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Item 9A. Controls and Procedures

2021-01-26 compared with 2020-03-23 · 667 added, 696 removed, 487 unchanged (74% of the section changed)

26 unchanged sentences

are designed and operated to provide reasonable assurance about the reliability of the Company’s financial reporting and

its process for preparing financial statements in accordance with generally accepted accounting principles (“GAAP”).

There are inherent limitations in the effectiveness of any system of internal control, including the possibility of human error

and the circumvention or overriding of controls.

Accordingly, even effective internal controls can provide only reasonable assurance

with respect to financial statement preparation.

Further, because of changes in conditions, the effectiveness of internal control

may vary over time.

its process for preparing financial statements in accordance with U.S.

There are inherent limitations in

the effectiveness of any system of internal control, including the possibility of human error and the circumvention or overriding

Accordingly, even effective internal controls can provide only reasonable assurance with respect to financial statement

Further, because of changes in conditions, the effectiveness of internal control may vary over time.

on management’s evaluation as of December 31, 2020, our management identified the material weaknesses set forth below in

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applying complex accounting principles.

management concluded that in light of the material weaknesses described above, our company did not maintain effective internal

management concluded that in light of the material weaknesses described above, the Company did not maintain effective internal

control over financial reporting as of December 31, 2020 based on the criteria set forth in Internal Control-Integrated Framework

(2013) issued by the COSO.

September 17, 2018, the Board of Directors of the Company concluded that due to ineffective controls we failed to follow GAAP

in accounting for our digital assets.

This failure arose from a material weakness which required us to restate our financial statements

for the year ended December 31, 2017 as well as two other periods.

Subsequent to the Company’s

filing its annual report for the year ended December 31, 2019, the Board of Directors of the Company concluded that due to

ineffective controls we failed to follow U.S.

GAAP in accounting for our Digital Assets.

The Company erroneously classified

a $374,979 purchase of digital currencies as an investing activity which was re-classified to an operating activity in the statement

of cash flows on the Company’s amended annual report filed on June 22, 2020.

This failure arose from a material weakness

which required us to restate our financial statements for the year ended December 31, 2019.

IN INTERNAL CONTROL OVER FINANCIAL REPORTING

3 unchanged sentences

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

following table presents information with respect to our officers and directors as of the date of this report:

First Elected or

Executive Officer, Chief Financial Officer and Chairman

Operating Officer, Secretary and Director

director serves until our next annual meeting of the stockholders or unless they resign earlier.

The Board of Directors elects

officers and their terms of office are at the discretion of the Board of Directors.

of Officers and Directors

following is a brief account of the education and business experience during at least the past five years of our officers and

directors, indicating the person’s principal occupation during that period, and the name and principal business of the organization

in which such occupation and employment were carried out.

Allen, age 44, has served as our Chief Executive Officer and Chief Financial Officer since February 5, 2014 and as

our Chairman of the Board since September 11, 2014.

Allen is responsible for our overall corporate strategy and direction

as well as managing our corporate finances.

Since January 12, 2018 Mr.

Allen has been the CEO of Global Bit Ventures Inc.

(“GBV”),

which has discontinued its operations.

From October 10, 2017, Mr.

Allen has been a director of GBV.

Allen is also on the advisory

board of GoCoin LLC, a leading Digital Asset payment processor.

Allen has extensive experience in business strategy and structuring

and executing a variety of investment banking and capital markets transactions, including financings, IPO’s and mergers

and acquisitions.

From February, 2012 through January, 2014 Mr.

Allen was a Managing Director at RK Equity Capital Markets LLC

(“RK”) and focused on natural resources investment banking and added to RK’s capital markets efforts.

Allen co-founded RK Equity Investment Corp.

(“RKEIC”) and served as a member of its board from inception

through September 7, 2014.

Allen has extensive experience in business strategy, investment banking and capital markets transactions.

Prior to his work in the blockchain industry he worked domestically and internationally on projects in technology, media, natural

resources, logistics, medical services and financial services.

He has served as a Managing Director at numerous boutique investment

banks focused on advising and raising capital for small and mid-size companies.

Allen received a B.S.

in Mechanical Engineering

from Lehigh University and a M.B.A.

from the Mason School of Business at the College of William & Mary.

The Board concludes

Allen’s background and leadership experiences in the industry qualify him to serve on the Board.

Handerhan, age 43, has served as our Chief Operating Officer since February 5, 2014 and was appointed as our Secretary

on March 11, 2014.

Handerhan served as our Chairman of the Board from February 5, 2014 to September 11, 2014 and was a co-founder

of BitcoinShop.us LLC.

Handerhan supports both our business and development strategy across the management team.

Since January

Handerhan has been the Secretary and a director of GBV.

From February, 2011 through February, 2014 Mr.

served as an independent IT and web services consultant to the National Aeronautics and Space Administration (“NASA”).

From October, 2005 until February, 2014 Mr.

Handerhan was the President and Chief Executive Officer of Meesha Media Group, LLC

which provided high-definition video production services, Web 2.0 development, database management, and social media solutions.

From March, 2002 through October, 2006 Mr.

Handerhan served as a team leader for NASA in their Peer Review Services group.

to working at NASA’s Peer Review Services group Mr.

Handerhan served as the web developer for Folio Investments.

received a B.S.

in Computer Science from Czech Technical University.

The Board concludes that Mr.

Handerhan’s extensive

experiences in IT qualify him to serve on the Board.

Garrity , age 59, has served as our independent Director since October 16, 2017.

Garrity has over 25 years’

in the financial services industry, he has held senior roles including CFO and board of director positions for both publicly-held

and private companies, and has extensive experience in several disciplines including operating, advisory and research, and is

CEO of New York City based consulting firm, GVA Research.

Garrity is a Partner at BTblock, a blockchain and cybersecurity

consultancy firm, and a senior advisor at Quantum1Net which also has a focus on blockchain technology.

During 2008 and 2009,

Garrity served as CFO and a director at Interclick, Inc., a behavioral targeting internet advertising network.

2011 to May 14, 2013, Mr.

Garrity was Chief Financial Officer of Aspen Group, Inc., an online for-profit university.

14, 2013 through October 31, 2013, he was Executive Vice President Corporate Development for Aspen Group, Inc.

From February 1,

2017, through January 2018, Mr.

Garrity was acting CFO of Mutualink, Inc., a private company developing secure distributed networking

technologies to support communications interoperability for public & private-sector clients.

Garrity appears regularly

on CNBC, BNN, Bloomberg, The Financial Times, Asia Times, Yahoo Finance, and other media outlets.

Garrity, a director, is a Partner at BTblock, a blockchain consultancy firm, and a senior advisor at Quantum1Net which also has

a focus on blockchain technology.

It is possible that these activities will create conflicts in the future.

Given our small size

and lack of financial resources, we may be hampered in recruiting independent directors.

LEADERSHIP STRUCTURE AND ROLE IN RISK OVERSIGHT

Board of Directors is primarily responsible for overseeing our risk management processes.

The Board of Directors receives and

reviews periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding the Company’s

assessment of risks.

The Board of Directors focuses on the most significant risks facing us and our general risk management strategy,

and also ensures that risks undertaken by us are consistent with the Board of Directors’

appetite for risk.

While the Board

of Directors oversees the Company, our management is responsible for day-to-day risk management processes.

We believe this division

of responsibilities is the most effective approach for addressing the risks facing the Company and that our board leadership structure

supports this approach.

have not yet adopted a code of ethics that applies to our principal executive officers, principal financial officer, principal

accounting officer or controller, or persons performing similar functions, since we have been focusing our efforts on growing

our business and obtaining financing for our Company.

We expect to adopt a code as we further develop our business.

RELATIONSHIPS

are no family relationships between any of our directors, executive officers or directors.

OF THE BOARD OF DIRECTORS

to our size, we have not formally designated a nominating committee, an audit committee, a compensation committee, or committees

performing similar functions.

Board currently acts as our audit committee.

Since we are still a developing company, the Board of Directors is still in the process

of finding an “audit committee financial expert”

as defined in Regulation S-K.

IN CERTAIN LEGAL PROCEEDINGS

the past ten years, none of our officers, directors, promoters or control persons has been involved in any legal proceedings as

described in Item 401(f) of Regulation S-K.

The information required

by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with

the SEC within 120 days of the year ended December 31, 2020.

Our Board of Directors

has adopted a Code of Ethics applicable to all officers, directors and employees, which is available on our website (http://www.btcs.com)

under “Corporate Governance.”

We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding

amendment to, or waiver from, a provision of our Code of Ethics and by posting such information on our website at the address

and location specified above.

EXECUTIVE COMPENSATION

following summary compensation table sets forth information concerning compensation for services rendered in all capacities during

the fiscal years ended December 31, 2019 and 2018 awarded to, earned by or paid to our directors and executive officers.

in the summary compensation table represent the actual amount of compensation accrued under Generally Accepted Accounting Principles.

The footnotes represent cash actually paid.

COMPENSATION TABLE

and Principal Position

Handerhan, COO

Allen received cash compensation of $189,519 for the year ended December 31, 2018.

The $256,025 includes accrued and unpaid

salary of $66,506 as of December 31, 2018.

Handerhan received cash compensation of $146,412 for the year ended December 31, 2018.

The $198,550 includes accrued and unpaid

salary of $52,138 as of December 31, 2018.

Agreements with Executive Officers

achieve our compensation objective of retaining and motivating qualified executives, we believe that we need to provide our executive

officers with severance and change of control protections that are competitive with the protections offered by other companies.

