What changed in this filing

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Item 1. Financial Statements

2021-05-13 compared with 2020-11-04 · 716 added, 480 removed, 124 unchanged (91% of the section changed)

2 unchanged sentences

Current assets:

Digital currencies

Digital assets/currencies

Prepaid expense

2 unchanged sentences

Property and equipment, net

Staked digital assets/currencies

Total other assets

Liabilities and Stockholders’

Equity (Deficit):

Accounts payable and accrued expense

3 unchanged sentences

Stockholders’

equity (deficit):

Preferred stock;

1 unchanged sentence

Series B Convertible Preferred stock:

0 shares issued and outstanding at September 30, 2020 and December 31, 2019;

0 shares issued and outstanding at March 31, 2021 and

December 31, 2020;

Liquidation preference $0.001 per share

Series C-1 Convertible Preferred stock:

29,414 shares issued and outstanding at September 30, 2020 and December 31, 2019;

0 and 29,414 shares issued and outstanding at March

31, 2021 and December 31, 2020, respectively;

Liquidation preference $0.001 per share

Common stock, 975,000,000 shares authorized at $0.001 par value, 33,045,393 and 19,831,521 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively

Series C-2 Convertible Preferred stock:

1,100,000 and 0 shares issued and outstanding at March

31, 2021 and December 31, 2020, respectively;

Liquidation preference $0.001 per share

Common stock, 975,000,000 shares authorized at $0.001 par value, 55,891,645 and 42,011,617

shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively

Additional paid in capital

3 unchanged sentences

Total stockholders’

equity (deficit)

Total Liabilities and stockholders’

equity (deficit)

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

Statements of Operations

the three months ended

the nine months ended

and administrative

Three Months Ended March

Staking revenue

Total revenues

Cost of revenues

Staking expenses

Operating expenses:

loss on digital currencies

loss on digital currencies transactions

other expenses

$ (1,005,324 )

$ (1,795,897 )

dividend related to reduction of warrant strike price

loss attributable to common stockholders

$ (1,005,324 )

General and administrative

Research and development

Compensation and related expenses

Total operating expenses

Other (expenses) income:

Interest expense

Amortization on debt discount

Impairment loss on digital assets/currencies

Realized gains on digital asset/currency transactions

Total other income (expenses)

$ (6,782,175 )

Deemed dividends related to amortization of beneficial conversion feature of Series C-2 convertible

preferred stock

Deemed dividends related to recognition of downround adjustment to

conversion amount for Series C-2 convertible preferred stock

Net loss attributable to common stockholders

$ (11,620,571 )

loss per share attributable to common stockholders, basic and diluted

average number of common shares outstanding, basic and diluted

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 unaudited condensed financial statements.

1 unchanged sentence

(Deficit) Equity

the Three Months Ended September 30, 2020

Series C-1 Convertible

Preferred Stock

Stockholders’

(Deficit) Equity

Balance June 30, 2020

$ 117,808,716

$ (117,774,366 )

Common stock issued including equity commitment fee, net

Balance September 30, 2020

$ 118,633,142

$ (118,779,690 )

the Three Months Ended September 30, 2019

Series C-1 Convertible

Preferred Stock

Stockholders’

Balance June 30, 2019

$ 115,984,824

$ (115,907,423 )

Common stock issued including equity commitment fee, net

Conversion of convertible notes

Beneficial conversion features associated with convertible notes payable

Balance September 30, 2019

$ 116,647,537

$ (116,254,970 )

the Nine Months Ended September 30, 2020

Series C-1 Convertible

Preferred Stock

the Three Months Ended March 31, 2021

Stockholders’

4 unchanged sentences

Common stock issued including equity commitment fee, net

Conversion of convertible notes

Issuance of common stock and warrants for cash, net

Issuance of Series C-2 convertible preferred stock

Conversion of Series C-1 Convertible Preferred stock

Beneficial conversion features associated with convertible notes payable

Balance September 30, 2020

Beneficial conversion feature of Series C-2 convertible preferred stock

Deemed dividends related to amortization of beneficial conversion feature

of Series C-2 convertible preferred stock

Deemed dividends related to recognition of downround adjustment to conversion

amount for Series C-2 convertible preferred stock

Warrant exercise

Stock-based compensation

Stock-based compensation in connection with issuance of Series C-2 convertible

preferred stock

Balance March 31, 2021

$ 135,637,119

$ (126,322,062 )

the Nine Months Ended September 30, 2019

the Three Months Ended March 31, 2020

Series C-1 Convertible

1 unchanged sentence

Stockholders’

(Deficit) Equity

Balance December 31, 2019

2 unchanged sentences

Common stock issued including equity commitment fee, net

Conversion of convertible notes

Beneficial conversion features associated with convertible notes payable

Fractional shares adjusted for reverse split

Warrant exercise

Balance September 30, 2019

Balance March 31, 2020

$ 117,186,998

2 unchanged sentences

Statements of Cash Flows

For the nine months ended

September 30,

For the Three Months Ended

Net Cash flows used from operating activities:

1 unchanged sentence

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

Depreciation expenses

Depreciation expense

Amortization on debt discount

Purchase of digital currencies

Realized (loss) gain on digital currencies transactions

Impairment loss on digital currencies

Stock-based compensation

Stock-based compensation in connection with issuance of Series C-2 convertible

preferred stock

Staking revenue

Purchase of non-productive digital assets/currencies

Sale of non-productive digital assets/currencies

Realized gain on digital assets/currencies transactions

Impairment loss on digital assets/currencies

Changes in operating assets and liabilities:

3 unchanged sentences

Net cash used in operating activities

Net cash used in investing activities:

Purchase of productive digital assets/currencies

Net cash used in investing activities

Net cash provided by financing activities:

Proceeds from exercise of warrants

Proceeds from short term loan

Net proceeds from issuance of convertible notes

Net proceeds from issuance of common stock and warrants for cash

Net proceeds from issuance of common stock

Proceeds from issuance of Series C-2 convertible

preferred stock

Net cash provided by financing activities

Net (decrease) increase in cash

Net increase in cash

Cash, beginning of period

1 unchanged sentence

Supplemental disclosure of non-cash financing and investing activities:

Conversion of convertible note to common stock

Exchange of promissory note and accrued interest into convertible note

Fractional shares adjusted for reverse split

Deemed dividend

Deemed dividends related to amortization of beneficial conversion feature

of Series C-2 convertible preferred stock

Deemed dividends related to recognition of downround adjustment to conversion

amount for Series C-2 convertible preferred stock

Conversion of Series C-1 Preferred Stock

Beneficial conversion feature of Series C-2 convertible preferred stock

Beneficial conversion features associated with convertible notes payable

4 unchanged sentences

In February 2014,

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.

In January 2015,

the Company began a rebranding campaign using its BTCS.COM domain (shorthand for Blockchain Technology Consumer Solutions) to

better reflect its broadened strategy.

The Company released its new website which included broader information on its strategy.

In late 2014 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.

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.

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

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

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

investors in the United States.

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

limited to accredited investors.

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

coin offerings or from purchasers in such offerings.

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

initial coin offerings.

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

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

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

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

of multiple exchanges and wallets to aggregate portfolio holdings into a single platform to view and analyze performance, risk

metrics, and potential tax implications.

