 2023 and December 31, 2022, respectively:

of those assets and liabilities as of June 30, 2023 and December 31, 2022, respectively:

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

Non-recurring fair value measured at March 31, 2023

(in thousands)

Total carrying value at March 31, 2023

Non-recurring fair value measured at June 30, 2023

Total carrying value at June 30, 2023

Quoted prices in active markets

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Digital assets

Notes payable

Non-recurring fair value measured at December 31, 2022

(in thousands)

Total carrying value at December 31, 2022

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Digital assets, restricted

Notes payable

(1) Represents mining

Excludes $ 1,746 thousand of Property and equipment relating to containers and website and leasehold improvements.

the three months ended March 31, 2023, the fair value of digital assets and digital assets, restricted were transferred from Level 2

to Level 1, as a result of using the quoted price in the active market in accordance with ASC 820.

There were no other transfers among

Levels 1, 2 or 3 during the three months ended March 31, 2023.

As of March 31, 2023 and December 31, 2022, there were no other assets

and liabilities measured at fair value on a non-recurring basis.

Excludes $ 1,746 of Property and equipment relating to containers, website and leasehold improvements.

the three months ended March 31, 2023, the fair value of digital assets were transferred from Level 2 to Level 1, as a result of using the

quoted price in the active market in accordance with ASC 820.

There were no other transfers among Levels 1, 2 or 3 during the six months

ended June 30, 2023.

As of June 30, 2023 and December 31, 2022, there were no other assets and liabilities measured at fair value on

a non-recurring basis.

9 – NET LOSS PER SHARE

income per common share is calculated in accordance with ASC Topic 260 – “Earnings Per Share” (“ASC 260”).

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

during the period.

For the three months ended March 31, 2023 and 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.

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

31, 2023 and 2022 are as follows:

income per common share is calculated in accordance with ASC Topic 260 – Earnings Per Share .

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.

the three and six months ended June 30, 2023 and 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.

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

SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE

Three months ended March 31,

Three Months Ended

Six Months Ended

Warrants to purchase common stock

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Convertible notes to exchange common stock

Series A Preferred Stock

Total dilutive shares

1 unchanged sentence

SCHEDULE OF COMPUTATION OF BASIC AND DILUTED LOSS PER SHARE

Three months ended March 31,

Net loss attributable to common shareholders

Weighted average common shares - basic and diluted

Loss per common share - basic and diluted

Three Months Ended

Six Months Ended

(As Restated)

$ ( 212,626 )

$ ( 229,735 )

Series A Preferred Stock accretion to redemption value

Net loss attributable to common stockholders

$ ( 212,626 )

$ ( 229,735 )

Weighted average common stock outstanding - basic and diluted

Net loss attributable to common stockholders per common stock - basic and diluted

10 – COMPUTE NORTH BANKRUPTCY

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– Approximately

$ 10,000 thousand in Convertible Preferred Stock of Compute North Holdings, Inc.

$ 10,000 in Convertible Preferred Stock of Compute North Holdings, Inc.

– Approximately

$ 21,000 thousand related to an unsecured Senior Promissory note with Compute North LLC.

$ 21,000 related to an unsecured Senior Promissory note with Compute North LLC.

– Approximately

$ 50,000 thousand in operating deposits with Compute North primarily related to the King Mountain and Wolf Hollow hosting facilities.

Company recorded an impairment charge of $ 55,674 thousand during 2022.

On February 16, 2023, the Bankruptcy Court approved the Debtors

Plan of Reorganization, pursuant to which Marathon’s claim has been fixed at $ 40,000 thousand as an unsecured claim to be paid

out according to the timing and percentages within the approved Debtor’s plan.

$ 50,000 in operating deposits with Compute North primarily related to the King Mountain and

Wolf Hollow hosting facilities.

Company recorded an impairment charge of $ 55,674 during 2022.

On February 16, 2023, the Bankruptcy Court approved the Debtors Plan of

Reorganization, pursuant to which Marathon’s claim was fixed at $ 40,000 as an unsecured claim to be paid out according to the timing

and percentages within the approved Debtor’s plan.

The Company has yet to receive the settlement funds.

11 – STOCKHOLDERS’ EQUITY

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

Registration Statement on Form S-3 and 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 relating to shares of its common stock.

In accordance with the terms of the sales agreement, the Company

may offer and sell shares of its common stock having an aggregate offering price of up to $ 750,000 thousand from time to time through

Wainwright acting as its sales agent.

