What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2021-01-26 compared with 2020-03-23 · 614 added, 1136 removed, 468 unchanged (79% of the section changed)

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Common Stock is currently quoted on the OTCQB and has been quoted under the symbol “BTCS”.

The last reported sale

price of our common stock on March 9, 2020 was $0.085.

of March 9, 2020, there were 139 stockholders of record of our common stock, one of which is Cede & Co., a nominee for Depository

Trust Company, or DTC.

Shares of common stock that are held by financial institutions as nominees for beneficial owners are deposited

into participant accounts at DTC, and are considered to be held of record by Cede & Co.

Our Common Stock is currently

quoted on the OTCQB and has been quoted under the symbol “BTCS”.

The last reported sale price of our common stock

on January 22, 2021 was $1.61.

of January 22, 2021, there were 140 stockholders of record of our common stock, one of which is Cede & Co., a nominee

for Depository Trust Company, or DTC.

Shares of common stock that are held by financial institutions as nominees for beneficial

owners are deposited into participant accounts at DTC, and are considered to be held of record by Cede & Co.

as one stockholder.

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AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

January 30, 2014, the Board of Directors approved the adoption of a 2014 Plan.

The 2014 Plan provides for the grant of incentive

stock options, nonqualified stock options, restricted stock, restricted stock units, stock appreciation rights and other types

of stock-based awards to our employees, officers, directors and consultants.

Pursuant to the terms of the 2014 Plan, either the

Board or a board committee is authorized to administer the plan, including by determining which eligible participants will receive

awards, the number of shares of common stock subject to the awards and the terms and conditions of such awards.

Up to 258,395

(after giving effect to the 60:1 reverse split completed on February 13, 2017) shares of common stock are issuable pursuant to

awards under the 2014 Plan.

Unless earlier terminated by the Board, the 2014 Plan shall terminate at the close of business on

January 30, 2024.

On January 30, 2014, the

Board of Directors approved the adoption of a 2014 Plan.

The 2014 Plan provides for the grant of incentive stock options, nonqualified

stock options, restricted stock, restricted stock units, stock appreciation rights and other types of stock-based awards to our

employees, officers, directors and consultants.

Pursuant to the terms of the 2014 Plan, either the Board or a board committee

is authorized to administer the plan, including by determining which eligible participants will receive awards, the number of

shares of common stock subject to the awards and the terms and conditions of such awards.

Up to 8,613 (after giving effect to

prior reverse splits) shares of common stock are issuable pursuant to awards under the 2014 Plan.

Unless earlier terminated by

the Board, the 2014 Plan shall terminate at the close of business on January 30, 2024.

Assuming the Company’s 2021 Equity

Incentive Plan is approved by our shareholders at our 2021 Annual Meeting, we will no longer issue any securities under the 2014

of December 31, 2020, there are no incentive stock options, nonqualified stock options, restricted stock, restricted stock units,

stock appreciation rights and other types of stock-based awards issued pursuant to the 2014 Plan.

January 1, 2021, the Board of Directors approved the adoption of the 2021 Equity Incentive Plan (the “2021 Plan”).

The 2021 Plan, is subject to shareholder ratification, provides for the grant of incentive stock options, nonqualified stock options,

restricted stock, restricted stock units, stock appreciation rights and other types of stock-based awards to our employees, officers,

directors and consultants.

Pursuant to the terms of the 2021 Plan, either the Board or a board committee is authorized to administer

the plan, including by determining which eligible participants will receive awards, the number of shares of common stock subject

to the awards and the terms and conditions of such awards.

Up to 20,000,000 shares of common stock are issuable pursuant to awards

under the 2021 Plan.

Unless earlier terminated by the Board, the 2021 Plan shall terminate at the close of business on January

following table gives information about our common stock that may be issued upon the exercise of options granted to employees,

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COMPENSATION PLAN INFORMATION

Plan category

of securities

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compensation plans

compensation plans approved by security holders

compensation plans not approved by security holders

Equity compensation plans approved by security holders

Equity compensation plans not approved by security holders

SALES OF UNREGISTERED SECURITIES

sales of unregistered securities of our Company during the year ended December 31, 2019 are summarized below:

November 7, 2019, the Company issued a $200,000 promissory note (the “2019 Promissory Note”).

The 2019 Promissory

Note is due on August 7, 2020 and is:

(i) convertible at a 20% discount to the closing price of the Company’s common stock

on the date before exercise with a floor price of $0.02 per share, (ii) shall bear interest at 12% per annum (payable at maturity)

and in the event of default bears interest at a rate of 20%, (iii) convertible at the Company’s option subject to certain

limitations as set forth in the 2019 Promissory Note, and (iv) may be prepaid by the Company.

of the above offerings and sales were deemed to be exempt under Section 4(a)(2) of the Securities Act of 1933, as amended.

advertising or general solicitation was employed in offering the securities.

The offerings and sales were made to a limited number

of accredited investors, and transfer was restricted by us in accordance with the requirements of the Securities Act of 1933.

Each investor agreed that it was purchasing for investment and not with a view to distribution.

The sales of unregistered

securities of our Company during the year ended December 31, 2020 (other than what was disclosed on a Form 10-Q or Form 8-K)

are summarized below:

of Shares Due to Conversion of 2019 Promissory Note

April 6, 2020, the Company issued a total of 735,294 shares of the Company’s common stock for the conversion of $50,000

of principal on the 2019 Promissory Note.

May 7, 2020, the Company issued a total of 632,736 shares of the Company’s common stock for the conversion of the remaining

$150,000 of principal and $2,000 of interest on the 2019 Promissory Note.

May 11, 2020, the Company issued a total of 35,824 shares of the Company’s common stock for the conversion of the remaining

accrued interest of $9,458 on the 2019 Promissory Note.

of the above sales were deemed to be exempt under Section 4(a)(2) of the Securities Act of 1933.

No advertising or general solicitation

was employed in offering the securities.

The offerings and sales were made to a limited number of accredited investors, and transfer

was restricted by us in accordance with the requirements of the Securities Act of 1933.

Each investor agreed that it was purchasing

for investment and not with a view to distribution.

SELECTED FINANCIAL DATA

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statements as a result of a number of factors, including those set forth under “Risk Factors”

and elsewhere

in this report.

to additional financing, the Company plans to acquire additional Digital Assets to provide investors with indirect ownership of

Digital Assets that are not securities, such as bitcoin and ether.

The Company intends to acquire Digital Assets through open

market purchases.

We are not limiting our assets to a single type of Digital Asset and may purchase a variety of Digital Assets

that appear to benefit our investors, subject to the limitations contained within this report regarding Digital Securities.

and elsewhere in this

are an early entrant in the Digital Asset market and one of the first U.S.

publicly traded companies to be involved with Digital

Assets and blockchain technologies.

To our knowledge, we are one of a few public companies intending to acquire both Digital

Assets and a controlling interest in one or more businesses in the Digital Asset and blockchain industries.

Asset Initiatives

Company acquires Digital Assets to provide investors with indirect ownership of Digital Assets that are not securities, such as

bitcoin and ether.

The Company acquires Digital Assets through open market purchases.

We are not limiting our assets to a single

type of Digital Asset and may purchase a variety of Digital Assets that appear to benefit our investors, subject to the limitations

contained within this report regarding Digital Securities.

of December 31, 2020, the Company had the following Digital Assets:

Digital Asset

Bitcoin (BTC)

Ethereum (ETH)

of January 22, 2021, the Company had the following Digital Assets:

Company has not participated in any initial coin offerings as it believes most of the offerings entail the offering of Digital

Securities and require registration under the Securities Act and under state securities laws or can only be sold to accredited

investors in the United States.

Since about July 2017, initial coin offerings using Digital Securities have been (or should be)

limited to accredited investors.

Because we cannot qualify as an accredited investor, we do not intend to acquire coins in initial

coin offerings or from purchasers in such offerings.

Further, the Company does not intend to participate in registered or unregistered

initial coin offerings.

The Company will carefully review its purchases of Digital Securities to avoid violating the 1940 Act

and seek to reduce potential liabilities under the federal securities laws.

market is rapidly evolving and there can be no assurances that we will be competitive with industry participants that have or

may have greater resources than us.

Asset Data Analytics Platform

are also focused on Digital Assets and blockchain technologies.

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digital asset exchange APIs to read user data and does not allow for the trading of assets.

As a result of the pandemic, we have

experienced delays in the development of the platform.

Company is also seeking to acquire controlling interests in businesses in the blockchain industry as further described in this

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this rapidly evolving sector in an effort to enhance shareholder value.

Even though the prices of Digital Assets have been subject

to substantial volatility and there remains some regulatory uncertainty, we believe that businesses using blockchain technology

and those involved with Digital Assets such as bitcoin and ether, offer upside opportunity and are the types of opportunities

that we may pursue.

though the prices of Digital Assets have been subject to substantial volatility and there remains some regulatory uncertainty,

we believe that businesses using blockchain technology and those involved with Digital Assets such as bitcoin and ether, offer

upside opportunity and are the types of opportunities that we may pursue.

current framework or criteria is to seek and evaluate acquisition targets in the blockchain and Digital Asset sector which:

align with our business model of acquiring Digital Assets, and (ii) acquiring a controlling interest in one or more blockchain

technology related business ventures.

Our acquisition activities are spearheaded by Charles Allen, our Chief Executive Officer.

also monitor blockchain networks and may consider re-entering the digital asset mining business if and when we believe a positive

return on investment is achievable.

cannot assure you we will be successful in raising sufficient capital to implement our full business plan or assuming we can,

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OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2020 AND 2019

the years ended

and administrative

For the years ended

Operating expenses:

(expense) income:

loss on digital currencies

(loss) gain on digital currencies transactions

other (expenses) income

General and administrative

Research and development

Total operating expenses

Other expense:

Interest expense

Impairment loss on digital currencies

Realized loss on digital currencies transactions

Total other expenses

$ (2,556,094 )

dividend related to reduction of warrant strike price

loss attributable to common stockholders

$ (1,640,601 )

Deemed dividend related to reduction of warrant strike price

Net loss attributable to common stockholders

$ (2,556,094 )

$ (1,736,309 )

expenses for the years ended December 31, 2020 and 2019 were approximately $2.0 million and $1.4 million.

The slight increase

in operating expenses over the prior year mostly relates to increases in general and administrative expenses as a result of salary

increases to our executive management team.

expenses for the year ended 2019 was approximately $208.2 thousand and other income for the year ended 2018 was approximately

$163.7 thousand.

The decrease in other income over the prior year primarily relates to decrease in realized gain on sale of digital

currencies, an increase in interest expense related to debt discount amortization and an increase in impairment loss on digital

The increase is primarily

from contingent bonuses being earned for the achievement of performance milestones.

Research and development expenses for the

years ended December 31, 2020 and 2019 were $45,450 and $0 is from the development of our digital asset data analytics platform.

expenses for the year ended December 31, 2020 and 2019 was approximately $569,800 and $208,200, respectively.

increase is primarily from interest expense on our convertible notes and impairment of our digital asset holdings.

Net loss for the years

ended December 31, 2020 and 2019 were approximately $2.6 million and $1.6 million.

The increase is primarily due to increase of

both operating expenses and other expenses as discussed above.

loss attributable to common stockholders

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AND CAPITAL RESOURCES

of December 31, 2019, the Company had approximately $143 thousand of cash and $253 thousand in Digital Assets.

will require significant additional capital to sustain short-term operations and make the investments needed to execute our longer-term

business plan and repay our existing debt of $200,000 which becomes due on August 7, 2020.

Our existing liquidity is not sufficient

to fund operations and anticipated capital expenditures for the foreseeable future, and we will not have sufficient cash resources

to support our current operations for the next 12 months.

do not have sufficient capital to meet our expenses over the 12 months from the date of this report.

Our current cash is not sufficient

to sustain operations.

We will require significant additional capital to sustain short-term operations and make the investments

needed to execute our longer-term business plan.

If we attempt to obtain additional debt or equity financing, we cannot provide

assurance that such financing will be available to us on favorable terms, if at all.

2019 through the date of this report, the Company received $1,479,410 in exchange for 8,603,986 shares of common stock (excluding

419,652 commitment and pro-rata commitment shares) in connection with the $10 million Purchase Agreement with Cavalry Fund I LP.

of December 31, 2020, the Company had approximately $524,000 of cash and $996,000 in Digital Assets based

on the impaired value.

The fair market value of the Company’s Digital Assets, as of December 31, 2020, was approximately $3.9 million.

will require significant additional capital to sustain short-term operations and make the investments needed to execute our longer-term

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future, and we do not have sufficient cash resources to support our current operations for the next 12 months, and will need additional

funding, whether through our $10 million Purchase Agreement or other sources.

If we attempt to obtain additional debt or equity

financing or are unable to rely on the $10 million Purchase Agreement for any reason, we cannot provide assurance that such financing

will be available to us on favorable terms, if at all.

funding, whether through our $10 million Purchase Agreement or other sources, to resume revenue generating activities.

If we attempt

to obtain additional debt or equity financing, we cannot provide assurance that such financing will be available to us on favorable

terms, if at all.

of recurring operating losses, net operating cash flow deficits, and an accumulated deficit, there is substantial doubt about

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fees, in excess of corresponding (non-financing related) revenue.

While we continue to implement its business strategy, it intends

to finance its activities through:

current cash and cash equivalents on hand from the Company’s past equity offerings, and

additional funds raised through the sale of additional securities in the future.

While we continue to implement our business strategy,

we intend to finance our activities through:

current cash and cash equivalents on hand from the Company’s past debt and equity offerings by controlling costs, and

additional financing through sales of additional securities.

of December 31, 2020, the Company had sold 19,363,353 shares of common stock and issued 177,054 commitment shares under the $10

million Purchase Agreement and received approximately $3.03 million in connection with the sales.

We cannot provide any assurance

that we will be able to continue selling under the $10 million Purchase Agreement or that we will be able to do so at prices that

we believe are beneficial to the Company and its shareholders.

January 6, 2021, the Company received $1,100,000 in funds from Messrs.

David Garrity a director, and Charles Allen and Michal

Handerhan, executive officers and directors of the Company pursuant to the subscription agreements entered into with them on January

1, 2021 and issued to them 1,100,000 shares of the Company’s Series C-2 Convertible Preferred Stock.

January 15, 2021, the Company issued Calvary the 2021 Promissory Note and a Series D warrant to purchase 2,000,0000 shares of

the Company’s Common Stock (the “Series D Warrant”) in consideration for $1,000,000.