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

may have greater resources than us.

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

assets, including bitcoin.

The Company is currently focused on blockchain and digital currency ecosystems.

2014 we shifted our focus towards our transaction verification service business, also known as bitcoin mining, though in mid-2016

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

In January 2015, the Company began a

rebranding campaign using its BTCS.com domain to better reflect its broadened strategy.

The Company recently released its

new website which included broader information on its strategy.

the first quarter of 2021, the Company resumed its blockchain infrastructure operations (previously referred to as transaction verification

services) with a focus on securing proof-of-stake blockchains and anticipates this will be a core focus going forward.

Blockchain infrastructure

operations can broadly be defined as earning a reward for securing a blockchain by processing and validating transactions on that blockchain.

The Company is developing a proprietary staking-as-a-service platform that would enable clients to stake and delegate supported cryptocurrencies

through a non-custodial platform.

Company is also developing a proprietary digital asset data analytics platform aimed at enabling users to aggregate their portfolio holdings

from multiple exchanges and wallets into a single platform to view and analyze performance, risk metrics, and potential tax implications.

The internally developed platform utilizes digital asset exchange APIs to read user data and does not allow for the trading of assets.

Company employs a digital asset treasury strategy with a primary focus on disruptive non-security protocol layer assets such as

bitcoin and ethereum.

The Company receives digital assets from its blockchain infrastructure solutions business and acquires

digital assets through open market purchases.

The Company is not limiting its assets to a single type of digital asset and may

hold a variety of digital assets.

The Company will carefully review its purchases of digital securities to avoid violating the

1940 Act and seek to reduce potential liabilities under the federal securities laws.

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

greater resources than us.

2 - Basis of Presentation

3 unchanged sentences

all of the information and notes required by GAAP for annual financial statements, but in the opinion of the Company’s management,

reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair presentation of the financial

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

Interim results are not necessarily indicative

of results for a full year.

The unaudited condensed financial statements and notes should be read in conjunction with the financial

statements and notes for the year ended December 31, 2019.

reflect all adjustments consisting of normal, recurring adjustments, that are necessary for a fair presentation of the financial position,

results of operations and cash flows for the interim periods presented.

Interim results are not necessarily indicative of results for

The unaudited condensed financial statements and notes should be read in conjunction with the financial statements and notes

for the year ended December 31, 2020.

3 - Liquidity, Financial Condition and Management’s Plans

Company has commenced its planned operations but has limited operating activities to date.

The Company has financed its operations

since inception using proceeds received from capital contributions made by its officers and proceeds in financing transactions.

Notwithstanding,

the Company has limited revenues, limited capital resources and is subject to all of the risks and uncertainties that are typical

of an early stage enterprise.

Significant uncertainties include, among others, whether the Company will be able to raise the capital

it needs to finance its longer-term operations and whether such operations, if launched, will enable the Company to sustain operations

as a profitable enterprise.

to Unaudited Condensed Financial Statements

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

used $1,663,889 of cash in its operating activities for the nine months ended September 30, 2020.

The Company incurred $1,795,897

net loss for the nine months ended September 30, 2020.

The Company had cash of $364,703 and negative working capital of $113,924

at September 30, 2020.

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

its business plans.

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

execute its longer-term business plan.

The Company’s existing liquidity is not sufficient to fund its operations and anticipated

capital expenditures for the foreseeable future.

The Company is currently seeking to obtain additional equity financing, primarily

through the Equity Line Purchase Agreement with Cavalry and seeking to obtain additional equity linked debt financing, however

there are currently no other commitments of debt or equity in place for further financing nor is there any assurance that such

financing will be available to the Company on favorable terms, if at all.

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

the Company’s ability to continue as a going concern for one year from the issuance of the financial statements.

The financial

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

The Company has not made adjustments to the

accompanying financial statements to reflect the potential effects on the recoverability and classification of assets or liabilities

should the Company be unable to continue as a going concern.

Company continues to incur ongoing administrative and other operating expenses, including public company expenses, in excess of

While the Company continues to implement its business strategy, it intends to finance its activities by:

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

additional financing through sales of additional securities whether through Cavalry or other investors.

The Company has financed its operations since

inception using proceeds received from investments from third-party investors as well as from officers and directors of the Company.

the first quarter of 2021, the Company received net proceeds of approximately $13.3 million from the issuance of a convertible note,

issuances of common stock and warrants, and the issuance of Series C-2 convertible preferred stock.

Therefore, the Company has adequate

cash to fund its operations for at least the next twelve months.

4 - Summary of Significant Accounting Policies

have been no material changes in the Company’s significant accounting policies to those previously disclosed in the 2019

Annual Report.

have been no material changes in the Company’s significant accounting policies to those previously disclosed in the 2020 Annual

Company runs its own digital asset validating nodes and has entered into network-based smart contracts.

Through these contracts,

the Company provides cryptocurrency to stake a node for the purpose of processing and validating transactions and adding

blocks to a respective blockchain network.

The term of a smart contract can

vary based on the rules of the respective blockchain and typically last a few weeks to months after it is canceled by the operator

and requires that the cryptocurrency staked remain locked up during the duration of the smart contract.

In exchange for validating

transactions and staking the cryptocurrency, the Company is entitled to all of the fixed cryptocurrency award for running the

Company’s own node and successfully processing, validating and/or adding a block to the blockchain.

The provision of processing

and validating blockchain transactions is an output of the Company’s ordinary activities.

Each separate block creation

or validation under a smart contract with a network represents a performance obligation.

The transaction consideration the Company

receives, the fixed cryptocurrency awards, is noncash consideration, which the Company measures at fair value on the date received.

The fair value of the cryptocurrency award received is determined using the quoted price of the related cryptocurrency on the

date of receipt.

The satisfaction of the performance obligation for processing and validating blockchain transactions

occurs at a point in time when confirmation is received from the network indicating that the validation is complete and the awards

are available for transfer.

At that point, revenue is recognized.

Company’s cost of revenue consists primarily of direct production costs related to the operations of processing and

validating transactions on the network, rent and utilities for locations housing server nodes to the extent applicable, hosting

costs if cloud-based servers are utilized and fees (including stock based fees) paid to 3rd parties to assist in the software

maintenance and operations of its nodes.

Assets Translations and Remeasurements

Assets are included in current assets in the balance sheets.

assets are included in the balance sheets as either current assets or other assets if they are staked and locked

up for over one year.

Digital assets are recorded at cost less impairment.

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

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

Impairment exists when the carrying amount exceeds its fair value.

In testing for impairment, the Company has the option to first

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

If it is determined

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

If the Company

concludes otherwise, it is required to perform a quantitative impairment test.

To the extent an impairment loss is recognized,

the loss establishes the new cost basis of the asset.

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

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

exists when the carrying amount exceeds its fair value.

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

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

If it is determined that it is not more likely

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

If the Company concludes otherwise, it is required

to perform a quantitative impairment test.

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

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.

costs to transactions on a first-in, first-out basis.

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.

to Unaudited Condensed Financial Statements

accompanying unaudited condensed financial statements have been prepared in conformity with accounting principles generally accepted

in the United States of America (“US GAAP”).

This requires management to make estimates and assumptions that affect

certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial

statements, and the reported amounts of revenue and expenses during the period.