As of March 31, 2023, the Company has sold 63,498,908 shares of common stock for an aggregate purchase

price of $ 524,781 thousand, net of offering costs, pursuant to this At-The-Market Offering Agreement.

LLC relating to shares of the Company’s common stock.

In accordance with the terms of the sales agreement, the Company may offer

and sell shares of its common stock having an aggregate offering price of up to $ 750,000 from time to time through Wainwright acting

as its sales agent.

As of June 30, 2023, the Company has sold 70,264,987 shares of common stock for an aggregate purchase price of $ 590,321 ,

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

Stock Warrants

of March 31, 2023 and December 31, 2022, the Company had 324,375 issued and outstanding stock warrants.

summary of the restricted stock award activity (represented by restricted stock units (RSUs) for the three months ended March 31, 2023

is as follows:

summary of the Company’s issued and outstanding stock warrants and changes during the period ended June 30, 2023 is as follows:

OF OUTSTANDING STOCK WARRANTS

Number of Warrants

Weighted Average Exercise Price

Weighted Average Remaining Contractual Life (in years)

Outstanding as of December 31, 2022

Outstanding as of June 30, 2023

summary of the restricted stock award activity (represented by restricted stock units (“RSUs”)) for the six months ended

June 30, 2023 is as follows:

SUMMARY OF RESTRICTED STOCK AWARD ACTIVITY

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Nonvested at December 31, 2022

Nonvested at March 31, 2023

November 18, 2021, the Company issued $ 650,000 thousand principal of its 1.0 % Convertible Senior Notes due 2026 (the “Notes”).

The Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of November 18, 2021, between

Nonvested at June 30, 2023

A Preferred Stock

June 5, 2023, the Company entered into a securities purchase agreement for the purchase of 15,000 shares of Series A redeemable convertible

preferred stock.

On June 8, 2023, upon closing of the offering, the Company issued 15,000 shares of Series A Preferred Stock for total

gross proceeds of $ 14,286 before deducting the placement agent’s fees and other estimated offering expenses.

Each share of Series

A Preferred Stock had a purchase price of $ 952.38 , representing an original issue discount of approximately 5 % of the $ 1,000 stated value

of each share.

Each share of Series A Preferred Stock is convertible into shares of the Company’s common stock at an initial conversion

price of $ 14.52 per share, at the option of the holder, at any time following the Company’s receipt of stockholder approval for

an increase in its authorized shares of common stock.

The Company will be permitted to compel conversion of the Series A Preferred Stock

after the fulfillment of certain conditions and subject to certain limitations.

Series A Preferred Stock permits the holders thereof to vote together with the holders of the Company’s common stock on a proposal

to increase the authorized shares of the Company’s common stock at an annual or special meeting of the Company’s stockholders.

The Series A Preferred Stock permits the holder to cast 500,000 votes per share of Series A Preferred Stock on such proposal.

A Preferred Stock will not be permitted to vote on any other matter.

The holders of the Series A Preferred Stock agreed not to transfer

their shares of preferred stock until after the meeting of Company stockholders.

The holders of the Series A Preferred Stock agreed to

vote their shares on such proposal in the same proportions as the shares of common stock.

The holders of the Series A Preferred Stock

have the right to require the Company to redeem their shares of preferred stock for cash at 105% of the stated value of such shares commencing

after the earlier of the Company’s stockholders’ approval of the authorized share increase and 90 days after the closing

of the issuance of the Series A Preferred Stock and until 120 days after such closing .

Series A Preferred Stock was recorded outside of stockholder’s equity as mezzanine equity.

At June 30, 2023, the Company increased

the carrying value of Series A Preferred Stock to its redemption value and recorded the difference to additional paid-in capital.

method treats the end of the reporting period as if it were also the redemption date for the security.

November 18, 2021, the Company issued $ 650,000 principal of its 1.0 % Convertible Senior Notes due 2026 (the “Notes”).

Notes were issued pursuant to, and are governed by, an indenture (the “Indenture”), dated as of November 18, 2021, between

the Company and U.S.

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Company and the initial purchasers of the Notes, the Company also granted the initial purchasers an option, for settlement within a period

of 13 days from, and including, November 18, 2021 to purchase up to an additional $ 97,500 thousand principal of Notes, which additional

Notes were purchased on November 23, 2021, for an aggregate principal amount of Notes purchased of $ 747,500 thousand.

All references

in this disclosure to “Notes” includes the Notes issued on both November 18, 2021 and November 23, 2021.