The 2021 December Promissory

Note is (i) due on November 15, 2021, (ii) convertible at a 35% discount to the closing price of the Company’s common stock

on the date before exercise with a floor price of $0.75 per share and (iii) shall bear interest at 12% per annum (payable at maturity).

Subject to certain limitations, the Company may force conversion of the 2021 Promissory Note.

The 2,000,000 Series D Warrants

are exercisable for cash only at $2.16 per share, over a two-year period, and do not contain anti-dilution or price protection.

On January 15, 2021, the Company issued 2,000,000 shares of the Company’s Common Stock to Cavalry upon the exercise of all

their Series C warrants and payment of the exercise price of $400,000.

Cavalry and the Company entered into an agreement whereby

the Cavalry would exercise early for cash provided that the Company register the underlying shares of Common Stock within 30 days

Treatment of Digital Assets

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gain (loss) on sale of Digital Assets are included in other income (expense) in the statements of operations.

Company assesses impairment of Digital Assets quarterly if the fair value of digital assets was less than its cost basis on any

day during the quarter.

The Company recognizes impairment losses on Digital Assets caused by decreases in fair value using the

dollar spot price of the related Digital Asset as of each impairment date.

Such impairment in the value of Digital

Assets is recorded as a component of costs and expenses in our statements of operations.

There were no impairment losses related

to Digital Assets during the year ended December 31, 2018.

The Company recorded an impairment loss of approximately $121 thousand

The Company assesses impairment

of Digital Assets quarterly if the fair value of Digital Assets was less than its cost basis on any day during the quarter.

The Company recognizes impairment losses on Digital Assets caused by decreases in fair value using the average U.S.

price of the related Digital Asset as of each impairment date.

Such impairment in the value of Digital Assets is recorded as a

component of costs and expenses in our statements of operations.

The Company recorded an impairment loss of approximately $165,000

related to Digital Assets during the year ended December 31, 2020.

CONCERN AND MANAGEMENT PLANS

audited financial statements for the year ended December 31, 2020, have been prepared on a going concern basis, which implies

that we will continue to realize our assets and discharge our liabilities and commitments in the normal course of business.

have not generated revenues during the years ended December 31, 2019 and 2018 and have never paid any dividends and are unlikely

to pay dividends or generate substantial earnings in the immediate or foreseeable future.

Our continuation as a going concern

is dependent upon the continued financial support from our shareholders, the ability of our company to obtain necessary financing

to achieve our operating objectives, and the attainment of profitable operations.

As of December 31, 2019, we have an accumulated

deficit of $117.0 million since inception.

As we do not have sufficient funds for our planned or new operations, we will need

to raise additional funds for operations.

These factors, among others, raise substantial doubt about our ability to continue as

a going concern.

that we will continue to realize our assets and discharge our liabilities and commitments in the normal course of business for

one year from the date the financial statements are issued.

We have not generated revenues during the years ended December

31, 2020 and 2019 and have never paid any dividends and are unlikely to pay dividends or generate substantial earnings in the

immediate or foreseeable future.

Our continuation as a going concern is dependent upon the continued financial support from our

shareholders, the ability of our company to obtain necessary financing to achieve our operating objectives, and the attainment

of profitable operations.

As of December 31, 2020, we have an accumulated deficit of $119.5 million since inception.

not have sufficient funds for our planned or new operations, we will need to raise additional funds for operations.

These factors,

among others, raise substantial doubt about our ability to continue as a going concern.

continuation of our business is dependent upon us raising additional financial support.

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loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

to additional financing, the Company plans to acquire additional Digital Assets to provide investors with indirect ownership of

Digital Assets that are not securities, such as bitcoin and ether.

The Company intends to acquire Digital Assets through open

market purchases.

Additionally, the Company may acquire Digital Assets by resuming its transaction verification services business

through outsourced data centers and earning rewards in Digital Assets by securing their respective blockchains.

We are not limiting

our assets to a single type of Digital Asset and may purchase a variety of Digital Assets that appear to benefit our investors,

subject to the certain limitations regarding Digital Securities.

The Company is also seeking to acquire controlling interests

in businesses in the blockchain industry.

See “Risk Factors”

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gain (loss) on sale of Digital Assets are included in other income (expense) in the statements of operations.

Company assesses impairment of Digital Assets quarterly if the fair value of digital assets was less than its cost basis on any

day during the quarter.

The Company recognizes impairment losses on Digital Assets caused by decreases in fair value using the

Company assesses impairment of Digital Assets quarterly if the fair value of Digital Assets was less than its cost

basis on any day during the quarter.

The Company recognizes impairment losses on Digital Assets caused by decreases in fair

value using the average U.S.

dollar spot price of the related Digital Asset as of each impairment date.

Such impairment in the value of Digital

Assets are recorded as a component of costs and expenses in our statements of operations.

Such impairment in

the value of Digital Assets are recorded as a component of costs and expenses in our statements of operations.

recorded impairment losses of approximately $121,000 and $165,000 related to Digital Assets during the years ended

December 31, 2019 and December 31, 2020, respectively.

Accounting Pronouncements

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Related to Our Company

need to secure additional financing.

require additional funds since we have very limited operating capital and negative working capital.

As of March 9, 2020, we had

approximately $247,500 in cash and the fair market value of our Digital Assets was approximately $349,346.

Our cash as of the

date of this report is expected, to only be sufficient to cover our public company costs through August 2020 depending on expenses

which excludes:

i) the repayment of the $200,000 convertible promissory note (the “2019 Promissory Note”), and ii)

the payment of accrued and unpaid compensation to our executives.

anticipate that we will incur operating losses for the foreseeable future.

cash burn rate is approximately $80,000 per month, may increase as we continue to spend additional cash on legal and accounting

expenses in connection with our public reporting requirements.

If we are not successful in securing additional financing including

toxic funding, we will likely be required to cease operations.

we do not raise additional debt or equity capital, we may not be able to pay all of our indebtedness.

we do not raise additional debt or equity capital, we may not be able to pay all of our indebtedness or may have to sell a portion

of our Digital Assets.

May 2019, we signed a Purchase Agreement with Cavalry.

We may direct Cavalry to purchase shares of our common stock up to $10,000,000

under the Purchase Agreement over a 36-month period assuming there is an effective registration statement covering the shares.

(of which $3,034,541 has already been sold) under the Purchase Agreement over a 36-month period assuming there is an effective

registration statement covering the shares.

extent we rely on Cavalry as a source of funding will depend on a number of factors including, the prevailing market price of

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sufficient funding from Cavalry does not occur for any reason including Cavalry suffering liquidity issues or failure of the Company

to keep the registration statement current, we will need to secure another source of funding in order to satisfy our working capital

Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we

require it, the consequences could be a material adverse effect on our business, operating results, financial condition and prospects.

we do not raise the necessary working capital, we will not be able to remain operational.

to keep the registration statement current, we will need to secure another source of funding or sell some of or Digital Assets

in order to pay off our indebtedness.

Should the financing we require be unavailable or prohibitively expensive when we require

it, the consequences could have a material adverse effect on our business, operating results, financial condition and prospects.

auditors have issued a “going concern”

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opinion indicates that the financial statements

have been prepared assuming we will continue as a going concern and do not include any adjustments to reflect the possible future

effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result if

we do not continue as a going concern.

Therefore, you should not rely on our balance sheet as an indication of the amount of proceeds

that would be available to satisfy claims of creditors, and potentially be available for distribution to shareholders, in the

event of liquidation.

have been prepared assuming we will continue as a going concern for one year from the date the financial statements are issued

and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets,

or the amounts and classification of liabilities that may result if we do not continue as a going concern.

Therefore, you should

not rely on our balance sheet as an indication of the amount of proceeds that would be available to satisfy claims of creditors,

and potentially be available for distribution to shareholders, in the event of liquidation.

have a limited operating history and a history of operating losses, and expect to incur significant additional operating losses.

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Digital Assets and blockchain technologies become more widely available, we expect the services and products associated with them

In 2017, the SEC issued a DAO Report that promoters that use initial coin offerings or token sales to raise capital

may be engaged in the offer and sale of securities in violation of the Securities Act and the Securities Exchange Act of 1934

(the “Exchange Act”).

This may cause us to potentially change our future business in order to comply fully with the

federal securities laws as well as applicable state securities laws.

As a result, to stay current with the industry, our business

model may need to evolve as well.

From time to time we may modify aspects of our business model relating to our product mix and

service offerings.

We cannot offer any assurance that these or any other modifications will be successful or will not result in

harm to the business.

We may not be able to manage growth effectively, which could damage our reputation, limit our growth and

negatively affect our operating results.

In 2017, the Securities and Exchange Commission (“SEC”) issued a DAO Report that promoters that use initial

coin offerings or token sales to raise capital may be engaged in the offer and sale of securities in violation of the Securities

Act and the Securities Exchange Act of 1934 (the “Exchange Act”).

This may cause us to potentially change our future

business in order to comply fully with the federal securities laws as well as applicable state securities laws.

As a result, to

stay current with the industry, our business model may need to evolve as well.

From time to time we may modify aspects of our

business model relating to our product mix and service offerings.

We cannot offer any assurance that these or any other modifications

will be successful or will not result in harm to the business.

We may not be able to manage growth effectively, which could damage

our reputation, limit our growth and negatively affect our operating results.

loss of our executive officers Charles Allen, our Chairman, Chief Executive Officer and Chief Financial Officer, and Michal Handerhan,

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employment agreement.

a result of the Company’s past inability to compensate its officers at generally accepted market levels and its historic

failure to either make payroll or make payroll on a timely basis, its officers choose to devote a substantial amount of their

time to involvement with other companies or on other projects.

Although our officers are now receiving compensation for their

services, we can provide no assurances that we will not suffer liquidity issues in the near future as we implement our business

If the Company is unable to pay our officers their compensation, they may again devote time to other projects which may

have a material adverse effect on us.

loss of Charles Allen, our Chairman, Chief Executive Officer and Chief Financial Officer, and Michal Handerhan, our Chief Operating

Officer, would have a material adverse effect on us.

simultaneous loss of services of both Charles Allen and Michal Handerhan, would result in the Company having no officers or employees

and would subsequently cease all operations which would have a material adverse effect on us.

See the second risk factor below

on the loss of our executive officers and employees.

The loss of Charles Allen, our Chairman, Chief Executive Officer and Chief Financial Officer, and Michal

Handerhan, our Chief Operating Officer, would have a material adverse effect on us.

Handerhan our Chief Operating Officer has notified the Company that in the event of the departure of Charles Allen, our Chairman,

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In the event both of officers

terminate their Employment Agreements for Good Reason, this would result in the Company owing them $585,200 and would leave the

Company without officers or employees which may have a material adverse effect upon us, your investment and the ability of the

Company to continue operations.

inability to attract and retain additional personnel could affect our ability to successfully grow our business.

future success depends on our ability to identify, attract, hire, train, retain and motivate other highly-skilled technical, managerial,

editorial, merchandising, marketing and customer service personnel.

Competition for such personnel is intense.

Our failure to

retain and attract the necessary technical, managerial, editorial, merchandising, marketing, and customer service personnel could

harm our business.

terminate their Employment Agreements for Good Reason, this would result in the Company owing them approximately $611,000 and

would leave the Company without officers or employees which may have a material adverse effect upon us, your investment, and hamper

the ability of the Company to continue operations.

may need to implement additional finance and accounting systems, procedures and controls as we grow our business and organization

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financial performance.

disasters and geo-political events could adversely affect our business.

disasters, including hurricanes, cyclones, typhoons, tropical storms, floods, earthquakes and tsunamis, weather conditions, including

winter storms, droughts and tornados, whether as a result of climate change or otherwise, and geo-political events, including

civil unrest or terrorist attacks, that affect us or other service providers could adversely affect our business.

there has been limited precedence set for financial accounting of Digital Assets other than Digital Securities, it is unclear

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to develop and implement appropriate internal controls and reporting procedures.

we fail to establish and maintain an effective system of internal control, we may not be able to report our financial results

accurately or to prevent fraud.

Any inability to report and file our financial results accurately and timely could harm our reputation

and adversely impact the trading price of our Common Stock.

During our assessment of the effectiveness of internal control over

financial reporting as of December 31, 2018, management identified a significant deficiency in our disclosure controls and procedures

which may lead to a failure to prevent or detect misstatements.

internal control is necessary for us to provide reliable financial reports and prevent fraud.

If we cannot provide reliable financial

reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment

existed, and our business and reputation with investors may be harmed.

As a result, our small size and any current internal control

deficiencies may adversely affect our financial condition, results of operation and access to capital.

During our assessment of

the effectiveness of internal control over financial reporting as of December 31, 2018, management identified a significant deficiency

related to presence of weakness in our disclosure control and procedure resulting from limited internal audit functions.

of our inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Projections of

any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes

in conditions, or that the degree of compliance with any policies and procedures may deteriorate.

we lack effective internal controls and disclosure controls we erroneously accounted for Digital Assets using a fair value methodology

which was not consistent with United States generally accepted accounting principles (“US GAAP”) and required us to

restate our financial statements for the year ended December 31, 2017 and the three and six months ended March 31, 2018 and June

30, 2018, our failure to establish and maintain effective internal control over financial reporting could result in material misstatements

in our financial statements and a failure to meet our reporting and financial obligations which could have a material adverse

effect on our financial condition.

which was not consistent with United States generally accepted accounting principles (“U.S.

GAAP”) and required

us to restate our financial statements for the year ended December 31, 2017 and the three and six months ended March 31, 2018

and June 30, 2018, our failure to establish and maintain effective internal control over financial reporting could result in material

misstatements in our financial statements and a failure to meet our reporting and financial obligations which could have a material

adverse effect on our financial condition.

effective internal control over financial reporting is necessary for us to produce reliable financial statements.

in this report, our internal controls and disclosure controls were not effective as of December 31, 2018.

Because of our ineffective

controls and material weaknesses, we did not account for our Digital Assets correctly in our financial statements and restated

our audited financial statements for the year ended December 31, 2017 and the unaudited financial statements for the quarters

ended March 31, 2018 and June 30, 2018.

herein, our internal controls and disclosure controls were not effective as of December 31, 2018.

Because of our ineffective controls

and material weaknesses, we did not account for our Digital Assets correctly in our financial statements and restated our audited

financial statements for the year ended December 31, 2017 and the unaudited financial statements for the quarters ended March

31, 2018 and June 30, 2018.

in April 2020, the Company received an oral comment from the Staff of the SEC regarding the classification of Digital Asset transactions

as an Investing Activity in its Cash Flow Statement within the Company’s Form 10-K for the year ended December 31, 2019

(“Form 10-K”).