The Company’s significant estimates and

assumptions include the recoverability and useful lives of long-lived 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 intangible assets, if any, 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.

The Company recognizes impairment losses on digital assets caused by decreases in fair value using the lowest 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.

Developed Software

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.

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.

Thereafter, 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.

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.

accompanying unaudited condensed financial statements have been prepared in conformity with GAAP.

This requires management to make estimates

and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at

the date of the financial statements, and the reported amounts of revenue and expenses during the period.

The Company’s significant

estimates and assumptions include the recoverability and useful lives of intangible assets, stock-based compensation, the valuation of

derivative liabilities, the valuation of convertible preferred stock and the valuation allowance related to the Company’s deferred

Certain of the Company’s estimates, including the carrying amount of the intangible assets, if any, 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 accounts for share-based payment awards exchanged for services at the estimated grant date fair value of the award.

Stock options

issued under the Company’s long-term incentive plans are granted with an exercise price equal to no less than the market price

of the Company’s stock at the date of grant and expire up to ten years from the date of grant.

These options generally vest over

a one-year period.

Company estimates the fair value of stock option grants using the Black-Scholes option pricing model and the assumptions used in calculating

the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application

of management’s judgment.

Term - The expected term of options represents the period that the Company’s stock-based awards are expected to be outstanding

based on the simplified method, which is the half-life from vesting to the end of its contractual term.

Volatility - The Company computes stock price volatility over expected terms based on its historical common stock trading prices.

Interest Rate - The Company bases the risk-free interest rate on the implied yield available on U.

Treasury zero-coupon issues

with an equivalent remaining term.

Dividend - The Company has never declared or paid any cash dividends on its common shares and does not plan to pay cash dividends

in the foreseeable future, and, therefore, uses an expected dividend yield of zero in its valuation models.

January 1, 2017, the Company elected to account for forfeited awards as they occur, as permitted by ASU 2016-09.

Ultimately, the actual

expenses recognized over the vesting period will be for those shares that vested.

Prior to making this election, the Company estimated

a forfeiture rate for awards at 0%, as the Company did not have a significant history of forfeitures.

Preferred Stock

Company applies the accounting standards for distinguishing liabilities from equity when determining the classification and measurement

of its preferred stock.

Preferred stock subject to mandatory redemption are classified as liability instruments and are measured at fair

Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the

control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control)

are classified as temporary equity.

At all other times, preferred shares are classified as stockholders’

The Company evaluated

the classification of its convertible preferred stock and determined that such instruments meet the criteria for equity classification.

Company has also evaluated its convertible preferred stock in accordance with the provisions of ASC 815, Derivatives and Hedging ,

including consideration of embedded derivatives requiring bifurcation.

The issuance of the convertible preferred stock could generate

a beneficial conversion feature, which arises when a debt or equity security is issued with an embedded conversion option that is beneficial

to the investor or in the money at inception because the conversion option has an effective strike price that is less than the market

price of the underlying stock at the commitment date.

Conversion Feature of Convertible Notes Payable

Company accounts for convertible notes payable in accordance with the guidelines established by the FASB Accounting Standards Codification

(“ASC”) Topic 470-20, Debt with Conversion and Other Options.

The beneficial conversion feature of a convertible note is

normally characterized as the convertible portion or feature of certain notes payable that provide a rate of conversion that is below

market value or in-the-money when issued.

The Company records a beneficial conversion feature related to the issuance of a convertible

note when issued.

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

The effective conversion price and the market

price of the Company’s common stock are used to calculate the intrinsic value of the conversion feature.

The intrinsic value is

recorded in the financial statements as a debt discount from the face amount of the note and such discount is amortized over the expected

term of the convertible note (or to the conversion date of the note, if sooner) and is charged to interest expense.

Loss per Share

loss per share is computed by dividing the net income or loss applicable to common shares by the weighted average number of common

shares outstanding during the period.

Diluted earnings per share is computed using the weighted average number of common shares

and, if dilutive, potential common shares outstanding during the period.

Potential common shares consist of the Company’s

convertible preferred stock, convertible notes and warrants.

Diluted loss per share excludes the shares issuable upon the conversion

of preferred stock, notes and warrants from the calculation of net loss per share if their effect would be anti-dilutive.

following financial instruments were not included in the diluted loss per share calculation as of September 30, 2020 and 2019

because their effect was anti-dilutive:

As of September 30,

loss per share is computed by dividing the net income or loss applicable to common shares by the weighted average number of common shares

outstanding during the period.

Diluted earnings per share is computed using the weighted average number of common shares and, if dilutive,

potential common shares outstanding during the period.

Potential common shares consist of the Company’s convertible preferred stock,

convertible notes and warrants.

Diluted loss per share excludes the shares issuable upon the conversion of preferred stock, notes and

warrants from the calculation of net loss per share if their effect would be anti-dilutive.

following financial instruments were not included in the diluted loss per share calculation as of March 31, 2021 and 2020 because their

effect was anti-dilutive:

As of March 31,

Warrants to purchase common stock

Series C-1 Convertible Preferred stock

Series C-2 Convertible Preferred stock

Convertible notes

Accounting Pronouncements

December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting standards Update (“ASU”)

December 2019, the FASB issued ASU No.

2019-12, “Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is

intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions to the general

principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

This guidance is effective

for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted.

Simplifying the Accounting for Income Taxes (“ASU

2019-12”), which is intended to simplify various aspects related to accounting for income taxes.

ASU 2019-12 removes certain exceptions

to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application.

This guidance

is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption

The Company is currently evaluating the impact of this standard on its financial statements and related disclosures.

recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified

Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact

on the Company’s present or future financial statements.

5 - Note Payable and Accounts Payable

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 GAAP.

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 areas.

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.

recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public

Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s

present or future financial statements.

5 - Note Payable

December Promissory Note

December 16, 2020, the Company issued Cavalry Fund I LP (“Cavalry”) a $1,000,000 promissory note (the “2020

December Promissory Note”) 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.

In connection with issuance of the 2020 December

Promissory Note, the Company issued a Series C warrant to purchase 2,000,000 shares of the Company’s common stock

at an exercise price of $0.20, the Series C warrants were exercised for cash on January 15, 2021, resulting in proceeds of $400,000

to the Company.

the three months ended March 31, 2021, the Company recorded interest expense of approximately $29,589 for the 2020 December Promissory

As of March 31, 2021, the principal balance of the 2020 December Promissory Note was $1 million and accrued interest on the note

payable amounted to approximately $35,000.

the three months ended March 31, 2021, the Company recorded approximately $315,000 amortization of debt discount related to the 2020

December Promissory Note.

Promissory 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.

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.

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.

to Unaudited Condensed Financial Statements

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 nine months ended September 30, 2020, the Company recorded approximately $40,000 in interest expense related to amortization

on debt discount related to the 2019 Promissory Note.

the nine months ended September 30, 2020, the Company recorded interest expense of approximately $7,900.

As of September 30, 2020,

the principal balance of the 2019 Promissory Note was $0.

January 15, 2021, the Company issued Calvary the 2021 Promissory Note in consideration for $1,000,000.

The 2021 Promissory Note is (i)

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

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

Subject to certain

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

connection with issuance of the Note, the Company issued a Series D warrant to purchase 2,000,000 shares of the Company’s

common stock at an exercise price of $2.16 per share (the “Warrant”).

