What changed in this filing

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Item 1. Financial Statements

2021-11-09 compared with 2021-08-06 · 530 added, 405 removed, 359 unchanged (72% of the section changed)

1 unchanged sentence

Balance Sheets

assets/currencies

current assets

and equipment, net

digital assets/currencies

Prepaid expense

Total current assets

Other assets:

Property and equipment, net

Staked digital assets/currencies

Total other assets

Liabilities and Stockholders’ Equity

Accounts payable and accrued expense

Accrued compensation

Convertible notes payable, net

Total current liabilities

Stockholders’ equity:

Preferred stock;

and Stockholders’ Equity:

payable and accrued expense

notes payable, net

current liabilities

Stockholders’

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

Series B Convertible Preferred stock:

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 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 June 30, 2021 and December 31, 2020, respectively;

C-1 Convertible Preferred stock:

0 and 29,414 shares issued and outstanding at September 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, 57,123,458 and 42,011,617 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

Additional paid in capital

Accumulated deficit

C-2 Convertible Preferred stock:

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

Liquidation preference

$ 0.001 per share

stock, 97,500,000 shares authorized at $ 0.001 par value, 10,102,711 and 4,201,035 shares issued and outstanding at September 30,

2021 and December 31, 2020, respectively

paid in capital

( 135,006,472 )

( 119,539,887 )

Total stockholders’ equity

Total Liabilities and stockholders’ equity

stockholders’ equity

Liabilities and stockholders’ equity

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

Statements of Operations

Three Months Ended June 30,

Six Months Ended June 30,

Staking revenue

Total revenues

Cost of revenues

Staking expenses

September 30,

and administrative

and development

and related 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

( 1,134,771 )

Impairment loss on digital assets/currencies

( 2,267,374 )

( 3,569,138 )

Realized gains (loss) on digital asset/currency transactions

Total other expenses

(expenses) income:

on debt discount

( 1,716,744 )

in fair value of warrant liabilities

loss on digital assets/currencies

( 3,777,785 )

gains (loss) on digital asset/currency transactions

other income (expenses)

$ ( 3,842,337 )

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$ ( 1,795,897 )

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

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

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

loss attributable to common stockholders

$ ( 3,855,525 )

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$ ( 1,795,897 )

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

Weighted average number of common shares outstanding, basic and diluted

loss per share attributable to common stockholders, basic and diluted

average number of common shares outstanding, basic and diluted

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

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

the Three Months Ended September 30, 2021

C-1 Convertible

C-2 Convertible

Stockholders’

Balance March 31, 2021

June 30, 2021

$ 137,959,473

$ ( 131,164,135 )

Common stock issued including equity commitment fee, net

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

Stock-based compensation

stock issued including equity commitment fee, net

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 convertible notes, shares

Beneficial conversion features associated with convertible notes payable

of common stock, net of offering cost / At-the-market offering

of common stock and warrants for cash, net

of common stock and warrants for cash, net , shares

liabilities value related to Issuance of common stock

( 5,771,250 )

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

of Series C-2 Convertible Preferred stock

( 1,100,000 )

( 6,216,289 )

Balance June 30, 2021

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

of Series C-1 Convertible Preferred stock

of Series C-1 Convertible Preferred stock, shares

conversion features associated with convertible notes payable

conversion feature of Series C-2 convertible preferred stock

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

dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock

shares adjusted for reverse split

exercise , shares

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

( 3,842,337 )

the Three Months Ended June 30, 2020

C-1 Convertible

September 30, 2021

$ 143,472,733

$ ( 135,006,472 )

the Three Months Ended September 30, 2020

C-1 Convertible

Stockholders’

March 31, 2020

June 30, 2020

$ 117,834,086

$ ( 117,774,366 )

stock issued including equity commitment fee, net

of convertible notes

conversion features associated with convertible notes payable

June 30, 2020

( 1,005,324 )

the Six Months Ended June 30, 2021

( 1,005,324 )

September 30, 2020

$ 118,662,882

$ ( 118,779,690 )

$ ( 113,475 )

the Nine Months Ended September 30, 2021

C-1 Convertible

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Stockholders’

Balance December 31, 2020

December 31, 2020

$ 120,578,944

$ ( 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

Conversion of Series C-1 Convertible

Preferred stock

Beneficial conversion features

associated with convertible notes payable

Beneficial conversion feature

stock issued including equity commitment fee, net

of common stock, net of offering cost / At-the-market offering

of common stock and warrants for cash, net

liabilities value related to Issuance of common stock

( 5,771,250 )

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

of Series C-1 Convertible Preferred stock

of Series C-2 Convertible Preferred stock

( 1,100,000 )

Warrant exercise

Stock-based compensation

Stock-based compensation in connection

with issuance of Series C-2 convertible preferred stock

( 6,216,289 )

conversion features associated with convertible notes payable

conversion feature of Series C-2 convertible preferred stock

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

dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock

( 5,020,883 )

Balance June 30,

shares adjusted for reverse split

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

( 15,466,585 )

the Six Months Ended June 30, 2020

Series C-1 Convertible

Series C-2 Convertible

Total Stockholders’

Preferred Stock

Balance December 31, 2019

September 30, 2021

$ 143,472,733

$ ( 135,006,472 )

the Nine Months Ended September 30, 2020

C-1 Convertible

Stockholders’

December 31, 2019

$ 116,798,021

Common stock issued including equity commitment fee, net

Conversion of convertible notes

Beneficial conversion features associated with convertible notes payable

Balance June 30, 2020

$ ( 116,983,793 )

$ ( 183,760 )

$ 116,798,021

$ ( 116,983,793 )

$ ( 183,760 )

stock issued including equity commitment fee, net

of convertible notes

conversion features associated with convertible notes payable

( 1,795,897 )

September 30, 2020

$ 118,662,882

$ ( 118,779,690 )

$ ( 113,475 )

$ 118,662,882

$ ( 118,779,690 )

$ ( 113,475 )

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

Statements of Cash Flows

For the Six Months Ended

Net Cash flows used from operating activities:

the Nine Months Ended

Cash flows used from operating activities:

$ ( 15,466,585 )

$ ( 1,795,897 )

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

Depreciation expense

Amortization on debt discount

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

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

on debt discount

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

in fair value of warrant liabilities

( 2,066,250 )

Sale of non-productive digital assets/currencies

Realized gain on digital assets/currencies transactions

of non-productive digital assets/currencies

( 5,761,550 )

Impairment loss on digital assets/currencies

Changes in operating assets and liabilities:

Prepaid expenses and other current assets

Accounts payable and accrued expenses

Accrued compensation

Net cash used in operating activities

of non-productive digital assets/currencies

gain on digital assets/currencies transactions

( 3,054,418 )

loss on digital assets/currencies

in operating assets and liabilities:

expenses and other current assets

payable and accrued expenses

cash used in operating activities

( 3,904,421 )

Net cash used in investing activities:

Purchase of productive digital assets/currencies for staking

( 1,663,889 )

Purchase of property and equipment

Net cash used in investing activities

cash used in investing activities:

of productive digital assets/currencies for validating

( 9,462,279 )

Net cash provided by financing activities:

Proceeds from short term loan

Proceeds from exercise of warrants

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 increase (decrease) in cash

Cash, beginning of period

Cash, end of period

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

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

Conversion of convertible note to common stock

of property and equipment

cash used in investing activities

( 9,466,822 )

cash provided by financing activities:

from short term loan

from exercise of warrants

from issuance of Series C-2 convertible preferred stock

proceeds from issuance of convertible notes

proceeds from issuance of common stock and warrants for cash

proceeds from issuance of common stock

proceeds from issuance common stock/ At-the-market offering

to convertible notes principle and accrued interest

( 1,092,712 )

cash provided by financing activities

increase in cash

beginning of period

end of period

disclosure of non-cash financing and investing activities:

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

dividends related to recognition of downround adjustment to conversion amount for Series C-2 convertible preferred stock

of Series C-1 Preferred Stock

conversion feature of Series C-2 convertible preferred stock

conversion features associated with convertible notes payable

of convertible note to common stock

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

3 unchanged sentences

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.

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.

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.

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

1 unchanged sentence

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

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

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

through a non-custodial platform.

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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.

The Company receives digital assets from its blockchain infrastructure 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.

to Articles of Incorporation

August 12, 2021, the Company filed a Certificate of Change with the Nevada Secretary of State to affect a 1-for-10 reverse split of the

Company’s class of common stock (the “Reverse Split”).

The Certificate of Change became effective on August 13, 2021.

fractional shares were issued in connection with the Reverse Split and all such fractional interests were rounded up to the nearest whole

number of shares of common stock.

The Company now has 97,500,000 shares of common stock authorized.

Numbers of shares of the Company’s

preferred stock were not affected by the Reverse Split;

however, the conversion ratios have been adjusted to reflect the Reverse Split.

The financial statements have been retroactively restated to reflect the Reverse Split.

2 - Basis of Presentation

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for the year ended December 31, 2020.

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

3 - Liquidity, Financial Condition and Management’s Plans

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 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.

The Company has plans to continue to raise proceeds from sale of common stock and issuance of debt to fund operations as needed

for the next twelve months.

the nine months ended September 30, 2021, the Company received net proceeds of approximately $ 14.6

million from the issuance of:

Series C-2 convertible

preferred stock, a convertible note, common stock and warrants issued pursuant to the Purchase agreement, common stock issued pursuant

to the Equity Line Purchase Agreement, the cash exercise of warrants, and the proceeds from the common stock sold pursuant to the ATM

On September 30, 2021, the fair market value of the Company’s liquid digital assets was approximately $ 6.2

million and the Company had approximately

$ 0.66 million of cash.

As such, the Company has adequate cash to fund operations for at least the next twelve months.

1 unchanged sentence

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 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.

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

Through these contracts, the Company

provides cryptocurrency to stake a node for the purpose of 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 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 a 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

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.

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

44 unchanged sentences

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.

9 unchanged sentences

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 the issuance of common stock purchase warrants issued in connection with the equity offerings in accordance with

the provisions of ASC 815, Derivatives and Hedging (“ASC 815”).

The Company classifies as equity any contracts that (i) require

physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or settlement in its own shares

(physical settlement or net-share settlement).

The Company classifies as assets or liabilities any contracts that (i) require net-cash

settlement (including a requirement to net-cash settle the contract if an event occurs and if that event is outside the control of the

Company) or (ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).

In addition, Under ASC 815, registered common stock warrants that require the issuance of registered shares upon exercise and do not

expressly preclude an implied right to cash settlement are accounted for as derivative liabilities.

The Company classifies these derivative

warrant liabilities on the balance sheet as a current liability.

Company assessed the classification of common stock purchase warrants as of the date of each offering and determined that such instruments

originally met the criteria for equity classification;

however, as a result of the Company no longer being in control of whether the

warrants may be cash settled, the instruments no longer qualify for equity classification.

Accordingly, the Company classified the warrants

as a liability at their fair value and adjusts the instruments to fair value at each reporting period.

This liability is subject to re-measurement

at each balance sheet date until the warrants are exercised or expired, and any change in fair value is recognized as “change in

the fair value of warrant liabilities” in the statements of operations.

The fair value of the warrants has been estimated

using a Black-Scholes valuation model (see Note 6).

Company accounts for share-based payment awards exchanged for services at the estimated grant date fair value of the award.

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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.

These options often 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

53 unchanged sentences

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 June 30, 2021 and 2020 because their

effect was anti-dilutive:

Schedule of Earnings Per Share Anti-diluted

As of June 30,

Warrants to purchase common stock

Series C-1 Convertible Preferred stock

Series C-2 Convertible Preferred stock

Convertible notes

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

their effect was anti-dilutive:

of Earnings Per Share Anti-diluted

of September 30,

to purchase common stock

C-1 Convertible Preferred stock

Accounting Pronouncements

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5 - Note Payable

December Promissory Note

December Promissory Note (Retired)

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

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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

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.

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.

the nine months ended September 30, 2021, the Company recorded approximately $ 868,000 amortization of debt discount related to the 2020

December Promissory Note.

the nine months ended September 30, 2021, the Company recorded interest expense of approximately $ 88,000 for the 2020 December Promissory

September 24, 2021, the Company paid off in full the 2020 December Promissory Note.

Repayment to Cavalry consisted of $ 1,000,000 in principal

and $ 92,712 in accrued interest, for a total of $ 1,092,712 .

Cavalry confirmed the 2020 December Promissory Note had been fully paid and

the Company has no further obligations with respect to the note.

January Promissory Note

January 15, 2021, the Company issued Calvary a $ 1,000,000 promissory note (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 $ 7.50 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 2021 Promissory Note, the Company issued a Series D warrant to purchase 200,000 shares of the Company’s

common stock at an exercise price of $ 21.60 per share (the “Series D 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 470-20-25-2.

In this case, the Series D 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.

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

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

the nine months ended September 30, 2021, the Company recorded approximately $ 848,000 amortization of debt discount related to the 2021

Promissory Note.

the nine months ended September 30, 2021, the Company recorded interest expense of approximately $ 85,000 for the 2021 Promissory Note.

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

to approximately $ 85,000 .

6 - Fair Value of Financial Assets and Liabilities

instruments, including cash and cash equivalents, accounts and other receivables, accounts payable and accrued liabilities are carried

at cost, which management believes approximates fair value due to the short-term nature of these instruments.

The Company measures the

fair value of financial assets and liabilities based on the exchange price that would be received for an asset or paid to transfer a

liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market

participants on the measurement date.

The Company maximizes the use of observable inputs and minimizes the use of unobservable inputs

when measuring fair value.

Company uses three levels of inputs that may be used to measure fair value:

1 - quoted prices in active markets for identical assets or liabilities

2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable

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

following table presents the Company’s assets and liabilities that are measured at fair value at September 30, 2021 and December

of Fair Value of Assets and Liabilities Valued on Recurring Basis

value measured at September 30, 2021

at September 30,

prices in active markets

other observable inputs

unobservable inputs

Fair value measured at December 31, 2020

Total at December 31,

Quoted prices in active markets

Significant other observable inputs

Significant unobservable inputs

Warrant Liabilities

3 Valuation Techniques

3 financial liabilities consist of the warrant liabilities for which there is no current market for these securities such that the determination

of fair value requires significant judgment or estimation.

Changes in fair value measurements categorized within Level 3 of the fair

value hierarchy are analyzed each period based on changes in estimates or assumptions and recorded as appropriate.

significant decrease in the volatility or a significant decrease in the Company’s stock price, in isolation, would result in a

significantly lower fair value measurement.

Changes in the values of the warrant liabilities are recorded in “change in fair value

of warrant liabilities” in the Company’s statements of operations.

March 2, 2021, the Company entered into a securities purchase agreement (the “Offering”) with certain purchasers pursuant

to which the Company agreed to sell an aggregate of (i) 950,000 shares of common stock, and (ii) common stock warrants (the “Warrants”)

to purchase up to 712,500 shares of common stock for gross proceeds of $ 9.5 million in a private placement.

The closing of the Offering

occurred on March 4, 2021.

Warrants require, at the option of the holder, a net-cash settlement following certain fundamental transactions (as defined in the Warrants)

at the Company.

At the time of issuance, the Company maintained control of certain fundamental transactions and as such the Warrants

were initially classified in equity.

As of September 30, 2021, the Company no longer maintained control of certain fundamental transactions

as they did not control a majority of shareholder votes.

As such, the Company may be required to cash settle the Warrants if a fundamental

transaction occurs which is outside the Company’s control.

Accordingly, the Warrants are classified as liabilities.

have been recorded at their fair value using the Black-Scholes valuation model, and will be recorded at their respective fair value at

each subsequent balance sheet date.

This model incorporates transaction details such as the Company’s stock price, contractual

terms, maturity, risk free rates, as well as volatility.

Warrants require the issuance of registered shares upon exercise, do not expressly preclude an implied right to cash settlement and are

therefore accounted for as derivative liabilities.

The Company classifies these derivative warrant liabilities on the balance

sheet as a current liability.

summary of quantitative information with respect to the valuation methodology and significant unobservable inputs used for the Company’s

warrant liabilities that are categorized within Level 3 of the fair value hierarchy at the date of issuance and, as of September 30,

2021, is as follows:

of Valuation Methodology and Significant Unobservable Inputs Warrant Liabilities

rate of interest

life (in years)

dividend yield

risk-free interest rate was based on rates established by the Federal Reserve Bank.

For the Warrants, the Company estimates expected

volatility giving primary consideration to the historical volatility of its common stock.

The general expected volatility is based on

the standard deviation of the Company’s underlying stock price’s daily logarithmic returns.

The expected life of the warrants

was determined by the expiration date of the warrants.

The expected dividend yield was based on the fact that the Company has not historically

paid dividends on its common stock and does not expect to pay dividends on its common stock in the future.

following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities for the nine

months ended September 30, 2021 and 2020, that are measured at fair value on a recurring basis:

of Changes in Fair Value and Other Adjustments of Warrants

Value of Level 3 financial liabilities

liabilities classification

value adjustment of warrant liabilities

( 2,066,250 )

7 - Stockholders’ Equity

Company is authorized to issue up to 2,000,000 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

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 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.

January 1, 2021, members of the Company’s management subscribed for 110,000 shares of the Company’s Series C-2 Convertible

Preferred Stock (the “Series C-2”), for a total of $ 1,100,000 at $ 10.00 per Share of Series C-2.

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.

7 unchanged sentences

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.

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 was 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.

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.

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.

9 unchanged sentences

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.

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

5 unchanged sentences

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.

The Conversion Rate is based upon the Conversion Price of $ 1.70 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.

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.

Upon the conversion of Series C-2 into common stock on September 14, 2021, the total amortization of the beneficial

conversion feature is $ 45,541 and the remaining discount is netted against additional paid in capital.

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

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

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 Company 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 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 Amount.

As of September 30, 2021, over $13 million of capital

was raised and the adjustment to the Conversion Amount was fully triggered.

The Company recognized the effect of the down-round protection

when capital raises occur 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.

On September 14, 2021, the Series C-2 was converted into 4,011,766

shares of common stock.

August 25, 2021, the Company issued 14,477 shares of common stock in connection with the 1-for-10 Reverse Split resulting from the rounding

up of fractional shares of common stock to the whole 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 400,000 shares (the “Registration

Statement”) pursuant to the equity line of credit purchase agreement with Cavalry (the “Equity Line Purchase Agreement”).

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

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).

the nine months ended September 30, 2021, the Company issued approximately 321,740 shares of common stock (inclusive of approximately

17,590 pro-rata commitment shares) under the Registration Statement resulting in aggregate net proceeds of $ 3,014,005 (net of

$ 1,000 in transfer agent fees) and $ 3,015,005 in gross proceeds at a per share price of approximately $ 9.37 (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

March 4, 2021, the Company entered into a securities purchase agreement (the “RD Purchase Agreement”) with institutional

investors, pursuant to which the Company sold and issued, in a registered direct offering, 950,000

shares of the Company’s common stock, at

3 unchanged sentences

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

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

Net proceeds were $ 8.9

million after deducting placement agent fees

and other offering expenses paid for by the Company.

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

Pursuant to the RD 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.

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 .

Company also entered into a placement agent 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.

The Company 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 .

At The Market Offering Agreement

September 14, 2021, the Company entered into an At-The-Market Offering Agreement (the “ATM Agreement”) with H.C.

& Co., LLC, as agent (“H.C.

Wainwright”), pursuant to which the Company may offer and sell, from time-to-time through

Wainwright, shares of the Company’s common stock having an aggregate offering price of up to $ 98,767,500 million (the “Shares”).

The Company will pay H.C.

Wainwright a commission rate equal to 3.0 % of the aggregate gross proceeds from each sale of Shares.

the nine months ended September 30, 2021, the Company sold a total of 41,290 shares of common stock under the ATM Agreement for aggregate

total gross proceeds of approximately $ 279,000 at an average selling price of $ 6.76 per share, resulting in net proceeds of approximately

$ 219,746 after deducting commissions and other transaction costs.

of Shares Pursuant to Cash Exercise of Series C Warrants

January 15, 2021, the Company issued 200,000 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.

C warrants and payment of the exercise amount 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

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.

March 30, 2021, the Company issued 19,609 shares of common stock upon the conversion of 29,414 shares of Series C-1 Convertible Preferred

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 Shares Due to Conversion of Series C-2 Preferred Stock

September 14, 2021, the Series C-2 was converted into 4,011,766 shares of common stock.

Please refer to the discussion above.

of Restricted Stock to Service Providers

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

the nine months ended September 30, 2021, the Company issued to four service providers a total of approximately 52,800 shares of restricted

common stock, representing a total fair value of $ 0.6 million.

Equity Incentive Plan

15 unchanged sentences

Of the stock options:

(i) 4.8 million options will vest on January 1, 2022 and (ii) the remaining options vested

(i) 480,000 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.

April 1, 2021, the Company granted 35,000 stock options with an exercise price of $ 10.30 to Charles B.

Lee and Carol Van Cleef, directors

1 unchanged sentence

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

(i) 14,000 options will vest on April 1, 2022 and (ii) the remaining 21,000 options vest based

upon the Company’s stock price meeting certain milestones.

Company records compensation expense for the 14,000 options 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 21,000 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 nine 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

of Weighted-average Assumptions Used to Estimate Fair Value

the nine months ended

stock price volatility

rate of interest

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

17 unchanged sentences

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

Total Intrinsic Value

Weighted Average Remaining Contractual

Life (in years)

Outstanding as of December 31, 2020

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 2021

Equity Incentive Plan to Messrs.

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.

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

of Option Activity

Average Exercise Price

Intrinsic Value

Average Remaining Contractual Life (in years)

as of December 31, 2020

options granted

as of September 30, 2021

vested and exercisable

January 1, 2021, the Board of Directors of the Company approved 275,000 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.

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.

As of September

30, 2021, all 275,000 restricted stock units vested with a total fair value of approximately $ 2.8 million.

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 and was recorded on the September 14, 2021 vesting date when the listing occurred.

April 1, 2021, the Company granted a total of 15,000

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.

restricted stock units to two non-employee

directors of the Company.

The restricted stock units vest when the Company lists its common stock on a national securities exchange.

As of September 30, 2021, all 15,000

restricted stock units vested with a total fair

value of approximately $ 0.2

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 and was recorded on the September

14, 2021 vesting date when the listing occurred.

June 28, 2021, the Company granted 50,781

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

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

restricted stock units to the Company’s

then Chief Financial Officer.

restricted stock units were to vest over a five-year period as follows:

20 % of the 50,781 restricted stock units were to

vest on the one-year anniversary of the grant date, and the remaining 80% were to vest monthly over the following four years with

vesting occurring on the last day of each respective month.

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 nine months ended September 30, 2021 are

of Restricted Stock

Number of Restricted Stock Units

Weighted Average Grant Day Fair Value

Nonvested at December 31, 2020

Nonvested at September 30, 2021

compensation expense for the nine months ended September 30, 2021 was approximately $ 13.8 million, comprised of $ 203,000 restricted common

stock issued to service providers not pursuant to the 2021 Plan and approximately $ 10.3 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.

Unrecognized compensation expense for the Company was $ 2.0 million on September 30, 2021.

Stock-based compensation

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

Stock-based compensation

expense for the three and nine months ended September 30, 2021 and 2020 was as follows:

Schedule of Stock-based Compensation Expense

Three Months Ended September 30,

Nine Months Ended September 30,

Employee stock option awards

Employee restricted stock units awards

Non-employee restricted stock awards

Series C-2 allocation

8 - Employee Benefit Plans

3 unchanged sentences

up to 100 % of employee contributions.

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

During the nine months ended September 30, 2021, the Company made contributions to the 401(k) Plan

of $ 39,000 .

9 - Subsequent Events

October 1, 2021 to November 4, 2021, the Company sold a total of 172,547 shares of common stock under the ATM Agreement for aggregate

total gross proceeds of $ 1,185,474 at an average selling price of $ $ 6.87 per share, resulting in net proceeds of approximately $ 1,147,886

after deducting commissions and other transaction costs.

October 25, 2021, the Company received a filing acknowledgment with respect to a Certificate of Withdrawal with the Secretary of State

of the State of Nevada.

The Certificate of Withdrawal, was effective on October 25, 2021, and eliminated from the Articles of Incorporation

of the Company all matters set forth in the Company’s Certificate of Designation with respect to the Company’s Series C-2

Preferred Stock that had been previously filed with the Secretary of State of the State of Nevada on January 5, 2021.

No shares of the

Series C-2 Preferred Stock were issued and outstanding at the time of the filing of the Certificate of Withdrawal, and none will be issued.

November 4, 2021, Mr.

Andrew Lee resigned as the Company’s Chief Financial Officer.

In connection with the resignation, Mr.

Allen was appointed interim Chief Financial Officer.

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