As mentioned above, we previously misclassified Digital Assets in 2017 financial statements and failed

to correct this in the Form 10-K.

The Company has amended the Form 10-K to reclassify Digital Asset transactions from an Investing

Activity to an Operating Activity on the Cash Flow Statement.

material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such

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prevented or detected on a timely basis.

the Company is now following US GAAP in accounting for its Digital Assets, it has not remediated its material weaknesses.

can be no assurance as to when these material weaknesses will be remediated or that additional material weaknesses will not arise

in the future.

Any failure to remediate the material weaknesses, or the development of new material weaknesses in our internal

control over financial reporting, could result in material misstatements in our financial statements and cause us to fail to meet

our reporting and financial obligations, which in turn could have a material adverse effect on our financial condition and the

trading price of our Common Stock.

the Company is now following U.S.

GAAP in accounting for its Digital Assets, it has not remediated its material weaknesses.

There can be no assurance as to when these material weaknesses will be remediated or that additional material weaknesses will

not arise in the future.

Any failure to remediate the material weaknesses, or the development of new material weaknesses in our

internal control over financial reporting, could result in material misstatements in our financial statements and cause us to

fail to meet our reporting and financial obligations, which in turn could have a material adverse effect on our financial condition

and the trading price of our Common Stock.

company compliance may make it more difficult to attract and retain officers and directors.

Sarbanes-Oxley Act and rules implemented by the Securities and Exchange Commission have required changes in corporate governance

practices of public companies.

As a public company, we expect these rules and regulations to increase our compliance costs in

2019 and beyond and to make certain activities more time consuming and costly.

The impact of the SEC’s July 25, 2017 report

on Digital Securities (the “DAO Report”) as well as recent enforcement actions and speeches made by the SEC’s

Chairman will increase our compliance and legal costs.

More recently, the SEC’s Chairman commented that most initial coin

offerings (a type of Digital Asset) involve the offer of a Digital Security.

As a public company, we also expect that these rules

and regulations will make it more difficult and expensive for us to obtain director and officer liability insurance in the future

and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or

similar coverage.

As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of

directors or as executive officers, and to maintain insurance at reasonable rates, or at all.

Sarbanes-Oxley Act and rules implemented by the SEC have required changes in corporate governance practices of public companies.

As a public company, we expect these rules and regulations to increase our compliance costs and make certain activities more time

consuming and costly.

The impact of the SEC’s July 25, 2017 report on Digital Securities (the “DAO Report”)

as well as enforcement actions and speeches made by the SEC’s Chairman will increase our compliance and legal costs.

a public company, we also expect that these rules and regulations will make it more difficult and expensive for us to obtain director

and officer liability insurance in the future and we may be required to accept reduced policy limits and coverage or incur substantially

higher costs to obtain the same or similar coverage.

As a result, it may be more difficult for us to attract and retain qualified

persons to serve on our board of directors or as executive officers, and to maintain insurance at reasonable rates, or at all.

stock price may be volatile.

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many of which are beyond our control, including the following:

in our industry including changes which adversely affect bitcoin and other Digital Assets;

pricing pressures;

volatility in the stock prices of Digital Assets issuers;

volatility in the price of bitcoin and other Digital Assets;

in our industry including changes which adversely affect bitcoin, ethereum, and other Digital Assets;

volatility in the price of bitcoin, ethereum, and other Digital Assets;

ability to obtain working capital financing;

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of our common stock;

of our Series C-1 Convertible Preferred Stock and the subsequent sale of the underlying common stock;

of our convertible notes and the subsequent sale of the underlying common stock;

of our warrants and the subsequent sale of the underlying common stock;

of our convertible notes and the subsequent sale of the underlying common stock;

ability to execute our business plan;

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of any strategic relationship;

developments;

regulatory developments;

and other external factors.

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a return on your investment will only occur if our stock price appreciates.

is currently a limited trading market for our Common Stock and we cannot ensure that one will be sustained.

shares of common stock are not traded on a national securities exchange, and the price, may not reflect our actual or perceived

There can be no assurance that there will be an active market for our shares of common stock in the future.

liquidity will be dependent on the perception of our operating business, among other things.

We may, in the future, take certain

steps, including utilizing investor awareness campaigns, press releases, road shows and conferences to increase awareness of our

business and any steps that we might take to bring us to the awareness of investors may require we compensate consultants with

cash and/or stock.

There can be no assurance that there will be any awareness generated or the results of any efforts will result

in any impact on our trading volume.

Consequently, investors may not be able to liquidate their investment at a price that reflects

the value of the business and trading may be at an inflated price relative to the performance of our company due to, among other

things, availability of sellers of our shares.

The price of our common stock has been highly volatile.

Because there may be a

low price for our shares of common stock and because of our involvement in the Digital Asset business, many brokerage firms or

clearing firms may not be willing to effect transactions in the securities or accept our shares for deposit in an account.

if an investor finds a broker willing to effect a transaction in the shares of our common stock, the combination of brokerage

commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price.

Further, many lending institutions

will not permit the use of low priced shares of common stock as collateral for any loans.

our common stock does not trade on a national securities exchange, the prices of our common stock may be more volatile and lower

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could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon

liquidation, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right

to the redemption of the shares, together with a premium, prior to the redemption of our common stock.

In addition, our board

of directors could authorize the issuance of a series of preferred stock that has greater voting power than our common stock or

that is convertible into our common stock, which could decrease the relative voting power of our common stock or result in dilution

to our existing shareholders.

liquidation, provide holders of the preferred anti-dilution protection, the right to receive dividend payments before dividends

are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to

the redemption of our common stock.

In addition, our board of directors could authorize the issuance of a series of preferred

stock that has greater voting power than our common stock or that is convertible into our common stock (for example, the issuance

of our outstanding Series C-2 which votes on a 2-for-1 as converted basis), which could decrease the relative voting power of

our common stock or result in dilution to our existing shareholders.

future sales of our common stock by us or by our existing shareholders could cause our stock price to fall.

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services to other businesses and individuals under commercial agreements.

and financial institutions may not provide banking services, or may cut off services, to businesses that engage in cryptocurrency-related

number of companies that engage in bitcoin and/or other cryptocurrency-related activities have been unable to find banks or financial

institutions that are willing to provide them with bank accounts and other services.

Similarly, a number of companies and individuals

or businesses associated with cryptocurrencies may have had and may continue to have their existing bank accounts closed or services

discontinued with financial institutions in response to government action, particularly in China, where regulatory response to

cryptocurrencies has been to exclude their use for ordinary consumer transactions within China.

We also may be unable to obtain

or maintain these services for our business.

The difficulty that many businesses that provide bitcoin and/or derivatives on other

cryptocurrency-related activities have and may continue to have in finding banks and financial institutions willing to provide

them services may be decreasing the usefulness of cryptocurrencies as a payment system and harming public perception of cryptocurrencies,

and could decrease their usefulness and harm their public perception in the future.

usefulness of cryptocurrencies as a payment system and the public perception of cryptocurrencies could be damaged if banks or

financial institutions were to close the accounts of businesses engaging in bitcoin and/or other cryptocurrency-related activities.

This could occur as a result of compliance risk, cost, government regulation or public pressure.

The risk applies to securities

firms, clearance and settlement firms, national stock and derivatives on commodities exchanges, the over-the-counter market, and

the Depository Trust Company, which, if any of such entities adopts or implements similar policies, rules or regulations, could

negatively affect our relationships with financial institutions and impede our ability to convert cryptocurrencies to fiat currencies.

Such factors could have a material adverse effect on our ability to continue as a going concern or to pursue our strategy at all,

which could have a material adverse effect on our business, prospects or operations and harm investors.

Digital Assets may be determined to be Digital Securities, we may inadvertently violate the 1940 Act and incur large losses as

a result and potentially be required to register as an investment company.

This would have a material adverse effect on an investment

plan to acquire a portfolio of Digital Assets including bitcoin, ethereum and other Digital Assets.

There is an increased regulatory

examination of Digital Assets and Digital Securities.

This has led to regulatory and enforcement activities.

As of the date of

this filing, we are not aware of any rules that have been proposed to regulate the Digital Assets we hold as securities.

be certain as to how future regulatory developments will impact the treatment of bitcoins, ethereum and other Digital Assets under

the 1940 Act, a company may be deemed an investment company under if the value of its investment securities is more than 40% of

its total assets (exclusive of government securities and cash items) on a consolidated basis.

Digital Assets we may own in the

future may be determined to be Digital Securities by the SEC or a court.

Additionally, one or more states may conclude bitcoin,

ethereum, or other Digital Assets held by us in the future are securities under state securities laws which would require registration

under state laws including merit review laws.

For example California defines the term “investment contract”

more strictly

than the SEC.

legislation and SEC rulemaking and other regulatory developments, including interpretations released by a regulatory authority,

may impact the manner in which bitcoin, ethereum, and other Digital Assets are treated for classification and clearing purposes.

The SEC’s July 25, 2017 DAO Report expressed its view that Digital Assets may be securities depending on the facts and circumstances.

a Digital Asset we hold were later determined to be a Digital Security, we could inadvertently become an investment company, as

defined by the 1940 Act, if the value of the Digital Securities we owned exceeded 40% of our assets excluding cash.

We are subject

to the following risks:

to legal advice, the SEC or a court may conclude that bitcoin, ethereum, or other Digital Assets we later acquire to be securities;

on legal advice, we may acquire other Digital Assets which we have been advised are not securities but later are held to be

may knowingly acquire Digital Assets that are securities and acquire minority investments in businesses which investments

are securities.

the event that the Digital Assets held by us exceed 40% of our total assets, exclusive of cash, we may inadvertently become an

investment company.

order to limit our acquisition of Digital Securities to stay within the 40% threshold, we will examine the manner in which a Digital

Assets was initially marketed to determine if it may be deemed a Digital Security and subject to federal and state securities

Even if we conclude that a particular Digital Asset is not a security under the 1940 Act, certain states take a stricter

view which means the Digital Asset may have violated applicable state securities laws.

the total value of securities which we hold rise to more than 40% of our assets (exclusive of cash) SEC Rule 3a-2 under the 1940

Act allows an issuer to prevent itself from being deemed an investment company if it reduces its holdings of securities to less

than 40% of its assets (exclusive of cash) and does not go above the 40% threshold more than once every three years.

if changes in the classification of Digital Assets causes us to exceed the 40% threshold, we may experience large losses when

we liquidate digital securities as a result of continued volatility.

40% requirement may limit our ability to make certain investments or enter into joint ventures that could otherwise have a positive

impact on our earnings.

In any event, we do not intend to become an investment company engaged in the business of investing and

trading securities.

the extent that Digital Assets held by us are deemed by the SEC or a state legislator to fall within the definition of a security,

we may be required to register and comply with additional regulation under the Investment Company Act, including additional periodic

reporting and disclosure standards and requirements and the registration of our Company as an investment company.

Such additional

registrations:

i) would result in extraordinary, non-recurring expenses, ii) is time consuming and restrictive, iii) would require

a restructuring of our operations, and iv) we would be very constrained in the kind of business we could do as a registered investment

company, thereby materially and adversely impacting an investment in us.

Further, if our examination of a Digital Asset is incorrect,

we may incur regulatory penalties and private investor liabilities since Section 5 of the Securities Act is a strict liability

statute much like selling spoiled milk and state securities laws generally impose liability for negligence for misrepresentations.

order to comply with the 1940 Act, we anticipate having increased management time and legal expenses in order to analyze which

Digital Assets are securities and periodically analyze our total holdings to ensure that we do not maintain more than 40% of our

total assets (exclusive of cash) as securities.

If our view that the Digital Assets we hold are not securities is challenged by

the SEC and courts uphold the challenge, we may inadvertently violate the 1940 Act and incur substantial legal fees in defending

our position.

The cost of such compliance would result in the Company incurring substantial additional expenses, and the failure

to register if required would have a materially adverse impact to conduct our operations.

current or future outbreak of a health epidemic or other adverse public health developments, such as the pneumonia caused by the

COVID-19 coronavirus, could disrupt our operations and may affect the price of digital assets and adversely affect our business.

COVID-19 coronavirus, could disrupt our operations and adversely affect our business.

business could be adversely affected by the effects of health epidemics.

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operations and have no contingency plans and limited resources if anyone was to be affected by the coronavirus.

Further consequences

of the COVID-19 outbreak may have a material affect on the digital asset market.

Our business could be adversely affected to the

extent that the COVID-19 outbreak evolves into a worldwide health crises.

Related to the Bitcoin Network and Bitcoins

following risks relate to our proposed business and the effects upon us assume we obtain financing in a sufficient amount to re-enter

this business.

further development and acceptance of the Bitcoin Network and other Digital Asset systems, which represent a new and rapidly changing

industry, are subject to a variety of factors that are difficult to evaluate.

The slowing or stopping of the development or acceptance

of the Bitcoin Network may adversely affect an investment in our Company.

Assets such as bitcoins that may be used, among other things, to buy and sell goods and services are a new and rapidly evolving

industry of which the Bitcoin Network is a prominent, but not unique, part.

The growth of the Digital Assets industry in general,

and the Bitcoin Network in particular, is subject to a high degree of uncertainty.

The factors affecting the further development

of the Digital Assets industry, as well as the Bitcoin Network, include:

worldwide growth in the adoption and use of bitcoins and other Digital Assets;

and quasi-government regulation of bitcoins and other Digital Assets and their use, or restrictions on or regulation of access

to and operation of the Bitcoin Network or similar Digital Assets systems;

maintenance and development of the open-source software protocol of the Bitcoin Network;

During 2020, as

a result of the COVID-19 pandemic, we experienced significant delays in the development of our digital asset data analytics platform

and may experience future delays as the pandemic continues.

Related to Digital Assets

further development and acceptance of cryptographic and algorithmic protocols governing the issuance of and transactions in cryptocurrencies,

which represent a rapidly changing industry, are subject to a variety of factors that are difficult to evaluate.

use of Digital Assets to, among other things, buy and sell goods and services and complete transactions, is part of a new and

rapidly evolving industry that employs cryptocurrency assets based upon a computer-generated mathematical and/or cryptographic

Large-scale acceptance of cryptocurrencies as a means of payment has not, and may never, occur.

The growth of the Digital

Assets industry in general, and the use of Digital Assets in particular, is subject to a high degree of uncertainty.

affecting the further development of the Digital Assets industry, include but are not limited to:

worldwide growth in the adoption and use of Digital Assets as a medium of exchange;

and quasi-government regulation of Digital Assets and their use, or restrictions on or regulation of access to and operation

of the Digital Assets systems;

maintenance and development of the open-source software protocol of Digital Asset Networks;

in consumer demographics and public tastes and preferences;

availability and popularity of other forms or methods of buying and selling goods and services, including new means of using

fiat currencies;

fiat currencies and digital forms of fiat currencies;

economic conditions and the regulatory environment relating to Digital Assets;

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decline in the popularity or acceptance of the Bitcoin Network could adversely affect an investment in us.