As of March 31,

2023 and December 31, 2022, notes outstanding, net of unamortized discounts of approximately $ 14,240 thousand and $ 15,211 thousand, respectively,

were $ 733,260 thousand and $ 732,289 thousand, respectively.

of 13 days from, and including, November 18, 2021 to purchase up to an additional $ 97,500 principal of Notes, which additional Notes

were purchased on November 23, 2021, for an aggregate principal amount of Notes purchased of $ 747,500 .

All references in this disclosure

to “Notes” includes the Notes issued on both November 18, 2021 and November 23, 2021.

As of June 30, 2023 and December 31,

2022, notes outstanding, net of unamortized discounts of approximately $ 13,269 and $ 15,211 , respectively, were $ 734,231 and $ 732,289 ,

respectively.

Notes accrue interest at a rate of 1.00 % per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning

on June 1, 2022.

The Notes will mature on December 1, 2026, unless earlier repurchased, redeemed or converted.

Before the close of business

on the business day immediately before September 1, 2026, noteholders will have the right to convert their Notes only upon the occurrence

of certain events .

From and after September 1, 2026, noteholders may convert their Notes at any time at their election until the close

of business on the second scheduled trading day immediately before the maturity date.

The Company will settle conversions by paying or

delivering, as applicable, cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s

The initial conversion rate is 13.1277 shares of common stock per $ 1 thousand principal amount of Notes, which represents an

initial conversion price of approximately $ 76.17 per share of common stock.

The conversion rate and conversion price will be subject

to customary adjustments upon the occurrence of certain events.

In addition, if certain corporate events that constitute a “Make-Whole

Fundamental Change” (as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased

for a specified period of time.

The Notes will mature on December 1, 2026, unless earlier repurchased, redeemed or converted, which scenarios the Company

is currently contemplating and may consummate in advance of the maturity date.

Before the close of business on the business day immediately

before September 1, 2026, noteholders will have the right to convert their Notes only upon the occurrence of certain events .

after September 1, 2026, noteholders may convert their Notes at any time at their election until the close of business on the second

scheduled trading day immediately before the maturity date.

The Company will settle conversions by paying or delivering, as applicable,

cash, shares of its common stock or a combination of cash and shares of its common stock, at the Company’s election.

conversion rate is 13.1277 shares of common stock per one thousand dollar principal amount of Notes, which represents an initial conversion

price of approximately $ 76.17 per share of common stock.

The conversion rate and conversion price will be subject to customary adjustments

upon the occurrence of certain events.

In addition, if certain corporate events that constitute a “Make-Whole Fundamental Change”

(as defined in the Indenture) occur, then the conversion rate will, in certain circumstances, be increased for a specified period of

July 28, 2022, the Company entered into a Revolving Credit and Security Agreement (the “Agreement”) with Silvergate Bank

(the “Bank”) pursuant to which Silvergate had agreed to loan the Company up to $ 100,000 thousand on a revolving basis pursuant

to the terms of the Agreement.

This facility refinanced and replaced an existing $ 100,000 thousand facility the Company had in place

with the Bank.

On the same date, the Company also entered into a $ 100,000 thousand principal term loan facility (the “Term Loan”)

with Silvergate.

See Form 10-K for the year ended December 31, 2022 for the terms of the facilities set forth in the Agreement and the

(the “Bank”) pursuant to which Silvergate had agreed to loan the Company up to $ 100,000 on a revolving basis pursuant to

the terms of the Agreement.

This facility refinanced and replaced an existing $ 100,000 facility the Company had in place with the Bank.

On the same date, the Company also entered into a $ 100,000 principal term loan facility (the “Term Loan”) with Silvergate.

See Form 10-K for the year ended December 31, 2022 for the terms of the facilities set forth in the Agreement and the Term Loan.

February 6, 2023, the Company provided Silvergate Bank with the required 30-day notice stating the Company’s intent to prepay the

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asset or lease liability associated with the leases.

Variable lease cost during the three months ended March 31, 2023 are disclosed in

the table below.

Variable lease cost during the six months ended June 30, 2023 are disclosed in the

Office space and mining facilities comprise the Company’s material underlying asset classes under operating lease

The Company has no material finance leases.

of March 31, 2023, the Company’s right-of-use (“ROU”) assets and total lease liabilities were $ 1,180 thousand and $ 1,245

thousand, respectively, for leases in the United States.

As of December 31, 2022, the Company’s ROU assets and total lease liabilities

were $ 1,276 thousand and $ 1,343 thousand, respectively.