Offering our executive officers these payments and benefits facilitates the operation of our business, allows them to better focus

their time, attention and capabilities on our business, provides for a clear and consistent approach to managing involuntary departures

with mutually understood separation benefits, and aligns with market practice.

June 22, 2017, we entered into an employment agreement with Charles Allen (the “Allen Employment Agreement”), whereby

Allen agreed to serve as our Chief Executive Officer and Chief Financial Officer for a period of two years, subject to renewal,

in consideration for an annual salary of $245,000, which shall be increased annually by 4.5% (the “Annual Increase”).

Additionally, under the terms of the Allen Employment Agreement, Mr.

Allen shall be eligible for an annual bonus if we meet certain

criteria, as established by the Board of Directors.

Allen shall be entitled to participate in all benefits plans we provide

to our senior executive.

We shall reimburse Mr.

Allen for all reasonable expenses incurred in the course of his employment.

Company shall pay the Mr.

Allen $500 per month to cover telephone and internet expenses.

If the Company does not provide office

Allen the Company will pay him an additional $500 per month to cover expenses in connection with their office space

February 6, 2019 we amended the Allen Employment Agreement whereby the annual salary was increased to $345,000 per year effective

January 1, 2019, all other terms of the Allen Employment Agreement remained unchanged including the Annual Increase.

June 22, 2017, we entered into an employment agreement with Michal Handerhan (the “Handerhan Employment Agreement”),

Handerhan agreed to serve as our Chief Operating Officer and Secretary for a period of two years, subject to renewal,

in consideration for an annual salary of $190,000, which shall be increased by the Annual Increase.

Additionally, under the terms

of the Handerhan Employment Agreement, Mr.

Handerhan shall be eligible for an annual bonus if we meet certain criteria, as established

by the Board of Directors.

Handerhan shall be entitled to participate in all benefits plans we provide to our senior executive.

We shall reimburse Mr.

Handerhan for all reasonable expenses incurred in the course of his employment.

The Company shall pay Mr.

Handerhan $500 per month to cover telephone and internet expenses.

If the Company does not provide office space to Mr.

the Company will pay him an additional $500 per month to cover expenses in connection with their office space needs.

February 6, 2019 we amended the Handerhan Employment Agreement whereby the annual salary was increased to $215,000 per year effective

on January 1, 2019, all other terms of the Handerhan Employment Agreement remained unchanged including the Annual Increase.

terms of the Allen Employment Agreement and Handerhan Employment Agreement (collectively the “Employment Agreements”)

provide each of Messrs.

Allen and Handerhan (the “Executives”) certain, severance and change of control benefits if

the Executive resigns from the Company for good reason or the Company terminates him other than for cause.

In such circumstances,

the Executive would be entitled to a lump sum payment equal to (i) the Executive’s then-current base salary, and (ii) payment

on a pro-rated basis of any bonus or other payments earned in connection with any bonus plan to which the Executive was a participant.

In addition, the severance benefit for the Executives the employment agreements include the Company continuing to pay for medical

and life insurance coverage for up to one year following termination.

If, within eighteen months following a change of control

(as defined below), the Executive’s employment is terminated by the Company without cause or he resigns from the Company

for good reason, the Executive will receive certain severance compensation.

In such circumstances, the cash benefit to the Executive

will be a lump sum payment equal to two times (i) his then-current base salary and (ii) his prior year cash bonus and incentive

compensation.

Upon the occurrence of a change of control, irrespective of whether his employment with the Company terminates,

each Executive’s stock options and equity-based awards will immediately vest.

“change of control”

for purposes of the Employment Agreements means any of the following:

(i) the sale or partial

sale of the Company to an un-affiliated person or entity or group of un-affiliated persons or entities pursuant to which such

party or parties acquire shares of capital stock of the Company representing at least twenty five (25%) of the fully diluted capital

stock (including warrants, convertible notes, and preferred stock on an as converted basis) of the Company;

(ii) the sale of the

Company to an un-affiliated person or entity or group of such persons or entities pursuant to which such party or parties acquire

all or substantially all of the Company’s assets determined on a consolidated basis, or (iii) Incumbent Directors (Mr.

Handerhan) cease for any reason, including, without limitation, as a result of a tender offer, proxy contest, merger or

similar transaction, to constitute at least a majority of the board of directors of the Company.

Additionally,

pursuant to the terms of the Employment Agreements, we have entered into an indemnification agreement with each Executive Officer.

December 14, 2017, the Company agreed to pay Charles Allen, its CEO, and Michal Handerhan, its COO, cash bonuses of $75,000 and

$35,000, respectively for 2017.

The Company further agreed to pay Mr.

Allen and Mr.

Handerhan contingent cash bonuses of $175,000

and $75,000 respectively (the “2017 Contingent Bonuses”) which will be deemed earned on the earlier of i) the closing

of a merger approved by the Board, ii) the closing of one or many financings in 2018 totaling over $1.25 million in gross proceeds,

or iii) the Company having cash and the fair market value of Digital Assets valued at over $1.5 million.

Provided further that

the 2017 Contingent Bonuses if deemed earned will only be payable if the Company has at least $1.25 million in cash and the fair

market value of Digital Assets prior to paying the bonuses.

The 2017 Contingent Bonuses are not conditioned upon the continued

service of either Mr.

Handerhan and do not expire.

As of the date of this report the conditions to earn the 2017

Contingent Bonuses have not yet been achieved.

February 6, 2019, the Company agreed to pay Charles Allen, its CEO, and Michal Handerhan, its COO, contingent cash bonuses of

$256,025 and $150,000, respectively for 2018 (the “2018 Contingent Bonuses”) which will be deemed earned and payable

upon the repayment and / or settlement of the $200,000 Promissory Note issued on December 18, 2018.

On September 18, 2019, the

Company exchanged the $200,000 Promissory Note and accrued interest of $17,973 for a $217,973 Convertible Promissory Note due

on December 18, 2019 (the “New Note”).

From September 18, 2019 through October 16, 2019 the Company issued 1,931,788

shares of the Company’s Common Stock for the conversion of all $217,973 principal on the New Note.

The Company subsequently

paid all the accrued interest expense of $905 on the New Note as such the conditions to earn the 2018 Contingent Bonuses have

been achieved and the 2018 Contingent Bonuses are currently owing but unpaid.

January 19, 2020, the Company agreed to pay Charles Allen, its CEO, and Michal Handerhan, its COO, cash bonuses of $15,000 and

$10,000, respectively for 2019.

The Company also agreed to pay Mr.

Allen and Mr.

Handerhan contingent cash bonuses of $462,000

and $235,750 (collectively the “2019 Contingent Bonuses”).

The Contingent Cash Bonuses will be earned and payable

upon the achievement or satisfaction of any one of the following performance goals or criteria:

1) The Company either:

i) consummates

a merger with another company which would constitute a change of control, or ii) signs a letter of intent (an “LOI”),

approved by the board, to merge with another company which would constitute a change of control, 2) the combined value of the

Company’s cash and fair market value of digital assets (collectively the “Assets”) at any point in time are:

i) greater than or equal to $1.25 million, then 25% of the Contingent Cash Bonuses will be deemed earned and payable, ii) greater

than or equal to $1.75 million (excluding any portion of Contingent Cash Bonuses previously earned whether paid or accrued), then

25% of the Contingent Cash Bonuses will be deemed earned and payable, iii) greater than or equal to $2 million (excluding any

portion of Contingent Cash Bonuses previously earned whether paid or accrued), then the remaining 50% of the Contingent Cash Bonuses

will be deemed earned and payable, and 3) provided further if the Company and Mr.

Handerhan agree to exchange their

respective Contingent Cash Bonus or a portion thereof for equity securities (not debt) then the above performance criteria do

not need to be achieved with respect to the portion of Contingent Cash Bonuses exchanged for equity.

The Contingent Cash Bonuses

are not conditioned upon the continued service of Mr.

Handerhan and do not expire.

amendments to the Employment Agreements, the 2018 Contingent Bonuses and 2019 Contingent Bonuses were approved unanimously by

following summary compensation table sets forth information concerning compensation for services rendered in all capacities during

the fiscal years ended December 31, 2019 and 2018 awarded to, earned by or paid to our directors excluding executive officers.

The numbers in the summary compensation table represent the actual amount of compensation accrued under Generally Accepted Accounting

and Principal Position

Earned or Paid in Cash ($)

Garrity, Director

January 1, 2018 the Company entered into a one-year consulting agreement with GVA Research LLC (“GVA”) whereby it

will pay GVA a quarterly consulting fee of $13,750.

David Garrity is the owner and principal of GVA and this is irrespective of

and not included in the Director compensation.

The Company did not renew the GVA consulting agreement for 2019.

February 6, 2019 the Company reevaluated the level of compensation for its sole director and agreed to an annual director fee

of $18,750 per quarter or $75,000 per year effective January 1, 2019.

EQUITY AWARDS AT FISCAL YEAR-END TABLE

are no outstanding equity awards issued to our Named Executive Officers as of December 31, 2019.

The information required

by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with

the SEC within 120 days of the year ended December 31, 2020.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

following table sets forth certain information regarding beneficial ownership of our common stock and C-1 Convertible Preferred

Stock as of the date of this report:

(i) by each of our directors, (ii) by each of the Named Executive Officers, (iii) by all

of our executive officers and directors as a group, and (iv) by each person or entity known by us to beneficially own more than

5% of any class of our outstanding voting shares.

Unless otherwise noted, the address is c/o BTCS Inc., 9466 Georgia Avenue #124,

Silver Spring, MD 20901.

and address of

and nature of

ownership (1)

officers and directors as a group (three persons)

C-1 Convertible Preferred Stock

Fund I LP (2)

ownership of common stock records only is determined based on shares owned together with securities exercisable or convertible

into shares of common stock within 60 days of March 9, 2020, for each shareholder.