Digital Assets may be determined to be Digital Securities, we may inadvertently violate the 1940 Act and incur large losses as

a result and potentially be required to register as an investment company or terminate operations.

Assets we may own in the future may be determined to be Digital Securities by the SEC or a court.

If a Digital Asset we were to

hold was later determined to be a Digital Security, we could inadvertently become an investment company, as defined by the 1940

Act, if the value of the Digital Securities we owned exceeded 40% of our assets excluding cash.

We are subject to the following

to legal advice, the SEC or a court may conclude that bitcoin, ether, or other Digital

Assets we later acquire to be securities;

on legal advice, we may acquire other Digital Assets which we have been advised are not securities but later are held to be

may knowingly acquire Digital Assets that are securities and acquire minority investments in businesses which investments

are securities;

of the internal procedures we take to avoid surpassing the 40% threshold, future volatility during the course of a day may

cause use to exceed the 40% threshold.

we exceed the test, we will have one-year to reduce our holdings of securities below the 40% threshold.

However, that can only

occur once during a three-year period.

Accordingly, if changes in the classification of Digital Assets causes us to exceed the

40% threshold, we may experience large losses when we liquidate securities as a result of continued volatility.

Further, if we

elect to sell a private investment, not only may it be difficult to find a buyer but we could incur a significant loss on the

sale of a private investment due to not only the lack of liquidity but also the entity’s poor performance.

If we are able

to come below the 40% threshold and again face the same problem, it is likely we will be forced to terminate operations, sell

all assets and distribute cash to our shareholders who will likely suffer very large losses.

Further, the cost of distributing

cash to our shareholders may exceed the amount of cash on hand in which case we would use our remaining funds to wind down the

We Acquire Digital Securities, Even Unintentionally, We May Violate the Investment Company Act and Incur Potential Third-Party

expect that if we obtain sufficient financing, we will acquire a portfolio of Digital Assets including bitcoins, ether and Digital

There is an increased regulatory examination of Digital Assets and Digital Securities.

This has led to regulatory

and enforcement activities.

In order to limit our acquisition of Digital Securities to stay within the 40% threshold, we will

examine the manner in which Digital Assets were initially marketed to determine if they may be deemed Digital Securities and subject

to federal and state securities laws.

Even if we conclude that a particular Digital Asset is not a security under the Securities

Act, certain states including California take a stricter view of the term “investment contract”

which means the Digital

Asset may have violated applicable state securities laws.

This will result in increased compliance costs and legal fees.

examination of a Digital Asset is incorrect, we may incur regulatory penalties and private investor liabilities since Section

5 of the Securities Act is a strict liability statute much like selling spoiled milk and state securities laws generally impose

liability for negligence for misrepresentations.

outcome of these factors could have negative effects on our ability to continue as a going concern or to pursue our business strategy

at all, which could have a material adverse effect on our business, prospects or operations as well as potentially negative effect

on the value of any bitcoin, ethereum or other Digital Assets we hold or acquire, which would harm investors in our securities.

there is relatively small use of bitcoins in the retail and commercial marketplace in comparison to relatively large use by speculators,

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could adversely impact an investment in us.

Facebook is seeking to develop a cryptocurrency, it may adversely affect the value of bitcoins and Digital Assets.

May 2019, Facebook announced its plans for a cryptocurrency called Libra.

The massive social network and 27 other partners are

touting the Libra digital coin and Facebook’s corresponding digital wallet, Calibra, as a way to make sending payments around

the world as easy as it is to send a photo.

Because Facebook is a leader in social media, when and if it launches its coins, it

could adversely affect the value of bitcoins and Digital Assets.

In July 2019, Facebook announced that Libra will not launch until

all regulatory concerns have been met.

In October 2019, many partners left the Libra Association including Paypal, eBay, Mastercard,

Stripe, and Visa.

Bitcoin Network contributors could propose amendments to the Bitcoin Network’s protocols and software that, if accepted

and authorized by the Bitcoin Network, could adversely affect an investment in us.

small group of individuals contribute to the Bitcoin Core project on Github.

This group of contributors is currently headed by

van der Laan, the current lead maintainer.

These individuals can propose refinements or improvements to the Bitcoin

Network’s source code through one or more software upgrades that alter the protocols and software that govern the Bitcoin

Network and the properties of bitcoin, including the irreversibility of transactions and limitations on the mining of new bitcoin.

Proposals for upgrades and discussions relating thereto take place on online forums.

For example, there is an ongoing debate regarding

altering the Blockchain by increasing the size of blocks to accommodate a larger volume of transactions.

Although some proponents

support an increase, other market participants oppose an increase to the block size as it may deter miners from confirming transactions

and concentrate power into a smaller group of miners.

To the extent that a significant majority of the users and miners on the

Bitcoin Network install such software upgrade(s), the Bitcoin Network would be subject to new protocols and software that may

adversely affect an investment in the Shares.

In the event a developer or group of developers proposes a modification to the Bitcoin

Network that is not accepted by a majority of miners and users, but that is nonetheless accepted by a substantial plurality of

miners and users, two or more competing and incompatible Blockchain implementations could result.

This is known as a “hard

In such a case, the “hard fork”

in the Blockchain could materially and adversely affect the perceived

value of bitcoin as reflected on one or both incompatible Blockchains, which may adversely affect an investment in us.

has recently forked and additional forks may occur in the future which may affect the value of bitcoin held by the Company.

a malicious actor or botnet obtains control in excess of 50% of the processing power active on a Digital Asset Network, it is

possible that such actor or botnet could manipulate a blockchain in a manner that adversely affects an investment in us.

a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions

of the computers) obtains a majority of the processing power dedicated to mining a cryptocurrency, it may be able to alter blockchains

on which transactions of cryptocurrency reside and rely by constructing fraudulent blocks or preventing certain transactions from

completing in a timely manner, or at all.

The malicious actor or botnet could control, exclude or modify the ordering of transactions,

though it could not generate new units or transactions using such control.

The malicious actor could “double-spend”

its own cryptocurrency (i.e., spend the same bitcoin in more than one transaction) and prevent the confirmation of other users’

transactions for as long as it maintained control.

To the extent that such malicious actor or botnet does not yield its control

of the processing power on the network or the cryptocurrency community does not reject the fraudulent blocks as malicious, reversing

any changes made to blockchains may not be possible.

The foregoing description is not the only means by which the entirety of

blockchains or cryptocurrencies may be compromised but is only an example.

there are no known reports of malicious activity or control of blockchains achieved through controlling over 50% of the processing

power on the network, it is believed that certain mining pools may have exceeded the 50% threshold in bitcoin.

The possible crossing

of the 50% threshold indicates a greater risk that a single mining pool could exert authority over the validation of bitcoin transactions.

To the extent that the bitcoin ecosystem, and the administrators of mining pools, do not act to ensure greater decentralization

of bitcoin mining processing power, the feasibility of a malicious actor obtaining control of the processing power will increase

because the botnet or malicious actor could compromise more than 50% mining pool and thereby gain control of blockchain, whereas

if the blockchain remains decentralized it is inherently more difficult for the botnet of malicious actor to aggregate enough

processing power to gain control of the blockchain, may adversely affect an investment in our common stock.

Such lack of controls

and responses to such circumstances could have a material adverse effect on our ability to continue as a going concern or to pursue

our new strategy at all, which could have a material adverse effect on our business, prospects or operations and potentially the

value of any bitcoin, ethereum or other Digital Assets we acquire or hold, and harm investors.

has forked three times and additional forks may occur in the future which may affect the value of bitcoin held by the Company.

August 1, 2017, bitcoin’s blockchain was forked three times creating Bitcoin Cash, Bitcoin Gold and Bitcoin SV.

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effect on bitcoin’s value.

open-source structure of the Bitcoin Network protocol means that the contributors to the protocol are generally not directly compensated

for their contributions in maintaining and developing the protocol.

A failure to properly monitor and upgrade the protocol could

damage the Bitcoin Network and an investment in us.

Bitcoin Network operates based on an open-source protocol maintained by contributors, largely on the Bitcoin Core project on GitHub.

As an open source project, Bitcoin is not represented by an official organization or authority.

As the Bitcoin Network protocol

is not sold and its use does not generate revenues for contributors, contributors are generally not compensated for maintaining

and updating the Bitcoin Network protocol.

Although the MIT Media Lab’s Digital Currency Initiative funds the current maintainer

van der Laan, among others, this type of financial incentive is not typical.

The lack of guaranteed financial incentive

for contributors to maintain or develop the Bitcoin Network and the lack of guaranteed resources to adequately address emerging

issues with the Bitcoin Network may reduce incentives to address the issues adequately or in a timely manner.

This may adversely

affect an investment in us.

a malicious actor or botnet obtains control in excess of 50 percent of the processing power active on the Bitcoin Network, it

is possible that such actor or botnet could manipulate the Blockchain in a manner that adversely affects an investment in us.

a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions

of the computers) obtains a majority of the processing power dedicated to mining on the Bitcoin Network, it may be able to alter

the Blockchain on which the Bitcoin Network and all bitcoin transactions rely by constructing alternate blocks if it is able to

solve for such blocks faster than the remainder of the miners on the Bitcoin Network can add valid blocks.

In such alternate blocks,

the malicious actor or botnet could control, exclude or modify the ordering of transactions, though it could not generate new

bitcoins or transactions using such control.

Using alternate blocks, the malicious actor could “double-spend”

own bitcoins (i.e., spend the same bitcoins in more than one transaction) and prevent the confirmation of other users’

for so long as it maintains control.

To the extent that such malicious actor or botnet does not yield its majority control of

the processing power on the Bitcoin Network or the bitcoin community does not reject the fraudulent blocks as malicious, reversing

any changes made to the Blockchain may not be possible.

Such changes could adversely affect an investment in us.

late May and early June 2014, a mining pool known as GHash.io approached and, during a 24- to 48-hour period in early June may

have exceeded, the threshold of 50% of the processing power on the Bitcoin Network.

To the extent that GHash.io did exceed 50%

of the processing power on the network, reports indicate that such threshold was surpassed for only a short period, and there

are no reports of any malicious activity or control of the Blockchain performed by GHash.io.

Furthermore, the processing power

in the mining pool appears to have been redirected to other pools on a voluntary basis by participants in the GHash.io pool, as

had been done in prior instances when a mining pool exceeded 40% of the processing power on the Bitcoin Network.

to and possible crossing of the 50% threshold indicate a greater risk that a single mining pool could exert authority over the

validation of bitcoin transactions.

To the extent that the bitcoin ecosystem, including the Core Developers and the administrators

of mining pools, do not act to ensure greater decentralization of bitcoin mining processing power, the feasibility of a malicious

actor obtaining in excess of 50% of the processing power on the Bitcoin Network (e.g., through control of a large mining pool

or through hacking such a mining pool) will increase, which may adversely impact an investment in us.

the award of bitcoin for solving blocks and transaction fees for recording transactions are not sufficiently high to incentivize

miners, miners may cease expending hashrate to solve blocks and confirmations of transactions on the Blockchain could be slowed

A reduction in the hashrate expended by miners on the Bitcoin Network could increase the likelihood of a malicious

actor obtaining control in excess of 50%) of the aggregate hashrate active on the Bitcoin Network or the Blockchain, potentially

permitting such actor to manipulate the Blockchain in a manner that adversely affects an investment in us.

the award of new bitcoin for solving blocks declines, and if transaction fees are not sufficiently high, miners may not have an

adequate incentive to continue mining and may cease their mining operations.

The current fixed reward for solving a new block

is 12.5 bitcoin per block;

the reward decreased from 25 bitcoin in July 2016.

It is estimated that it will halve again in about

This reduction may result in a reduction in the aggregate hashrate of the Bitcoin Network as the incentive for miners

will decrease.

Moreover, miners ceasing operations would reduce the aggregate hashrate on the Bitcoin Network, which would adversely

affect the confirmation process for transactions (i.e., temporarily decreasing the speed at which blocks are added to the Blockchain

until the next scheduled adjustment in difficulty for block solutions) and make the Bitcoin Network more vulnerable to a malicious

actor obtaining control in excess of 50% of the aggregate hashrate on the Bitcoin Network.

Periodically, the Bitcoin Network has

adjusted the difficulty for block solutions so that solution speeds remain in the vicinity of the expected ten minute confirmation

time targeted by the Bitcoin Network protocol.

The Company believes that from time to time there will be further considerations

and adjustments to the Bitcoin Network regarding the difficulty for block solutions.

More significant reductions in aggregate

hashrate on the Bitcoin Network could result in material, though temporary, delays in block solution confirmation time.

Any reduction

in confidence in the confirmation process or aggregate hashrate of the Bitcoin Network may negatively impact the value of bitcoin,

which will adversely impact an investment in us.

the extent that the profit margins of Bitcoin mining operations are not high, operators of Bitcoin mining operations are more

likely to immediately sell bitcoins earned by mining in the Bitcoin Exchange Market, resulting in a reduction in the price of

bitcoins that could adversely impact an investment in us.

the past three years, Bitcoin Network mining operations have evolved from individual users mining with computer processors, graphics

processing units and first-generation ASIC servers.

Currently, new processing power brought onto the Bitcoin Network is predominantly

added by incorporated and unincorporated “professionalized”

mining operations.

Professionalized mining operations

may use proprietary hardware or sophisticated ASIC machines acquired from ASIC manufacturers.

They require the investment of significant

capital for the acquisition of this hardware, the leasing of operating space (often in data centers or warehousing facilities),

incurring of electricity costs and the employment of technicians to operate the mining farms.

As a result, professionalized mining

operations are of a greater scale than prior Bitcoin Network miners and have more defined, regular expenses and liabilities.

regular expenses and liabilities require professionalized mining operations to more immediately sell bitcoins earned from mining

operations on the Bitcoin Exchange Market, whereas it is believed that individual miners in past years were more likely to hold

newly mined bitcoins for more extended periods.

The immediate selling of newly mined bitcoins greatly increases the supply of

bitcoins on the Bitcoin Exchange Market, creating downward pressure on the price of bitcoins.

extent to which the value of bitcoin mined by a professionalized mining operation exceeds the allocable capital and operating

costs determines the profit margin of such operation.