Detachable warrants issued in a bundled

transaction with debt and equity offerings are accounted for on a separate basis.

The allocation of the issuance proceeds to the

base instrument and to the warrants depends on the accounting classification of the separate warrant as equity or liability.

the warrants are classified as equity, then the allocation is made based upon the relative fair values of the base instrument

and the warrants following the guidance in ASC 470-20-25-2.

In this case, the Warrant is equity-classified, with the fair value

at issuance was approximately $3,580,000.

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

to the 2021 Promissory Note of approximately $782,000 with a corresponding credit to additional paid-in capital.

addition, the 2021 Promissory Note does not contain any embedded features that require bifurcation pursuant to ASC 815-15.

At the issuance

date, the 2021 Promissory Note was convertible into 705,716 shares of common stock at $1.41 per share, but the Company’s fair value

of underlying common stock was $2.18 per share.

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

discount to the 2021 Promissory Note of approximately $218,000 with a corresponding credit to additional paid-in capital.

the three months ended March 31, 2021, the Company recorded interest expense of approximately $24,658 for the 2021 Promissory Note.

of March 31, 2021, the principal balance of the 2021 Promissory Note was $1 million and accrued interest on the note payable amounted

to approximately $25,000.

the three months ended March 31, 2021, the Company recorded approximately $247,000 amortization of debt discount related to the

2021 Promissory Note.

April 17, 2020, the Company issued Cavalry Fund I LP (the “Fund”) a $500,000 promissory note (the “2020 Promissory

Note”) in consideration for $500,000.

The 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 Promissory Note.

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 7,770,008 shares of common stock at $0.064

per share, but the Company’s fair value of underlying common stock was $0.099 per share.

As such, the Company recognized

a beneficial conversion feature, resulting in a discount to the Notes of approximately $269,000 with a corresponding credit to

additional paid-in capital.

the nine months ended September 30, 2020, the Company recorded approximately $146,000 in interest expense related to amortization

on debt discount related to the 2020 Promissory Note.

As of September 30, 2020, the remaining unamortized debt discount related

to the 2020 Promissory Note was approximately $123,000.

the nine months ended September 30, 2020, the Company recorded interest expense of approximately $27,000.

As of September 30,

2020, the principal balance of the 2020 Promissory Note was $500,000.

Accounts Payable

the nine months ended September 30, 2020, the Company recorded compensation payable of $1,006,401 which relates to contingent

bonuses earned for the achievement of performance milestones.

6 - Stockholders’

Company is authorized to issue up to 20,000,000 shares of preferred stock.

This preferred stock may be issued in one or more series,

and shall have such designations, preferences and relative, participating, optional or other special rights and qualifications,

limitations or restrictions thereof as shall be determined at the time of issuance by the Company’s board of directors without

further action by the Company’s shareholders.

January 1, 2021, members of the Company’s management 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

The Company obtained an independent valuation of the Series C-2 and $179,277 of compensation expense was recognized, representing

the difference between the fair value and the proceeds received.

Series C-2 is not mandatorily redeemable and is not unconditionally redeemable.

The Series C-2 is callable by the Company.

Certificate of Designation required that the Company, within 180 days of the Initial Issuance Date, call a special meeting of

stockholders seeking shareholder ratification of the issuance of the Series C-2.

If the ratification of the issuance was not approved

prior to the twelve-month anniversary of the Initial Issuance Date (the “Vote Deadline”), the Series C-2 would be

redeemed at a price equal to 107% of (i) the Stated Value per share plus (ii) all unpaid dividends thereon.

if the Company had filed a proxy with the SEC prior to the Vote Deadline but was unable to conduct a vote prior to the Vote Deadline

then the Vote Deadline shall be extended until such time as the vote is conducted.

The Series C-2 holders were not entitled to

vote on the ratification.

The call provision would have been automatically triggered if the ratification of the issuance was not

approved in a special meeting of stockholders prior to the twelve-month anniversary of the Initial Issuance Date.

held the meeting within the required period and the Series C-2 is no longer redeemable.

on the guidance in ASC 480-10-S99 (“ASR 268”), a redeemable equity instrument is not to be included in permanent equity.

Rather, it should be reported between long-term debt and stockholders’

equity, without a subtotal that might imply it is

a part of stockholders’

equity (i.e., “temporary equity”

or “mezzanine capital”).

ASR 268 specifies

that redeemable stock is any type of equity security, including common or preferred stock, when it has any condition for redemption

which is not solely within the control of the issuer without regard to probability.

Series C-2 Certificate of Designation required the Company to redeem the Series C-2 if stockholder approval was not received by

the Vote Deadline.

Stockholder approval was not considered to be “solely within the Company’s control.”

approval occurred on March 31, 2021, at which time the Series C-2 was no longer callable by the Company.

As such, the Series C-2

was initially classified in temporary equity under ASR 268 and was reclassified to permanent equity upon stockholder approval

on March 31, 2021.

holders of Series C-2 shall be entitled to receive dividends or distributions on each share of Series C-2 on an “as converted”

into Common Stock when and if dividends are declared on the Common Stock by the Board of Directors.

Dividends shall be paid in

cash or property, as determined by the Board of Directors.

any time or times on or after the two-year anniversary of the Initial Issuance Date, each Holder shall be entitled to convert

any portion of the outstanding Series C-2 held by such Holder into validly issued, fully paid and non-assessable shares of Common

at the Conversion Rate.

The Conversion Amount is subject to adjustment for certain capitalization and Anti-Dilution Events.

Series C-2 will automatically be converted at the earlier of:

(i) the four-year anniversary of the Initial Issuance Date, and

(ii) simultaneous with the Corporation’s Common Stock being listed on a national securities exchange.

The Conversion Rate

is based upon the Conversion Price of $.17 which resulted in a beneficial conversion feature at the time of issuance.

the Company recognized a beneficial conversion amount of $129,412 as a reduction to the carrying amount of the convertible instrument.

This discount will be amortized as a dividend over two years, the earliest conversion date.

Conversion Amount may be adjusted due to certain Anti-Dilution Events.

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 Anti-Dilution

Amount per share of Series C-2 shall be the product of:

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

the Corporation after the Initial Issuance Date (the “

Capital Raised ”).

further, for the determination

of the Anti-Dilution Amount, the amount of Capital Raised shall be limited to $13 million, regardless of how much capital the

Corporation raises.

In the event capital is raised simultaneous with a listing on a national securities exchange and the automatic

conversion of the Series C-2 then such funds shall be included in the Capital Raised for the purpose of determining the Anti-Dilution

As of March 31, 2021, $12,915,008 of Capital Raised triggered an adjustment to the Conversion Amount.

The Company recognized

the effect of the down-round protection when the capital raises occurred as the difference between:

(1) the financial instrument’s

fair value (without the down round feature) using the pre-trigger exercise price, and (2) the financial instrument’s fair

value (without the down round feature) using the reduced exercise price.

The value of the effect of the down round feature of

$4,822,220 was treated as a dividend and a reduction to income available to common shareholders in the basic EPS calculation.

As of March 31, 2021, the Series C-2 was convertible into 39,897,669 shares of common stock.

of Shares Pursuant to Equity Line of Credit Purchase Agreement

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

Registration Statement was declared effective by the SEC on December 20, 2019.

the nine months ended September 30, 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 $415,000.

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 nine months ended September 30, 2020, Company issued 5,623,385 shares of common stock (including 56,885 pro-rata commitment

shares) under the third Registration Statement pursuant to the Purchase Agreement with Cavalry resulting in aggregate proceeds

of approximately $975,000.

of Shares Due to Conversion of 2019 Promissory Note

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

of principal on the 2019 Promissory Note.

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

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

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

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

January 28, 2021, the Company filed a registration statement on Form S-1 seeking to register 4,000,000 shares (the “Registration

Statement”).

The Registration Statement was declared effective by the SEC on February 1, 2021.

the three months ended March 31, 2021, the Company issued 1,718,144 shares of common stock (including 117,545 pro-rata commitment

shares) under the Registration Statement pursuant to the equity line of credit purchase agreement with Cavalry (the

“Equity Line”) resulting in aggregate net proceeds of $2,014,259 (net of $750 of transfer agent fees) and $2,015,008

in gross proceeds at a per share price of $1.173 (inclusive of the pro-rata commitment shares).

of Shares Pursuant to Registered Direct Offering

March 4, 2021, the Company closed on a securities purchase agreement (the “Purchase Agreement”) with institutional

investors, pursuant to which the Company sold and issued, in a registered direct offering, 9,500,000 shares of the Company’s

common stock, at a purchase price per share of $1.00 and immediately exercisable five-year warrants to purchase 7,125,000 shares

of common stock at an exercise price of $1.15 per share (the “Warrants”

and together with the common stock,

the “Securities”).

The gross proceeds from the offering was $9.5 million, before deducting fees payable to the placement

agent and other estimated offering expenses payable by the Company, and the net proceeds were $8.9 million.

Purchase Agreement contains representations, warranties, indemnification and other provisions customary for transactions of this

Pursuant to the Purchase Agreement, subject to limited exceptions, each of the Company and its officers and directors

agreed not to, and not to publicly disclose the intention to, sell or otherwise dispose of, any shares of common stock

or any securities convertible into, or exchangeable or exercisable for, common stock, for a period ending 60 days after

the date of the prospectus supplement for this offering.

Company also entered into a placement agent agreement (the “PA Agreement”) with A.G.P./Alliance Global Partners (“AGP”),

pursuant to which AGP agreed to serve as the exclusive placement agent for the Company in connection with that offering.

paid AGP a cash placement fee equal to 7.0% of the aggregate gross proceeds raised in the offering (reduced to 3.5% for certain investors),

and reimbursed the placement agent for its legal fees and other accountable expenses in the amount of $40,000.

of Shares Pursuant to Cash Exercise of Series C Warrants

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 exercise.

of Shares Due to Conversion of Series C-1 Preferred Stock

March 30, 2021, the Company issued 196,094 shares of common stock upon the conversion of 29,414 shares of Series C-1 Convertible

Preferred stock.

After this conversion, there were no Series C-1 shares outstanding and the Company filed a Certificate of Withdrawal

with the Secretary of State of the State of Nevada.

The Certificate of Withdrawal eliminated from the Articles of Incorporation

of the Company all matters set forth in the Series C-1.

of Restricted Stock to Service Providers

the three months ended March 31, 2021, the Company issued to RedChip Companies Inc.

and Launchnodes LTD, two service providers of the

Company, 400,000 and 65,790 shares of restricted common stock respectively, with a total fair value of $0.5 million.

Equity Incentive Plan

Company’s 2021 Equity Incentive Plan (the “2021 Plan”) was effective on January 1, 2021 and approved by shareholders

on March 31, 2021.

The Company has reserved 20,000,000 shares of common stock for issuance pursuant to the 2021 Plan.

January 1, 2021, the Board of Directors of the Company approved the grant of 12 million stock options with an exercise price of

$0.19 under the Company’s 2021 Plan to Messrs.

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

officers and directors of the Company.

Effective as of January 1, 2021, the Company and each optionee executed Stock Option Agreements

evidencing the option grants.

While stockholder approval (or ratification) of the grants was not required (under either the Stock

Option Agreements or by the resolutions of the Board of Directors approving such grants), the Board of Directors voluntarily caused

the Company to seek shareholder ratification of the grants to limit any potential exposure to breach of fiduciary duty claims.

As a result, based on the guidance in ASC 718, the date the stockholders ratified the grants (March 31, 2021) is the deemed grant

date solely with respect to GAAP for those stock options.

Of the stock options:

(i) 4.8 million options will vest on January 1,

2022 and (ii) the remaining options vested (prior to March 31, 2021) based upon the Company’s stock price meeting certain

The Company records compensation expense for stock options based on the estimated fair value of the options on

the deemed grant date using the Black-Scholes-Merton option pricing formula with the assumptions included in the table below.

The Company uses historical data to determine the exercise behavior, volatility and forfeiture rate of the options.

The following weighted-average

assumptions were used to estimate the fair value of options granted during:

Three-Months Ended March 31,

Dividend yield

Expected volatility

Risk-free interest rate

Expected term

Expected Volatility :

The Company uses historical volatility as it provides a reasonable estimate of the expected volatility.

Historical volatility

is based on the most recent volatility of the stock price over a period of time equivalent to the expected term of the option.

Risk-Free Interest

The risk-free interest rate is based on the U.S.

treasury zero-coupon yield curve in effect at the time of grant for

the expected term of the option.

Expected Term :

The Company’s expected term represents the weighted-average period that the Company’s stock options are expected to

be outstanding.

The expected term is based on the expected time to post-vesting exercise of options by employees.

uses historical exercise patterns of previously granted options to derive employee behavioral patterns used to forecast expected

exercise patterns.

For awards vesting

upon the achievement of a service condition, compensation cost measured on the grant date will be recognized on a straight-line

basis over the vesting period.

For awards vesting upon the achievement of the market conditions which were met at the date of

grant, compensation cost measured on the date of grant was immediately recognized.

summary of option activity under the Company’s stock option plan for three months ended March 31, 2021 is presented below:

Number of Shares

Weighted Average

Exercise Price

Total Intrinsic Value

Weighted Average Remaining

Contractual Life (in years)

Outstanding as of December 31, 2020

Employee options issued

Outstanding as of March 31, 2021

Options vested and exercisable

January 1, 2021, the Board of Directors of the Company approved 2.75 million restricted stock unit grants under the Company’s

2021 Equity Incentive Plan to Messrs.

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

directors of the Company.

Effective as of January 1, 2021, the Company and each recipient executed a Restricted Stock Agreement

evidencing the stock grants.

While stockholder approval (or ratification) of the grants was not required (under either the Restricted

Stock Agreements or by the resolutions of the Board of Directors approving such grants), the Board of Directors voluntarily caused

the Company to seek shareholder ratification of the grants to limit any potential exposure to breach of fiduciary duty claims.

As a result, based on the guidance in ASC 718, the date the stockholders ratified the grants (March 31, 2021) is the deemed

grant date solely with respect to GAAP for those restricted stock grants.

The restricted stock units vest when the Company lists

its Common Stock on a national securities exchange.

As of March 31, 2021, the restricted stock units remained unvested.

cost of stock-based compensation for restricted stock units is measured based on the closing fair market value of the Company’s

common stock at the deemed grant date.

Because the listing on a national securities exchange is not deemed probable of occurring

until the event occurs, compensation cost measured on the deemed grant date will not be recognized until the listing actually

summary of the Company’s restricted stock units granted under the 2021 Plan during the three months ended March 31, 2021 are as

Number of Restricted

Weighted Average Grant Day Fair Value

Nonvested at December 31, 2020

Nonvested at March 31, 2021

Based Compensation

compensation expense for the three months ended March 31, 2021 was approximately $7.0 million, comprised of $59,000

for the issuance of restricted common stock to service providers not pursuant to the 2021 Plan and approximately $7.0

million in connection with options issued pursuant to the 2021 Plan.

Unrecognized compensation expense for the Company’s

was $5.2 million at March 31, 2021.

$4.7 million of the unrecognized compensation expense is expected to be recognized on January 1, 2022, $0.3 million expected to be amortized through September 2022 and $0.1 million through February 2024.

Share-based compensation expense is recorded

as a part of selling, general and administrative expenses, compensation expenses and cost of revenues.

7 - Employee Benefit Plans

Company maintains defined contribution benefit plans under Section 401(k) of the Internal Revenue Code covering substantially all qualified

employees of the Company (the “401(k) Plan”).

Under the 401(k) Plan, the Company may make discretionary contributions of

up to 100% of employee contributions.

During the three months ended March 31, 2021, the Company made contributions to the 401(k) Plan

8 - Subsequent Events

October 6, 2020 to October 28, 2020, the Company issued 3,421,615 shares of common stock (including 27,418 pro-rata commitment

shares) under the third Registration Statement pursuant to the Purchase Agreement with Cavalry resulting in aggregate proceeds

of approximately $469,922.

November 2, 2020, the Company issued a total of 371,503 shares of the Company’s common stock for the conversion

of $42,500 of principal on the 2020 Promissory Note.

April 1, 2021, the Company issued its legal counsel 48,544 fully-vested shares of the Company’s common stock for a $50,000 pre-payment

of legal fees.

April 1, 2021, the Company issued Kilwar LLC 13,637 fully-vested shares of the Company’s common stock in connection with an Information

Technology Services Agreement related to the development of its data analytics platform.

On May 6, 2021,

the Company issued 1,169,632 shares of common stock (including 46,667 pro-rata commitment shares) pursuant to the

Equity Line with Cavalry resulting in aggregate proceeds of $800,000.

2 Management’s Discussion and Analysis of Financial Condition and Results of Operations.

2 unchanged sentences

statements that involve risks and uncertainties.

Words such as may, will, should, would, anticipates, expects, intends, plans,

believes, seeks, estimates and similar expressions identify such forward-looking statements.

Readers are cautioned not to place

undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof.

no obligation to update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting

forward-looking statements.

Factors that could cause or contribute to these differences include those discussed in the Risk Factors

contained in our Annual Report on Form 10-K filed with the SEC on March 23, 2020 and our Prospectus dated June 26, 2020.

Words such as may, will, should, would, anticipates, expects, intends, plans, believes,

seeks, estimates and similar expressions identify such forward-looking statements.

Readers are cautioned not to place undue reliance

on these forward-looking statements, which reflect management’s analysis only as of the date hereof.

We assume no obligation to

update these forward-looking statements to reflect actual results or changes in factors or assumptions affecting forward-looking statements.

Factors that could cause or contribute to these differences include those discussed in the Risk Factors contained in our Annual Report

on Form 10-K for the year ended December 31, 2020 and our Prospectus filed with the SEC on February 16, 2021.

are an early entrant in the digital asset market and one of the first U.S.

publicly traded companies to be involved with Digital

Assets and block chain technologies.

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

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

Asset Initiatives

Company acquires additional Digital Assets to provide

investors with indirect ownership of Digital Assets that are not securities, such as bitcoin and ether.

The Company acquires

Digital Assets through open market purchases.

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

a variety of Digital Assets that appear to benefit our investors, subject to the limitations contained within this report regarding

Digital Securities.

following table reflects the fair market value of our Digital Assets as of September 30, 2020:

Digital Asset

Bitcoin (BTC)

Ethereum (ETH)

following table reflects the fair market value of our Digital Assets as of November 3, 2020.

Digital Asset

Bitcoin (BTC)

Ethereum (ETH)

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

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

investors in the United States.

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

limited to accredited investors.

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

coin offerings or from purchasers in such offerings.

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

initial coin offerings.

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

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

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

may have greater resources than us.

publicly traded companies to focus on digital assets and blockchain

technologies.

Through our blockchain infrastructure operations we secure disruptive blockchains by actively processing and validating

blockchain transactions and are rewarded with digital assets.

We are also developing a digital asset data analytics platform which allows

users to consolidate crypto trades from multiple exchanges on a single platform.

Digital assets are core to our corporate treasury strategy

with a primary focus on disruptive non-security protocol layer assets.

Infrastructure

infrastructure solutions can broadly be defined as earning a reward for securing a blockchain by processing and validating transactions

on that blockchain.

There are currently two main consensus mechanisms used to secure blockchains:

i), proof-of-work (“PoW”),

in which nodes dedicate computational resources, and ii) proof-of-stake (“PoS”), in which nodes dedicate financial resources.

The intention behind both PoW and PoS is to make it practically infeasible for any single malicious actor to have enough computational

power or ownership stake to successfully attack the blockchain.

PoW, a miner does “work”

using energy consuming computers and is rewarded for this “work”

with digital assets.

The miner, through nodes, is validating transactions on the blockchain, essentially converting electricity and computing power into a

digital currency reward comprised of transaction fees and newly minted digital assets.

Bitcoin is an example of this and is by far the

largest and most secure PoW blockchain.

PoS, miners actively operate nodes and validate transactions and are required to stake their holdings of a digital currency to participate

in the consensus algorithm such that bad behavior can be penalized by “slashing”

the miners holdings and/or rewards.

requires less energy/electricity to be consumed and can give cryptocurrency holders who actively operate nodes and validate transactions

a reward in the base cryptocurrency, provided that they “stake”

their holdings.

Miners who break the rules or fail to do

the required “work”

are penalized by “slashing,”

their rewards or staked digital assets thus bad behavior among

miners is discouraged and the blockchain is maintained and secured.

Cardano, Polkadot, and ethereum 2.0 are examples of PoS blockchains.

Company actively operates 240 nodes on the ethereum beacon chain and plans to expand its PoS operations to secure other disruptive blockchain

The Company is not currently securing PoW blockchains, such as bitcoin’s blockchain, but may in the future.

Company is developing a proprietary staking-as-a-service platform to allow users to stake and delegate supported cryptocurrencies through

a non-custodial platform.

Asset Data Analytics Platform

are also focused on Digital Assets and blockchain technologies.

We are currently internally developing a digital asset data

analytics platform aimed at aggregating users’

information, such as tracking of multiple exchanges and wallets to

aggregate portfolio holdings into a single platform to view and analyze performance, risk metrics, and potential tax

implications.

The platform utilizes digital asset exchange APIs to read user data and does not allow for the trading of

As a result of the pandemic, we have experienced delays in the development of the platform.