Beneficial ownership is determined in accordance

with the rules of the SEC and generally includes voting or investment power with respect to securities.

Shares of common stock

subject to securities exercisable or convertible into shares of common stock that are currently exercisable or exercisable

within 60 days of the date of March 9, 2020, are deemed to be beneficially owned by the person holding such securities for

the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of

computing the percentage ownership of any other person.

As of March 9, 2020, there were 24,213,051 shares of our common stock

issued and outstanding.

The holders of the outstanding preferred stock have blockers which limit their voting and conversion

privileges to 4.99% of outstanding common stock within the foregoing 60 day periods.

The percentages reflect their ownership

of each series of preferred stock, which is not subject to any blocker.

Fund I Management LLC, the investment manager of Cavalry Fund I LP, has voting and investment power over these securities.

Thomas Walsh is the managing member of Cavalry Fund I Management LLC, which is the general partner of Cavalry Fund I LP.

Walsh disclaims beneficial ownership over these securities.

61 Kinderkamack Road Woodcliff Lake, NJ 07677.

Rock has voting and dispositive power over shares held by DiamondRock, LLC.

Address is 425 East 63 rd Street, New

York, NY 10065.

The information required

by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with

the SEC within 120 days of the year ended December 31, 2020.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Person Transactions

the years ended December 31, 2019 and 2018, the Company was not party to any lease agreements for corporate office space and its

employees have been working virtually.

The Company is paying each of Mr.

Allen and Mr.

Handerhan $1,000 per month to cover out

of pocket expenses associated with phone, internet and office space.

common stock is quoted on the OTCQB quotation system, which does not have director independence requirements.

Using the definition

of independence set forth in the rules of the NASDAQ Stock Market, neither Mr.

Handerhan would be considered an independent

The information required

by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with

the SEC within 120 days of the year ended December 31, 2020.

PRINCIPAL ACCOUNTING FEES AND SERVICES

the years ended December 31, 2019 and 2018 we engaged RBSM as our independent auditor.

For the years ended December 31, 2019 and

2018, we incurred fees as discussed below:

Audit fees consist of fees related to professional services rendered in connection with the audit of our annual financial statements

and reviews, of the quarterly financial statements.

policy is to pre-approve all audit and permissible non-audit services performed by the independent accountants.

These services

may include audit services, audit-related services, tax services and other services.

Under our policy, pre-approval is generally

provided for particular services or categories of services, including planned services, project-based services and routine consultations.

In addition, the Board of Directors may also pre-approve particular services on a case-by-case basis.

Our Board of Directors approved

all services that our independent accountants provided to us in the past two fiscal years.

The information required

by this item is incorporated by reference to our Proxy Statement for the 2021 Annual Meeting of Stockholders to be filed with

the SEC within 120 days of the year ended December 31, 2020.

(a) Documents filed as part of the

(1) Financial Statements.

to Financial Statements, which appears on page F-1 hereof.

The financial statements listed in the accompanying Index to Financial

Statements are filed herewith in response to this Item.

(2) Financial Statements Schedules.

All schedules are omitted because they are not applicable or because the required information is contained in the financial statements

or notes included in this report.

(3) Exhibits.

See the Exhibit Index.

EXHIBIT INDEX

Filed/Furnished

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Certificate of Designation for Series B Convertible Preferred Stock

Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock

Certificate of Correction to Series B Convertible Preferred Stock

Certificate of Designation for Series C-1 Convertible Preferred Stock

Amended and Restated Certificate of Designation of Series C-1 Convertible Preferred Stock

Certificate of Amendment to the Series C-1 Certificate of Designation

Certificate of Designation for Series C-2 Convertible Preferred Stock

Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series C-1 Convertible Preferred Stock

Certificate of Withdrawal of Certificate of Designation for Series C Convertible Preferred Stock

Certificate of Withdrawal of Certificate of Designation for Series B Convertible Preferred Stock

Certificate of Withdrawal of Certificate of Designation for Series A Preferred Stock

Certificate of Correction to Series C-2 Convertible Preferred Stock

Certificate of Amendment filed February 13, 2017

4 unchanged sentences

Convertible Note dated as of November 7, 2019

Certificate of Amendment to the Series C-1 COD

Amended Series A Common Stock Purchase Warrant

Amended Additional Common Stock Purchase Warrant

Amended Bonus Common Stock Purchase Warrant

Amended Series B Common Stock Purchase Warrant

Amended Amendment to Securities Agreement

Form of Series B Common Stock Purchase Warrant

Form of Series C-1 Securities Purchase Agreement

Form of Side Letter

Convertible Note dated as of April 17, 2020

Convertible Note dated as of December 16, 2020

Securities Escrow Agreement dated February 19, 2016

Securities Purchase Agreement dated June 6, 2016

20% Original Issue Discount Junior Convertible note due December 5, 2016

Security Agreement dated June 6, 2016

Pledge Agreement dated June 6, 2016

Subsidiary Guaranty dated June 6, 2016

Amendment to Subscription Agreement dated May 27, 2016

Form of Warrant Exercise Agreement dated as of June 8, 2016

Form of Series A Warrant

Form of Additional Warrant

Form of Bonus Warrant

Convertible Promissory Note dated December 6, 2016

Form of Note Leak-Out Agreement dated March 2, 2017

Form of January Leak-Out Agreement dated February 8, 2017

Form of April Leak-Out Agreement dated February 6, 2017

Form of January Lock-Up Agreement dated February 8, 2017

Form of April Lock-Up Agreement dated February 6, 2017

Settlement Agreement and Note dated March 22, 2017

Form of Series A Common Stock Purchase Warrant dated May 24, 2017

Form of Additional Common Stock Purchase Warrant dated May 24, 2017

Form of Bonus Common Stock Purchase Warrant dated May 24, 2017

Form of Registration Right Agreement dated as of May 24, 2017

5 unchanged sentences

Michal Handerhan

Settlement Agreement and Note

Form of Note Leak-Out Agreement

Form of January Leak-Out Agreement

Form of April Leak-Out Agreement

Form of January Lock-Up Agreement

Form of April Lock-Up Agreement

Convertible Promissory Note

Securities Purchase Agreement

20% Original Issue Discount Junior Convertible note due December 5, 2016

Security Agreement

Pledge Agreement

Subsidiary Guaranty

Amendment to Subscription Agreement

Securities Escrow Agreement

Form of Series C Warrant

Form of Series B Common Stock Purchase Warrant dated October 10, 2017

Form of Series C-1 Securities Purchase Agreement dated October 10, 2017

Form of Side Letter dated October 4, 2017

Amended Series A Common Stock Purchase Warrant dated May 24, 2017

Amended Additional Common Stock Purchase Warrant dated May 24, 2017

Amended Bonus Common Stock Purchase Warrant dated May 24, 2017

Amended Series B Common Stock Purchase Warrant dated October 10, 2017

Amended Amendment to Securities Agreement dated December 7, 2017

Form of Series C Common Stock Purchase Warrant dated October 11, 2018

Equity Line Purchase Agreement dated as of May 13, 2019

2 unchanged sentences

Side Letter dated as of November 7, 2019

of Subsidiaries

Certification

of the Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant

to Section 302 of the Sarbanes-Oxley Act of 2002

Certification

of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant

to Section 906 of the Sarbanes-Oxley Act of 2002.

Side Letter with Cavalry Fund I LP dated April 17, 2020

Side Letter with Cavalry Fund I LP dated December 16, 2020

Form of Series C Common Stock Purchase Warrant dated December 16, 2020

Form of Subscription Agreement –Series C-2 Convertible Preferred Stock

List of Subsidiaries

Certification of the Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Certification of the Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Instance Document

7 unchanged sentences

accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned,

thereunto duly authorized on March 23, 2020.

March 23, 2020

thereunto duly authorized on January 26, 2021.

Charles Allen

13 unchanged sentences

related statements of operations, stockholders’

(deficit), and cash flows for each of the years in the two-year period ended

December 31, 2019, and the related notes (collectively referred to as the financial statements).

(deficit) equity, and cash flows for each of the years in the two-year period

ended December 31, 2020, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial

2 unchanged sentences

with accounting principles generally accepted in the United States of America.

Company’s Ability to Continue as a Going Concern

Company's Ability to Continue as a Going Concern

accompanying financial statements have been prepared assuming the Company will continue as a going concern.

3 unchanged sentences

to continue as a going concern.

Management’s evaluation of the events and conditions and management’s plan in regard

to these matters are also described in Note 3.

The financial statements do not include any adjustments that might result from

the outcome of this uncertainty.

Management's evaluation of the events and conditions and management’s plan in regard to

these matters are also described in Note 3.

The financial statements do not include any adjustments that might result from the

outcome of this uncertainty.

financial statements are the responsibility of the Company’s management.

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We believe that our audits provide a reasonable basis for our opinion.

Audit Matters

critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were

communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material

to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of

critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by

communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or

disclosures to which they relate.

of the matter

discussed in Note 4 to the financial statements, the Company’s balance sheet includes digital currencies which are recorded

at cost less impairment.

Significant judgment is exercised by the Company in determining the impairment for these digital

assets because there is limited authoritative accounting guidance regarding accounting for digital assets.

we addressed the matter in our audit

principal audit procedures related to the Company’s impairment of digital assets included the following:

obtained an understanding of the Company’s accounting for digital assets.

We evaluated how management calculated the impairment

and assessed whether the methodology was consistent with industry practices.

We also tested the observable assumptions used in

the impairment calculation on a sample basis and the mathematical accuracy of the calculations.