A professionalized mining operation may be more likely to sell a higher

percentage of its newly mined bitcoin rapidly if it is operating at a low profit margin-and it may partially or completely cease

operations if its profit margin is negative.

In a low profit margin environment, a higher percentage could be sold into the Bitcoin

Exchange Market more rapidly, thereby potentially reducing bitcoin prices.

Lower bitcoin prices could result in further tightening

of profit margins, particularly for professionalized mining operations with higher costs and more limited capital reserves, creating

a network effect that may further reduce the price of bitcoin until mining operations with higher operating costs become unprofitable

and remove mining power from the Bitcoin Network.

The network effect of reduced profit margins resulting in greater sales of newly

mined bitcoin could result in a reduction in the price of bitcoin that could adversely impact an investment in us.

the extent that any miners cease to record transactions in solved blocks, transactions that do not include the payment of a transaction

fee will not be recorded on the Blockchain until a block is solved by a miner who does not require the payment of transaction

Any widespread delays in the recording of transactions could result in a loss of confidence in the Bitcoin Network, which

could adversely impact an investment in us.

the extent that any miners cease to record transactions in solved blocks, such transactions will not be recorded on the Blockchain.

Currently, there are no known incentives for miners to elect to exclude the recording of transactions in solved blocks;

to the extent that any such incentives arise (e.g., a collective movement among miners or one or more mining pools forcing bitcoin

users to pay transaction fees as a substitute for or in addition to the award of new bitcoins upon the solving of a block), actions

of miners solving a significant number of blocks could delay the recording and confirmation of transactions on the Blockchain.

Any systemic delays in the recording and confirmation of transactions on the Blockchain could result in greater exposure to double-spending

transactions and a loss of confidence in the Bitcoin Network, which could adversely impact an investment in us.

acceptance of Bitcoin Network software patches or upgrades by a significant, but not overwhelming, percentage of the users and

miners in the Bitcoin Network could result in a “fork”

in the Blockchain, resulting in the operation of two separate

networks until such time as the forked Blockchains are merged.

The temporary or permanent existence of forked Blockchains could

adversely impact an investment in us.

is an open source project and, although there is an influential group of leaders in the Bitcoin Network community including the

Core Developers, there is no official developer or group of developers that formally controls the Bitcoin Network.

Any individual

can download the Bitcoin Network software and make any desired modifications, which are proposed to users and miners on the Bitcoin

Network through software downloads and upgrades, typically posted to the bitcoin development forum on GitHub.com.

A substantial

majority of miners and bitcoin users must consent to those software modifications by downloading the altered software or upgrade

that implements the changes;

otherwise, the changes do not become a part of the Bitcoin Network.

Since the Bitcoin Network’s

inception, changes to the Bitcoin Network have been accepted by the vast majority of users and miners, ensuring that the Bitcoin

Network remains a coherent economic system;

however, a developer or group of developers could potentially propose a modification

to the Bitcoin Network that is not accepted by a vast majority of miners and users, but that is nonetheless accepted by a substantial

population of participants in the Bitcoin Network.

In such a case, and if the modification is material and/or not backwards compatible

with the prior version of Bitcoin Network software, a fork in the Blockchain could develop and two separate Bitcoin Networks could

result, one running the pre-modification software program and the other running the modified version (i.e., a second “Bitcoin”

Such a fork in the Blockchain typically would be addressed by community-led efforts to merge the forked Blockchains,

and several prior forks have been so merged.

This kind of split in the Bitcoin Network could materially and adversely impact an

investment in us and, in the worst case scenario, harm the sustainability of the Bitcoin Network’s economy.

property rights claims may adversely affect the operation of the Bitcoin Network.

parties may assert intellectual property claims relating to the holding and transfer of Digital Assets and their source code.

Regardless of the merit of any intellectual property or other legal action, any threatened action that reduces confidence in the

Bitcoin Network’s long-term viability or the ability of end-users to hold and transfer bitcoins may adversely affect an

investment in us.

Additionally, a meritorious intellectual property claim could prevent us and other end-users from accessing

the Bitcoin Network or holding or transferring their bitcoins.

As a result, an intellectual property claim against us or other

large Bitcoin Network participants could adversely affect an investment in us.

Bitcoin Exchanges on which bitcoins trade are relatively new and, in most cases, largely unregulated and may therefore be more

exposed to fraud and failure than established, regulated exchanges for other products.

To the extent that the Bitcoin Exchanges

representing a substantial portion of the volume in bitcoin trading are involved in fraud or experience security failures or other

operational issues, such Bitcoin Exchanges’

failures may result in a reduction in the price of bitcoin and can adversely

affect an investment in us.

Bitcoin Exchanges on which the bitcoins trade are new and, in most cases, largely unregulated.

Furthermore, many Bitcoin Exchanges

(including several of the most prominent US Dollar denominated Bitcoin Exchanges) do not provide the public with significant information

regarding their ownership structure, management teams, corporate practices or regulatory compliance.

As a result, the marketplace

may lose confidence in, or may experience problems relating to, Bitcoin Exchanges, including prominent exchanges handling a significant

portion of the volume of bitcoin trading.

the past four years, a number of Bitcoin Exchanges have been closed due to fraud, failure or security breaches.

In many of these

instances, the customers of such Bitcoin Exchanges were not compensated or made whole for the partial or complete losses of their

account balances in such Bitcoin Exchanges.

While smaller Bitcoin Exchanges are less likely to have the infrastructure and capitalization

that make larger Bitcoin Exchanges more stable, larger Bitcoin Exchanges are more likely to be appealing targets for hackers and

“malware”

(i.e., software used or programmed by attackers to disrupt computer operation, gather sensitive information

or gain access to private computer systems).

Further, the collapse of the largest Bitcoin Exchange in 2014 suggests that the failure

of one component of the overall Bitcoin ecosystem can have consequences for both users of a Bitcoin Exchange and the Bitcoin industry

2018, China shut down Bitcoin Exchanges and other virtual currency trading platforms.

A Wall Street Journal article reported that

China accounted for the bulk of global bitcoin trading as of early 2018.

Further, in late January 2018, the Wall Street Journal

reported that $530 million of cryptocurrency was missing from a Japanese exchange.

On May 7, 2019, Coindesk reported that approximately

$41 million in Bitcoin was stolen from crypto exchange Binance.

has been reported that Bithumb, a South Korea exchange was hacked, resulting in a $180 million loss.

This followed its reported

loss of $350 million in 2018.

In 2019, the Chief Executive Officer of Quadriga, the largest exchange in Canada, died without providing

for an alternative way to access its systems causing a reported $200 million loss.

lack of stability in the Bitcoin Exchange Market and the closure or temporary shutdown of Bitcoin Exchanges due to fraud, business

failure, hackers or malware, or government-mandated regulation may reduce confidence in the Bitcoin Network and result in greater

volatility in bitcoin value.

These potential consequences of a Bitcoin Exchange’s failure could adversely affect an investment

or economic crises may motivate large-scale sales of Bitcoins, which could result in a reduction in Bitcoin value and adversely

affect an investment in us.

an alternative to fiat currencies that are backed by central governments, Digital Assets such as bitcoins, which are relatively

new, are subject to supply and demand forces based upon the desirability of an alternative, decentralized means of buying and

selling goods and services, and it is unclear how such supply and demand will be impacted by geopolitical events.

Nevertheless,

political or economic crises may motivate large-scale acquisitions or sales of bitcoins either globally or locally.

sales of bitcoins would result in a reduction in bitcoin value and could adversely affect an investment in us.

for bitcoin is driven, in part, by its status as the most prominent and secure Digital Asset.

It is possible that a Digital Asset

other than bitcoins could have features that make it more desirable to a material portion of the Digital Asset user base, resulting

in a reduction in demand for bitcoins, which could have a negative impact on the price of bitcoins and adversely affect an investment

Bitcoin Network and bitcoins, as an asset, hold a “first-to-market”

advantage over other Digital Assets.

This first-to-market

advantage is driven in large part by having the largest user base and, more importantly, the largest combined mining power in

use to secure the Blockchain and transaction verification system.

Having a large mining network results in greater user confidence

regarding the security and long-term stability of a Digital Asset’s network and its block chain;

as a result, the advantage

of more users and miners makes a Digital Asset more secure, which makes it more attractive to new users and miners, resulting

in a network effect that strengthens the first-to-market advantage.

of March 9, 2020, there were over 2,400 alternate Digital Assets (or altcoins) tracked by CoinMarketCap, having a total market

capitalization (including the market capitalization of bitcoin) of approximately $223 billion, using market prices and total outstanding

supply of each Digital Asset.

This included altcoins using a “proof of work”

mining structure similar to Bitcoin,

and those using a “proof of stake”

transaction verification system that is different than Bitcoin’s mining system

(e.g., Peercoin, Bitshares and NXT).

As of March 9, 2020, bitcoin’s $142 billion market capitalization was approximately

6.5 times the size of the $22 billion market cap of ETH, the second largest Digital Asset.

Despite the marked first-mover advantage

of the Bitcoin Network over other Digital Assets, it is possible that another Digital Asset could become materially popular due

to either a perceived or exposed shortcoming of the Bitcoin Network protocol that is not immediately addressed by the Bitcoin

contributor community or a perceived advantage of an altcoin that includes features not incorporated into Bitcoin.

Asset obtains significant market share (either in market capitalization, mining power or use as a payment technology), this could

reduce bitcoin’s market share as well as other Digital Assets we may become involved in and have a negative impact on the

demand for, and price of, such Digital Assets and could adversely affect an investment in us.

ability to adopt technology in response to changing security needs or trends poses a challenge to the safekeeping of our Digital

history of the Bitcoin Exchange Market has shown that Bitcoin Exchanges and large holders of bitcoins must adapt to technological

change in order to secure and safeguard their bitcoins and other Digital Assets.

We rely on Bitgo Inc.’s multi-signature

enterprise storage solution to safeguard our bitcoins from theft, loss, destruction or other issues relating to hackers and technological

We believe that it may become a more appealing target of security threats as the size of our bitcoin holdings grow.

the extent that either Bitgo Inc.

or we are unable to identify and mitigate or stop new security threats, our bitcoins may be

subject to theft, loss, destruction or other attack, which could adversely affect an investment in us.

threats to us could result in, a loss of Company’s Digital Assets, or damage to the reputation and our brand, each of which

could adversely affect an investment in us.

breaches, computer malware and computer hacking attacks have been a prevalent concern in the Bitcoin Exchange Market since the

launch of the Bitcoin Network.

Any security breach caused by hacking, which involves efforts to gain unauthorized access to information

or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment,

and the inadvertent transmission of computer viruses, could harm our business operations or result in loss of our bitcoins and

other Digital Assets.

Any breach of our infrastructure could result in damage to our reputation which could adversely affect an

investment in us.

Furthermore, we believe that, as our assets grow, it may become a more appealing target for security threats

such as hackers and malware.

will primarily rely on the exchanges we hold our digital assets at and Bitgo Inc.’s multi-signature enterprise storage solution

to safeguard our bitcoins and other digital assets from theft, loss, destruction or other issues relating to hackers and technological

Nevertheless, the exchanges we utilize or Bitgo Inc.’s security system may not be impenetrable and may not be free

from defect or immune to acts of God, and any loss due to a security breach, software defect or act of God will be borne by us.

In January 2018, the Japanese cryptocurrency exchange Coincheck reported that hackers breached Coincheck’s security and

stole approximately $530 million worth of cryptocurrency.

Our bitcoins and other Digital Assets are also stored with exchanges

such as Itbit, Kraken and Coinbase and others prior to selling them.

February 1, 2019, a 20 year old hacker pled guilty to stealing more than $5,000,000 worth of crypto currency from 40 victims through

SIM swapping.

The hacker is the first individual convicted of a crime for SIM swapping, which is growing increasingly popular

with criminals as a way to steal crypto currency.

In SIM swapping, hackers call a telecoms company posing as their target and

claim that their SIM card has been lost, and that they would like their number to be ported to a new card.

The criminals can convince

phone companies that they are who they claim to be by providing social security numbers or addresses.

Once the telecoms company

transfers the number to a new SIM, hackers can bypass two-step authentication measures for accounts by using the phone as a recovery

By using this method and acquiring someone’s phone number, a hacker can get into every account the person owns within

minutes and that person cannot do anything about it.

security system and operational infrastructure may be breached due to the actions of outside parties, error or malfeasance of

an employee of ours, or otherwise, and, as a result, an unauthorized party may obtain access to our, private keys, data or bitcoins.

Additionally, outside parties may attempt to fraudulently induce employees of ours to disclose sensitive information in order

to gain access to our infrastructure.

As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage

systems change frequently, or may be designed to remain dormant until a predetermined event and often are not recognized until

launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures.

actual or perceived breach of our security system occurs, the market perception of the effectiveness of our security system could

be harmed, which could adversely affect an investment in us.

the event of a security breach, we may be forced to cease operations, or suffer a reduction in assets, the occurrence of each

of which could adversely affect an investment in us.

loss of confidence in our security system, or a breach of our security system, may adversely affect us and the value of an investment

will take measures to protect us and our bitcoins and other Digital Assets from unauthorized access, damage or theft;

it is possible that the security system may not prevent the improper access to, or damage or theft of our bitcoins.

breach could harm our reputation or result in the loss of some or all of our bitcoins.

A resulting perception that our measures

do not adequately protect our Digital Assets could result in a loss of current or potential shareholders, reducing demand for

our common stock and causing our shares to decrease in value.

transactions are irrevocable and stolen or incorrectly transferred bitcoins may be irretrievable.

As a result, any incorrectly

executed Bitcoin transactions could adversely affect an investment in us.

(and other Digital Asset) transactions are not, from an administrative perspective, reversible without the consent and active

participation of the recipient of the transaction or, in theory, control or consent of a majority of the processing power on the

Bitcoin Network.

Once a transaction has been verified and recorded in a block that is added to the Blockchain, an incorrect transfer

of Digital Assets or a theft of Digital Assets generally will not be reversible and we may not be capable of seeking compensation

for any such transfer or theft.

Although our transfers of bitcoins will regularly be made to or from vendors, consultants, services

providers, etc.

it is possible that, through computer or human error, or through theft or criminal action, our bitcoins could

be transferred from us in incorrect amounts or to unauthorized third parties.

To the extent that we are unable to seek a corrective

transaction with such third party or is incapable of identifying the third party which has received our bitcoins through error

or theft, we will be unable to revert or otherwise recover incorrectly transferred Company Digital Assets.

To the extent that

we are unable to seek redress for such error or theft, such loss could adversely affect an investment in us.

Digital Assets may be subject to loss, damage, theft or restriction on access.

is a risk that part or all of our digital assets could be lost, stolen or destroyed.