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

We plan to continue to evaluate other strategic opportunities including acquiring controlling interests in business in

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

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

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

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

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

align with our business model of acquiring Digital Assets or acquiring a controlling interest in one or more blockchain technology

related business ventures, and (ii) have sufficient capital to provide working capital.

As disclosed in this report we have limited

cash, and accordingly as a critical framework element are seeking acquisition targets with sufficient capital which may help us

sustain our operations without having us rely on toxic funding structures.

Our acquisition activities are spearheaded by Charles

Allen, our Chief Executive Officer who regularly communicates with Mr.

David Garrity, one of our independent directors who is

also seeking acquisition targets on behalf of the Company.

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

return on investment is achievable.

However, given the current network difficulties and price levels to mine both bitcoin and

ethereum we do not believe mining offers a positive return on investment at present and have no immediate plans to resume mining.

of recurring operating losses, net operating cash flow deficits, and an accumulated deficit, our independent auditors have indicated

in their report on our December 31, 2019 financial statements that there is substantial doubt about our ability to continue as

a going concern.

continuation of our business is dependent upon us raising additional funds.

The issuance of additional equity or convertible debt

securities by us could result in a significant dilution in the equity interests of our current stockholders.

Obtaining commercial

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

We continue to incur

ongoing administrative and other expenses, including public company expenses, primarily accounting and legal fees, in excess of

corresponding (non-financing related) revenue.

While we continue to implement its business strategy, it intends to finance its

activities through:

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

additional financing through sales of additional securities.

of Operations for the Three Months Ended September 30, 2020 and 2019

following table reflects our operating results for the three months ended September 30, 2020 and 2019:

For the three months ended

September 30,

Operating expenses:

General and administrative

Total operating expenses

Other expense:

Interest expense

Impairment loss on digital currencies

Realized loss on digital currencies transactions

Total other expenses

are also developing a proprietary digital asset data analytics platform aimed at enabling users to aggregate their portfolio holdings

from multiple exchanges and wallets into a single platform to view and analyze performance, risk metrics, and potential tax implications.

The internally developed platform utilizes digital asset exchange APIs to read user data and does not allow for the trading of assets.

As a result of the pandemic, we have experienced delays in the development of the platform, however, on April 1, 2021 we engaged an information

technology service provider to assist with the further development and acceleration of the platform.

Asset Treasury Strategy

Company employs a digital asset treasury strategy with a primary focus on disruptive non-security protocol layer assets such as bitcoin

and ethereum.

The Company receives digital assets from its blockchain infrastructure solutions business and acquires digital assets through

open market purchases.

The Company is not limiting its assets to a single type of digital asset and may hold a variety of digital assets.

The Company will carefully review its purchases of digital securities to avoid violating the 1940 Act and seek to reduce potential liabilities

under the federal securities laws.

following tables reflect our digital assets held and their fair market values at period end:

Assets Held at Period End

Fair Market Value of Digital Assets at Period End

7,724.5 ETH is staked on ethereum’s 2.0 beacon chain and the remaining approximately 9 ETH is not staked.

of May 11, 2021 the fair market value of our digital assets was $37.7 million.

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

greater resources than us.

financial measure

addition to our results determined in accordance with GAAP, we believe Adjusted EBITDA, a non-GAAP measure, is useful in evaluating our

operating performance.

We believe that Adjusted EBITDA may be helpful to investors because it provides consistency and comparability

with past financial performance and the economic realities of our business specifically, but not limited to, the accounting for digital

However, Adjusted EBITDA is presented for supplemental informational purposes only, has limitations as an analytical tool, and

should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP.

Among other non-cash

and non-recurring items, Adjusted EBITDA excludes stock-based compensation expense (including stock-based compensation issued to service

providers), which has recently been, and will continue to be for the foreseeable future, a significant recurring expense for our business

and an important part of our compensation strategy.

In addition, other companies, including companies in our industry, may calculate

similarly titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the

usefulness of our non-GAAP financial measures as tools for comparison.

A reconciliation is provided below for each non-GAAP financial

measure to the most directly comparable financial measure stated in accordance with GAAP.

Investors are encouraged to review the related

GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial

measures, and not to rely on any single financial measure to evaluate our business.

calculate Adjusted EBITDA as net income (loss), adjusted to exclude, depreciation and amortization, interest expense, stock-based compensation

expense (including stock-based compensation issued to service providers), and impairment of intangible digital assets.

following table provides a reconciliation of net income (loss) to Adjusted EBITDA:

Three Months Ended March

Net income (loss)

$ (6,782,175 )

expenses for the three months ended September 30, 2020 and 2019 were $879,954 and $260,773, respectively.

The increase is primarily

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

expense for the three months ended September 30, 2020 and 2019 was $125,370 and $86,774, respectively.

The increase is primarily

from interest expense on our convertible notes.

of Operations for the Nine Months Ended September 30, 2020 and 2019

following table reflects our operating results for the nine months ended September 30, 2020 and 2019:

For the nine months ended

September 30,

Adjusted to exclude the following:

Depreciation and amortization

Interest expense

Stock-based compensation

Impairment of intangible digital assets

Adjusted EBITDA

of Operations for the Three Months Ended March 31, 2021 and 2020

following table reflects our operating results for the three months ended March 31, 2021 and 2020:

Three Months Ended March

Staking revenue

Total revenues

Cost of revenues

Staking expenses

Operating expenses:

General and administrative

Research and development

Compensation and related expenses

Total operating expenses

Other expense:

Other (expenses) income:

Interest expense

Impairment loss on digital currencies

Realized loss on digital currencies transactions

Total other expenses

Amortization on debt discount

Impairment loss on digital assets/currencies

Realized gains on digital asset/currency transactions

Total other income (expenses)

$ (6,782,175 )

Deemed dividend related to reduction of warrant strike price

Deemed dividends related to amortization of beneficial conversion feature of Series C-2 convertible

preferred stock

Deemed dividends related to recognition of downround adjustment to

conversion amount for Series C-2 convertible preferred stock

Net loss attributable to common stockholders

$ (11,620,571 )

$ (1,007,486 )

expenses for the nine months ended September 30, 2020 and 2019 were $1,410,473 and $813,004, respectively.

The increase is primarily

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

expense for the nine months ended September 30, 2020 and 2019 was $385,424 and $98,774, respectively.

The increase is primarily

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

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

Weighted average number of common shares outstanding, basic and diluted

for the three months ended March 31, 2021 and 2020 were approximately $73,000 and $0, respectively.

The increase is from our blockchain

infrastructure solutions staking revenue.

Cost of revenues for the

three months ended March 31, 2021 and 2020 were approximately $15,000 and $0, respectively.

The increase is from our blockchain

infrastructure staking operating costs, including, web service hosting fees, and cash and stock-based compensation related

to services provided by vendor.

expenses for the three months ended March 31, 2021 and 2020 were approximately $8.0 million and $0.3 million, respectively.

The increase is primarily from stock compensation granted to employees and our non-employee director.

The equity compensation

was not valued based on the Company’s stock price of $0.19, the last closing date prior to the date of issuance of January

1, 2021 but instead, in accordance with GAAP, valued as of March 31, 2021 (the date the Company received stockholder ratification).

On that date, the Company’s stock price was $1.03 which caused the significant corresponding stock compensation expense.

Income (Expenses)

income (expenses) for the three months ended March 31, 2021 and 2020 was approximately $1.1 million and $(0.1) million,

respectively.