In addition, we also evaluated

the reasonableness of the impairment.

have served as the Company’s auditor since 2016.

and Subsidiaries

York | Washington, DC | California | Nevada

| India | Greece

of ANTEA International with offices worldwide

Current assets:

and equipment, net

and Stockholders’

payable and accrued expense

notes payable, net

current liabilities

Digital currencies

Prepaid expense

Total current assets

Other assets:

Property and equipment, net

Total other assets

Liabilities and Stockholders’

Equity (Deficit):

Accounts payable and accrued expense

Accrued compensation

Convertible notes payable, net

Total current liabilities

Stockholders’

equity (deficit):

Preferred stock;

20,000,000 shares authorized at $0.001 par value:

B Convertible Preferred stock:

0 shares issued and outstanding at December 31, 2019 and 2018;

Liquidation preference $0.001

C-1 Convertible Preferred stock:

Series B Convertible Preferred stock:

0 shares issued and outstanding at December 31, 2020 and

Liquidation preference

$0.001 per share

stock, 975,000,000 shares authorized at $0.001 par value, 19,831,521 and 12,515,201 shares issued and outstanding at December

31, 2019 and 2018, respectively

paid in capital

Liquidation preference $0.001 per share

Series C-1 Convertible Preferred stock:

29,414 shares issued and outstanding at December 31,

2020 and 2019;

Liquidation preference $0.001 per share

Common stock, 975,000,000 shares authorized at $0.001 par value, 42,011,617 and 19,831,521 shares

issued and outstanding at December 31, 2020 and 2019, respectively

Additional paid in capital

Accumulated deficit

(119,539,887 )

(116,983,793 )

stockholders’

Liabilities and stockholders’

Total stockholders’

equity (deficit)

Total Liabilities and stockholders’

equity (deficit)

accompanying notes are an integral part of these financial statements.

and Subsidiaries

of Operations

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 )

loss per share attributable to common stockholders, basic and diluted

average number of common shares outstanding, basic and diluted

Deemed dividend related to reduction of warrant strike price

Net loss attributable to common stockholders

$ (2,556,094 )

$ (1,736,309 )

Net loss per share attributable to common stockholders, basic and diluted

Weighted average number of common shares outstanding, basic and diluted

accompanying notes are an integral part of these financial statements.

and Subsidiaries

Statement of Stockholders’

of Stockholders’

(Deficit) Equity

the years ended December 31, 2020 and 2019

B Convertible

C-1 Convertible

Series C-1 Convertible

Stockholders’

January 1, 2018 (Restated)

Preferred Stock

Balance December 31, 2018

$ 115,074,655

$ (115,343,192 )

of Series B Convertible Preferred stock to common stock

of Series C-1 Convertible Preferred stock to common stock

Common stock issued including equity commitment fee, net

Conversion of convertible notes and interest

Beneficial conversion features associated with convertible notes payable

Fractional shares adjusted for reverse split

Warrant exercise

December 31, 2018

Balance December 31, 2019

$ 116,780,174

$ (116,983,793 )

stock issued including equity commitment fee, net

of convertible notes

conversion features associated with convertible notes payable

shares adjusted for reverse split

December 31, 2019

Common stock issued including equity commitment fee, net

Conversion of convertible notes and interest

Beneficial conversion features associated with convertible notes payable

Balance December 31, 2020

$ 120,541,135

$ (119,539,887 )

accompanying notes are an integral part of these consolidated financial statements.

and Subsidiaries

Statements of Cash Flows

the years ended

Cash flows used from operating activities:

accompanying notes are an integral part of these financial statements.

of Cash Flows

For the years ended

Net Cash flows used from operating activities:

$ (2,556,094 )

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

on debt discount

loss (gain) on digital currencies transactions

from sale of digital currencies

loss on digital currencies

in operating assets and liabilities:

expenses and other current assets

payable and accrued expenses

cash used in operating activities

cash used in investing activities:

of digital currencies

of property and equipment

cash used in investing activities

cash provided by financing activities:

from short term loan

from exercise of warrants

proceeds from issuance of common stock

cash provided by financing activities

increase (decrease) in cash

beginning of period

end of period

paid for interest and taxes

disclosure of non-cash financing and investing activities:

of Series B Convertible Preferred Stock to common stock

of Series C-1 Convertible Preferred Stock to common stock

of convertible note to common stock

of promissory note and accrued interest into convertible note

warrant exercise

shares adjusted for reverse split

conversion features associated with convertible notes payable

accompanying notes are an integral part of these consolidated financial statements.

and Subsidiaries

$ (1,640,601 )

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

Depreciation expense

Amortization on debt discount

Purchase of digital currencies

Realized loss on digital currencies transactions

Impairment loss on digital currencies

Interest expense

Changes in operating assets and liabilities:

Prepaid expenses and other current assets

Accounts payable and accrued expenses

Accrued compensation

Net cash used in operating activities

Net cash provided by financing activities:

Proceeds from exercise of warrants

Proceeds from short term loan

Net proceeds from issuance of common stock

Net cash provided by financing activities

Net increase in cash

Cash, beginning of year

Cash, end of year

Supplemental disclosure of non-cash financing and investing activities:

Conversion of convertible note and interest to common stock

Exchange of promissory note and accrued interest into convertible note

Fractional shares adjusted for reverse split

Deemed dividend

Beneficial conversion features associated with convertible notes payable

accompanying notes are an integral part of these financial statements.

TO FINANCIAL STATEMENTS

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In February 2014,

the Company entered the business of hosting an online ecommerce marketplace where consumers can purchase merchandise using Digital

the Company entered the business of hosting an online ecommerce marketplace where consumers could purchase merchandise using Digital

Assets, including bitcoin and is currently focused on blockchain and digital currency ecosystems.

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we shifted our focus towards our transaction verification service business, also known as bitcoin mining, though in mid-2016 we

ceased our transaction verification services operation at our North Carolina facility due to capital constraints.

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 certain limitations regarding Digital Securities.

The Company is also seeking

to acquire controlling interests in businesses in the blockchain industry.

ceased our mining operation at our North Carolina facility due to capital constraints.

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 certain

limitations regarding Digital Securities.

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

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

asset blockchains are typically maintained by a network of participants which run servers which secure their blockchain.

Company is also seeking to acquire controlling interests in businesses in the blockchain industry.

Company is also internally developing a digital asset data analytics platform to provide information to users, such as tracking

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2 - Basis of Presentation

accompanying financial statements include the accounts of the Company and its wholly-owned subsidiaries, DM.

DM was dissolved

on May 2, 2018.

The Company maintains its books of account and prepares financial statements in accordance with Generally Accepted

Accounting Principles in the United States of America (“U.S.

Company maintains its books of account and prepares financial statements in accordance with Generally Accepted Accounting Principles

in the United States of America (“U.S.

GAAP”).

The Company’s fiscal year ends on December 31.

All significant intercompany balances and transactions have been eliminated in consolidation.

3 - Liquidity, Financial Condition and Management’s Plans

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as a profitable enterprise.

and Subsidiaries

TO FINANCIAL STATEMENTS

working capital needs are influenced by our level of operations, and generally decrease with higher levels of revenue.

used approximately $1.1 million of cash in its operating activities for the year ended December 31, 2019.

The Company incurred

$1.6 million net loss for the year ended December 31, 2019.

The Company had cash of approximately $0.1 million and a negative

working capital of approximately $0.2 million at December 31, 2019.

The Company expects to incur losses into the foreseeable future

as it undertakes its efforts to execute its business plans.

used $2,973,003 of cash in its operating activities for the year ended December 31, 2020.

The Company incurred $2,556,094 net

loss for the year ended December 31, 2020.

The Company had cash of $524,135 and working capital of $1,043,057 at December

The Company expects to incur losses into the foreseeable future as it undertakes its efforts to execute its business

Company will require significant additional capital to sustain its short-term operations and make the investments it needs to

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As of December

31, 2019 and 2018, the Company had $0 in excess of the FDIC insured limit.

31, 2020 and 2019, the Company had $274,135 and $0 in excess of the FDIC insured limit, respectively.

Assets Translations and Remeasurements

13 unchanged sentences

Subsequent reversal of impairment losses is not permitted.

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

and Subsidiaries

TO FINANCIAL STATEMENTS

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 is less than its cost basis.

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.

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 are recorded as

a component of costs and expenses in our statements of operations.

Internally Developed Software

Internally developed

software consisting of the core technology of the Company’s digital asset data analytics platform which is being designed

to allow user to aggregate and analyze data from Digital Asset exchanges.

For internally developed software, the Company uses

both its own employees as well as the services of external vendors and independent contractors.

The Company accounts for computer

software used in the business in accordance with ASC 985-20 and ASC 350.

ASC 985-20, Software-Costs

of Computer Software to Be Sold, Leased, or Otherwise Marketed, requires that software development costs incurred in conjunction

with product development be charged to research and development expense until technological feasibility is established.

until the product is released for sale, software development costs must be capitalized and reported at the lower of unamortized

cost or net realizable value of the related product.

Some companies use a “tested working model”

approach to establishing

technological feasibility (i.e., beta version).

Under this approach, software under development will pass the technological feasibility

milestone when the Company has completed a version that contains essentially all the functionality and features of the final version

and has tested the version to ensure that it works as expected.

ASC 350, Intangibles-Goodwill

and Other , requires computer software costs associated with internal use software to be charged to operations as incurred

until certain capitalization criteria are met.

Costs incurred during the preliminary project stage and the post-implementation

stages are expensed as incurred.

Certain qualifying costs incurred during the application development stage are capitalized as

property, equipment and software.

These costs generally consist of internal labor during configuration, coding, and testing activities.