We believe that our Digital Assets will be

an appealing target to hackers or malware distributors seeking to destroy, damage or steal our Digital Assets.

Although we utilize

the exchanges we hold our Digital Assets at and Bitgo Inc.’s enterprise multi-signature storage solution for our bitcoins,

to minimize the risk of loss, damage and theft, we cannot guarantee that it will prevent such loss, damage or theft, whether caused

intentionally, accidentally or by act of God.

Access to our Digital Assets could also be restricted by natural events (such as

an earthquake or flood) or human actions (such as a terrorist attack).

Any of these events may adversely affect our operations

and, consequently, an investment in us.

limited rights of legal recourse against us, and our lack of insurance protection expose us and our shareholders to the risk of

loss of our bitcoins and other Digital Assets for which no person is liable.

bitcoins and other Digital Assets held by us are not insured.

Therefore, a loss may be suffered with respect to our bitcoins which

is not covered by insurance and for which no person is liable in damages which could adversely affect our operations and, consequently,

an investment in us.

and other Digital Assets held by us are not subject to FDIC or SIPC protections.

will not hold our bitcoins and other Digital Assets with a banking institution or a member of the Federal Deposit Insurance Corporation

(“FDIC”) or the Securities Investor Protection Corporation (“SIPC”) and, therefore, our Digital Assets

are not subject to the protections enjoyed by depositors with FDIC or SIPC member institutions.

may not have adequate sources of recovery if our bitcoins and other Digital Assets are lost, stolen or destroyed.

our bitcoins or other Digital Assets are lost, stolen or destroyed under circumstances rendering a party liable to us, the responsible

party may not have the financial resources sufficient to satisfy our claim.

For example, as to a particular event of loss, the

only source of recovery for us might be limited, to the extent identifiable, other responsible third parties (e.g., a thief or

terrorist), any of which may not have the financial resources (including liability insurance coverage) to satisfy a valid claim

sale of our bitcoins or other Digital Assets to pay expenses at a time of low prices could adversely affect an investment in us.

may sell bitcoins or other Digital Assets to pay expenses on an as-needed basis, irrespective of then-current prices.

volatility of bitcoin and other Digital Assets could mean that prices are low when we need to sell.

Consequently, our Digital

Assets may be sold at a time when the prices are low, which could adversely affect an investment in us.

property rights claims may adversely affect an investment in us.

are not aware of any intellectual property claims that may prevent us from operating and holding bitcoins or other Digital Assets;

however, third parties may assert intellectual property claims relating to the operation of us and the mechanics instituted for

the investment in, holding of and transfer of bitcoins or other Digital Assets.

Regardless of the merit of an intellectual property

or other legal action, any legal expenses to defend or payments to settle such claims would be extraordinary expenses and be borne

by us through the sale of our bitcoins and other Digital Assets.

Additionally, a meritorious intellectual property claim could

prevent us from operating and force us to liquidate our bitcoins and other Digital Assets.

As a result, an intellectual property

claim against us could adversely affect an investment in us.

changes or actions may restrict the use of Digital Assets or the operation of trading markets in a manner that adversely affects

an investment in us.

a few years ago, little or no regulatory attention has been directed toward bitcoin, other Digital Assets and the markets where

they trade by U.S.

federal and state governments, foreign governments and self-regulatory agencies.

As bitcoin has grown in popularity

and in market size and initial coin offerings which tend to be Digital Securities, the SEC, Federal Reserve Board, U.S.

and certain other U.S.

agencies (e.g., the CFTC, FinCEN and the Federal Bureau of Investigation) have begun to examine the operations

of the initial coin offerings, Bitcoin Network, bitcoin users and the Bitcoin Exchange Market.

July 25, 2017, the SEC issued its DAO Report which concluded that Digital Assets or tokens issued for the purpose of raising funds

may be securities within the meaning of the federal securities laws.

The DAO Report focused on the activities of a virtual organization

which offered tokens in exchange for ether which is the second largest reported digital currency.

The DAO Report emphasized that

whether Digital Asset is a security is based on the facts and circumstances.

Although the Company’s activities are not focused

on raising capital or assisting others that do so, the federal securities laws are very broad, and there can be no assurances

that the SEC will not take enforcement action against the Company in the future including for the sale of unregistered securities

in violation of the Securities Act or acting as an unregistered investment company in violation of the Investment Company Act.

The SEC has taken various actions against persons or entities misusing bitcoin in connection with fraudulent schemes (i.e., Ponzi

scheme), inaccurate and inadequate publicly disseminated information, and the offering of unregistered securities.

More recently,

the SEC suspended trading in three Digital Asset public companies.

Since issuing the DAO Report the SEC Chairman has stated that

the SEC is carefully examining initial coin offerings and similar areas involving Digital Assets for their compliance with the

Securities Act.

On November 16, 2018, the SEC announced its first civil penalties solely targeting ICO securities registration

violators in reference to settled charges against ICO issuers CarrierEQ, Inc., (“Airfox”) and Paragon Coin, Inc.

(“Paragon”).

Stephanie Avakian, Co-Director of the SEC’s Enforcement Division, stated that “we have made it clear that companies

who issue securities through ICOs are required to comply with existing statutes and rules governing the registration of securities.”

Unlike Slock.It, which faced no penalty, Airfox and Paragon were each ordered to:

1) pay $250,000 in penalties, 2) register their

tokens pursuant to the Exchange Act, and 2) to file periodic reports with the SEC for at least a year.

recently, it has been publicly reported that the SEC staff has been issuing subpoenas seeking information about initial coin offerings.

Although we have never invested in initial coin offering, lawsuits filed by the SEC claiming that initial coin offering issuers

and cryptocurrency public companies violate the Securities Act and the Exchange Act and the resulting publicity may have a material

adverse effect on the prices of Digital Assets we own and otherwise adversely affect opportunities in the Blockchain industry,

which in turn will have an adverse impact on our business and prospects.

CFTC has determined that bitcoin and other virtual currencies are commodities and the sale of derivatives based on digital currencies

must be done in accordance with the provisions of the CEA and CFTC regulations.

Also of significance, is that the CFTC appears

to have taken the position that bitcoin is not encompassed by the definition of currency under the CEA and CFTC regulations.

CFTC defined bitcoin and other “virtual currencies”

as “a digital representation of value that functions as

a medium of exchange, a unit of account, and/or a store of value, but does not have legal tender status in any jurisdiction.

and other virtual currencies are distinct from ‘real’

currencies, which are the coin and paper money of the United

States or another country that are designated as legal tender, circulate, and are customarily used and accepted as a medium of

exchange in the country of issuance.”

To the extent that bitcoin itself is determined to be a security, commodity future

or other regulated asset, or to the extent that a US or foreign government or quasi-governmental agency exerts regulatory authority

over the Bitcoin Network or bitcoin trading and ownership, trading or ownership in bitcoin or an investment in us may be adversely

CFTC affirmed its approach to the regulation of bitcoin and bitcoin-related enterprises on June 2, 2016, when the CFTC settled

charges against Bitfinex, a Bitcoin Exchange based in Hong Kong.

In its Order, the CFTC found that Bitfinex engaged in “illegal,

off-exchange commodity transactions and failed to register as a futures commission merchant”

when it facilitated borrowing

transactions among its users to permit the trading of bitcoin on a “leveraged, margined or financed basis”

first registering with the CFTC.

In 2017 the CFTC stated that it would consider bitcoin and other virtual currencies as commodities

or derivatives depending on the facts of the offering.

In December 2017, bitcoin futures trading commenced on two CFTC regulated

futures markets.

In 2018 two federal district courts determined that Digital Assets were commodities and can be regulated by the

CFTC as such.

state regulators such as the NYSDFS have also initiated examinations of bitcoin, the Bitcoin Network and the regulation thereof.

The NYSDFS began requiring New York based companies to have a “BitLicense”

in June 2015.

The “BitLicense”

regulates the conduct of businesses that are involved in “virtual currencies”

in New York or with New York customers,

and prohibits any person or entity involved in such activity to conduct activities without a license.

Out of concern of over regulating

cryptocurrency, New York has formed a task force to further study the scope of its regulation.

Additionally,

federal magistrate judge in the U.S.

District Court for the Eastern District of Texas has ruled that “Bitcoin is

a currency or form of money,”

a Florida circuit court judge determined that bitcoin did not qualify as money or “tangible

wealth,”

and an opinion from the U.S.

District Court for the Northern District of Illinois identified bitcoin as “virtual

currency.”

Additionally, two CFTC commissioners publicly expressed a belief that derivatives based on bitcoin are subject

to the same regulation as those based on commodities, and the IRS released guidance treating bitcoin as property that is not currency

federal income tax purposes.

Taxing authorities of a number of U.S.

states have also issued their own guidance regarding

the tax treatment of bitcoin for state income or sales tax purposes.

On June 28, 2014, the Governor of the State of California

signed into law a bill that removed state-level prohibitions on the use of alternative forms of currency or value (including bitcoin).

The bill indirectly authorizes bitcoin’s use as an alternative form of money in the state.

In February 2015, a bill was

introduced in the California State Assembly to establish a licensing regime for businesses engaging in “virtual currencies.”

In September 2015, the bill was ordered to become an inactive file and as of the date of this report there hasn’t been further

consideration by the California State Assembly.

As of August 2016, the bill was withdrawn from consideration for vote for the

remainder of the year.

In March of 2019, California Assembly Majority Leader Ian Calderon introduced Assembly Bill 1489, which

would govern virtual currency business activity that takes place with or on behalf of California residents.

The bill proposes

to require companies to go through a regulatory approval process to conduct crypto-related activities in the state by requiring

licensure with stipulations on net worth, security, and reserves.

Entities would be subject to examination, consolidations and

data sharing to maintain compliance.

As presently drafted, Bill 1489 does not consider virtual currencies (also known as cryptocurrencies

and digital assets) to be legal tender, whether or not it is denominated in legal tender.

It states that virtual currency is a

representation of value for exchange, storage of value, or unit of account.

currently faces an uncertain regulatory landscape in not only the United States but also in many foreign jurisdictions such as

the European Union, China and Russia.

While certain governments such as Germany, where the Ministry of Finance has declared bitcoin

to be “

Rechnungseinheiten ”

(a form of private money that is recognized as a unit of account, but not recognized

in the same manner as fiat currency), have issued guidance as to how to treat bitcoin, most regulatory bodies have not yet issued

official statements regarding intention to regulate or determinations on regulation of bitcoin, the Bitcoin Network and bitcoin

those for which preliminary guidance has been issued in some form, Canada and Taiwan have labeled bitcoin as a digital or virtual

currency, distinct from fiat currency, while Sweden and Norway are among those to categorize bitcoin as a form of virtual asset

or commodity.

In Australia, a GST (similar to the European value added tax (“VAT”)) is currently applied to bitcoin,

forcing a ten (10) percent markup on top of market price, essentially preventing the operation of any Bitcoin Exchange.

be undergoing a change, however, since the Senate Economics References Committee and the Productivity Commission recommended that

digital currency be treated as money for GST purposes to remove the double taxation.

The United Kingdom determined that the VAT

will not apply to bitcoin sales.

Since December 2013, China, Iceland, Vietnam and Russia have taken a more restrictive stance

toward bitcoin and, thereby, have reduced the rate of expansion of bitcoin use in each country.

In May 2014, the Central Bank

of Bolivia banned the use of bitcoin as a means of payment.

In the summer and fall of 2014, Ecuador announced plans for its own

state-backed electronic money, while passing legislation that prohibits the use of decentralized Digital Assets such as bitcoin.

In July 2016, economists at the Bank of England advocated that central banks issue their own digital currency, and the House of

Lords and Bank of England started discussing the feasibility of creating a national virtual currency, the BritCoin.

2016, Iceland was studying how to create a system in which all money is created by a central bank, and Canada was beginning to

experiment with a digital version of its currency called CAD-COIN, intended to be used exclusively for interbank payments.

August 24, 2017, Canada issued guidance stating the sale of cryptocurrency may constitute an investment contract in accordance

with Canadian law for determining if an investment constitutes a security.

In July 2016, the Russian Ministry of Finance indicated

it supports a proposed law that bans bitcoin domestically but allows for its use as a foreign currency.

Russia recently issued

several releases indicating they may begin regulating bitcoin and licensing miners and entities engaging in initial coin offerings.

Conversely, regulatory bodies in some countries such as India and Switzerland have declined to exercise regulatory authority when

afforded the opportunity.

In April 2015, the Japanese Cabinet approved proposed legal changes that would reportedly treat bitcoin

and other Digital Assets as included in the definition of currency.

These regulations would, among other things, require market

participants, including exchanges, to meet certain compliance requirements and be subject to oversight by the Financial Services

Agency, a Japanese regulator.

In September 2017 Japan began regulating Bitcoin Exchanges and registered several such exchanges

to operate within Japan.

In July 2016, the European Commission released a draft directive that proposed applying counter-terrorism

and anti-money laundering regulations to virtual currencies, and, in September 2016, the European Banking authority advised the

European Commission to institute new regulation specific to virtual currencies, with amendments to existing regulation as a stopgap

Various foreign jurisdictions may, in the near future, adopt laws, regulations or directives that affect the Bitcoin

Network and its users, particularly Bitcoin Exchanges and service providers that fall within such jurisdictions’

Such laws, regulations or directives may conflict with those of the United States and may negatively impact the acceptance

of bitcoin by users, merchants and service providers outside of the United States and may therefore impede the growth of the bitcoin

On September 4, 2017, reports were published that China may begin prohibiting the practice of using cryptocurrency for

capital fundraising.

Additional reports have surfaced that China is considering regulating Bitcoin Exchanges by enacting a licensing

regime wherein Bitcoin Exchanges may legally operate.

In April 2019, China’s National Development Reform Commission listed

crypto-mining among a variety of industries it intends to eliminate.

In October 2018, The Shenzhen Court of International Arbitration

of China published a case analysis on contract disputes between parties to a share transfer agreement involving cryptocurrencies

and held that cryptocurrency was protected as property in China.

In September 2017, the Financial Services Commission of South

Korea released a statement that initial coin offerings would be prohibited as a fundraising tool.

In December of 2018, the South

Korea’s Financial Services Commission, the country’s top financial regulator, stated that six bills related to the

regulation of cryptocurrencies had been submitted to the National Assembly.

One of the bills would require all persons in charge

of a cryptocurrency transfer business - including trading, brokerage and management –

to register with the Financial Services

In June 2017, India’s government ruled in favor of regulating bitcoin.

In December 2017, India’s finance

minister told the media that the government does not consider bitcoin a legal tender.

In April 2018, the Reserve Bank of India

issued a statement to all entities regulated by the Reserve Bank, stating that they must cease all activities related to cryptocurrency.

The Internet and Mobile Association of India challenged the ban via petition to the Supreme Court of India, which ordered the

Reserve Bank of India to devise a clear regulation regarding cryptocurrency.

The Supreme Court of India will resume hearing the

case in July 2019.

In 2018, Australia passed legislation which requires digital currency exchange providers to register with AUSTRAC

(the Australian Transaction Reports and Analysis Centre).

In its budget summary for 2017-2018, the Australian government stated

that, as part of its plan to make it easier for digital currency businesses to operate in the country, purchases of digital currency

will no longer be subject to the general sales tax.

effect of any future regulatory change on us, bitcoins, or other Digital Assets is impossible to predict, but such change could

be substantial and adverse to us and could adversely affect an investment in us.

may be illegal now, or in the future, to acquire, own, hold, sell or use bitcoins or other Digital Assets in one or more countries,

and ownership of, holding or trading in our Company’s securities may also be considered illegal and subject to sanction.

currently bitcoins and other Digital Assets are not regulated or are lightly regulated in most countries, including the United

States, one or more countries such as China and Russia may take regulatory actions in the future that severely restricts the right

to acquire, own, hold, sell or use bitcoins or other Digital Assets or to exchange Digital Assets for currency.

Such an action

may also result in the restriction of ownership, holding or trading in our securities.

Such restrictions may adversely affect

decentralized nature of Digital Asset systems may lead to slow or inadequate responses to crises, which may negatively affect

our business .

decentralized nature of the governance of Digital Asset systems may lead to ineffective decision making that slows development

or prevents a network from overcoming emergent obstacles.

Governance of many Digital Asset systems is by voluntary consensus and

open competition with no clear leadership structure or authority.

To the extent lack of clarity in corporate governance of cryptocurrency

systems leads to ineffective decision making that slows development and growth of such Digital Assets, the value of our common

stock may be adversely affected.

Asset Exchanges are relatively new and therefore may be more exposed to fraud and failure than established, regulated exchanges

for other products.

To the extent that large Digital Asset Exchanges representing a substantial portion of the Digital Asset volume

are involved in fraud or experience security failures or other operational issues, such Exchanges’

failures may result in

a reduction in the price of Digital Assets and adversely affect an investment in us.

number of Digital Asset Exchanges have been closed due to fraud, failure or security breaches.

In many of these instances, the

customers of such Exchanges were not compensated or made whole for the partial or complete losses of their account balances in

such Exchanges.

While smaller Exchanges are less likely to have the infrastructure and capitalization that make larger Exchanges

more stable, larger Exchanges are more likely to be appealing targets for hackers and “malware”

(i.e., software used

or programmed by attackers to disrupt computer operation, gather sensitive information or gain access to private computer systems).

A lack of stability in an Exchange Market and the closure or temporary shutdown of larger Digital Asset Exchanges due to fraud,

business failure, hackers or malware, or government-mandated regulation may reduce confidence in Digital Assets overall and result

in greater volatility in Digital Asset values.

These potential consequences of a Exchange’s failure could adversely affect

an investment in us.

we become an inadvertent investment company in violation of the 1940 Act, our failure to register under the 1940 Act will adversely

affect us and you will likely lose your entire investment.

the 1940 Act, a company may be deemed an investment company under if the value of its investment securities is more than 40% of

its total assets (exclusive of government securities and cash items) on a consolidated basis.

the event that the Digital Assets held by us exceed 40% of our total assets, exclusive of cash, we may inadvertently become an

investment company.

While we are putting in place policies that we expect will work to keep the investment securities held by

us at less than 40% of our total assets, which may include actively monitoring the value of our investment securities, acquiring

assets bitcoin with our cash, or liquidating our investment securities.

Rules under the 1940 Act permit a company to breach the 40% threshold once every three years assuming it reduces its investment

securities below 40% within one year.

Otherwise registration under the 1940 Act would be required.

40% requirement may limit our ability to make certain investments or enter into joint ventures that could otherwise have a positive

impact on our earnings.

In any event, we do not intend to become an investment company engaged in the business of investing and

trading securities.

The failure to register when required would likely make our common stock worthless.

we become an investment company and fail to register, we would have to stop doing almost all business.

Registration is time consuming

and restrictive and would require a restructuring of our operations, and we would be very constrained in the kind of business

we could do as a registered investment company.

Further, we would become subject to substantial regulation concerning management,

operations, transactions with affiliated persons and portfolio composition, and would need to file reports under the 1940 Act

The cost of such compliance would result in the Company incurring substantial additional expenses, and the failure to

regulatory changes or interpretations of our activities require our registration as a MSB under the regulations promulgated by

FinCEN under the authority of the U.S.

Bank Secrecy Act, we may be required to register and comply with such regulations.

If regulatory

changes or interpretations of our activities require the licensing or other registration of us as a money transmitter (or equivalent

designation) under state law in any state in which we operate, we may be required to seek licensure or otherwise register and

comply with such state law.

In the event of any such requirement, to the extent the Company decides to continue, the required

registrations, licensure and regulatory compliance steps may result in extraordinary, non-recurring expenses to us.

decide to cease the Company’s operations.

Any termination of certain Company operations in response to the changed regulatory

circumstances may be at a time that is disadvantageous to investors.

the extent that the activities of the Company cause it to be deemed a MSB under the regulations promulgated by FinCEN under the

authority of the U.S.

Bank Secrecy Act, the Company may be required to comply with FinCEN regulations, including those that would

mandate the Company to implement anti-money laundering programs, make certain reports to FinCEN and maintain certain records.

the extent that the activities of the Company cause it to be deemed a “money transmitter”

(or equivalent designation)

under state law in any state in which the Company operates, the Company may be required to seek a license or otherwise register

with a state regulator and comply with state regulations that may including the implementation of anti-money laundering programs,

maintenance of certain records and other operational requirements.

Currently, the NYSDFS has finalized its “BitLicense”

framework for businesses that conduct “virtual currency business activity,”

the Conference of State Bank Supervisors

has proposed a model form of state level “virtual currency”

regulation and additional state regulators including those

from California, Idaho, Virginia, Kansas, Texas, South Dakota and Washington have made public statements indicating that virtual

currency businesses may be required to seek licenses as money transmitters.

In July 2016, North Carolina updated the law to define

“virtual currency”

and the activities that trigger licensure in a business friendly approach that encourages companies

to use virtual currency and blockchain technology.

Specifically, the North Carolina law does not require miners or software providers

to obtain a license for multi-signature software, smart contract platforms, smart property, colored coins and non-hosted, non-custodial

Starting January 1, 2016, New Hampshire requires anyone exchanges a digital currency for another currency must become

a licensed and bonded money transmitter.

In numerous other states, including Connecticut and New Jersey, legislation is being

proposed or has been introduced regarding the treatment of bitcoin and other Digital Assets.

The Company will continue to monitor

for developments in such legislation, guidance or regulations.

additional federal or state regulatory obligations may cause the Company to incur extraordinary expenses, possibly affecting an

investment in the Resale Shares in a material and adverse manner.

Furthermore, the Company and its service providers may not be

capable of complying with certain federal or state regulatory obligations applicable to MSBs and MTs.

If the Company is deemed

to be subject to and determines not to comply with such additional regulatory and registration requirements, we may act to dissolve

and liquidate the Company.

Any such action may adversely affect an investment in us.

is a lack of liquid markets, and possible manipulation of blockchain/cryptocurrency-based Digital Assets.

Assets that are represented and trade on a ledger-based platform may not necessarily benefit from viable trading markets.

exchanges have listing requirements and vet issuers;

requiring them to be subjected to rigorous listing standards and rules, and

monitor investors transacting on such platform for fraud and other improprieties.

These conditions may not necessarily be replicated

on a distributed ledger platform, depending on the platform’s controls and other policies.

The laxer a distributed ledger

platform is about vetting issuers of cryptocurrency assets or users that transact on the platform, the higher the potential risk

for fraud or the manipulation of the ledger due to a control event.

These factors may decrease liquidity or volume or may otherwise

increase volatility or other assets trading on a ledger-based system, which may adversely affect us.

Such circumstances could

adversely affect an investment in us.

or economic crises may motivate large-scale sales of Digital Assets, which could result in a reduction in Digital Asset values

and adversely affect an investment in us.

Geopolitical crises may

motivate large-scale sales of Digital Assets, which could rapidly decrease the price of Digital Assets.

Alternatively,

as an emerging asset class with limited acceptance as a payment system or commodity, global crises and general economic downturn

may discourage investment in Digital Assets as investors focus their investment on less volatile asset classes as a means

of hedging their investment risk.

an alternative to fiat currencies that are backed by central governments, Digital Assets such as bitcoin and ethereum, which are

relatively new, are subject to supply and demand forces based upon the desirability of an alternative, decentralized means of

buying and selling goods and services, and it is unclear how such supply and demand will be impacted by geopolitical events.

Nevertheless,

political or economic crises may motivate large-scale acquisitions or sales of Digital Assets either globally or locally.

sales of Digital Assets would result in a reduction in Digital Asset values and could adversely affect an investment in us.

price of Digital Assets may be affected by the sale of such Digital Assets by other vehicles investing in Digital Assets or tracking

cryptocurrency markets.

global market for Digital Assets is characterized by supply constraints that differ from those present in the markets for commodities

or other assets such as gold and silver.

The mathematical protocols under which certain cryptocurrencies are mined permit the

creation of a limited, predetermined amount of currency, while others have no limit established on total supply.

To the extent

that other vehicles investing in Digital Assets or tracking Digital Asset markets form and come to represent a significant proportion

of the demand for Digital Assets, large redemptions of the securities of those vehicles and the subsequent sale of Digital Assets

by such vehicles could negatively affect Digital Asset prices and therefore affect the value of our Digital Assets.

could have a material adversely affect an investment in us.

changes or actions may alter the nature of an investment in us or restrict the use of Digital Assets in a manner that adversely

affects our business, prospects or operations.

Digital Assets have grown in both popularity and market size, governments around the world have reacted differently to Digital

certain governments have deemed them illegal, and others have allowed their use and trade without restriction, while in

some jurisdictions, such as in the U.S., subject to extensive, and in some cases overlapping, unclear and evolving regulatory

requirements.

Ongoing and future regulatory actions may impact our ability to continue to operate, and such actions could affect

our ability to continue as a going concern or to pursue our new strategy at all, which could have a material adverse effect on

our business, prospects or operations.

interpretations require the regulation of bitcoins and other Digital Assets under the CEA by the CFTC, we may be required to register

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Any such action may adversely affect an investment in us.

No CFTC orders or rulings are applicable

to our business.

regulatory changes or interpretations require the regulation of bitcoins and other Digital Assets (in contrast to Digital Securities)

under the Securities Act and Investment Company Act by the SEC, we may be required to register and comply with such regulations.

To the extent that we decide to continue operations, the required registrations and regulatory compliance steps may result in

extraordinary, non-recurring expenses to us.

We may also decide to cease certain operations.

This would likely have a material

adverse effect on us and investors may lose their investment.

and future legislation and SEC rulemaking and other regulatory developments, including interpretations released by a regulatory

authority, may impact the manner in which bitcoins are treated for classification and clearing purposes.

The SEC’s July

25, 2017 DAO Report expressed its view that Digital Assets may be securities depending on the facts and circumstances.

date of this report, we are not aware of any rules that have been proposed to regulate the Digital Assets we hold as securities.

We cannot be certain as to how future regulatory developments will impact the treatment of bitcoins and other Digital Assets under

Such additional registrations may result in extraordinary, non-recurring expenses, thereby materially and adversely impacting

an investment in us.

If we determine not to comply with such additional regulatory and registration requirements, we may seek

to cease certain of our operations.

Any such action may adversely affect an investment in us.

the extent that Digital Assets including bitcoins are deemed by the SEC to fall within the definition of a security, we may be

required to register and comply with additional regulation under the Investment Company Act, including additional periodic reporting

and disclosure standards and requirements and the registration of our Company as an investment company.

Additionally, one or more

states may conclude bitcoins are a security under state securities laws which would require registration under state laws including

merit review laws which would adversely impact us since we would likely not comply.

As stated earlier in this report, some states

including California define the term “investment contract”

more strictly than the SEC.

Such additional registrations

may result in extraordinary, non-recurring expenses of our Company, thereby materially and adversely impacting an investment in

If we determine not to comply with such additional regulatory and registration requirements, we may seek to cease

all or certain parts of our operations.

Any such action would likely adversely affect an investment in us and investors may suffer

a complete loss of their investment.

Company does not currently have any mining operations but may resume its mining operations through outsourced data centers if

it receives additional capital.

To the extent that the Company resumes mining operations and acquires Digital Assets as a result

of mining, we do not intend to trade the Digital Assets until we determine, with the assistance of legal counsel, that the Digital

Assets are not securities, the Digital Assets would only be used for our own account.

We do not believe

that bitcoin and ether are securities.

As such, we do not intend to acquire securities in amounts that are equal to or greater

than 40% of our assets.

Should the total value of securities which we hold rise to more than 40% of our assets (exclusive of cash)

we note that SEC Rule 3a-2 under the 1940 Act allows an issuer to prevent itself from being deemed an investment company if it

reduces its holdings of securities to less than 40% of its assets (exclusive of cash) and does not go above the 40% threshold

more than once every three years.

In order to comply with the 1940 Act, we anticipate having increased management time and legal

expenses in order to analyze which Digital Assets are securities and periodically analyze our total holdings to ensure that we

do not maintain more than 40% of our total assets (exclusive of cash) as securities.

If our view that ether is not a security

is challenged by the SEC and courts uphold the challenge, we may inadvertently violate the 1940 Act and incur substantial legal

fees in defending our position.

In such case the legal fees may exceed our available assets which could adversely affect an investment

federal or state legislatures or agencies initiate or release tax determinations that change the classification of bitcoins or

other Digital Assets as property for tax purposes (in the context of when such Digital Assets are held as an investment), such

interactions with a blockchain may expose us to SDN or blocked persons or cause us to violate provisions of law that did not contemplate

distribute ledger technology.

Office of Financial Assets Control of the US Department of Treasury requires us to comply with its sanction program and not conduct

business with persons named on its specially designated nationals (“SDN”) list.

However, because of the pseudonymous

nature of blockchain transactions we may inadvertently and without our knowledge engage in transactions with persons named on

OFAC’s SDN list.

Our Company’s policy prohibits any transactions with such SDN individuals, but we may not be adequately

capable of determining the ultimate identity of the individual with whom we transact with respect to selling cryptocurrency assets.

Moreover, federal law prohibits any US person from knowingly or unknowingly possessing any visual depiction commonly known as

child pornography.

Recent media reports have suggested that persons have imbedded such depictions on one or more blockchains.

Because our business requires us to download and retain one or more blockchains to effectuate our ongoing business, it is possible

that such digital ledgers contain prohibited depictions without our knowledge or consent.

To the extent government enforcement

authorities literally enforce these and other laws and regulations that are impacted by decentralized distributed ledger technology,

we may be subject to investigation, administrative or court proceedings, and civil or criminal monetary fines and penalties, all

of which could harm our reputation and affect the value of our common stock.

federal or state legislatures or agencies initiate or release tax determinations that change the classification of bitcoins, ethereum

or other Digital Assets as property for tax purposes (in the context of when such Digital Assets are held as an investment), such

determination could have a negative tax consequence on our Company or our shareholders.

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of bitcoins and negatively impact an investment in our Company.

Related to Our Digital Assets Holdings

loss or destruction of a private key required to access a Digital Assets such as bitcoin may be irreversible.

Our loss of access

to our private keys or our experience of a data loss relating to our Company’s Digital Assets could adversely affect an

investment in our Company.

are controllable only by the possessor of both the unique public key and private key relating to the local or online digital wallet

in which the bitcoins are held.

We are required by the operation of the Bitcoin Network to publish the public key relating to

a digital wallet in use by us when it first verifies a spending transaction from that digital wallet and disseminates such information

into the Bitcoin Network.

We safeguard and keep private the private keys relating to our bitcoins not held at exchanges by utilizing

Bitgo Inc.’s enterprise multi-signature storage solution;

to the extent a private key is lost, destroyed or otherwise compromised

and no backup of the private key is accessible, we will be unable to access the bitcoins held by it and the private key will not

be capable of being restored by the Bitcoin Network.

Any loss of private keys relating to digital wallets used to store our bitcoins

could adversely affect an investment in us.

Risks Related to Our Digital Assets Holdings

Digital Assets may be subject to loss, damage, theft or restriction on access.

is a risk that part or all of our Digital Assets could be lost, stolen, destroyed or become inaccessible.

We believe that our

Digital Assets will be an appealing target to hackers or malware distributors seeking to destroy, damage or steal our Digital

To minimize the risk of loss, damage and theft, security breaches, and unauthorized access we hold our Digital Assets

at exchanges and have also relied on Bitgo Inc.’s (“Bitgo”) enterprise multi-signature storage solution.

Nevertheless,

the exchanges we utilize or Bitgo’s security system may not be impenetrable and may not be free from defect or immune to

acts of God, and any loss due to a security breach, software defect or act of God will be borne by us.

Any of these events may

adversely affect our operations and, consequently, an investment in us.

the extent that any of our Digital Assets are held by Exchanges, we may face heightened risks from cybersecurity attacks and financial

stability of the Exchanges.

Company will use Digital Asset exchanges to hold certain of the its Digital Assets;

the Company’s bitcoin will either be

held directly by the Company in a bitcoin wallet utilizing Bitgo Inc.’s enterprise multi-signature storage solution or at

Digital Asset exchanges.

All Digital Assets not held in the Company’s Bitgo wallets will be subject to the risks encountered

by a Digital Asset exchange including a DDoS Attack or other malicious hacking, a sale of the Digital Asset exchange, loss of

the Digital Assets by the Digital Asset exchange and other risks similar to those described on page 26 in a risk factor

entitled “Security threats to us could result in, a loss of Company’s Digital Assets, or damage to the reputation

and our brand, each of which could adversely affect an investment in us.”

The Company may not maintain a custodian agreement

with the Digital Asset exchange that holds the Company’s Digital Assets.

Exchange typically do not provide insurance and

may lack the resources to protect against hacking and theft.

In the future we may acquire other Digital Assets that are held by

If a material amount of our Digital Assets are held by Exchanges, we may be materially and adversely affected if the

Exchanges suffer cyberattacks or incur financial problems.

Digital Assets not held in a Company’s controlled wallet such as Bitgo’s will be held at Exchanges and subject to

the risks encountered by those Exchange including DDoS Attacks, other malicious hacking, a sale of the exchange, loss of the Digital

Assets by the exchange, security breaches, and unauthorized access of our account by hackers.

The Company may not maintain a custodian

agreement with the Exchanges that it holds its Digital Assets at.

Exchanges do not provide insurance and may lack the resources

to protect against hacking and theft.

We may be materially and adversely affected if the Exchanges suffer cyberattacks or incur

financial problems.

loss or destruction of a private key required to access a Digital Assets may be irreversible.

Our loss of access to our private

keys could adversely affect an investment in our Company.

Assets such as bitcoin are controllable only by the possessor of both the unique public key and private key relating to the local

or online digital wallet in which the Digital Assets are held.

We are required by the operation of the Digital Asset Network to

publish the public key relating to a digital wallet in use by us when it first verifies a spending transaction from that digital

wallet and disseminates such information into the Network.

We safeguard and keep private the private keys relating to our Digital

Assets not held at exchanges by utilizing Bitgo’s multi-signature storage solution;

to the extent a private key is lost,

destroyed or otherwise compromised and no backup of the private key is accessible, we will be unable to access the Digital Assets

held by it and the private key will not be capable of being restored by the Network.

Any loss of private keys relating to digital

wallets used to store our Digital Assets could adversely affect an investment in us.

threats to us could result in, a loss of Company’s Digital Assets.

breaches, computer malware and computer hacking attacks have been a prevalent concern in the Bitcoin Exchange Market since the

launch of the Bitcoin Network.

Any security breach caused by hacking, which involves efforts to gain unauthorized access to information

or systems, or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment,

and the inadvertent transmission of computer viruses, could harm our business operations or result in loss of our bitcoins and

other Digital Assets.

Any breach of our infrastructure could result in damage to our reputation which could adversely affect an

investment in us.

Furthermore, we believe that, as our assets continues to grow, it may become a more appealing target for security

threats such as hackers and malware.

security system and operational infrastructure may be breached due to the actions of outside parties, error or malfeasance of

an employee of ours, or otherwise, and, as a result, an unauthorized party may obtain access to our, private keys, data or bitcoins.

Additionally, outside parties may attempt to fraudulently induce employees of ours to disclose sensitive information in order

to gain access to our infrastructure.

As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage

systems change frequently, or may be designed to remain dormant until a predetermined event and often are not recognized until

launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures.

actual or perceived breach of our security system occurs, the market perception of the effectiveness of our security system could

be harmed, which could adversely affect an investment in us.

In the event of a security breach, we may be forced to cease operations,

or suffer a reduction in assets, the occurrence of each of which could adversely affect an investment in us.

or fraudulent Digital Asset transactions may be irreversible.

Asset transactions are not, from an administrative perspective, reversible without the consent and active participation of the

recipient of the transaction.

Once a transaction has been verified and recorded in a block that is added to a blockchain,

an incorrect transfer of Digital Assets or a theft of Digital Assets generally will not be reversible, and we may not be capable

of seeking compensation for any such transfer or theft.

It is possible that, through computer or human error, or through theft

or criminal action, our Digital Assets could be transferred from us in incorrect amounts or to unauthorized third parties.

the extent that we are unable to seek a corrective transaction with such third party or are incapable of identifying the third

party which has received our Digital Assets through error or theft, we will be unable to revert or otherwise recover incorrectly

transferred Digital Assets.

To the extent that we are unable to seek redress for such error or theft, such loss could adversely

affect an investment in us.

limited rights of legal recourse against us, and our lack of insurance protection expose us and our shareholders to the risk of

loss of our Digital Assets for which no person is liable.

Digital Assets held by us are not insured.

Therefore, a loss may be suffered with respect to our Digital Assets which is not covered

by insurance and for which no person is liable in damages which could adversely affect our operations and, consequently, an investment

Assets held by us are not subject to FDIC or SIPC protections.

do not and will not hold our bitcoins and other Digital Assets with a banking institution or a member of the Federal Deposit Insurance

Corporation (“FDIC”) or the Securities Investor Protection Corporation (“SIPC”) and, therefore, our Digital

Assets are not subject to the protections enjoyed by depositors with FDIC or SIPC member institutions.

Related to Our Digital Asset Data Analytics Platform Development

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rather than focusing on other business opportunities which may prove to have been more lucrative in hindsight.

if we do successfully develop our platform and bring it to the marketplace, there is no guarantee that we will attract a sufficient

number of users to generate revenue or become profitable.

Our competitors, most of whom have greater capital and human resources

than we do, may develop technologies that are superior to our platform or commercialize comparable technologies before us, in

which case our ability to attract users and generate revenue therefrom could be rendered unlikely or even impossible.

to obtain users for our platform or find an alternative means of commercializing our platform to recoup our investment therein,

it will have a material adverse effect on our financial condition.

if we do successfully develop our platform and bring it to the marketplace, there is no guarantee that we will attract enough

users to generate revenue or become profitable.

Our competitors, most of whom have greater capital and human resources than we

do, may develop technologies that are superior to our platform or commercialize comparable technologies before us, in which case

our ability to attract users and generate revenue therefrom could be rendered unlikely or even impossible.

If we fail to obtain

users for our platform or find an alternative means of commercializing our platform to recoup our investment therein, it will

have a material adverse effect on our financial condition.

if we develop and commercialize our Digital Asset Data Analytics Platform, we may not be able to generate material revenues.

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of network security measures, our servers are vulnerable to computer viruses, physical or electronic break-ins and similar disruptions,

the occurrence of any of which could lead to interruptions, delays, loss of critical data or the inability launch our platform.

the occurrence of any of which could lead to interruptions, delays, loss of critical data or the inability to launch our

The occurrence of any of the foregoing risks could harm our business.

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exposure, damage to our reputation, and a loss of confidence in our security measures, which could harm our business.

may infringe the intellectual property rights of others, which may prevent or delay our product development efforts and stop us

from commercializing or increase the costs of commercializing the digital asset data analytics platform.

commercial success depends significantly on our ability to operate without infringing the patents and other intellectual property

rights of third parties however, we may not always be able to determine that we are using or accessing protected information or

For example, there could be issued patents of which we are not aware that our products infringe.

There also could be

patents that we believe we do not infringe, but that we may ultimately be found to infringe.

Moreover, patent applications are

in some cases maintained in secrecy until patents are issued.

The publication of discoveries in scientific or patent literature

frequently occurs substantially later than the date on which the underlying discoveries were made and patent applications were

Because patents can take many years to issue, there may be currently pending applications of which we are unaware that

may later result in issued patents that our products infringe.

we could expend significant resources defending against patent infringement and other intellectual property right claims;

could require us to divert resources away from operations.

Any damages we are required to pay or injunctions against our continued

use of such intellectual property in resolution of such claims may cause a material adverse effect to our business and operations,

which could adversely affect the trading price of our securities and harm our investors.

Related to the Purchase Agreement with Cavalry

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of our common stock.

As of March 9, 2020, Cavalry has purchased 8,603,986 shares (excluding 419,652 commitment

and pro-rata commitment shares) for $1,479,410 under the Purchase Agreement.

The purchase shares that may be sold pursuant to

the Purchase Agreement may be sold by us to Cavalry at our discretion from time to time over a 36-month period commencing

after the SEC has declared effective a registration statement covering the respective shares.

The purchase price for the

shares that we may sell to Cavalry under the Purchase Agreement will fluctuate based on the price of our common stock.

Depending on market liquidity at the time, sales of such shares may cause the trading price of our common stock to fall.

Additionally, the amount that we may sell to Cavalry will be limited to the Daily Trading Dollar Volume on the day of, or day

before, the Put.

If the trading volume and/or price of our common stock is low, our ability to raise capital under the

Purchase Agreement will be limited and/or take an extensive time to raise capital.

As of the date of this filing, we have directed Cavalry to purchase 19,363,353 shares (excluding 510,388

commitment and pro-rata commitment shares) and have received $3,034,541.

The purchase shares that may be sold pursuant to the

Purchase Agreement may be sold by us to Cavalry at our discretion from time to time over a 36-month period commencing after the

SEC has declared effective the registration statement covering the respective shares.

The purchase price for the shares that we

may sell to Cavalry under the Purchase Agreement will fluctuate based on the price of our common stock.

Depending on market liquidity

at the time, sales of such shares may cause the trading price of our common stock to fall.

Additionally, the amount that we may

sell to Cavalry will be limited to the Daily Trading Dollar Volume on the day of, or day before, the Put.

If the trading volume

and/or price of our common stock is low, our ability to raise capital under the Purchase Agreement will be limited and/or take

an extensive time to raise capital.

generally have the right to control the timing and amount of any sales of our shares to Cavalry, except that, pursuant to the

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all of our funding needs, even if we are able and choose to sell all $10,000,000 under the Purchase Agreement.

we elect to issue and sell more than the shares offered under any one prospectus to Cavalry, which we have the right, but not

the obligation, to do, we must first register for resale under the Securities Act any such additional shares on a subsequent prospectus.

If we elect to

issue and sell more than the shares offered under any one prospectus to Cavalry, which we have the right, but not the obligation,

to do, we must first register for resale under the Securities Act any such additional shares on a subsequent prospectus.

elected to enter into the Purchase Agreement with Cavalry as we expect that amount of capital over the next 12 months will be

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capital needs.

Should the financing we require to sustain our working capital needs be unavailable

or prohibitively expensive when we require it, the consequences could be a material adverse effect on our business, operating

results, financial condition and prospects.

sale of our common stock to Cavalry will cause dilution and the sale of the shares by Cavalry could cause the price of our common

stock to decline.

number of shares ultimately offered for sale by Cavalry is dependent upon the number of shares sold to Cavalry under the Purchase

The purchase price for the common stock to be sold to Cavalry pursuant to the Purchase Agreement will fluctuate based

on the price of our common stock.

Depending upon market liquidity at the time, a sale of shares by Cavalry at any given time could

cause the trading price of our common stock to decline.

After it has acquired such shares, Cavalry may sell all, some or none

of such shares.

Therefore, sales to Cavalry by us under the Purchase Agreement will result in substantial dilution to the interests

of other holders of our common stock.

The sale of a substantial number of shares of our common stock, or anticipation of such

sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price

that we might otherwise wish to effect sales.

However, we have the right to control the timing and amount of any sales of our

shares to Cavalry.

Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive

when we require it, the consequences could be a material adverse effect on our business, operating results, financial condition

and prospects.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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What changed 10-K

Item 5. Market for Registrant’s Common Equity