The decrease in other expenses is primarily due to a $3.1 million realized gain on digital asset/currency transactions,

partially offset by $1.3 million impairment loss on digital assets/currencies and $0.6 million amortization of debt discount and

interest expense on our convertible notes.

loss for the three months ended March 31, 2021 and 2020 was approximately $6.8 million and $0.4 million, respectively.

The increase is primarily due to increase of operating expenses as discussed above.

loss attributable to common stockholders

incurred $0 and $95,708 of deemed dividend related to reduction of warrant strike price during the nine months ended September

30, 2020 and 2019, respectively.

incurred approximately $32,000 and $0 related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock,

and $4.8 million and $0 of deemed dividends related to recognition of anti-dilution adjustment to conversion amount for Series C-2 convertible

preferred stock for the three months ended March 31, 2021 and 2020, respectively.

and Capital Resources

Cash from Operating Activities

cash used in operating activities was $1,663,889 for the nine months ended September 30, 2020.

Net cash used in operating activities

for the nine months ended September 30, 2020 was primarily driven by a $1,795,897 net loss and $808,355 purchase of digital currencies,

and partially offset by impairment loss on digital currencies of $162,254 and amortization of debt discount of $186,199.

cash used in operating activities was $1,130,323 for the nine months ended September 30, 2019.

Net cash used in operating activities

for the nine months ended September 30, 2019 was primarily driven by a $911,778 net loss, purchases of digital currencies of $249,923

and changes in operating assets and liabilities of $50,601, and was partially offset by impairment loss on digital assets of $40,698

and amortization on debt discount of $39,741.

the three months ended March 31, 2021, net cash used in operating activities was $2.5 million, which was primarily driven by a

$6.8 million net loss and $5.8 million purchase of non-productive digital currencies, $3.1 million realized gain on non-productive

digital assets/currencies transaction, and partially offset by sale of non-productive digital assets/currencies of $4.3 million

and impairment loss on digital currencies of $1.3 million and stock-based compensation of $7.5 million.

the three months ended March 31, 2020, net cash used in operating activities was approximately $0.3 million, which was primarily driven

by a $0.4 million net loss and partially offset by impairment loss on digital currencies of $74,000.

Cash from Investing Activities

the three months ended March 31, 2021, net cash used in investing activities was $8.0 million, which was from $8.0 million of purchase

of productive digital assets/currencies for staking.

the three months ended March 31, 2020, there were no investing activities.

Cash from Financing Activities

cash provided by financing activities was $1,885,494 for the nine months ended September 30, 2020.

During the nine months ended

September 30, 2020, the Company issued 11,810,018 shares of common stock (including 81,104 pro-rata commitment shares)

under the Purchase Agreement with Cavalry resulting in aggregate proceeds of approximately $1.4 million.

In addition, the Company

entered into a $500,000 short term convertible note payable in April 2020.

The convertible note bears interest at 12%.

cash provided by financing activities was approximately $1.4 million for the nine months ended September 30, 2019, including $0.2

million from exercise of warrants and $1.1 million from selling a total of 4,041,407 shares of common stock under the Purchase

Agreement which excludes 333,334 commitment shares issued upon entering the Purchase Agreement.

of November 3, 2020, the Company had $770,742 of cash.

September 30, 2020, we had current assets of $1,299,181 and current liabilities of $1,413,105, rendering negative working capital

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

used $1,663,889 of cash in its operating activities for the nine months ended September 30, 2020.

The Company incurred a $1,795,897

net loss for the nine months ended September 30, 2020.

The Company had cash of $364,703 and negative working capital of $113,924

at September 30, 2020.

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

its business plans.

April 17, 2020, we issued an institutional investor a $500,000 promissory note (the “Promissory Note”) in consideration

for $500,000.

The 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 Promissory Note.

of October 28, 2020, the Company had sold 19,540,407 shares of common stock (and issued 177,054 commitment shares) under the $10

million Purchase Agreement and received $3,034,541 in connection with the sales.

We cannot provide any assurance that we will

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

are beneficial to the Company and its shareholders.

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

business plan.

Our existing liquidity is not sufficient to fund operations and anticipated capital expenditures for the foreseeable

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

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

If we attempt

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

terms, if at all.

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

our ability to continue as a going concern.

The unaudited financial statements have been prepared assuming we will continue as

a going concern.

We have not made adjustments to the accompanying unaudited financial statements to reflect the potential effects

on the recoverability and classification of assets or liabilities should we be unable to continue as a going concern.

continue to incur ongoing administrative and other expenses, including public company expenses, primarily accounting and legal

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

While we continue to implement its business strategy, it intends

to finance its activities through:

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

additional financing through sales of additional securities.

the three months ended March 31, 2021, net cash provided by financing activities was approximately $13.4 million, which was primarily

driven by approximately $2.0 million aggregate proceeds from issuance of 1,718,144 shares of common stock under our Equity

Line, $1.0 million proceeds from issuance of convertible notes, $8.9 million net proceeds from issuance of common stock and warrants

for cash, $0.4 million from the cash exercise of Series C Warrants, and $1.1 million proceeds from issuance of Series C-2 convertible

preferred stock.

the three months ended March 31, 2020, net cash provided by financing activities was approximately $0.4 million, which was related

to the issuance of 6,186,633 shares of common stock under the Equity Line with Cavalry.

of May 11, 2021, the Company had $4.036 million of cash.

March 31, 2021, we had current assets of $8.4 million, long term assets of $7.7 million, and current liabilities of $0.8 million, rendering

working capital of $7.6 million.

the first quarter of 2021, the Company received gross proceeds of approximately $13.0 million from the issuance

of a convertible note, the issuance of common stock and warrants, and the issuance of Series

C-2 convertible preferred stock.

Therefore, the Company has adequate cash to fund its operations for at least the next twelve

Balance Sheet Transactions

are not a party to any off-balance sheet transactions.

We have no guarantees or obligations other than those which arise out of

normal business operations.

We have no guarantees or obligations other than those which arise out of normal

business operations.

ACCOUNTING PRONOUNCEMENTS

information on recent accounting pronouncements, see Note 4 to the Unaudited Condensed Financial Statements.

Note Regarding Forward-Looking Statements

report contains forward-looking statements including our liquidity and future business plans.

Forward-looking statements can be

identified by words such as “anticipates,”

“intends,”

“plans,”

“seeks,”

“believes,”

“estimates,”

“expects”

and similar references to future periods.

Forward-looking

statements are based on our current expectations and assumptions regarding our business, the economy and other future conditions.

Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances

that are difficult to predict.

Our actual results may differ materially from those contemplated by the forward-looking statements.

We caution you therefore against relying on any of these forward-looking statements.

They are neither statements of historical

fact nor guarantees or assurances of future performance.

Important factors that could cause actual results to differ materially

from those in the forward-looking statements are contained in our filings with the SEC, including our Prospectus dated June 26,

Any forward-looking statement made by us speaks only as of the date on which it is made.

Factors or events that could cause

our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them.

no obligation to publicly update any forward-looking statement, whether as a result of new information, future developments or

otherwise, except as may be required by law.

3 Quantitative and Qualitative Disclosures About Market Risk

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

What changed 10-Q

Item 1. Financial Statements