Capitalization begins when (i) the preliminary project stage is complete, (ii) management with the relevant authority authorizes

and commits to the funding of the software project, and (iii) it is probable both that the project will be completed and that

the software will be used to perform the function intended.

and Equipment

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3 - inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)

accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United

States of America (“US GAAP”).

accompanying financial statements have been prepared in conformity with U.S.

This requires management to make estimates and assumptions that affect certain reported

2 unchanged sentences

The Company’s significant estimates and assumptions

include the recoverability and useful lives of indefinite life intangible assets, stock-based compensation, the valuation of derivative

liabilities, and the valuation allowance related to the Company’s deferred tax assets.

Certain of the Company’s estimates,

including the carrying amount of the indefinite life intangible assets, could be affected by external conditions, including those

unique to the Company and general economic conditions.

It is reasonably possible that these external factors could have an effect

on the Company’s estimates and could cause actual results to differ from those estimates and assumptions.

include the recoverability and useful lives of indefinite life intangible assets, stock-based compensation, and the valuation

allowance related to the Company’s deferred tax assets.

Certain of the Company’s estimates, including the carrying

amount of the indefinite life intangible assets, could be affected by external conditions, including those unique to the Company

and general economic conditions.

It is reasonably possible that these external factors could have an effect on the Company’s

estimates and could cause actual results to differ from those estimates and assumptions.

Company recognizes income taxes on an accrual basis based on tax positions taken or expected to be taken in its tax returns.

13 unchanged sentences

Since the Company’s inception, no such interest or penalties have been incurred.

TO FINANCIAL STATEMENTS

Stock-Based Compensation

4 unchanged sentences

date, based on the estimated number of awards that are expected to vest and will result in a charge to operations.

and Subsidiaries

TO FINANCIAL STATEMENTS

13 unchanged sentences

their effect was anti-dilutive:

of December 31,

to purchase common stock

C-1 Convertible Preferred stock

As of As of December 31,

Warrants to purchase common stock

Series C-1 Convertible Preferred stock

Convertible notes

Company applies the guidance enumerated in ASC 480 “Distinguishing Liabilities from Equity”

13 unchanged sentences

Accordingly, all issuances of preferred stock are presented as a component of stockholders’

Company has evaluated the Series A Convertible Preferred Stock (“Preferred Stock”) component of the Private Placement

and determined it should be considered an “equity host”

Company has evaluated the Series C-1 Convertible Preferred Stock (“Preferred Stock”) component of the Private

Placement and determined it should be considered an “equity host”

and not a “debt host”

as defined by ASC 815, Derivatives

This evaluation is necessary in order to determine if any embedded features require bifurcation and, therefore, separate

accounting as a derivative liability.

The Company’s analysis followed the “whole instrument approach,”

compares an individual feature against the entire preferred stock instrument which includes that feature.

The Company’s

analysis was based on a consideration of the Preferred Stock’s economic characteristics and risks and more specifically

evaluated all the stated and implied substantive terms and features including (i) whether the Preferred Stock included redemption

features, (ii) whether the preferred stockholders were entitled to dividends, (iii) the voting rights of the Preferred Stock and

(iv) the existence and nature of any conversion rights.

As a result of the Company’s determination that the Preferred Stock

is an “equity host,”

as defined by

ASC 815, Derivatives and Hedging.

This evaluation is necessary in order to determine if any embedded features require bifurcation

and, therefore, separate accounting as a derivative liability.

The Company’s analysis followed the “whole instrument

approach,”

which compares an individual feature against the entire preferred stock instrument which includes that feature.

The Company’s analysis was based on a consideration of the Preferred Stock’s economic characteristics and risks and

more specifically evaluated all the stated and implied substantive terms and features including (i) whether the Preferred Stock

included redemption features, (ii) whether the preferred stockholders were entitled to dividends, (iii) the voting rights of the

Preferred Stock and (iv) the existence and nature of any conversion rights.

As a result of the Company’s determination that

the Preferred Stock is an “equity host,”

the embedded conversion feature is not considered a derivative liability.

TO FINANCIAL STATEMENTS

Conversion Feature of Convertible Notes Payable

6 unchanged sentences

to the issuance of a convertible note when issued.

and Subsidiaries

TO FINANCIAL STATEMENTS

discounted face value is then used to measure the effective conversion price of the note.

5 unchanged sentences

Accounting Pronouncements

May 2014, the FASB issued ASU No.

2014-09, “Revenue from Contracts with Customers (Topic 606)”

(ASU 2014-09) as modified

2015-14, “Revenue from Contracts with Customers (Topic 606):

Deferral of the Effective Date,”

“Revenue from Contracts with Customers (Topic 606):

Principal versus Agent Considerations (Reporting Revenue Gross versus

2016-10, “Revenue from Contracts with Customers (Topic 606):

Identifying Performance Obligations and

Licensing,”

2016-12, “Revenue from Contracts with Customers (Topic 606):

Narrow-Scope Improvements and

Practical Expedients.”

The revenue recognition principle in ASU 2014-09 is that an entity should recognize revenue to depict

the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be

entitled in exchange for those goods or services.

In addition, new and enhanced disclosures will be required.

Companies may adopt

the new standard either using the full retrospective approach, a modified retrospective approach with practical expedients, or

a cumulative effect upon adoption approach.

The Company adopted ASU 2014-09 on January 1, 2018, using the modified retrospective

Because the Company doesn’t have any customer contracts as of January 1, 2018, the adoption of ASU 2014-09 did

not have a material impact on the Company’s financial position, results of operations, equity or cash flows.

December 2019, the FASB issued ASU No.

8 unchanged sentences

related disclosures.

In August 2020,

the FASB issued ASU No.

2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and

Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts

in an Entity’s Own Equity , which simplifies accounting for convertible instruments by removing major separation

models required under current U.S.

The ASU removes certain settlement conditions that are required for equity contracts

to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain

This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December

15, 2021, with early adoption permitted.

The Company is currently evaluating the impact of this standard on its financial

statements and related disclosures.

5 - Note Payable

December 18, 2018, the Company issued a $200,000 promissory note to one institutional investor (the “Promissory Note”).

The Promissory Note was due on September 18, 2019 and bears interest at a rate of 12%.

In the event of default, the Promissory

Note bears interest at a rate of 20%.

By the maturity date of the Promissory Note, the Company made no payment in connection with

this Promissory Note and accrued interest expense of $17,973.

On September 18, 2019, the Company and holder of the Promissory

Note agreed to exchange the Promissory Note, including $17,973 accrued and unpaid interest for a new $217,973 Convertible Note

dated September 18, 2019 (the “Convertible Note”).

The Convertible Note is due December 18, 2019 and is convertible

at a 20% discount to the closing price of the Company’s common stock on the principal trading market on the date before

exercise, provided however that the conversion price shall never be less than $0.10 per share.

The Convertible Note shall bear

interest at 12% per annum (payable at maturity) and may be prepaid by the Company.

From September 18, 2019 to September 30, 2019,

the Company issued a total of 1,252,058 shares of the Company’s Common Stock for the conversion of $150,000 of principal

on the Convertible Note and made no payment in connection with this Convertible Note and accrued interest expense.

16, 2019, the Company issued a total of 679,730 shares of the Company’s Common Stock for the conversion of the remaining

$67,973 of principal on the Convertible Note and subsequently paid all the accrued interest expense of $905 on the Convertible

The exchange of the Promissory Note into the Convertible Note met the definition of an extinguishment.

However, the carrying

amount of the Promissory Note and the fair value of the Convertible Note were comparable.

Therefore, no gain or loss was recorded

on the extinguishment.

In addition, the Convertible Note does not contain any embedded features that require bifurcation pursuant

to ASC 815-15.

Promissory Note

November 7, 2019, the Company issued Cavalry Fund I LP (“Cavalry”) 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.

the Convertible Note does not contain any embedded features that require bifurcation pursuant to ASC 815-15.

At the issuance date,

the Convertible Note was convertible into 2,173,913 shares of common stock at $0.09 per share, but the Company’s fair value

of underlying common stock was $0.12 per share.

As such, the Company recognized a beneficial conversion feature, resulting in

a discount to the Notes of approximately $50,000 with a corresponding credit to additional paid-in capital.

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.

the year ended December 31, 2020, the Company recorded approximately $40,000 in interest expense related to amortization on debt

discount related to the 2019 Promissory Note.

the year ended December 31, 2020, the Company recorded interest expense of approximately $8,000.

As of December 31, 2020, the

principal balance of the 2019 Promissory Note was $0.

TO FINANCIAL STATEMENTS

April Promissory Note

April 17, 2020, the Company issued Cavalry a $500,000 promissory note (the “2020 April Promissory Note”) in consideration

for $500,000.

The 2020 April Promissory Note is (i) due on February 17, 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 $0.01 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 2020

April Promissory Note.

In addition, this note does not contain any embedded features that require bifurcation pursuant to ASC

At the issuance date, the Convertible Note was convertible into 7,770,008 shares of common stock at $0.064 per share,

1 unchanged sentence

As such, the Company recognized a beneficial

conversion feature, resulting in a discount to the Notes of approximately $54,000 with a corresponding credit to additional paid-in

During the year ended December 31, 2019, the Company recorded approximately $54,000 in interest expense related to amortization

on debt discount related to the Convertible Note.

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.

During the year ended December 31,

2019, the Company recorded approximately $10,000 in interest expense related to amortization on debt discount related to the 2019

Promissory Note.

As of December 31, 2019, the Convertible Note had principal balance of $0.2 million, accrued interest on the

note payable of approximately $4,000 and approximately $40,000 remaining unamortized debt discount.

