What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-08-06 compared with 2021-05-13 · 472 added, 548 removed, 292 unchanged (78% of the section changed)

9 unchanged sentences

Total other assets

Liabilities and Stockholders’

Liabilities and Stockholders’ Equity

Accounts payable and accrued expense

2 unchanged sentences

Total current liabilities

Stockholders’

Stockholders’ equity:

Preferred stock;

1 unchanged sentence

Series B Convertible Preferred stock:

0 shares issued and outstanding at March 31, 2021 and

December 31, 2020;

0 shares issued and outstanding at June 30, 2021 and December 31, 2020;

Liquidation preference $ 0.001 per share

Series C-1 Convertible Preferred stock:

0 and 29,414 shares issued and outstanding at March

31, 2021 and December 31, 2020, respectively;

0 and 29,414 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively;

Liquidation preference $ 0.001 per share

Series C-2 Convertible Preferred stock:

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

31, 2021 and December 31, 2020, respectively;

1,100,000 and 0 shares issued and outstanding at June 30, 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

Common stock, 975,000,000 shares authorized at $ 0.001 par value, 57,123,458 and 42,011,617 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

Additional paid in capital

2 unchanged sentences

( 119,539,887 )

Total stockholders’

Total Liabilities and stockholders’

Total stockholders’ equity

Total Liabilities and stockholders’ equity

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

Statements of Operations

Three Months Ended March

Three Months Ended June 30,

Six Months Ended June 30,

Staking revenue

10 unchanged sentences

Amortization on debt discount

( 1,134,771 )

Impairment loss on digital assets/currencies

Realized gains on digital asset/currency transactions

Total other income (expenses)

( 2,267,374 )

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

( 3,569,138 )

Realized gains (loss) on digital asset/currency transactions

Total other expenses

( 2,899,884 )

( 1,763,573 )

$ ( 4,842,073 )

$ ( 420,302 )

$ ( 11,624,248 )

$ ( 790,573 )

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

( 5,020,883 )

Net loss attributable to common stockholders

$ ( 5,056,913 )

$ ( 420,302 )

$ ( 16,677,484 )

$ ( 790,573 )

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

1 unchanged sentence

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

of Changes in Stockholders’

(Deficit) Equity

the Three Months Ended March 31, 2021

Stockholders’

(Deficit) Equity

Balance December 31, 2020

of Changes in Stockholders’ (Deficit) Equity

the Three Months Ended June 30, 2021

Series C-2 Amount

Series C-1 Convertible

Series C-2 Convertible

Stockholders’

Balance March 31, 2021

$ 135,637,119

1 unchanged sentence

Common stock issued including equity commitment fee, net

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

Beneficial conversion feature of Series C-2 convertible preferred stock

Deemed dividends related to amortization of beneficial conversion feature

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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

of convertible notes

Conversion of convertible notes, Shares

conversion features associated with convertible notes payable

Issuance of common stock and warrants

for cash, net

Issuance of common stock and warrants

for cash, net, shares

Issuance of Series C-2 convertible preferred stock

Issuance of Series C-2 convertible

preferred stock, Shares

Conversion of Series C-1 Convertible Preferred stock

Conversion of Series C-1 Convertible

Preferred stock, Shares

Beneficial conversion feature

of Series C-2 convertible preferred stock

Beneficial conversion feature

of Series C-2 convertible preferred stock, Shares

Warrant exercise

Warrant exercise, Shares

Stock-based compensation in connection

with issuance of Series C-2 convertible preferred stock

Stock-based compensation in connection

with issuance of Series C-2 convertible preferred stock, Shares

( 4,842,073 )

Balance June 30, 2021

$ 137,908,063

$ ( 131,164,135 )

the Three Months Ended June 30, 2020

C-1 Convertible

C-2 Convertible

Stockholders’

March 31, 2020

( 117,354,064

stock issued including equity commitment fee, net

of convertible notes

conversion features associated with convertible notes payable

June 30, 2020

( 117,774,366

the Six Months Ended June 30, 2021

C-1 Convertible

C-2 Convertible

Stockholders’

Balance December 31, 2020

$ 120,541,135

$ ( 119,539,887 )

Common stock issued including

equity commitment fee, net

Issuance of common stock and warrants

for cash, net

Issuance of Series C-2 convertible

preferred stock

Balance March 31, 2021

Conversion of Series C-1 Convertible

Preferred stock

Beneficial conversion features

associated with convertible notes payable

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

( 5,020,883 )

Warrant exercise

Stock-based compensation

Stock-based compensation in connection

with issuance of Series C-2 convertible preferred stock

( 11,624,248 )

the Three Months Ended March 31, 2020

( 11,624,248 )

Balance June 30,

$ 137,908,063

$ ( 131,164,135 )

the Six Months Ended June 30, 2020

Series C-1 Convertible

Series C-2 Convertible

Total Stockholders’

Preferred Stock

Stockholders’

Preferred Stock

Balance December 31, 2019

1 unchanged sentence

$ ( 116,983,793 )

$ ( 183,760 )

Common stock issued including equity commitment fee, net

Balance March 31, 2020

Conversion of convertible notes

Beneficial conversion features associated with convertible notes payable

Balance June 30, 2020

$ 117,808,716

2 unchanged sentences

Statements of Cash Flows

For the Three Months Ended

For the Six Months Ended

Net Cash flows used from operating activities:

$ ( 11,624,248 )

$ ( 790,573 )

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

2 unchanged sentences

Stock-based compensation

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

preferred stock

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

Staking revenue

Purchase of non-productive digital assets/currencies

( 5,761,549 )

Sale of non-productive digital assets/currencies

Realized gain on digital assets/currencies transactions

( 3,054,418 )

Impairment loss on digital assets/currencies

4 unchanged sentences

Net cash used in operating activities

( 3,291,045 )

( 1,115,523 )

Net cash used in investing activities:

Purchase of productive digital assets/currencies

Purchase of productive digital assets/currencies for staking

( 8,493,136 )

Purchase of property and equipment

Net cash used in investing activities

( 8,496,381 )

Net cash provided by financing activities:

Proceeds from short term loan

Proceeds from exercise of warrants

2 unchanged sentences

Net proceeds from issuance of common stock

Proceeds from issuance of Series C-2 convertible

preferred stock

Proceeds from issuance of Series C-2 convertible preferred stock

Net cash provided by financing activities

Net increase in cash

Net increase (decrease) in cash

Cash, beginning of period

1 unchanged sentence

Supplemental disclosure of non-cash financing and investing activities:

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

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

1 unchanged sentence

Beneficial conversion features associated with convertible notes payable

Conversion of convertible note to common stock

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

1 unchanged sentence

1 - Business Organization and Nature of Operations

(formerly Bitcoin Shop, Inc.), a Nevada corporation (the “Company”) was incorporated in 2008.

In February 2014,

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

(formerly Bitcoin Shop, Inc.), a Nevada corporation (the “Company”) was incorporated in 2008.

In February 2014, the

Company entered the business of hosting an online e-commerce 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.

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 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

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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.

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

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

in the United States (“GAAP”) for interim financial information, the instructions to Form 10-Q and the rules and regulations

Accordingly, since they are interim statements, the accompanying unaudited condensed financial statements do not include

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,

3 unchanged sentences

for the year ended December 31, 2020.

3 - Liquidity, Financial Condition and Management’s Plans

3 - Liquidity, Financial Condition and Management’s Plan s

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

1 unchanged sentence

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.

the six months ended June 30, 2021, the Company received net proceeds of approximately $ 14.2

million from the issuance of a convertible

note, common stock, warrants, and Series C-2 convertible preferred stock.

As such, the Company has adequate cash to fund 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 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.

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 cancelled 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.

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 non-cash 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 the balance sheets as either current assets or other assets if they are staked and locked

up for over one year.

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 Impairments

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.

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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.

We assign 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.

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.

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.

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

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cost or net realizable value of the related product.

Some companies use a “tested working model”

approach to establishing

Some companies use a “tested working model” approach to establishing

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

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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.

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.

2 unchanged sentences

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

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.

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

1 unchanged sentence

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

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.

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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’

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

The Company evaluated

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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

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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

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potential common shares outstanding during the period.

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

convertible notes and warrants.

1 unchanged sentence

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

following financial instruments were not included in the diluted loss per share calculation as of June 30, 2021 and 2020 because their

effect was anti-dilutive:

As of March 31,

Schedule of Earnings Per Share Anti-diluted

As of June 30,

Warrants to purchase common stock

4 unchanged sentences

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.

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

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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):

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.

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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.

1 unchanged sentence

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.

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 six months ended June 30, 2021, the Company recorded interest expense of approximately $ 60,000 for the 2020 December Promissory Note.

As of June 30, 2021, the principal balance of the 2020 December Promissory Note was $1 million and accrued interest on the note payable

amounted to approximately $ 64,000 .

the six months ended June 30, 2021, the Company recorded approximately $ 589,000 amortization of debt discount related to the 2020 December

Promissory Note.

Promissory Note

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

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).

1 unchanged sentence

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.

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.

If 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

In this case, the Warrant is equity-classified, with the fair value at issuance was approximately $ 3,580,000 .

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

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.

1 unchanged sentence

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.

6 - Stockholders’

the six months ended June 30, 2021, the Company recorded interest expense of approximately $ 55,000 for the 2021 Promissory Note.

June 30, 2021, the principal balance of the 2021 Promissory Note was $ 1 million and accrued interest on the note payable amounted to

approximately $ 55,000 .

the six months ended June 30, 2021, the Company recorded approximately $ 546,000 amortization of debt discount related to the 2021 Promissory

6 - Stockholders’ Equity

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.

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 C-2.

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 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.

further, 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 would have been

extended until such time as the vote is conducted.

The Series C-2 holders were not entitled to vote on the ratification.

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.

The Company 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

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

basis” 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

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.

The Series C-2 will automatically

be converted at the earlier of:

(i) the four-year anniversary of the Initial Issuance Date, and (ii) simultaneously with the Company’s

Common Stock being listed on a national securities exchange.

The Conversion Rate is based upon the Conversion Price of $ 0.17

which resulted in a beneficial conversion

feature at the time of issuance.