The Company has amortized right-of-use assets totaling $ 84 thousand and $ 110

thousand for the three months ended March 31, 2023, and year ended December 31, 2022, respectively.

of June 30, 2023, the Company’s right-of-use (“ROU”) assets and total lease liabilities were $ 559 and $ 597 , respectively.

As of December 31, 2022, the Company’s ROU assets and total lease liabilities were $ 1,276 and $ 1,343 , respectively.

has amortized right-of-use assets totaling $ 71 and $ 29 for the three months ended June 30, 2023 and 2022, respectively.

The Company has

amortized right-of-use assets totaling $ 167 and $ 48 for the six months ended June 30, 2023 and 2022, respectively.

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

2 unchanged sentences

SCHEDULE OF COMPONENTS OF LEASE COST

(in thousands)

For the Three Months Ended March 31,

(in thousands)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Operating leases

5 unchanged sentences

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

SUMMARY OF MINIMUM LEASE PAYMENTS

For the Three Months Ended March 31,

(in thousands, except term and discount rate data)

OF MINIMUM LEASE PAYMENTS

For the Six Months Ended June 30,

Operating cash flows from operating leases

2 unchanged sentences

SCHEDULE OF LEASE LIABILITY MATURITY

(in thousands)

2023 (remaining)

5 unchanged sentences

Compute North provided operating services to

the Company and hosted our mining rigs at multiple facilities.

We delivered miners to Compute North, which then installed the mining

rigs at those facilities, operated and maintained the mining rigs, and provided energy to keep the miners operating.

During the course

of the chapter 11 cases, Compute North sold substantially all of their assets in a series of 363 sale transactions, including Compute

North’s ownership interests in non-debtor entities that own or partially-own facilities that house our miners.

the Company and hosted its mining rigs at multiple facilities.

The Company delivered miners to Compute North, which then installed the

mining rigs at those facilities, operated and maintained the mining rigs, and provided energy to keep the miners operating.

course of the chapter 11 cases, Compute North sold substantially all of their assets in a series of 363 sale transactions, including

Compute North’s ownership interests in non-debtor entities that own or partially-own facilities that house the Company’s

November 23, 2022, the Company and certain of its affiliates timely filed proofs of claim asserting various claims against Compute North,

8 unchanged sentences

claim against Compute North LLC in the amount of $ 40,000 and its Preferred Equity Interests in Compute North Holdings, Inc.

amount of 39,597 shares of Series C Preferred Stock was confirmed.

in the amount

of 39,597 shares of Series C Preferred Stock was confirmed.

In exchange, the Company agreed to vote in favor of Compute North’s

9 unchanged sentences

any distributions under the Plan on account of its claims and interests.

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

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

The complaint is based on allegations substantially

similar to the allegations in the December 2021 putative class action complaint, related to the Company’s disclosure of an SEC

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

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

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

May 5, 2022, a second shareholder derivative complaint was filed in the United States District Court for the District of Nevada, against

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

The second shareholder derivative complaint

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

On May 11, 2022, the

defendants moved to dismiss the second shareholder derivative complaint.

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

A June 13, 2022 scheduling order provided for plaintiffs

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

On November 22,

2022, before a consolidated complaint was due, plaintiffs voluntarily dismissed both actions without prejudice.

On November 23, 2022,

both actions were closed.

Class Action Complaint

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

the Company and present and former senior management.

The complaint alleges securities fraud related to the disclosure of an SEC investigation

previously made by the Company on November 15, 2021.

Plaintiff Tad Schlatre served the complaint on the Company on March 1, 2022.

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

On October 21, 2022, lead plaintiff voluntarily dismissed the

complaint without prejudice.

On December 7, 2022, the action was closed.

March 30, 2023, a putative class action complaint was filed in the United States District Court for the District of Nevada, against the

Company and present and former senior management.

The complaint alleges securities fraud related to the Company’s announcement

of accounting restatements on February 28, 2023.

Plaintiff has not served the complaint on the Company.

March 30, 2023, a putative class action complaint was filed in the United States District Court for the District of Nevada, against

the Company and present and former senior management, alleging claims under Section 10(b) and 20(a) of the Securities Exchange Act

of 1934 (the “Exchange Act”) arising out of the Company’s announcement of accounting restatements on February 28,

The defendants’ time to respond has been extended until after the appointment of a lead plaintiff.

To date, no lead

plaintiff has been appointed.

June 22, 2023, a shareholder derivative complaint was filed in the Circuit Court of the 17th Judicial Circuit for Broward County, Florida,

against current members of the Company’s board of directors and senior management, alleging claims for breach of fiduciary duty

and unjust enrichment based on allegations substantially similar to the allegations in the March 30, 2023 putative class action complaint.

July 8, 2023, a second shareholder derivative complaint was filed in the United States District Court for the District of Nevada, against

current and former members of the Company’s board of directors and senior management, alleging claims under Sections 14(a), 10(b), and 21D of the Exchange Act, and for breach of fiduciary duty, unjust enrichment,

and waste of corporate assets, based on allegations substantially similar to the allegations in the March 30, 2023 putative class action complaint.

July 12, 2023, a third shareholder derivative complaint was filed in the United States District Court for the District of Nevada, against

current and former members of the Company’s board of directors and senior management, alleging claims under Section 14(a) of the Exchange Act and for breach of fiduciary duty, based on allegations substantially similar to the allegations in the March 30, 2023 putative class action complaint.

July 13, 2023, a fourth shareholder derivative complaint was filed in the Circuit Court of the 17th Judicial Circuit for Broward County,

Florida, against current members of the Company’s board of directors and senior management, alleging claims for breach of fiduciary duty, unjust enrichment, and waste of corporate assets, based on allegations substantially similar to the allegations in the March 30, 2023 putative class action complaint.

October 6, 2020, the Company entered into a series of agreements with multiple parties to design and build a data center for up to 100-megawatts

in Hardin, MT.

in Hardin, Montana.

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

4 unchanged sentences

and certain of its executives received a subpoena to produce documents and communications concerning the Hardin, Montana data center

facility described in our Form 8-K dated October 13, 2020.

The Company received an additional subpoena from the SEC on April 10, 2023,

relating to, among other things, transactions with related parties.

We understand that the SEC may be investigating whether or not there

may have been any violations of the federal securities law.

We are cooperating with the SEC.

facility described in the Company’s Form 8-K dated October 13, 2020.

The Company received an additional subpoena from the SEC on

April 10, 2023, relating to, among other things, transactions with related parties.

The Company understands that the SEC may be investigating

whether or not there may have been any violations of the federal securities law.

The Company is cooperating with the SEC.

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

23 unchanged sentences

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.

The trial has

been rescheduled for January 29, 2024, and is scheduled for four days, including jury selection.

on February 24, 2022, the Court noted that a jury is more likely to accept $ 150 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.

The trial has been rescheduled

for January 29, 2024, and is scheduled for four days, including jury selection.

15 – RELATED PARTY TRANSACTIONS

September 23, 2022, the Company made an incremental $ 30,000 thousand investment in Auradine, Inc., bringing its total holdings in Auradine

to $ 35,500 thousand based upon a previously issued and disclosed SAFE instrument.

Said Ouissal, a director of the Company, currently

owns approximately 5 % 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 was no longer

deemed to be an independent director of the Company.

September 23, 2022, the Company made an incremental $ 30,000 investment in Auradine, Inc., bringing its total holdings in Auradine to

$ 35,500 based upon a previously issued and disclosed SAFE instrument.

Said Ouissal, a director of the Company, currently owns approximately

5 % 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 was no longer deemed to be an independent

director of the Company.

As a result, Mr.

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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.

has concluded that no such events or transactions took place that would require disclosure and in this Note

16 other than as disclosed below.

Results of the Company’s Annual Meeting and Amendment to the

Company’s Articles of Incorporation

July 27, 2023, the Company held an annual meeting of stockholders (the “Meeting”).

As of the record date for the Meeting,

shares of common stock were issued and outstanding 1 .

A total of 79,507,015

shares of common stock, constituting a quorum, were present and

accounted for at the Meeting.

At the Meeting, the Company’s stockholders approved the below proposals (with the Series A Preferred

Stock voting alongside the common stock (15,000

shares with 500,000 votes per share voting on proposal 3 in the same proportions as the shares of common stock were voted) ):

OF VOTES CAST

CAST COMMON STOCK:

Stock Increase

CAST SERIES A PREFERRED (CONVERTED BASIS):

5,172,875,000

# of Common shares as of June 16, 2023

# of Series A (converted basis into Common shares) as of June 16, 2023

5,351,250,000

shares voted through the meeting

shares (converted basis) voted through the meeting on Proposal # 3 only

5,172,875,000

5,252,382,015

As no other matters were brought for a vote before the meeting, the

votes on Proposal #5 of 14,846,275 shares in favor, 13,072,702 shares against, and 836,041 shares abstaining, have no impact.

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