In addition, the Convertible

Note does not contain any embedded features that require bifurcation pursuant to ASC 815-15.

At the issuance date, the Convertible

Note was convertible into 2,173,913 shares of common stock at $0.09 per share, but the Company’s fair value of underlying

common stock was $0.12 per share.

As such, the Company recognized a beneficial conversion feature, resulting in a discount to

the Notes of approximately $50,000 with a corresponding credit to additional paid-in capital.

and Subsidiaries

TO FINANCIAL STATEMENTS

conversion feature, resulting in a discount to this note of approximately $269,000 with a corresponding credit to additional paid-in

November 2 to December 3, 2020, the Company issued a total of 5,200,906 shares of the Company’s common stock for the conversion

of the $500,000 of principal of 2020 April Promissory Note.

December 16, 2020, the Company issued a total of 343,703 shares of the Company’s common stock for the conversion of accrued

interest of $35,298 on the 2020 April Promissory Note.

the year ended December 31, 2020, the Company recorded approximately $269,000 in interest expense related to amortization on debt

discount related to the 2020 April Promissory Note.

the year ended December 31, 2020, the Company recorded interest expense of approximately $35,000.

As of December 31, 2020, the

principal balance of the 2020 Promissory Note was $0.

December Promissory Note

December 16, 2020, the Company issued Cavalry a $1,000,000 promissory note (the “2020 December Promissory Note”) and

a Series C warrant to purchase 2,000,0000 shares of the Company’s Common Stock (the “Warrant”) in consideration

for $1,000,000.

The 2020 December Promissory Note is (i) due on October 16, 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 $0.04 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 2020

December Promissory Note.

2,000,000 Warrants are exercisable for cash only at $0.20 per share, over a two-year period, and does not contain anti-dilution

or price protection.

the year ended December 31, 2020, the Company recorded approximately $45,000 in interest expense related to amortization on debt

discount related to the 2020 December Promissory Note.

As of December 31, 2020, the remaining unamortized debt discount related

to the 2020 December Promissory Note was approximately $868,000.

the year ended December 31, 2020, the Company recorded interest expense of approximately $5,000.

As of December 31, 2020, the

principal balance of the 2020 December Promissory Note was $1,000,000.

the year ended December 31, 2020, the Company recorded compensation payable, to Charles Allen, its CEO, and Michal Handerhan,

its COO, of approximately $349,000 this relates to the achievement of performance milestones set forth in the 2019

Contingent Bonuses.

6 - Stockholders’

Equity (Deficit)

to Articles of Incorporation

9 unchanged sentences

The financial statements have been retroactively restated to reflect the reverse stock split.

are authorized to issue 20,000,000 shares of $0.001 par value preferred stock in one or more series with such designations, voting

powers, if any, preferences and relative, participating, optional or other special rights, and such qualifications, limitations

and restrictions, as are determined by resolution of our board of directors.

The issuance of preferred stock may have the effect

of delaying, deferring or preventing a change in control of our company without further action by shareholders and could adversely

affect the rights and powers, including voting rights, of the holders of common stock.

In certain circumstances, the issuance

of preferred stock could depress the market price of the common stock.

C-1 Preferred Stock

have 29,414 shares of outstanding Series C-1 Convertible Preferred Stock (the “Series C-1”) which converts into 196,093

shares of common stock.

Each share of Series C-1 converts into approximately 6.667 shares of common stock.

The Certificate of

Designation contains what is commonly referred to as a blocker which limits the number of shares of common stock which the holder

may “beneficially own”

to 4.99% of the common stock issued and outstanding.

Under Rule 13d-3 of the Exchange Act,

in determining beneficial ownership the holder must consider shares of common stock that may be issued upon conversion or exercise

of other securities within 60-days of the date of calculation and which are not subject to any limitation on conversion or exercise.

The Series C-1 also contains a provision requiring the Company to treat all holders equally.

TO FINANCIAL STATEMENTS

April 18, 2019, the Company issued 16,860 shares of Common Stock in connection with the one-for 30 reverse split resulting from

the rounding up of fractional shares of Common Stock to the whole shares of Common Stock.

2019, the Company issued 4,374,741 shares of Common Stock (including 333,334 commitment shares and 68,532 pro-rata commitment

shares) under the Purchase Agreement with Cavalry resulting in aggregate proceeds of approximately $1.16 million.

2019, the Company issued 4,642,108 shares of Common Stock (including 333,334 commitment shares and 68,532 pro-rata

commitment shares) under the Purchase Agreement with Cavalry resulting in aggregate proceeds of approximately $1.16 million.

2019, the Company issued 725,564 shares of Common Stock for the cash exercise of Series A Warrants, Additional Warrants, and Bonus

Warrants resulting in aggregate proceeds of $228 thousand to the Company.

Warrants resulting in aggregate proceeds of $228,000 to the Company.

2019, the Company issued a total of 1,931,788 shares of the Company’s Common Stock for the conversion of approximately $200,000

of principal on the Convertible Note.

of principal and $18,000 of interest on the Convertible Note.

Line Purchase Agreement

May 13, 2019, the Company entered into an equity line purchase agreement with Cavalry Fund I LP (“Cavalry”) (the “Purchase

Agreement”) pursuant to which Cavalry agreed to purchase from the Company, at Company’s sole discretion, up to $10,000,000

of common stock (subject to certain limitations) from time to time over a 36-month period.

In consideration for entering into

the $10 million Purchase Agreement, the Company issued to Cavalry 333,334 shares of common stock as a commitment fee and will

issue up to 583,334 shares of common stock pro rata as Cavalry purchases additional shares.

May 13, 2019, the Company entered into an equity line purchase agreement with Cavalry (the “Purchase Agreement”) pursuant

to which Cavalry agreed to purchase from the Company, at Company’s sole discretion, up to $10,000,000 of common stock (subject

to certain limitations) from time to time over a 36-month period.

In consideration for entering into the $10 million Purchase

Agreement, the Company issued to Cavalry 333,334 shares of common stock as a commitment fee and will issue up to 583,334 shares

of common stock pro rata as Cavalry purchases additional shares.

with the execution of the Purchase Agreement on May 13, 2019, the Company and Cavalry also entered into a registration rights

24 unchanged sentences

preceding such Put date.

and Subsidiaries

TO FINANCIAL STATEMENTS

number of shares that may be sold under an Aftermarket Put shall be equal to the Daily Trading Dollar Volume, divided by the Aftermarket

3 unchanged sentences

for the Company’s common stock during the 12 consecutive trading days ending on the trading day immediately preceding such

TO FINANCIAL STATEMENTS

mutual agreement of Cavalry and the Company and subject to written confirmation by Cavalry that such agreement will not result

8 unchanged sentences

of $1,146,014, net of cost of $12,625.

The Company also issued 333,334 commitment shares and 68,532 pro-rata commitment

shares which were registered under the Registration Statement.

September 5, 2019, the Company filed a second Registration Statement on Form S-1 seeking to register 6,454,000 shares.

2 unchanged sentences

shares available for sale under the second Registration Statement for total proceeds of $15,986.

January 1, 2018, the Company issued 172,513 shares of Common Stock upon the conversion of 25,877 shares of Series B Convertible

Preferred stock.

April 20, 2018, the Company issued 13,073 shares of Common Stock upon the conversion of 1,961 shares of Series C-1 Convertible

Preferred stock.

April 23, 2018, the Company issued 39,220 shares of Common Stock upon the conversion of 5,883 shares of Series C-1 Convertible

Preferred stock.

April 24, 2018, the Company issued 84,973 shares of Common Stock upon the conversion of 12,746 shares of Series C-1 Convertible

Preferred stock.

July 23, 2018, the Company issued 8,961 shares of Common Stock for the cashless exercise of 18,518 warrants.

October 11, 2018 the Company issued four investors each 458,333 Series C Warrants or 1,833,333 warrants in aggregate.

C Warrants were not lawfully issued in accordance with the Nevada Revised Statutes (“NRS”).

October 25, 2018 the Company and each of the four investors who hold the Series C Warrants agreed to cancel the Series C Warrants

for no consideration.

Accordingly, the Series C Warrants are not outstanding.

November 13, 2018, pursuant to the Amendment to Securities Agreement dated December 7, 2017, the Company temporarily reduced the

exercise price of 133,333 Series A Warrants from $0.085 to $0.02 (the “Offer”).

The offer was made to all four investors

who are record holders of the Series A Warrants on identical terms.

Each investor had the option to exercise up to 33,333 Series

A Warrants at the lower exercise price.

the course of November 13 through November 16, 2018, the Company issued 95,000 shares of Common Stock for the cash exercise of

Series A Warrants through the Offer resulting in aggregate proceeds of $57,000 to the Company.

and Subsidiaries

the year ended December 31, 2020, the Company issued 6,186,633 shares of common stock (including 24,219 pro-rata commitment shares)

under the second Registration Statement pursuant to the Purchase Agreement with Cavalry resulting in aggregate proceeds of approximately

June 22, 2020, the Company filed a third Registration Statement on Form S-1 seeking to register 9,045,000 shares.

The third Registration

Statement was declared effective by the SEC on June 26, 2020.

the year ended December 31, 2020, Company issued 9,045,000 shares of common stock (including 84,303 pro-rata commitment shares)

under the third Registration Statement pursuant to the Purchase Agreement with Cavalry resulting in aggregate proceeds of approximately

$1,445,000 million.

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.

November 2 to December 3, 2020, the Company issued a total of 5,200,906 shares of the Company’s common stock for the conversion

of the $500,000 of principal of 2020 April Promissory Note.