As such, 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.

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 Company after the Initial Issuance Date (the “Capital Raised”).

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 Company 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 June 30, 2021, $13,715,008 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 $5,020,883 was

treated as a dividend and a reduction to income available to common shareholders in the basic EPS calculation .

As of June 30, 2021, the Series C-2 was convertible into 40,117,648

shares of common stock.

of Shares Pursuant to Equity Line of Credit Purchase Agreement

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

Statement”).

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

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).

the six months ended June 30, 2021, the Company issued 2,887,776

shares of common stock (inclusive of 164,212

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 $ 2,814,133

(net of $ 875

transfer agent fees) and $ 2,815,008

in gross proceeds at a per share price of approximately

(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”),

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

per share (the “Warrants” and together

with the common stock, the “Securities”).

Gross proceeds from the offering was $ 9.5

Net proceeds were $ 8.9 million after

deducting placement agent fees and other offering

expenses paid for by the Company.

Purchase Agreement contains representations, warranties, indemnifications 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

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.

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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.

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 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.

March 30, 2021, the Company issued 196,094

shares of common stock upon the conversion of

shares of Series C-1 Convertible Preferred stock.

After this conversion, there were no

Series C-1 shares outstanding so 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.

the six months ended June 30, 2021, the Company issued to four service providers of the Company a total of 527,971

shares of restricted common stock, representing

a total fair value of $ 0.6

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.

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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

$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.

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 :

(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 milestones.

April 1, 2021, the Company granted 350,000

stock options with an exercise price of $ 1.03

to Charles B.

Lee and Carol Van Cleef, directors

of the Company.

Of the stock options:

options will vest on April

1, 2022 and (ii) the remaining 210,000

options vest based upon the Company’s stock price meeting certain milestones.

Company records compensation expense for the 140,000

granted on April 1, 2021 based on the estimated fair value of the options on the deemed grant date using the Black-Scholes formula,

utilizing assumptions laid out in the table below.

The Company uses historical data to determine exercise behavior,

volatility and forfeiture rate of the options.

For the 210,000

options granted on April 1, 2021 that vest based

upon the Company’s stock price meeting certain milestones, the Company records compensation expense based on the estimated fair

value of the options using a Monte-Carlo simulation.

following weighted-average assumptions were used to estimate the fair value of options granted during the six months ended 2021 and

2020 for both the Black-Scholes formula and the Monte-Carlo simulation:

Summary of Weighted-average Assumptions Used to Estimate Fair Value

For the six months ended

Exercise price

Expected stock price volatility

Risk-free rate of interest

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

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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

Interest Rate :

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

1 unchanged sentence

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 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

The Company uses

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

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:

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.

For awards vesting upon the achievement of the market conditions

which were not met at the date of grant, compensation cost measured on the grant date will be recognized on a straight-line basis over

the vesting period based on estimation using a Monte-Carlo simulation.

summary of options activity under the Company’s stock option plan for six months ended June 30, 2021 is presented below:

Summary of Option Activity

Number of Shares

Weighted Average

Exercise Price

Weighted Average Exercise Price

Total Intrinsic Value

Weighted Average Remaining

Contractual Life (in years)

Weighted Average Remaining Contractual

Life (in years)

Outstanding as of December 31, 2020

Employee options issued

Outstanding as of March 31, 2021

Employee options granted

Outstanding as of June 30, 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

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

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

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

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.

of June 30, 2021, the restricted stock units remained unvested.

The 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 occurs.

April 1, 2021, the Company granted a total of 150,000

restricted stock units to Charles B.

and Carol Van Cleef, directors of the Company.

The restricted stock units vest when the Company lists its Common Stock on a national

securities exchange.

As of June 30, 2021, the restricted stock units remained unvested.

The 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.

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 occurs.

June 28, 2021, the Company granted 507,813

restricted stock units to Andrew Lee, the Company’s

Chief Financial Officer.

The restricted stock units will vest over a five -year

period as follows:

of the 507,813

restricted stock units will vest on the one-year

anniversary of the grant date, and the remaining 80% will vest monthly over the following four years with vesting occurring on

the last day of each respective month.

The grant date fair value of restricted stock units was approximately $ 0.3

summary of the Company’s restricted stock units granted under the 2021 Plan during the six months ended June 30, 2021 are as follows:

Summary of Restricted Stock

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.

Weighted Average

Grant Day Fair Value

Non-vested at December 31, 2020

Non-vested at June 30, 2021

compensation expense for the three months ended June 30, 2021 was approximately $ 8.8

million, comprised of $ 136,000

for the issuance of restricted common stock to

service providers not pursuant to the 2021 Plan and approximately $ 8.6

million in connection with options issued pursuant

to the 2021 Plan.

Unrecognized compensation expense for the Company was $ 3.7

million on June 30, 2021.

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

During the six months ended June 30, 2021, the Company made contributions to the 401(k) Plan of

8 - Subsequent Events

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.

statements in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

are forward-looking

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.

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 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 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 )

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 (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 )

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 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

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

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.

ACCOUNTING PRONOUNCEMENTS

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

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