December 16, 2020, the Company issued a total of 343,703 shares of the Company’s common stock for the conversion of accrued

interest of $35,298 on the 2020 April Promissory Note.

TO FINANCIAL STATEMENTS

1 unchanged sentence

following is a summary of warrant activity for the year ended December 31, 2020 and 2019:

as of December 31, 2017

of Series C Warrants

of Series C Warrants for no consideration

warrant exercise

exercise for cash

as of December 31, 2018

exercise for cash

as of December 31, 2019

Number of Warrants

Outstanding as of December 31, 2018

Warrants exercise for cash

Expiration of warrant

Outstanding as of December 31, 2019

Issuance of Series C Warrants

Expiration of warrant

Outstanding as of December 31, 2020

7 - Employment Agreements

5 unchanged sentences

be entitled to participate in all benefits plans we provide to our senior executive.

The Company accrued approximately $256,000

in bonuses during the year ended December 31, 2019 and did not pay or accrue any amount for bonuses during the year ended December

We shall reimburse Mr.

Allen for all reasonable expenses incurred in the course of his employment.

The Company shall

pay the Executive $500 per month to cover telephone and internet expenses.

If the Company does not provide office space to the

Executive the Company will pay the Executive an additional $500 per month to cover expenses in connection with their office space

Allen for all reasonable

expenses incurred in the course of his employment.

The Company shall pay the Executive $500 per month to cover telephone and internet

If the Company does not provide office space to the Executive the Company will pay the Executive an additional $500

per month to cover expenses in connection with their office space needs.

February 6, 2019 we amended the Allen Employment Agreement whereby the annual salary was increased to $345,000 per year effective

January 1, 2019.

January 1, 2019, all other terms of the Allen Employment Agreement remained unchanged including the Annual Increase.

the year ended December 31, 2020, Mr.

Allen’s annual salary was $360,525.

June 22, 2017, we entered into an employment agreement with Michal Handerhan (the “Handerhan Employment Agreement”),

5 unchanged sentences

be entitled to participate in all benefits plans we provide to our senior executive.

The Company accrued approximately $150,000

in bonuses during the year ended December 31, 2019 and did not pay or accrue any amount for bonuses during the year ended December

We shall reimburse Mr.

Handerhan for all reasonable expenses incurred in the course of his employment.

The Company shall

pay the Executive $500 per month to cover telephone and internet expenses.

If the Company does not provide office space to the

Executive the Company will pay the Executive an additional $500 per month to cover expenses in connection with their office space

Handerhan for all

reasonable expenses incurred in the course of his employment.

The Company shall pay the Executive $500 per month to cover telephone

and internet expenses.

If the Company does not provide office space to the Executive the Company will pay the Executive an additional

$500 per month to cover expenses in connection with their office space needs.

February 6, 2019 we amended the Handerhan Employment Agreement whereby the annual salary was increased to $215,000 per year effective

on January 1, 2019.

on January 1, 2019, all other terms of the Handerhan Employment Agreement remained unchanged including the Annual Increase.

the year ended December 31, 2020 Mr.

Handerhan’s annual salary was $224,675.

March 31, 2020, Charles Allen, the Company’s Chief Executive Officer and Chief Financial Officer, and Michal Handerhan,

the Company’s Chief Operating Officer, agreed to defer 35% of their cash compensation during the second quarter 2020 (the

“Period”) and refrain from making any payments during the Period on accrued and unpaid compensation owed prior to

The Company subsequently paid the deferred compensation for the Period.

TO FINANCIAL STATEMENTS

Termination/Severance

terms of the Allen Employment Agreement and Handerhan Employment Agreement (collectively the “Employment Agreements”)

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each Executive’s stock options and equity-based awards will immediately vest.

and Subsidiaries

TO FINANCIAL STATEMENTS

“change of control”

1 unchanged sentence

(i) the sale or partial

sale of the Corporation to an un-affiliated person or entity or group of un-affiliated persons or entities pursuant to which such

party or parties acquire shares of capital stock of the Corporation representing at least twenty five (25%) of the fully diluted

capital stock (including warrants, convertible notes, and preferred stock on an as converted basis) of the Corporation;

sale of the Corporation to an un-affiliated person or entity or group of such persons or entities pursuant to which such party

or parties acquire all or substantially all of the Corporation’s assets determined on a consolidated basis, or (iii) Incumbent

Directors (Mr.

Allen and Mr.

Handerhan) cease for any reason, including, without limitation, as a result of a tender offer, proxy

contest, merger or similar transaction, to constitute at least a majority of the board of directors of the Company.

sale of the Company to an un-affiliated person or entity or group of un-affiliated persons or entities pursuant to which such

party or parties acquire shares of capital stock of the Company representing at least twenty five (25%) of the fully diluted capital

stock (including warrants, convertible notes, and preferred stock on an as converted basis) of the Company;

(ii) the sale of the

Company to an un-affiliated person or entity or group of such persons or entities pursuant to which such party or parties acquire

all or substantially all of the Company’s assets determined on a consolidated basis, or (iii) Incumbent Directors (Mr.

Handerhan) cease for any reason, including, without limitation, as a result of a tender offer, proxy contest, merger or

similar transaction, to constitute at least a majority of the board of directors of the Company.

Additionally,

pursuant to the terms of the Employment Agreements, we have agreed to execute and deliver in favor of the Executives an indemnification

agreement and to maintain directors’

and officers’

insurance with terms and in the amounts commensurate with our senior

pursuant to the terms of the Employment Agreements, we have entered into an indemnification agreement with each executive officer.

December 14, 2017, the Company agreed to pay Charles Allen, its CEO, and Michal Handerhan, its COO, cash bonuses of $75,000 and

$35,000, respectively for 2017.

The Company further agreed to pay Mr.

Allen and Mr.

Handerhan contingent cash bonuses of $175,000

and $75,000 respectively (the “2017 Contingent Bonuses”) which will be deemed earned on the earlier of i) the closing

of a merger approved by the Board, ii) the closing of one or many financings in 2018 totaling over $1.25 million in gross proceeds,

or iii) the Company having cash and the fair market value of Digital Assets valued at over $1.5 million.

Provided further that

the 2017 Contingent Bonuses if deemed earned will only be payable if the Company has at least $1.25 million in cash and the fair

market value of Digital Assets prior to paying the bonuses.

The 2017 Contingent Bonuses are not conditioned upon the continued

service of either Mr.

Handerhan and do not expire.

The conditions to earn the 2017 Contingent Bonuses have been achieved

and the 2017 Contingent Bonuses have been paid.

February 6, 2019, the Company agreed to pay Charles Allen, its CEO, and Michal Handerhan, its COO, contingent cash bonuses of

$256,025 and $150,000, respectively for 2018 (the “2018 Contingent Bonuses”) which will be deemed earned and payable

upon the repayment and / or settlement of the $200,000 Promissory Note issued on December 18, 2018.

On September 18, 2019, the

Company exchanged the $200,000 Promissory Note and accrued interest of $17,973 for a $217,973 Convertible Promissory Note due

on December 18, 2019 (the “New Note”).

From September 18, 2019 through October 16, 2019 the Company issued 1,931,788

shares of the Company’s Common Stock for the conversion of all $217,973 principal on the New Note.

The Company subsequently

paid all the accrued interest expense of $905 on the New Note as such the conditions to earn the 2018 Contingent Bonuses have

been achieved and the 2018 Contingent Bonuses have been paid.

TO FINANCIAL STATEMENTS

January 19, 2020, the Company agreed to pay Charles Allen, its CEO, and Michal Handerhan, its COO, cash bonuses of $15,000 and

$10,000, respectively for 2019.

The Company also agreed to pay Mr.

Allen and Mr.

Handerhan contingent cash bonuses of $462,000

and $235,750 (collectively the “2019 Contingent Bonuses”).

The Contingent Cash Bonuses will be earned and payable

upon the achievement or satisfaction of any one of the following performance goals or criteria:

1) The Company either:

i) consummates

a merger with another company which would constitute a change of control, or ii) signs a letter of intent (an “LOI”),

approved by the board, to merge with another company which would constitute a change of control, 2) the combined value of the

Company’s cash and fair market value of Digital Assets (collectively the “Assets”) at any point in time

i) greater than or equal to $1.25 million, then 25% of the Contingent Cash Bonuses will be deemed earned and payable, ii)

greater than or equal to $1.75 million (excluding any portion of Contingent Cash Bonuses previously earned whether paid or accrued),

then 25% of the Contingent Cash Bonuses will be deemed earned and payable, iii) greater than or equal to $2 million (excluding

any portion of Contingent Cash Bonuses previously earned whether paid or accrued), then the remaining 50% of the Contingent Cash

Bonuses will be deemed earned and payable, and 3) provided further if the Company and Mr.

Handerhan agree to exchange

their respective Contingent Cash Bonus or a portion thereof for equity securities (not debt) then the above performance criteria

do not need to be achieved with respect to the portion of Contingent Cash Bonuses exchanged for equity.

The Contingent Cash Bonuses

are not conditioned upon the continued service of Mr.

Handerhan and do not expire.

The conditions to earn the 2019

Contingent Bonuses have been achieved and the 2019 Contingent Bonuses have been paid.

amendments to the Employment Agreements, the 2017 Contingent Bonuses, the 2018 Contingent Bonuses, and the 2019 Contingent Bonuses

were approved unanimously by the Board.

8 - Income Taxes

2 unchanged sentences

tax assets and liabilities at December 31, 2020 and 2019 are comprised of the following:

of December 31,

Net-operating

loss carryforward

As of December

Deferred tax assets:

Tax Asset, Net of Allowance

December 31, 2019, the Company had net operating loss carry forwards for federal and state tax purposes of approximately $6.84

million which begins to expire in 2034.

For tax years beginning after December 31, 2017, NOLs generated can offset only

80% of taxable income in any given tax year.

The 20-year carryforward period has been replaced with an indefinite carryforward

period for these NOLs generated in 2018 and future years.

Prior to the merger, the Company had generated net operating losses,

Net-operating loss carryforward (federal &

Total Deferred Tax Assets

Valuation allowance

Deferred Tax Asset, Net of Allowance

At December 31, 2020,

the Company had net operating loss (“NOL”) carry forwards for federal and state tax purposes of approximately

$9.23 million and $3.61 million respectively which begins to expire in 2034.

The NOLs carryforward amounts identified

in the table above are comprised of both the federal NOLs and state NOLs.

The tax effected federal NOL is $1.94 million and the

state NOL carryforward available is $0.228 million.

The state NOL carryforward available to the Company is taken from the actual

state tax returns filed in previous years.

The only state whereby NOL carryforwards are available is Maryland as that is the only

state that has losses apportioned to it based on state income tax rules.

The other state in which the Company has filed and continues

to file corporate income tax returns is Pennsylvania.

Because Pennsylvania uses the single receipts factor to apportion taxable

income (loss), since there are no receipts earned by the Company, the Pennsylvania state apportionment factor is zero and there

are no Pennsylvania NOLs available to be carried forward.

20-year carryforward period has been replaced with an indefinite carryforward period for these NOLs generated in tax years beginning

after December 31, 2017 and future years.

Prior to the February 5, 2014 merger, the Company had generated net operating losses,

which the Company’s preliminary analysis indicates would be subject to significant limitations pursuant to Internal Revenue

2 unchanged sentences

change of ownerships might be completely worthless.

Therefore, Management of the Company has recorded a Full Valuation Reserve,

since it is more likely than not that no benefit will be realized for the Deferred Tax Assets.

Therefore, management of the Company has recorded a Full

Valuation Reserve, since it is more likely than not that no benefit will be realized for the Deferred Tax Assets.

assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or

5 unchanged sentences

the deferred tax assets will not be realized in future periods, the Company has provided a valuation allowance for the full amount

of the deferred tax assets at December 31, 2019.

of the deferred tax assets at December 31, 2020 and 2019.

The valuation allowance increased by approximately $0.607 million

as of December 31, 2020.

TO FINANCIAL STATEMENTS

expected tax expense (benefit) based on the U.S.

federal statutory rate is reconciled with actual tax expense (benefit) as follows:

and Subsidiaries

TO FINANCIAL STATEMENTS

the years ended December 31,

Federal Income Tax Rate

Taxes, Net of Federal Tax Benefit

tax rate change

in Valuation Allowance

Taxes Provision (Benefit)

Company has not identified any uncertain tax positions requiring a reserve as of December 31, 2019.

years ended December 31,

Statutory Federal Income Tax Rate

State Taxes, Net of Federal Tax Benefit

Federal tax rate change

Change in Valuation Allowance

Income Taxes Provision (Benefit)

Company has not identified any uncertain tax positions requiring a reserve as of December 31, 2020 and 2019.

9 - Subsequent Events

From January 1, 2020 through

March 9, 2020 the Company sold 4,363,744 shares and issued 17,786 pro-rata commitment

shares available for sale under the second Registration Statement for

total proceeds of $304,785.

Company evaluates events that have occurred after the balance sheet date but before the financial statements are issued.

1 unchanged sentence

adjustment or disclosure in the financial statements other than disclosed.

January 1, 2021, Messrs.

David Garrity a director, and Charles Allen and Michal Handerhan, executive officers and directors of

the Company subscribed for 1,100,000 shares of the Company’s to be designated Series C-2 Convertible Preferred Stock (the

“Series C-2”), for a total of $1,100,000 at $1.00 per Share of Series C-2.

Subsequently the Company received all funds

and filed the Series C-2 Certificate of Designation with the State of Nevada.

The material terms of the Series C-2 (as corrected)

are summarized as follows:

and Stockholder Approval :

Under the terms of the Series C-2, the Company shall call a special meeting of stockholders within

180 days of the initial issuance date seeking stockholder ratification of the issuance of the Series C-2.

If the ratification

of the issuance is not approved prior to the twelve-month anniversary of the initial issuance date (the “Vote Deadline”),

the Series C-2 will be redeemed at a price equal to 107% of (i) the stated value per share, or $1.07 per share, plus (ii) all

unpaid dividends thereon.

If the Company has filed a proxy with the Securities and Exchange Commission prior to the Vote Deadline

and is unable to conduct a vote prior to the Vote Deadline then the Vote Deadline will be extended until such time as the vote

is conducted.

The Series C-2 will not be entitled to vote on the ratification.

Each share of Series C-2 is convertible into shares of the Company’s common stock, par value $0.001 per share, beginning

on the two-year anniversary of the initial issuance date at a per-share conversion rate determined by dividing the stated value

by $0.17, subject to anti-dilution adjustment provisions described below, if applicable.

Further, the Series C-2 automatically

converts into shares of common stock upon the earlier of:

(i) the four-year anniversary of the initial issuance date, and (ii)

the Company’s common stock being listed on a national securities exchange.

The Series C-2 ranks senior to the Company’s common stock, and to all other classes and series of equity securities of the

Company which by their terms do not rank pari passu or senior to the Series C-2.

The Series C-2 is subordinate to and ranks junior

to all indebtedness of the Company.

The holders of the Series C-2 are entitled to receive dividends or distributions on each share

of Series C-2 on an as converted basis.

If the issuance of the Series C-2 is ratified by the stockholders of the Company, each share of Series C-2 shall vote

on an as converted basis with the common stock or other equity securities of the Company on a two vote per one share of common

The common stock into which the Series C-2 is convertible shall, when issued, have all the same voting rights as

other issued and outstanding common stock of the Company.

Anti-Dilution

If at any time after the initial issuance date, the Company raises capital equal to or in excess of $5 million

by issuing common stock or common stock equivalents, then the following amount will be added to the numerator of the per-share

conversion formula:

the product of:

(i) 0.0000004, and (ii) the aggregate amount of all capital raised by the Company after the

initial issuance date, subject to a $13 million cap.

January 1, 2021, the Board of Directors of the Company approved grants of the following performance-based awards (“Awards”)

under the Company’s 2021 Equity Incentive Plan:

(i) 12 million stock options with an exercise price of $0.19 (the closing

stock price on the last trade date immediately prior to the grant) and (ii) 2.75 million restricted stock units, to Messrs.

and Handerhan, directors and executive officers of the Company and Messrs Garrity a director of the Company.

Of the Awards, Mr.

Allen, was granted 7,500,000 stock options and 2,000,000 restricted stock units, Mr.

Handerhan was granted 3,500,000 stock options

and 500,000 restricted stock units, Mr.

Garrity was granted 1,000,000 stock options and 250,000 restricted stock units.

and exercisability of these Awards, which are subject to stockholder approval, are summarized as follows:

million options will vest on January 1, 2022 and the remaining options and the restricted stock units will vest based upon the

following milestones:

options when the trailing 20-day average trading price is greater than or equal to $0.228

options when the trailing 20-day average trading price is greater than or equal to $0.274

options when the trailing 20-day average trading price is greater than or equal to $0.328

options when the trailing 20-day average trading price is greater than or equal to $0.394

restricted stock units when the Company lists its Common Stock on the Nasdaq or NYSE

trading price shall be defined as the closing price on each such day.

Company intends to seek stockholder approval for the vesting and exercisability of the foregoing equity incentive plan award s

at the same special meeting to be held for the ratification of the Series C-2 issuance.

TO FINANCIAL STATEMENTS

January 11, 2021, the Company issued RedChip Companies Inc.

400,000 shares of common stock in connection with an 18 month investor

relations engagement.

January 15, 2021, the Company issued Cavalry a $1,000,000 promissory note (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 Promissory

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.

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

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.

On January 21, 2021,

the Company filed a Certificate of Withdrawal with the Secretary of State of the State of Nevada.

The Certificate of Withdrawal,

which was effective upon filing, eliminated from the Articles of Incorporation of the Company all matters set forth in the Company’s

Certificate of Designation with respect to the Company’s Series A Preferred Stock that had been previously filed with the

Secretary of State of the State of Nevada on December 9, 2016.

No shares of the Series A Preferred Stock were issued or outstanding

at the time of the filing of the Certificate of Withdrawal, and none will be issued.

On January 21, 2021,

the Company filed a Certificate of Withdrawal with the Secretary of State of the State of Nevada.

The Certificate of Withdrawal,

which was effective upon filing, eliminated from the Articles of Incorporation of the Company all matters set forth in the Company’s

Certificate of Designation with respect to the Company’s Series B Convertible Preferred Stock that had been previously filed

with the Secretary of State of the State of Nevada on March 15, 2017.

No shares of the Series B Convertible Preferred Stock were

issued or outstanding at the time of the filing of the Certificate of Withdrawal, and none will be issued.

On January 6, 2021,

the Company issued Series C-2 Preferred Stock to Messrs.

David Garrity, a director, and Charles Allen and Michal Handerhan, executive

officers and directors of the Company.

After further review, the Company determined that there was a scrivener’s error in

Section 6 (Ant-Dilution Adjustment) of the Certificate of Designation.

The formula was meant to be the product of (i) 0.0000004

(as opposed to the filed 0.000002), and (ii) the aggregate amount of all capital raised by the Company after the initial issuance

date, subject to a $13 million cap.

On January 21, 2021 the Company filed a Certificate of Correction in the state of Nevada to

fix this error.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures