What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-03-31 compared with 2022-03-11 · 1034 added, 1011 removed, 401 unchanged (84% of the section changed)

7 unchanged sentences

as a result of a number of factors, including those set forth under “Risk Factors” and elsewhere in this report.

is 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 next-generation blockchains and

operate validator nodes on various proof of stake-based blockchain networks, earning rewards of additional Digital Assets by actively

validating transactions on the networks.

While this process is similar to Bitcoin mining the consensus mechanism is different.

are building on the foundation of our pre-established infrastructure with the development of a Digital Asset Platform.

feature of the dashboard, which is an open beta, allows users to evaluate their Digital Asset portfolios from multiple exchanges

on a single platform.

We also are developing and plan to integrate into the platform a Staking-as-a-Service feature that, once

launched, will allow users to participate in asset leveraging through securing blockchain protocols.

Infrastructure

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

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.

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

power or ownership stake to successfully attack the blockchain.

the case of PoW, a miner does “work” using energy-consuming computers and is rewarded for this “work” with Digital

The miner, typically through pools running nodes, validates 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 PoW and is by far the largest and most secure PoW blockchain.

miners, often referred to as validators in PoS systems, actively operate nodes and validate transactions.

Validators are required to

stake holdings of a digital currency to participate in the consensus algorithm and are rewarded in tokens for aligning behavior with

the rules of the algorithm.

Bad behavior can be penalized by “slashing” the validator’s holdings and/or rewards.

can also be removed from the network for breaking the rules.

Ill-intentioned behavior among validators is discouraged, allowing for the

blockchain to be properly maintained and secured.

Compared to PoW, PoS blockchains require less energy.

on the PoS blockchain protocol, native token holders have the opportunity to leverage their asset holdings by either delegating their

rights to a validator (“Delegating”), staking their token holdings in a staking pool (“Staking”), or running

their own validator (“Pooling”).

With Delegating, token holders indirectly participate by maintaining control of their private

keys and delegating their tokens to an existing validator.

Therefore, delegating is more akin to assigning voting rights of stock to

another person or entity via a power of attorney.

With Pooling, an operator and token holder combine tokens in order to improve the constituents’

collective odds of validating new blocks, and typically the operator takes custody of token holders funds i.e.

private keys.

for validation, the group is rewarded in tokens.

With both Delegating and Pooling, the validator operators earn a fee for providing the

technical capabilities of running a node 24/7 that requires regular, active maintenance and industry expertise.

BTCS uses its blockchain infrastructure

to operate validator nodes on various proof of stake-based blockchain networks.

In connection with the validation of transactions occurring

on those blockchain networks, BTCS will stake the Digital Assets native to those blockchains on the validator nodes it

operates in order to earn staking rewards.

BTCS may also use its blockchain infrastructure to validate and sign transactions on behalf

of customers that delegate their validation and voting rights to BTCS-operated validator nodes (referred to as “Staking-as-a-Service”

StaaS provider maintains an active role in validating transactions on a given PoS network on behalf of its delegators by (1) arranging

transactions using software to stake the relevant Digital Assets;

(2) monitoring the nodes it is operating to ensure they remain

online, ready to validate transactions;

and (3) verifying transactions on the network when required to earn rewards.

Apart from Bitcoin and Ethereum,

all of the Company’s Digital Asset holdings are in tokens secured by PoS or similar consensus mechanisms that allow for

Delegating and asset leveraging.

The Company is currently actively operating validator nodes on Ethereum’s beacon chain, Cardano,

Tezos, Avalanche, Kusama, and Cosmos.

The Company has also staked the following tokens Polkadot, Terra, Algorand, and Solana.

Building on that base, the Company plans to expand its PoS operations to secure other disruptive blockchain protocols that also allow

for delegating.

The Company believes its

blockchain infrastructure efforts will form the core growth for its Digital Asset Platform.

The Company utilizes

cloud infrastructure to operate and run its validator nodes and does not maintain its own physical assets, but may add this infrastructure

in the future.

Company currently holds the following Digital Assets which are core to its blockchain infrastructure efforts.

The table also includes

Bitcoin which is not core to our infrastructure operations.

refer to the “Fiscal 2022” and the “Fiscal 2021” we are referring to the years ended December 31, 2022 and December

31, 2021, respectively.

is an early entrant in the cryptocurrency market and one of the first publicly-traded U.S.

companies with a primary focus on blockchain

infrastructure and staking.

We specialize in operating validator nodes on various DPoS and PoS-based blockchain networks and stake the

native crypto assets on these blockchains to earn rewards in connection with transaction validation.

Our core growth for our Digital

Asset Platform, StakeSeeker, comes from our blockchain infrastructure operations.

StakeSeeker is a non-custodial platform that enables

users to learn how to earn staking rewards and analyze their crypto portfolios through a comprehensive crypto dashboard and education

employ a StaaS strategy that allows crypto asset holders to earn rewards by participating in network consensus mechanisms through staking

and delegating their crypto assets to Company-operated validator nodes.

As a non-custodial validator operator, we receive a percentage

of token holders’ staking rewards generated as a validator node fee, creating the opportunity for potential scalable revenue and

business growth with limited additional costs.

Our non-custodial staking model ensures the self-custody of crypto assets, mitigating concerns about the security of custodial exchanges and similar platforms.

believe that our blockchain infrastructure and StaaS strategy provide us with a unique competitive advantage in the rapidly evolving

blockchain industry.

We plan to expand our PoS operations to secure other disruptive blockchain protocols that allow for delegating and

asset leveraging, which presents a significant growth opportunity for the Company.

The growth of StakeSeeker’s user base as well

as the number and size of staked cryptocurrencies by Delegators to Company-run validator nodes are critical to our success.

that StaaS provides a more accessible and cost-effective way for crypto asset holders to participate in blockchain networks’ consensus

mechanisms, promoting the growth and adoption of blockchain technology.

a non-custodial StaaS provider, we do not hold or take possession of any Delegator funds, crypto assets, or crypto asset rewards at any

point during the Staking process.

Delegation does not involve the transfer of token ownership to a Validator.

While staking delegated

tokens remain in

the Delegator’s digital wallets.

The blockchain network calculates rewards earned, which are then distributed directly to the Delegator’s

At no point does the Validator gain access or control to the custody of the original staked tokens or rewards earned through

Staking to its node.

Therefore, the Company does not have any exposure to the custodial risks that a crypto exchange would have related

to excessive redemptions or withdrawals of crypto assets, suspension of redemptions or withdrawals.

Further, we do not issue or hold

crypto assets on behalf of the third parties and have no exposure to the risks an exchange would have with respect to loans, rehypothecation

table below describes BTCS’s quarterly crypto assets holdings as of the end of Fiscal 2021 through the end of Fiscal 2022.

Assets Held at Period End

Infinity (AXS)

Protocol (BAND)

Network (ROSE)

Protocol (NEAR)

Market Value of Crypto Assets at Period End

Bitcoin (BTC)

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Algorand (ALGO)

Market Value of Digital Assets at Period End

Axie Infinity (AXS)

Band Protocol (BAND)

Oasis Network (ROSE)

NEAR Protocol (NEAR)

of Crypto Assets at Period End

Bitcoin (BTC)

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Algorand (ALGO)

Approximately 9 ETH is not staked on Ethereum 2.0’s Beacon Chain.

of Digital Assets at Period End

Axie Infinity (AXS)

Band Protocol (BAND)

Oasis Network (ROSE)

NEAR Protocol (NEAR)

following table presents the Fair Market Value of crypto assets held compared to the GAAP Book Value reported on the Company’s

balance sheets.

December 31, 2022

December 31, 2021

Bitcoin (BTC)

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Algorand (ALGO)

Asset Platform

The Company is also developing

a proprietary Digital Asset Platform aimed at allowing users to evaluate their crypto portfolio holdings across multiple exchanges

and chains on a single platform.

The internally-developed dashboard utilizes Digital Asset exchange APIs to read user data and

does not allow for the trading of assets.

In addition to portfolio monitoring, we are also working to integrate a full suite of other

features including decentralized exchanges, wallets, risk metrics and potentially a way for users to calculate end-of year-reports for

tax purposes.

We believe that increasing the number of features we offer may create a sticky user experience across multiple, interrelated

Company is also currently developing and

plans to integrate into the Digital Asset Platform a proprietary Staking-as-a-Service feature aimed at allowing users to

delegate supported cryptocurrencies through a non-custodial platform to BTCS operated validator nodes.

Staking allows users to generate

an annual percentage yield (“APY”) on their staked assets whereas validator node operators charge a fee on users’ staked

asset rewards earned in addition to earning an APY on staked assets.

In turn, the highly scalable nature of both staking Digital Assets

as well as allowing users to stake Digital Assets to earn token rewards is the premise behind BTCS’ Staking-as-a-Service platform.

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

Asset Treasury Strategy

Company employs a Digital Asset treasury strategy with a primary focus on disruptive protocol layer assets such as Bitcoin which

are not able to be staked (i.e.

non-productive).

They are distinct from Digital Assets used as the foundation for our blockchain

infrastructure operations previously discussed.

The Company’s Digital Asset treasury holding is comprised of 90 Bitcoins

as set forth above.

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

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.

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, change in fair

value of warrant liabilities, and stock-based compensation expense (including stock-based compensation issued to service providers).

Adjusted EBITDA presented does not include adjustments for impairment of intangible Digital Assets.

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

For the years ended

Net income (loss)

$ (16,049,583 )

$ (2,556,094 )

Adjusted to exclude the following:

Depreciation and amortization

Interest expense

Change in fair value of warrant liabilities

Stock-based compensation

Adjusted EBITDA

$ (2,455,123 )

$ (2,152,317 )

Axie Infinity (AXS)

Band Protocol (BAND)

Oasis Network (ROSE)

NEAR Protocol (NEAR)

of Operations for the Years Ended December 31, 2022 and 2021

For the years ended

Validator revenue

Total revenues

following tables reflect our operating results for the years ended December 31, 2022 and 2021:

Cost of revenues

Validator expense

Operating expenses:

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Research and development

Compensation and related expenses

Total operating expenses

Other (expenses) income:

Compensation and related

(12,269,620 )

Impairment loss on crypto

gains on crypto asset transactions

operating expenses

Other income (expenses):

Interest expense

Amortization on debt discount

Change in fair value of warrant liabilities

Impairment loss on digital assets/currencies

Realized gains (loss) on digital asset/currency transactions

Total other income (expenses)

$ (16,049,583 )

Change in fair value of

warrant liabilities

Distributions

to warrant holders

other income (expenses)

$ (15,892,738 )

$ (16,049,583 )

for the years ended December 31, 2021 and 2020 were approximately $1.2 million and $0, respectively.

The increase is from our blockchain

infrastructure validating revenue as the Company began operating validator nodes during 2021.

We believe revenues will increase

as the Company continues to expand its blockchain infrastructure efforts.

of revenues for the years ended December 31, 2021 and 2020 were approximately $0.3 million and $0, respectively.

The increase is from

our blockchain infrastructure validating operating costs, including, web service hosting fees, and cash and stock-based compensation

related to services provided by vendors.

increase in revenue during Fiscal 2022 is from the expansion of our blockchain infrastructure validating revenue.

We believe revenues

will increase as the Company continues to expand its blockchain infrastructure efforts and as a result of an improvement in market prices

of the crypto assets we have staked.

increase in cost of revenues during Fiscal 2022 is due to our blockchain infrastructure validating operating costs, including, web service

hosting fees and services provided by vendors.

We believe our cost of revenues will increase as we continue to ramp up our business.

However, we believe gross margin will improve as

we add scale to our blockchain infrastructure operations, leading to improved gross profits.

Operating expenses for the years

ended December 31, 2021 and 2020 were approximately $18.0 million and $2.0 million.

The increase is primarily from $15.6 million non-cash

contingent bonuses being earned for the achievement of performance milestones as well as $0.7 million in research and development

expenses for development of our Digital Asset Platform.

We believe operating expenses will remain consistent as the Company continues

to utilize equity-based bonus incentives as a core part of its compensation strategy.

However, we believe gross margin will improve as we add scale to our blockchain infrastructure operations and reduce costs as a result

of increased operational efficiencies, leading to improved gross profits.

decrease in operating expenses during Fiscal 2022 is primarily due to the $14.9 million equity-based contingent bonuses granted to

employees and our non-employee directors during Fiscal 2021 for the achievement of performance milestones compared to only $2.6

million equity-based compensation in Fiscal 2022.

This is partially offset by the $13.3 million impairment loss on crypto assets (“Crypto Asset Impairment”) in Fiscal 2022, compared

to only $3.8 million Crypto Asset Impairment in Fiscal 2021.

believe operating expenses will remain consistent as the Company continues to utilize equity-based compensation incentives as a core

part of our compensation strategy.

However, volatility in the cryptocurrency markets will subject the Company to the possibility of

additional impairment charges on its crypto asset holdings.

Company is evaluating additional opportunities to reduce costs.

As part of our cost cutting measures, in June 2022, the Board of Directors

reduced all director fees for 2022 from $50,000 to $25,000 and reduced the Audit, Compensation, and Nominating and Corporate Governance

committee chair fees for 2022 to $5,000.

Additionally, the Company’s Chief Executive Officer

and Chief Operating Officer, each agreed to forfeit $25,000 of their annual base salaries for 2022.

Collectively, these cost-cutting

measures resulted in cost savings of approximately $141,000 for 2022.

Income (Expenses)

Other income (expenses) for the

year ended December 31, 2021 and 2020 was approximately $1.1 million and $(0.6) million, respectively.

The increase in other income is

primarily from $4.0 million change in fair value of warrant liabilities and $3.1 million realized gain on Digital Asset/currency

transactions and is partially offset by $1.9 million amortization on convertible notes debt discounts and $3.8 million impairment of

our Digital Asset holdings.

loss for the years ended December 31, 2021 and 2020 were approximately $16.0 million and $2.6 million.

The increase is primarily due

to increase of both operating expenses and other expenses as discussed above.

loss attributable to Common Stockholders

incurred approximately $46,000 and $0 related to amortization of beneficial conversion feature of Series C-2 convertible preferred stock,

and $5.0 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 years ended December 31, 2021 and 2020, respectively.

changes in other income for the years reported was primarily due to the decrease in the fair value of warrant liabilities.

This non-cash

expense is driven by the value of our stock price at the end of each quarter which we cannot predict.

slight decrease in our net loss for the years reported was primarily due to the decrease in operating expenses and changes in other income

(expense) as discussed above.

We believe that our net loss may increase as the Company incurs increased costs related to the development

of its Digital Asset Platform and incurs additional Crypto Asset Impairment losses due to volatility in the cryptocurrency markets.

AND CAPITAL RESOURCES

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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

During the year ended December 31, 2021, the Company sold a total of 466,791 shares of Common Stock under

the ATM Agreement for aggregate total gross proceeds of approximately $2,979,000 at an average selling price of $6.38 per share, resulting

in net proceeds of approximately $2,882,000 after deducting commissions and other transaction costs.

The Company’s financial

statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization

of assets, and liquidation of liabilities in the normal course of business.

Wainwright, shares of the Company’s Common Stock having an aggregate offering price of up to $98,767,500.

period September 14, 2021 through March 28, 2023, the Company sold a total of 2,934,433 shares of Common Stock under the ATM Agreement

for aggregate total gross proceeds of approximately $14,986,000 at an average selling price of $5.11 per share, resulting in net

proceeds of approximately $14,510,000 after deducting commissions and other transaction costs.

Company’s financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity

of operations, realization of assets, and liquidation of liabilities in the normal course of business.

is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate

on an ongoing basis.

At December 31, 2021, the Company had approximately $3.1 million of liquid Digital Assets (i.e.

non-staked) and

$1.4 million of cash compared to $1.0 million of liquid Digital Assets and $0.5 million cash at December 31, 2020.

December 31, 2021, we held approximately 90 bitcoins that composed a majority of our non-staked liquid Digital Asset balance.

believe we will need to sell any of our bitcoins within the next twelve months to meet our working capital requirements, although we

may from time to time sell bitcoins as part of treasury management operations, including to increase our cash balances.

The Bitcoin market

historically has been characterized by significant volatility in its price, limited liquidity and trading volumes compared to sovereign

currencies markets, relative anonymity, a developing regulatory landscape, susceptibility to market abuse and manipulation, and various

other risks inherent in its entirely electronic, virtual form and decentralized network.

During times of instability in the Bitcoin market,

we may not be able to sell our bitcoins at reasonable prices or at all.

As a result, our bitcoins are less liquid than our existing cash

and cash equivalents and may not be able to serve as a source of liquidity for us to the same extent as cash and cash equivalents.

addition, upon sale of our bitcoin, we may incur additional taxes related to any realized gains or we may incur capital losses as to

which the tax deduction may be limited.

We view our crypto asset

investments as long-term holdings and we do not plan to engage in regular trading of crypto assets.

During times of instability in the

market of crypto assets, we may not be able to sell our crypto assets at reasonable prices or at all.

As a result, our crypto assets

are less liquid than our existing cash and cash equivalents and may not be able to serve as a source of liquidity for us to the same

extent as cash and cash equivalents.

As of March 9, 2022,

the Company had approximately $3.0 million of cash and the fair market value of the Company’s liquid Digital Assets was

approximately $11.6 million.

The Company had no notes payable or any other long-term debt outstanding.

As of March 9, 2022, the

Company also has approximately $18.2 million available under the At the Market Offering Agreement over the next twelve months under

the Form S-3 baby shelf rules.

The Company believes that the existing cash and liquid Digital Assets held by us, in addition to the

funds available to the Company from the issuance of additional stock through the ATM Agreement, provide sufficient liquidity to meet

working capital requirements, anticipated capital expenditures and contractual obligations for at least the next twelve

Cash used in operating activities

was $4.9 million during the year ended December 31, 2021 compared to $3.0 million during the year ended December 31, 2020.

At December 31, 2022, the Company had approximately $2.1 million of cash.

view our crypto assets as long-term holdings and we do not plan to engage in regular trading of crypto assets.

Further certain of our

staked crypto assets may be locked up depending on a the specific blockchain protocol and we may be unable to unstake them in a timely

manner in order to liquidate to the extended desired.

During times of instability in the market of crypto assets, we may not be able

to sell our crypto assets at reasonable prices or at all.

As a result, our crypto assets may not be able to serve as a source of liquidity

for us to the same extent as cash and cash equivalents.

of March 28, 2023, the Company had approximately $1.5 million of cash and the fair market value of the Company’s liquid crypto

assets was approximately $3.6 million, which excludes $15.2 million of staked Ethereum.

The Company has no outstanding debt.

28, 2023, the Company also has approximately $6.5 million available under the ATM Agreement over the next twelve

months under the Form S-3 baby shelf rules, although, the amount that we may raise under the Form S-3 may increase or decrease based

upon our stock price.

The Company believes that the existing cash and liquid crypto assets held by us, in addition to the funds available

to the Company from the issuance of additional stock through the ATM Agreement, provide sufficient liquidity to meet working capital

requirements, anticipated capital expenditures and contractual obligations for at least the next twelve months.

used in operating activities was $0.8 million during the year ended December 31, 2022 compared to $4.9 million during the year ended

December 31, 2021.

used in investing activities was $9.0 million during the year ended December 31, 2022 compared to $9.5 million for the year ended December

Net cash outflow for investing activities was used primarily for the purchase of Digital Assets for blockchain infrastructure

Net cash outflow for investing activities was used primarily for the purchase of crypto assets for blockchain infrastructure

provided by financing activities was $10.5 million during the year ended December 31, 2022 compared to $15.2 million for the year ended

December 31, 2021.

This increase was primarily from proceeds from the issuance of:

Series C-2 convertible preferred stock ($1.1 million),

a convertible note ($1.0 million), Common Stock and warrants issued pursuant to the Purchase agreement ($8.7 million), Common Stock issued

pursuant to the Equity Line Purchase Agreement ($3.0 million), the cash exercise of warrants ($0.4 million), and the proceeds from the

Common Stock sold pursuant to the ATM Agreement ($2.8 million).

This was partially offset by $2 million repayment of convertible notes

during the year.

The Company has plans to continue to raise proceeds from the sale of Common Stock and issuance of debt to fund operations

The cash inflows from financing activities in Fiscal 2022 were primarily from proceeds of Common Stock sold pursuant

to the ATM Agreement ($11.1 million).

This was partially offset by a one-time return of capital distribution of $631,000 made to record

holders as of March 17, 2022.

The Company has plans to continue to raise proceeds from the sale of Common Stock to fund operations as

Balance Sheet Transactions

of December 31, 2021, there were no off balance sheet arrangement and we were not a party to any off-balance sheet transactions.

no guarantees or obligations other than those which arise out of normal business operations.

of December 31, 2022, there were no off-balance sheet arrangements and we were not a party to any off-balance sheet transactions.

have no guarantees or obligations other than those which arise out of normal business operations.

ACCOUNTING POLICIES AND ESTIMATES

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discussion and analysis:

Treatment of Digital Assets

Company accounts for its Digital Assets as indefinite-lived intangible assets in accordance with ASC 350, Intangibles –Goodwill

Treatment of Crypto Assets

Company accounts for its crypto assets as indefinite-lived intangible assets in accordance with ASC 350, Intangibles –Goodwill

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

10 unchanged sentences

Subsequent reversal of impairment losses is not permitted.

Assets held are included in the balance sheets as either current assets or other assets if they are staked and locked up for over one

The Company’s Digital Assets are initially recorded at fair value upon receipt (or “carrying value”).

value of Digital Assets is determined using the average U.S.

dollar spot price of the related Digital Asset.

On a quarterly basis, Digital

Assets are measured at carrying value, net of any impairment losses incurred since receipt.

The Company will record impairment losses

as the fair value falls below the carrying value of the Digital Assets at any time during the period, as determined using the lowest

dollar spot price of the related Digital Asset subsequent to its acquisition.

The Digital Assets can only be marked down when impaired

and not marked up when their value increases.

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

recorded impairment losses of approximately $3.8 million and $0.2 million related to Digital Assets during the years ended December 31,

2021 and December 31, 2020, respectively.

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

The Company’s crypto assets are initially recorded at fair value upon receipt (or “carrying value”).

fair value of crypto assets is determined using the U.S.

dollar spot price of the related crypto asset subsequent to its

On a quarterly basis, crypto assets are measured at carrying value, net of any impairment losses incurred since

The Company will record impairment losses as the fair value falls below the carrying value of the crypto assets at any time

during the period, as determined using the lowest U.S.

dollar spot price of the related crypto asset subsequent to its acquisition.

The crypto assets can only be marked down when impaired and not marked up when their value increases.

impairment in the value of crypto assets is recorded as a component of costs and expenses in our statements of operations.

recorded impairment losses of approximately $13.3 million and $3.8 million related to crypto assets during the years ended December 31,

2022 and 2021, respectively.

losses cannot be recovered for any subsequent increase in fair value until the sale or disposal of the asset.

Realized gain (loss) on

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

sale of crypto assets are included in other income (expense) in the statements of operations.

The Company recorded realized gains (losses)

on Digital Assets of approximately $3.1 million and ($2,000) during the years ended December 31, 2021 and December 31, 2020, respectively.

presentation of purchases and sales of Digital Assets on the Statement of Cash Flows is determined by the nature of the Digital Assets,

on crypto assets of approximately $0.5 million and $3.1 million during the years ended December 31, 2022 and 2021, respectively.

presentation of purchases and sales of crypto assets on the Statement of Cash Flows is determined by the nature of the crypto assets,

which can be characterized as productive (i.e.

purchased for purposes of staking) or non-productive.

The purchase of non-productive Digital

Assets and currencies are included as an operating activity, whereas the purchase of productive Digital Assets and currencies are included

The purchase of non-productive crypto

assets and currencies are included as an operating activity, whereas the purchase of productive crypto assets and currencies are included

as investing activities in accordance with ASC 230-10-20 Investing activities.

Productive Digital Assets that are staked with

a lock-up period of less than 12 months are presented on the Balance Sheet as current assets.

Staked Digital Assets with remaining lock-up

Productive crypto assets that are staked with a

lock-up period of less than 12 months are presented on the Balance Sheet as current assets.

Staked crypto assets with remaining lock-up

periods of greater than 12 months are presented as long-term other assets on the Balance Sheet.

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The Company generates revenue through staking rewards.

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.

The Company has entered into network-based

smart contracts by running its own crypto asset validator nodes (or “nodes”) as well as by staking crypto assets on nodes

run by third-party operators (either directly or through crypto exchanges).

Through these contracts, the Company provides cryptocurrency

to stake on 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 canceled by the

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

In exchange for staking

the cryptocurrency and validating transactions on blockchain networks, the Company is entitled to all of the fixed cryptocurrency award

for running the Company’s own node and is entitled to a fractional share of the fixed cryptocurrency award a third-party node operator

receives (less crypto asset transaction fees payable to the node operator or exchanges, which are immaterial and are recorded as a deduction

from revenue), for successfully validating or adding a block to the blockchain.

The Company’s fractional share of awards received

from delegating to a third-party validator node is based on the proportion of cryptocurrency the Company staked to the node to the total

cryptocurrency staked by delegators to the node.

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

2 unchanged sentences

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 cryptocurrency award – 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

3 unchanged sentences

Company accounts for stock-based compensation in accordance with ASC 718 Compensation - Stock Compensation (“ASC 718”).

718 addresses all forms of share-based payment (“SBP”) awards including shares issued under employee stock purchase plans

718 addresses all forms of share-based payment awards including shares issued under employee stock purchase plans

and stock incentive shares.

2 unchanged sentences

payment awards exchanged for services are accounted for at the fair value of the award on the estimated grant date.

Stock options issued

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

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

These options often vest over a one-year

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

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

These options 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

1 unchanged sentence

of management’s judgment.

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

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

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

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

Treasury zero-coupon issues

with an equivalent remaining term.

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

Historical volatility

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

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

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

for the expected term of the option.

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

to be outstanding.

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

The Company uses

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

Dividend - The Company has not historically declared or paid any cash dividends on its common shares and does not plan to pay any

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

Stock Units (RSUs)

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.

Stock-based compensation expense for the market-based restricted stock units with explicit service conditions

is recognized on a straight-line basis over the longer of the derived service period or the explicit service period, regardless of whether

the market condition is satisfied.

However, in the event that the explicit service period is not met, previously recognized compensation

cost would be reversed.

Market-based restricted stock units subject to market-based performance targets require achievement of the performance

target as well as a service condition in order for these RSUs to vest.

Company estimates the fair value of market-based RSUs as of the grant date and expected derived term using a Monte Carlo simulation that

incorporates pricing inputs covering the period from the grant date through the end of the derived service period.

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

Historical volatility

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

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

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

for the expected term of the RSUs.

Term - The Company’s expected term represents the weighted-average period that the Company’s RSUs are expected to be

The expected term is based on the stipulated 5-year period from the grant date until the market-based criteria are achieved.

If the market-based criteria are not achieved within the five-year period from the grant date, the RSUs will not vest and shall expire.

Hurdle Price - The vesting hurdle prices are determined by taking the vesting Market Cap criteria divided by the shares outstanding

as of the valuation dates.

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

5 unchanged sentences

Note 3 to the financial statements for a discussion of recent accounting standards and pronouncements.

COVID-19 pandemic has created significant national and global economic disruptions, which may adversely affect our business.

based on our current assessment, we do not expect any material impact on our long-term development, our operations, or our liquidity

due to the worldwide spread of COVID-19.

We are actively monitoring this situation and the possible effects on its financial condition,

liquidity, operations, suppliers, and the industry.

addition to the impacts of COVID-19, we have experienced, and are experiencing, the impact of domestic and global inflationary pressures

largely outside of our control.

This inflationary pressure impacts our cost structure, leading to operational adjustments, and increasing

the cost of retaining talent and certain professional costs, despite our continued focus on controlling our costs where

Management is unable to accurately predict when, or if, these national and global inflationary pressures will subside, or their

long-term impacts on our business and results of operations.

We are actively monitoring the situation and assessing potential mitigation

are numerous and varied risks, known and unknown, that may prevent us from achieving our goals.

3 unchanged sentences

Common Stock could decline and investors could lose all or part of their investment.

Our business is subject to numerous risks and uncertainties that you

should consider before investing in our common stock.

Set forth below is a summary of the principal risks we face:

We have a limited operating

history, particularly with respect to our developing blockchain infrastructure solutions business, Digital Asset platform and potential

staking-as-a -service operations

We have a history of

operating losses and expect to continue to experience operating losses in future periods.

We have an evolving

business model which we may be unable to develop, adapt or execute effectively, and we may be unable to manage our growth or implement

our business plan as intended or at all.

We are highly dependent

on our executive officers, particularly Charles Allen, our Chairman and Chief Executive Officer, and Michal Handerhan, our Chief

Operating Officer, and the loss of the services of these individuals or other key personnel could materially harm our business.

Our critical accounting

policies may prove to be incorrect, we may need to implement additional finance and accounting systems, procedures and controls,

and we face challenges inherent in operating a Digital Asset business which is subject to evolving accounting treatment for which

there is limited precedent.

We may be subject to

regulatory actions, private causes of actions such as intellectual property infringement claims, and restrictions and limited access

to baking and financial services due to our operations in the Digital Asset industry.

We face uncertainty

arising from large scale events including the recent Omicron variant of the COVID-19 virus and Russia’s invasion of Ukraine.

A particular Digital

Asset’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty, and if

we are unable to correctly characterize a Digital Asset, we may be subject to regulatory scrutiny, investigations, fines, sanctions,

business is subject to numerous risks and uncertainties that you should consider before investing in our common stock.

Set forth below

is a summary of the principal risks we face:

have a limited operating history, particularly with respect to our developing blockchain infrastructure solutions business, Digital

Asset Platform and staking-as-a -service operations.

have a history of operating losses and expect to continue to experience operating losses in future periods.

have an evolving business model which we may be unable to develop, adapt or execute effectively, and we may be unable to manage our

growth or implement our business plan as intended or at all.

are highly dependent on our executive officers, particularly Charles Allen, our Chairman and Chief Executive Officer, Michal

Handerhan, our Chief Operating Officer, Michael Prevoznik, our Chief Financial Officer, and Manish Paranjape, our Chief Technology

Officer, and the loss of the services of these individuals could materially harm our business.

may be subject to regulatory actions, private causes of actions such as intellectual property infringement claims, and restrictions

and limited access to baking and financial services due to our operations in the cryptocurrency industry, and regulatory or other

adverse developments in the cryptocurrency industry could otherwise adversely affect us.

Because of our involvement in staking of crypto

assets through use of our Digital Asset Platform, we are subject to risks inherent in engaging in activities involving financial instruments

owned by third party users, notwithstanding the non-custodial nature of our platform or other features management believes to constitute

meaningful distinctions for regulatory, compliance and other purposes.

particular crypto asset’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty,

and if we are unable to correctly characterize a crypto asset, we may be subject to regulatory scrutiny, investigations, fines, sanctions,

penalties and other adverse consequences, including potentially becoming subject to the Investment Company Act of 1940 which would

impose significant regulatory burdens and compliance costs.

Digital Assets and our

related activities are characterized by numerous other risks and uncertainties, including the possibility for adverse regulatory

developments such as bans or restrictions, theft, fraud, hacking, manipulation or malicious coding, price volatility, inaccurate

mining pool calculations, the potential for one cryptocurrency to branch into two, variations among and the potential for adverse

changes to blockchain algorithms, and other external forces beyond our control described more fully below.

The future development

and growth of Digital Assets such as cryptocurrencies is subject to a variety of factors that are difficult to predict and evaluate,

and the market for the Digital Assets we obtain and hold may not grow as we expect or the prices may decline, including due to political

Crypto assets and our related activities are characterized by numerous

other risks and uncertainties, including the possibility for adverse developments such as regulatory actions, bans or restrictions, declines

in the price of, demand for or public perception of crypto assets, theft, fraud, hacking, manipulation or malicious coding, price volatility,

the potential for one cryptocurrency to branch into two, variations among and the potential for adverse changes to blockchain algorithms,

and other external forces beyond our control described more fully below.

future development and growth of cryptocurrencies is subject to a variety of factors that are difficult to predict and evaluate,

and the market for the crypto assets we obtain and hold may not grow as we expect or the prices may decline, including due to political

or economic crises or other factors which we neither predict nor control.

The Digital Asset space

is subject to continuous regulatory uncertainty, and any adverse regulatory changes or other developments with respect to our operations

or the Digital Assets with which we transact may require us to alter our business model or suspend or cease some or all of our operations.

Our focus on PoS blockhain

networks exposes us to risk of loss due to features unique to those networks, including by virtue of being locked in by smart contracts

such that we cannot liquidate a portion of the relevant Digital Assets for a period of time during and after the staking process,

during which the price or value of the Digital Assets may depreciate.

We are reliant on a

single service provider for cloud computing infrastructure deployed in our blockchain infrastructure solutions business, and are

therefore exposed to the risks which may arise from potential adverse developments that may be caused or experienced by such service

Our Digital Asset platform

is still under development and may never be commercialized, and its current or potential additional functions may expose us to additional

risks such as cybersecurity threats and the application of data privacy and security laws which are onerous, and could give rise

to penalties, compliance costs and other losses or expenses.

Our stock price may

be subject to significant volatility due to a variety of factors, many of which are beyond our control, including its potential connection

to the price of one or more of the Digital Assets with which we are or may become involved.

Related to Our Company

We have a limited operating history, particularly

with respect to our new blockchain infrastructure operations which recently commenced and our planned platform and potential Staking-as-a-Service

operations that are still under development, and we have a history of operating losses, and expect to incur significant additional

operating losses.

We have a limited operating history,

and only recently commenced our new blockchain infrastructure operations in 2021.

Further, we lack an operating history with respect

to our planned additional Digital Asset Platform functions and a potential separate Staking-as-a-Service operations, each

of which are still in the development stages and may never be fully developed and commercialized as intended or at all.

the PoS blockchain networks on which our operations are centered are a relatively new and evolving means of validating Digital Asset

transactions.

Therefore, there is limited historical financial information upon which to base an evaluation of our performance.

prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in

their early stages of operations in general, and in the Digital Assets industry in particular with itself remains a relatively

new space imbued with risk and uncertainty.

We have generated net losses of $16.0 million and $2.6 million for the years ended December

31, 2021 and 2020, respectively.

We expect to incur additional net losses over the next several years as we seek to expand operations.

cryptocurrency space is subject to continuous regulatory uncertainty, and any adverse regulatory changes or other developments with

respect to our operations or the crypto assets with which we transact may require us to alter our business model or suspend or cease

some or all of our operations.

focus on PoS blockchain networks exposes us to risk of loss due to features unique to those networks, including by virtue of being

locked in by smart contracts such that we cannot liquidate a portion of the relevant crypto assets for a period of time during and

after the staking process, during which the price or value of the crypto assets may depreciate.

are reliant on a single service provider for cloud computing infrastructure deployed in our blockchain infrastructure solutions business,

and are therefore exposed to the risks which may arise from potential adverse developments that may be caused or experienced by such

service provider.

critical accounting policies may prove to be incorrect, we may need to implement additional finance and accounting systems, procedures

and controls, and we face challenges inherent in operating a crypto assets business which is subject to evolving accounting treatment

for which there is limited precedent.

stock price may be subject to significant volatility due to a variety of factors, many of which are beyond our control, including its

potential connection to the price of one or more of the crypto assets with which we are or may become involved.

Related to Our Company in General

have a limited operating history, particularly with respect to our new blockchain infrastructure operations which recently commenced

and our platform and staking-as-a-service business model, and we have a history of operating losses, and expect to incur significant

additional operating losses.

have a limited operating history, and only recently commenced our new blockchain infrastructure operations in 2021.

Further, we lack

an operating history with respect to our crypto asset analytics and staking-as-a-service platform’s functions and operations.

In addition, the PoS blockchain networks on which our operations are centered are a relatively new and evolving means of validating

crypto asset transactions.

Therefore, there is limited historical financial information upon which to base an evaluation of our

Our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently

encountered by companies in their early stages of operations in general, and in the cryptocurrency industry in particular with

itself remains a relatively new space imbued with risk and uncertainty.

We have generated net losses of $15.9 million and $16.0

million for the years ended December 31, 2022 and 2021, respectively.

We expect to incur additional net losses over the next several

years as we seek to expand operations.

The amount of future losses and when, if ever, we will achieve profitability are uncertain.

If we are unsuccessful at executing on our

business plan, our business, prospects, and results of operations may be materially adversely affected.

If we are unsuccessful at executing our business plan, our business, prospects, and results of operations may be materially

adversely affected.

have an evolving business model which we may be unable to develop, adapt or execute effectively.

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

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

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

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

well as applicable state securities laws.

As a result, to stay current with the industry, our business model may need to evolve in the

future as well.

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

example, a main component of our current business objective is developing a comprehensive Digital Asset analytics platform which enables

users to perform or utilize a variety of functions related to Digital Assets, such as portfolio monitoring, risk assessment and potentially

tax preparation all in one place in the hopes of attracting, maintaining and growing a customer base in the long term.

However, our investments

into and efforts with respect this goal may not come to fruition, including due to adverse developments in regulatory, technological,

competitive or other aspects that are beyond our control.

We cannot offer any assurance that our current business plan or any other modifications

or undertakings with respect thereto will be successful or will not result in harm to the business.

In addition, we may not be able to

manage our growth effectively, which could damage our reputation, limit our growth and negatively affect our operating results.

are unable to effectively develop, execute and adjust our business plan, or successfully manage our growth, you could lose some or all

of your investment.

crypto assets and blockchain technologies become more widely available, we expect the services and products associated with them to

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

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

“Exchange Act”).

More recently, the SEC has brought enforcement actions with respect to crypto assets and related

activities, including custodial staking-as-a-service models, as more particularly described later in these Risk Factors.

future developments may force or cause us to potentially change our future business in order to comply fully with the federal

securities laws as well as applicable state securities laws.

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

need to evolve in the future as well.

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

service offerings.

For example, a main component of our current business objective is developing a comprehensive crypto asset

analytics and staking-as-a-service platform which enables users to perform or utilize a variety of functions related to crypto

assets, such as portfolio monitoring, and risk assessment all in one place in the hopes of attracting, maintaining and growing a

customer base in the long term.

However, our investments into and efforts with respect to this goal may not come to fruition,

including due to adverse developments in regulatory, technological, competitive or other aspects that are beyond our control.

cannot offer any assurance that our current business plan or any other modifications or undertakings with respect thereto will be

successful or will not result in harm to the business.

In addition, we may not be able to manage our growth effectively, which could

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

If we are unable to effectively develop,

execute and adjust our business plan, or successfully manage our growth, you could lose some or all of your investment.

loss of our executive officers could have a material adverse effect on us.

success depends on the continued services of our executive officers, particularly Charles Allen, our Chairman and Chief Executive Officer,

and Michal Handerhan, our Chief Operating Officer, who have extensive market knowledge and long-standing industry relationships.

In particular,

our reputation among and our relationships with key Digital Asset industry leaders are the direct result of a significant investment

Our success depends on the continued services of our executive officers

who have extensive technological and market knowledge and long-standing industry relationships.

In particular, we have relied and will

continue to rely on Charles Allen, our Chairman and Chief Executive Officer, Michal Handerhan, our Chief Operating Officer, Michael Prevoznik,

our Chief Financial Officer, and Manish Paranjape, our Chief Technology Officer, to continue and grow our operations and execute our business

Our reputation among and our relationships with key cryptocurrency industry leaders are the direct result of a significant investment

of time and effort by these individuals to build our credibility in a highly specialized industry.

The loss of services of either Charles

Allen or Michal Handerhan, could diminish our business and growth opportunities and our relationships with key leaders in the Digital

Asset industry and could have a material adverse effect on us.

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

to satisfy new reporting requirements .

We are required to comply with

a variety of reporting, accounting and other rules and regulations.

Compliance with existing requirements is expensive.

We may need to

implement additional finance and accounting systems, procedures and controls to satisfy our reporting requirements and such further requirements

may increase our costs and require additional management time and resources.

For example, many Digital Assets, including those on PoS

blockchain networks with which we are or may become involved, demonstrate novel and unique accounting challenges, including due to smart

contracts affecting the underlying Digital Assets.

For the fiscal year ended December 31, 2020, our internal control over financial

reporting was determined to be ineffective, and while management believes the deficiencies have been remediated as of December 31, 2021,

similar deficiencies could arise in the future.

Any such deficiencies, should they arise, could cause investors to lose confidence

in our reported financial information, negatively affect the market price of our Common Stock, subject us to regulatory investigations

and penalties, and adversely impact our business and financial condition.

in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could

significantly affect our financial results .

accepted accounting principles and related accounting pronouncements, implementation guidelines and interpretations with regard to a

wide range of matters that are relevant to our business, including but not limited to revenue recognition, estimating valuation allowances

and accrued liabilities (including allowances for returns, credit card chargebacks, doubtful accounts and obsolete and damaged inventory),

internal use software and website development (acquired and developed internally), accounting for income taxes, valuation of long-lived

and intangible assets and goodwill, stock-based compensation and loss contingencies, are highly complex and involve many subjective assumptions,

estimates and judgments by our management.

Additional complexities can arise with respect to Digital Asset operations.

Changes in these

rules or their interpretation or changes in underlying assumptions, estimates or judgments by our management could significantly change

our reported or expected financial performance.

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

will be required to account for Digital Asset transactions in the future.

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

we will be required to account for Digital Asset transactions or assets.

Furthermore, a change in regulatory or financial accounting

standards could result in the necessity to restate our financial statements as has happened in the past.

Such a restatement could negatively

impact our business, prospects, financial condition and results of operation.

our estimates or judgment relating to our critical accounting policies prove to be incorrect, our operating results could be adversely

preparation of financial statements in conformity with generally accepted accounting principles, or GAAP, requires management to make

estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

We base our estimates

on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the

section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting

Policies and Estimates” in Part II, Item.

7 of this Annual Report on Form 10-K.

The results of these estimates form the

basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses that

are not readily apparent from other sources.

Significant estimates and judgments involve the identification of performance obligations

in revenue recognition, evaluation of tax positions, and the valuation of stock-based awards and Digital Assets we hold, among

Our operating results may be adversely affected if our assumptions change or if actual circumstances differ from those in our

assumptions, which could cause our operating results to fall below the expectations of analysts and investors, resulting in a decline

in the trading price of our Common Stock.

are subject to the information and reporting requirements of the Exchange Act), and other federal securities laws, including compliance

with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).

costs of preparing and filing annual and quarterly reports and other information with the SEC and furnishing audited reports to shareholders

will cause our expenses to be higher than they would have been if we were privately held.

It may be time consuming, difficult and costly

for us to develop, implement and maintain the internal controls and reporting procedures required by the Sarbanes-Oxley Act.

to hire additional financial reporting, internal controls and other finance personnel in order to develop and implement appropriate internal

controls and reporting procedures.

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

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

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

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

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

As a public company, we also expect

that these rules and regulations will make it more difficult and expensive for us to obtain director and officer liability insurance

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

or similar coverage.

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

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

may be accused of infringing intellectual property rights of third parties.

may be subject to legal claims of alleged infringement of the intellectual property rights of third parties.

We expect this risk to increase

as we continue to develop and roll-out additional functions in our Digital Asset Platform and potential StaaS operations in the future.

The ready availability of damages, royalties and the potential for injunctive relief has increased the defense litigation costs of patent

infringement claims, especially those asserted by third parties whose sole or primary business is to assert such claims.

even if not meritorious, may result in significant expenditure of financial and managerial resources, and the payment of damages or settlement

Additionally, we may become subject to injunctions prohibiting us from using software or business processes we currently use

or may need to use in the future or requiring us to obtain licenses from third parties when such licenses may not be available on financially

feasible terms or terms acceptable to us or at all.

In addition, we may not be able to obtain on favorable terms, or at all, licenses

or other rights with respect to intellectual property we do not own in providing ecommerce services to other businesses and individuals

under commercial agreements.

The loss of services of any of our

executive officers could diminish our business and growth opportunities and our relationships with key leaders in the crypto asset industry

and could have a material adverse effect on us.

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

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

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

Similarly, a number of companies and

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

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

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

We also may be unable to obtain or

maintain these services for our business.

The difficulty that many businesses that provide Bitcoin and/or derivatives on other cryptocurrency-related

activities have and may continue to have in finding banks and financial institutions willing to provide them services may be decreasing

the usefulness of cryptocurrencies as a payment system and harming public perception of cryptocurrencies, and could decrease their usefulness

and harm their public perception in the future.

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

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

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

The risk applies to securities firms, clearance

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

Company, which, if any of such entities adopts or implements similar policies, rules or regulations, could negatively affect our relationships

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

Such factors could have a material

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

on our business, prospects or operations and harm investors.

of the uncertainty arising from the recent strain of the COVID-19 virus, we may sustain a material adverse effect on our business, results

of operations, financial condition and future prospects depending upon a variety of factors.

global COVID-19 pandemic and the unprecedented actions taken by U.S.

federal, state and local governments and governments around the

world in order to stop the spread of the virus had a profound impact on the U.S.

and global economy, disrupting global supply chains

and creating significant volatility in the oil and gas markets.

according to the information of the U.S.

Bureau of Economic Analysis, the U.S.

economy recovered to pre-pandemic levels in the second

quarter of 2021 as vaccine rollout and federal aid fueled a surge in consumer spending, there is no guarantee that this growth

will be sustained or will not be reversed as the result of the emergence of new variants of the virus, which could be significantly more

contagious and cause more severe symptoms, including the Omicron variant.

The spread of the Omicron variant and the surge in infections

has in the past and may in the future create adverse effects upon our economy and our business.

For example, the pandemic, including

the recent Omicron variant, has delayed our development efforts with respect to out Digital Asset Platform.

It is difficult to project

how the pandemic will affect us in the future and whether it will have adverse effects upon the economy or the Company.

Because of the Russian

invasion of Ukraine, the effect on the capital markets and the economy is uncertain, we may have to deal with a recessionary economy

and economic uncertainty including possible adverse affects upon the Digital Asset market and our Common Stock.

As a result of the

Russian invasion of Ukraine, certain events are beginning to affect the global and U.S.

economy including increased inflation,

substantial increases in the prices of oil and gas, large Western companies ceasing to do business in Russia and uncertain capital

markets with declines in leading market indexes.

The duration of this war and its impact are at best uncertain and continuation may result in Internet access issues if Russia, for example,

began illicit cyber activities.

Ultimately the

economy may turn into a recession with uncertain and potentially severe impacts upon our industry.

We cannot predict how this will

affect our business, our Common Stock price or the market for Digital Assets but the impact may be adverse.

Related to Digital Assets

A particular Digital Asset’s status

as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty and if we are unable to properly

characterize a Digital Asset, we may be subject to regulatory scrutiny, investigations, fines, and other penalties, which may

adversely affect our business, operating results, and financial condition.

SEC and its staff have taken the position that certain Digital Assets fall within the definition of a “security” under

activities, and turmoil among financial institutions arising from or relating

to crypto assets or in general can materially adversely affect us and our industry.

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

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

Similarly, a number of companies and individuals

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

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

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

More recent government action in the U.S.

involving crypto

assets and related activities may cause this trend to expand in the U.S.

We also may be unable to obtain or maintain these services for

our business.

Many businesses that provide cryptocurrency-related activities may continue to have difficulties in finding banks and financial

institutions willing to provide them services which may decrease the usefulness of cryptocurrencies as a payment system and harm public

perception of cryptocurrencies, and could decrease their usefulness.

in March 2023 two large financial institutions in the U.S., Silicon Valley Bank and Signature Bank, which both serviced customers involved

with crypto assets, collapsed as continued negative economic prospects and failures to obtain payment from borrowers, together with a

large number of withdrawals, caused these banks to encounter substantial financial difficulty leading up to their failures.

to these events, the Federal Deposit Insurance Corporation (“FDIC”) transferred all the deposits, both insured and uninsured,

of these banks to corresponding “bridge banks” operated by the FDIC as it markets the institution to potential bidders.

the impact of these developments on the Company and on the crypto asset industry and the economy in general remain unclear, it is possible

that these events underscore a broader financial crisis facing the country, in which crypto assets may have played and/or have yet to

In the wake of these collapses, the U.S.

capital markets and the prices of equity securities and crypto assets have faced

significant volatility as investors continue to evaluate these events and how they may interact with other ongoing issues with the U.S.

economy, including inflation and Federal Reserve interest rate increases.

The usefulness of cryptocurrencies

as a payment system and the public perception of cryptocurrencies could be damaged if banks or financial institutions were to close the

accounts of businesses engaging in cryptocurrency-related activities, which contingencies may become more likely

in the future if and to the extent crypto assets are considered a significant factor in the recent financial collapses experienced by

the major banks as described above.

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

risk applies to securities firms, clearance and settlement firms, national stock and derivatives on commodities exchanges, the over-the-counter

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

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

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

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

Related to Crypto Assets

particular crypto asset’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty,

with a growing number of regulators taking the position that certain crypto assets are securities and bringing enforcement actions accordingly,

and if we are unable to properly characterize a crypto asset or comply with the applicable regulatory requirements, we may be subject

to regulatory scrutiny, investigations, fines, and other penalties, which may adversely affect our business, operating results, and financial

SEC and its staff have taken the position that certain crypto assets fall within the definition of a “security” under the

federal securities laws.

The legal test for determining whether any given Digital Asset is a security is a highly complex,

fact-driven analysis that evolves over time, and the outcome is difficult to predict.

The SEC generally does not provide advance guidance

or confirmation on the status of any particular Digital Asset as a security.

Furthermore, the SEC’s views in this area have evolved

over time and it is difficult to predict the direction or timing of any continuing evolution.

It is also possible that a change in the

governing administration or the appointment of new SEC commissioners could substantially impact the views of the SEC and its staff.

statements by senior officials at the SEC indicate that the SEC does not intend to take the position that Bitcoin or Ethereum are securities

(in their current form).

Bitcoin and Ethereum are the only Digital Assets as to which senior officials at the SEC have publicly

expressed such a view.

Moreover, such statements are not official policy statements by the SEC and reflect only the speakers’ views,

which are not binding on the SEC or any other agency or court and cannot be generalized to any other Digital Asset.

to all other Digital Assets, there is currently no certainty under the applicable legal test that such assets are not securities,

notwithstanding the conclusions we may draw based on our risk-based assessment regarding the likelihood that a particular Digital

Asset could be deemed a “security” under applicable laws.

Similarly, though the SEC’s Strategic Hub for Innovation

and Financial Technology published a framework for analyzing whether any given Digital Asset is a security in April 2019, this

framework is also not a rule, regulation or statement of the SEC and is not binding on the SEC.

foreign jurisdictions have taken a broad-based approach to classifying Digital Assets as “securities,” while other

foreign jurisdictions, such as Switzerland, Malta, and Singapore, have adopted a narrower approach.

As a result, certain Digital Assets

may be deemed to be a “security” under the laws of some jurisdictions but not others.

Various foreign jurisdictions may,

in the future, adopt additional laws, regulations, or directives that affect the characterization of Digital Assets as “securities,”

classification of a Digital Asset as a security under applicable law has wide-ranging implications for the regulatory obligations

that flow from the offer, sale, trading, and clearing of such assets.

For example, a Digital Asset that is a security in the U.S.

may generally only be offered or sold in the U.S.

pursuant to a registration statement filed with the SEC or in an offering that qualifies

for an exemption from registration.

Persons that effect transactions in Digital Assets that are securities in the U.S.

subject to registration with the SEC as a “broker” or “dealer.” Platforms that bring together purchasers and

sellers to trade Digital Assets that are securities in the U.S.

are generally subject to registration as national securities exchanges,

or must qualify for an exemption, such as by being operated by a registered broker-dealer as an alternative trading system, or ATS, in

compliance with rules for ATSs.

Persons facilitating clearing and settlement of securities may be subject to registration with the SEC

as a clearing agency.

Foreign jurisdictions may have similar licensing, registration, and qualification requirements.

While we do not currently, nor

do we plan to, offer, sell, trade, and clear Digital Assets or take custody of others Digital Assets as part of any potential

Staking-as-a-Service operations we may undertake, however, Digital Assets we stake and validate transactions for could

be deemed to be a “security” under applicable laws.

Our blockchain infrastructure operations which entails securing blockchains

by processing and validating blockchain transactions (most analogous to Bitcoin mining or operating a Bitcoin mining pool) could be construed

as facilitating transactions in Digital Assets;

as such we could be subject to legal or regulatory action in the event the SEC, a foreign

regulatory authority, or a court were to determine that a blockchain we secure is a “security” under applicable laws.

our platform is not registered or licensed with the SEC or foreign authorities as a broker-dealer, national securities exchange, or ATS

(or foreign equivalents), and we do not seek to register or rely on an exemption from such registration or license to secure blockchains.

are currently seeking legal guidance on the implications of running public validator nodes for delegated proof-of-stake blockchains.

Pending that determination, we have disabled the blockchain networks we secure from making payouts to those who delegate to our validator

nodes and do not plan to enable such payments unless and until we have received satisfactory legal guidance.

We believe that this

plan reflects a comprehensive and thorough process to facilitate the application of legal guidance once available to Digital Assets

to make an informed risk-based business judgment.

However, we recognize that the application of securities laws to the specific facts

and circumstances of Digital Assets is a complex and often unpredictable process and subject to change, and staking and securing

a blockchain, while similar to Bitcoin mining, does not guarantee any conclusion under the U.S.

federal securities laws, particularly

given that each Digital Asset and blockchain network is unique.

Therefore, if we do conclude that a particular Digital Asset is not a

security on advice of our legal counsel, and the SEC or other government agencies or courts disagree with this assessment, we could be

held liable for violation of securities laws.

In addition, new laws may be implemented that prevent or hinder us from operating in the

manner we currently conduct our business or plan to conduct our business, in which case our business may be materially harmed.

Further, if any Digital Asset

is deemed to be a security under any U.S.

federal, state, or foreign jurisdiction, or in a proceeding in a court of law or otherwise,

it may have adverse consequences for such Digital Asset.

For instance, the networks on which such Digital Assets are utilized

may be required to be regulated as securities intermediaries, and subject to applicable rules, which could effectively render the network

impracticable for its existing purposes.

Further, it could draw negative publicity and a decline in the general acceptance of the Digital

Also, such a development may make it difficult for such supported Digital Asset to be traded, cleared, and custodied

as compared to other Digital Asset that are not considered to be securities.

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

The legal test for determining whether any given crypto asset is a security is a highly complex, fact-driven

analysis that evolves over time, and the outcome is difficult to predict.

The SEC generally does not provide advance guidance or confirmation

on the status of any particular crypto asset as a security.

Furthermore, the SEC’s views in this area have evolved over time, and

the SEC’s Enforcement Division have recently demonstrated a willingness and intention to bring actions against businesses with

a crypto asset focus, including for failure to register transactions involving crypto assets under the federal securities laws by deeming

such crypto assets to be securities.

For example, in February 2023 the SEC charged Kraken with failing to register the offer and sale

of its staking-as-a-service program, whereby investors transfer crypto assets to Kraken for staking in exchange for advertised annual

investment returns.

Kraken settled this action by agreeing to cease its custodial staking business and to pay $30 million in disgorgement,

prejudgment interest and civil penalties.

While there are material distinctions between Kraken’s staking model and ours, including

the fact that we do not take custody of or exert control over the crypto assets that are staked using our platform, the SEC could disagree

with our assessment and seek to enforce the federal securities laws and regulations against our operations.

Similarly, in March 2023

the New York Attorney General became the first U.S.

regulator to claim in court that Ethereum, one of the major crypto assets which we

hold and stake, is a security in its lawsuit against KuCoin, a crypto asset exchange.

If we become subject to regulatory scrutiny or

enforcement actions by securities regulators, it could result in expensive litigation and penalties and cessation of the allegedly noncompliant

operations, which would materially adversely harm us, including due to our recent shift of focus to our non-custodial staking-as-a-service

business and the costs and efforts deployed towards its development.

These or additional developments that may arise underscore the risks

in our business, particularly its reliance on the use of crypto assets and staking of users’ crypto asset holdings.

certain crypto assets may be deemed to be a “security” under the laws of some jurisdictions but not others.

Various foreign

jurisdictions may, in the future, adopt additional laws, regulations, or directives that affect the characterization of crypto assets

as “securities.” As a result of the foregoing recent and potential developments, we may be forced to, or voluntarily elect

to, limit, suspend or cease our staking services operations or certain aspects thereof in order to comply with applicable laws and regulations

and avoid the regulatory scrutiny and adverse consequences that could result.

Further, because of how recent these government actions

are and the high probability that further action is forthcoming, we anticipate higher compliance costs and diversion of management’s

limited time and attention towards these events until a more definitive regulatory regime is established to govern the crypto asset industry

in which we operate.

we do not currently, nor do we plan to, offer, sell, trade, and clear crypto assets or take custody of crypto assets as part of any potential

staking-as-a-service operations we may undertake, crypto assets we stake and validate transactions for could be deemed to be a “security”

under applicable laws.

This could be the case even if we conclude that our activities are compliant with these laws and regulations.

Our blockchain infrastructure operations which entails securing blockchains by validating blockchain transactions (most analogous to

Bitcoin mining) could be construed as facilitating transactions in crypto assets;

as such we could be subject to legal or regulatory

action in the event the SEC, a foreign regulatory authority, or a court were to determine that a blockchain we secure is a “security”

under applicable laws.

Because our platform is not registered or licensed with the SEC or foreign authorities as a broker-dealer, national

securities exchange, or ATS (or foreign equivalents), and we do not seek to register or rely on an exemption from such registration or

license to secure blockchains.

We recognize that the application of securities laws to the specific facts and circumstances of crypto

assets is a complex and often unpredictable process and subject to change, and staking and securing a blockchain, while similar to Bitcoin

mining, does not guarantee any conclusion under the U.S.

federal securities laws, particularly given that each crypto asset and blockchain

network is unique.

Therefore, if we do conclude that a particular crypto asset is not a security on advice of our legal counsel, and

the SEC or other government agencies or courts disagree with this assessment, we could be held liable for violation of securities laws.

In addition, new laws may be implemented that prevent or hinder us from operating in the manner we currently conduct our business or

plan to conduct our business, in which case our business may be materially harmed.

if any crypto asset is deemed to be a security under any U.S.

federal, state, or foreign jurisdiction, or in a proceeding in a court

of law or otherwise, it may have adverse consequences for such crypto asset.

For instance, the networks on which such crypto assets are

utilized may be required to be regulated as securities intermediaries, and subject to applicable rules, which could effectively render

the network impracticable for its existing purposes.

Further, it could draw negative publicity and a decline in the general acceptance

of the crypto asset.

Also, such a development may make it difficult for such supported crypto asset to be traded, cleared, and custodied

as compared to other crypto assets that are not considered to be securities.

These events could, among things, result in a decline in

the market prices for the crypto assets on which our operations rely, and thereby reduce the demand for our solutions and the revenue

generated therefrom.

crypto assets may be determined to be Digital Securities, we may inadvertently violate the 1940 Act and incur large losses as a result

and potentially be required to register as an investment company.

This would have a material adverse effect on an investment in us.

plan to acquire a portfolio of Digital Assets including Bitcoin, Ethereum and other Digital Assets.

plan to acquire a portfolio of crypto assets including Ethereum and other crypto assets.

There is an increased regulatory

examination of Digital Assets and Digital Securities.

examination of crypto assets and Digital Securities.

This has led to regulatory and enforcement activities.

As of the date of this filing,

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

We cannot be certain as to

how future regulatory developments will impact the treatment of Bitcoins, Ethereum and other Digital Assets under the law.

As described elsewhere

in these Risk Factors, the SEC and certain state regulators have recently begun to take a more definitive and aggressive stance

indicating that crypto assets and related activities, including custodial staking-based services, entail the offer and sale of

securities subject to applicable securities laws and regulations.

We cannot be certain as to how future regulatory developments will

impact the treatment of Ethereum and other crypto assets, or our operations as they relate to such crypto assets or in

general, under the law.

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

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

Digital Assets we may own in the future may be determined

Crypto assets we may own in the future may be determined

to be Digital Securities by the SEC or a court.

Additionally, one or more states may conclude Bitcoin, Ethereum, or other Digital Assets

Additionally, one or more states may conclude Ethereum, or other crypto assets

held by us in the future are securities under state securities laws which would require registration under state laws including merit

For example, California defines the term “investment contract” more strictly than the SEC.

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

the manner in which Bitcoin, Ethereum, and other Digital Assets are treated for classification and clearing purposes.

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

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

In addition, the

New York Attorney General has taken the position that Ethereum is a security under New York law, and if this position is upheld it could

significantly impact Ethereum and other crypto assets, as notwithstanding the decentralized nature of crypto assets, a substantially

large proportion of capital markets activities and the U.S.

population are located in New York.

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

the manner in which Bitcoin, Ethereum, and other crypto assets are treated for classification and clearing purposes.

July 25, 2017 DAO Report expressed its view that crypto assets may be securities depending on the facts and circumstances, and recent

developments have confirmed that the SEC presently considers many if not most crypto assets to be securities.

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

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

We are subject to the following

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

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

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

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

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

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

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

the Digital Asset may have violated applicable state securities laws.

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

to legal advice, the SEC or a court may conclude that Ethereum, or other crypto assets we later acquire to be securities;

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

may knowingly acquire crypto assets that are securities and acquire minority investments in businesses which investments are securities.

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

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

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

we conclude that a particular crypto asset is not a security under the 1940 Act, certain states take a stricter view which means the

crypto asset may have violated applicable state securities laws.

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

allows an issuer to prevent itself from being deemed an investment company if it reduces its holdings of securities to less than 40%

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Accordingly, if changes in

the classification of Digital Assets causes us to exceed the 40% threshold, we may experience large losses when we liquidate digital

securities as a result of continued volatility.

the classification of crypto assets causes us to exceed the 40% threshold, we may experience large losses when we liquidate Digital Securities

as a result of continued volatility.

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

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

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

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

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

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materially and adversely impacting an investment in us.

Further, if our examination of a Digital Asset is incorrect, we may incur regulatory

Further, if our examination of a crypto asset is incorrect, we may incur regulatory

penalties and private investor liabilities since Section 5 of the Securities Act is a strict liability statute much like selling spoiled

milk and state securities laws generally impose liability for negligence for misrepresentations.

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

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

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

(exclusive of cash) as securities.

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

If our view that the crypto assets we hold are not securities is challenged by the SEC and courts

uphold the challenge, we may inadvertently violate the 1940 Act and incur substantial legal fees in defending our position.

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have a materially adverse impact to conduct our operations.

of the recent decline in the cryptocurrency market and other adverse developments and publicity surrounding the industry, our business

plans may not be successful and our business and financial condition may be adversely affected.

business is focused on the cryptocurrency industry, particularly blockchain infrastructure including our Digital Asset Platform.

hold and stake a number of crypto assets to generate revenue from the PoS systems on which they operate.

The crypto asset industry is

characterized by a high level of volatility, and the collapse in the prices of most popular crypto assets such as Bitcoin and Ethereum

has cast doubt on the future of crypto asset-focused businesses such as ours.

This trend was further impacted by the recent controversy

and failure surrounding FTX, a crypto asset exchange that collapsed after its Chief Executive Officer was accused of fraud and misappropriation

of corporate funds in a manner that has been compared to both Enron and Madoff.

Since then certain other crypto asset-focused companies

have filed for bankruptcy, and more recently in March 2023 three major U.S.

banks with involvement in crypto assets collapsed.

thus far has been a decline in the crypto assets markets and in the public’s perception of the industry.

In addition, following

the FTX controversy, regulators began reviewing crypto asset-focused companies and their operations with greater scrutiny, and have brought

enforcement actions seeking to restrict or cease such activities, such as the Kraken and KuCoin actions described above.

While we believe

the non-custodial staking model we are pursuing for our platform presents distinctions from custodial methods of holding and controlling

crypto assets such as those that were employed by FTX and Kraken, holders of crypto assets, regulators, and other stakeholders may fail

to appreciate this distinction or to consider it sufficient to utilize our services or invest in our business.

If we are unable to separate

ourselves from the recent adverse developments in the crypto asset space, or otherwise develop and execute on our business plan and blockchain

infrastructure in a manner that enables us to establish and maintain material revenue sources, our business and financial condition could

be materially adversely affected.

Further, a perceived lack of stability in the crypto asset and the closure or suspension shutdown of

crypto asset exchanges and networks due to business failure, hackers or malware, government-mandated regulation, or fraud, may reduce

confidence in crypto asset networks and result in greater volatility in crypto asset values and on our results of operations.

our focus on crypto assets, and the above-described past and/or any future adverse developments with respect to our operations or industry,

could result in declines or volatility in our stock price, difficulty or inability to obtain adequate financing as needed, on favorable

terms or at all, reduction in consumer demand for our platform and services, the risk of increased losses or asset impairments, and the

potential for legal proceedings and reputational harm which could arise from any of the foregoing.

Such external developments have the

potential to affect us even if we believe our financial condition, operations and infrastructure our secure.

These potential consequences

could materially adversely affect an investment in us.

in 2022 and more recently have increased the likelihood that U.S.

federal and state legislatures and regulatory agencies will enact

laws and regulations to regulate crypto assets and crypto asset intermediaries, such as crypto exchanges and

The collapse of TerraUSD and

Luna and the bankruptcy filings of FTX and its subsidiaries, Three Arrows Capital, Celsius Network, Voyager Digital, Genesis Global and

BlockFi have resulted in calls for heightened scrutiny and regulation of the crypto asset industry, with a specific focus on crypto asset

exchanges, platforms, and custodians.

Federal and state legislatures and regulatory agencies are expected to introduce and enact new

laws and regulations to regulate crypto asset intermediaries, such as crypto asset exchanges and custodians.

The March 2023 collapses

of Silicon Valley Bank, Silvergate Bank, and Signature Bank may amplify and/or accelerate these trends.

regulatory regime - namely the Federal

Reserve Board, U.S.

Congress and certain U.S.

agencies (e.g., the SEC, the CFTC, FinCEN, the Office of the Comptroller of the Currency,

the Federal Deposit Insurance Corporation, and the Federal Bureau of Investigation) as well as the White House have issued reports and

releases concerning crypto assets, including Bitcoin and crypto asset markets.

Further, in 2023 the House of Representatives formed two

new subcommittees:

the Digital Assets, Financial Technology and Inclusion Subcommittee and the Commodity Markets, Digital Assets, and

Rural Development Subcommittee, each of which were formed in part to analyze issues concerning crypto assets and demonstrate a legislative

intent to develop and consider the adoption of federal legislation designed to address the perceived need for regulation of and concerns

surrounding the crypto industry.

However, the extent and content of any forthcoming laws and regulations are not yet ascertainable with

certainty, and it may not be ascertainable in the near future.

A divided Congress makes any prediction difficult.

Further the SEC seems

to have changed tactics and in early 2023 it sued multiple crypto asset companies for selling unregistered securities.

We cannot predict

how these and other related events will affect us or the crypto asset business.

We cannot assure you that future legislation or regulation

will not have an adverse effect upon us.

It is possible that new laws and increased regulation and regulatory scrutiny may require the

Company to comply with certain regulatory regimes, which could result in new costs for the Company.

The Company may have to devote increased

time and attention to regulatory matters, which could increase costs to the Company.

New laws, regulations, and regulatory actions could

significantly restrict or eliminate the market for, or uses of, crypto assets including Ethereum, which could have a negative effect on

the value of Ethereum, which in turn would have a negative effect on the value of the Company’s shares.

our staking business is dependent on the value of the crypto assets we stake to obtain blockchain rewards, and because those rewards

are paid out in the form of the blockchain’s native crypto assets, the ongoing low market values and/or continued or long-term

declines in crypto asset prices will materially and adversely affect our results of operations.

discussed above, the cryptocurrency market experienced a critical decline in 2022 which continues thus far in 2023.

Prospects of a recovery

declined when the FTX controversy arose, as well as bankruptcies of other companies and projects in crypto asset and blockchain sector.

Our reliance on staking, which is expected to increase as we continue to seek to commercialize and improve upon our Digital Asset Platform

and non-custodial staking-as-a-service business, means that if the market values of the crypto assets we stake continues to decline or

remain at the relatively low levels they are currently, which appears possible given the adverse developments and wide scale sales of

and skepticism surrounding crypto assets that have resulted, the revenue we generate from staking will diminish.

This is because the

rewards for staking a given crypto asset are paid out in more of that same crypto asset.

Therefore, if the market price for the crypto

asset declines while staking is ongoing, unless the price later recovers the rewards we receive may not cover the decline in value of

If this trend continues, our operating results and financial condition will be materially adversely affected.

business faces significant scaling obstacles due to its dependence on crypto assets and related infrastructure.

assets on which our current and planned operations depend face significant scaling obstacles that can lead to high fees or slow transaction

settlement times, and attempts to increase the volume of transactions may not be effective.

Scaling of crypto assets is essential to

the widespread acceptance of crypto assets as a means of payment or other uses that stakeholders have in the past cited in demonstrating

interest in crypto assets.

Many crypto asset networks, including those with which we are or may become involved in our operations, face

significant scaling challenges.

For example, crypto assets are limited with respect to how many transactions can occur per second.

in the crypto asset ecosystem debate potential approaches to increasing the average number of transactions per second that a network

can handle and have implemented mechanisms or are researching ways to increase scale, such as increasing the allowable sizes of blocks,

and therefore the number of transactions per block, and sharding (a horizontal partition of data in a database or search engine), which

would not require every single transaction to be included in every single validator’s block.

However, there is no guarantee that

any of the mechanisms in place or being explored for increasing the scale of settlement of crypto asset transactions will be effective.

adoption of crypto assets as a means of payment or other uses does not occur on the schedule or scale anticipated or at all, the demand

for crypto assets may stagnate or decrease, which could adversely affect future prices of crypto assets we hold or otherwise rely upon

in our operations, and our results of operations and financial condition, which could have a material adverse effect on our business

or the market price for our securities.

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

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

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

use of crypto assets to, among other things, buy and sell goods and services and complete transactions, is part of a new and rapidly

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

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

The growth of the Digital Assets industry in general,

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

The growth of the cryptocurrency industry in general,

and the use of crypto assets in particular, is subject to a high degree of uncertainty.

The factors affecting the further development

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

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

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

Digital Assets systems;

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

of the cryptocurrency industry, include but are not limited to:

worldwide growth in the adoption and use of crypto assets as a medium of exchange;

and quasi-government regulation of crypto assets and their use, or restrictions on or regulation of access to and operation of the

crypto assets systems;

maintenance and development of the open-source software protocol of cryptocurrency networks;

in consumer demographics and public tastes and preferences;

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currencies and digital forms of fiat currencies;

economic conditions and the regulatory environment relating to Digital Assets;

impact of regulators focusing on Digital Assets and Digital Securities and the costs associated with such regulatory oversight.

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

economic conditions and the regulatory environment relating to crypto assets;

impact of regulators focusing on crypto assets and Digital Securities and the costs associated with such regulatory oversight.

decline in the popularity or acceptance of the Ethereum Network or other blockchains networks we have exposure to could adversely affect

an investment in us.

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

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

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

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

thus contributing to price volatility that could adversely affect an investment in us.

relatively new products and technologies, Bitcoins and the Bitcoin Network have only recently become widely accepted as a means of payment

for goods and services by many major retail and commercial outlets, and use of Bitcoins by consumers to pay such retail and commercial

outlets remains limited.

Conversely, a significant portion of Bitcoin demand is generated by speculators and investors seeking to profit

from the short- or long-term holding of Bitcoins.

A lack of expansion by Bitcoins into retail and commercial markets, or a contraction

of such use, may result in increased volatility or a reduction in the price of Bitcoin, either of which could adversely impact an investment

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

the value of any Ethereum or other crypto assets we hold or acquire, which would harm investors in our securities.

a malicious actor or botnet obtains control in excess of 50% of the processing power active on a cryptocurrency network, it is possible

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

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

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

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

in a timely manner, or at all.

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

could not generate new units or transactions using such control.

The malicious actor could “double-spend” its own cryptocurrency

(i.e., spend the same Bitcoin in more than one transaction) and prevent the confirmation of other users’ transactions for as long

as it maintained control.

To the extent that such malicious actor or botnet does not yield its control of the processing power on the

network, or the cryptocurrency community does not reject the fraudulent blocks as malicious, reversing any changes made to blockchains

may not be possible.

The foregoing description is not the only means by which the entirety of blockchains or cryptocurrencies may be

compromised but is only an example.

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

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

The possible crossing of the

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

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

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

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

decentralized it is inherently more difficult for the botnet of malicious actor to aggregate enough processing power to gain control

of the blockchain, may adversely affect an investment in our Common Stock.

Such lack of controls and responses to such circumstances

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

have a material adverse effect on our business, prospects or operations and potentially the value of any Bitcoin, Ethereum or other Digital

Assets we acquire or hold, and harm investors.

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

August 1, 2017, Bitcoin’s blockchain was forked at least three times, each time creating new cryptocurrencies such as Bitcoin Cash,

Bitcoin Gold and Bitcoin SV.

The forks resulted in a new blockchain being created with a shared history, and a new path forward.

value of the newly created Bitcoin Cash, Bitcoin Gold and Bitcoin SV may or may not have value in the long run and may affect the price

of Bitcoin if interest is shifted away from Bitcoin to the newly created Digital Assets.

The value of Bitcoin after the creation of a

fork is subject to many factors including the value of the fork product, market reaction to the creation of the fork product, and the

occurrence of forks in the future.

As such, the value of Bitcoin could be materially reduced if existing and future forks have a negative

effect on Bitcoin’s value.

decentralized nature of Digital Asset systems may lead to slow or inadequate responses to crises, which may negatively affect our business .

decentralized nature of the governance of Digital Asset systems may lead to ineffective decision making that slows development or prevents

of the computers) obtains a majority of the processing power or staked assets dedicated to either mining or staking a

cryptocurrency, it may be able to alter blockchains on which transactions of cryptocurrency reside and rely by constructing

fraudulent blocks or preventing certain transactions from completing in a timely manner, or at all.

The malicious actor or botnet

could control, exclude or modify the ordering of transactions, though depending on blockchain may not generate new units or

transactions using such control.

The malicious actor could “double-spend” its own cryptocurrency (i.e., spend the same

crypto asset in more than one transaction) and prevent the confirmation of other users’ transactions for as long as it

maintained control.

To the extent that such malicious actor or botnet does not yield its control of the processing power or staked

assets on the network, or the cryptocurrency community does not reject the fraudulent blocks as malicious, reversing any changes

made to blockchains may not be possible.

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

cryptocurrencies may be compromised but is only an example and may differ from blockchain to blockchain.

The possible crossing of the 50% threshold indicates a greater risk that

a single validator could exert authority over the validation of network transactions.

To the extent that a blockchain ecosystem including

other validators do not act to ensure greater decentralization of validator voting power, the feasibility of a malicious actor obtaining

control will increase because the botnet or malicious actor could compromise more than 50% voting power and thereby

gain control of blockchain, whereas if the blockchain remains decentralized it is inherently more difficult for the botnet of malicious

actor to aggregate enough voting power to gain control of the blockchain, may adversely affect an investment in our Common Stock.

lack of controls and responses to such circumstances could have a material adverse effect on our ability to continue as a going concern

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

the value of any Ethereum or other crypto assets we acquire or hold, and harm investors.

decentralized nature of crypto asset systems may lead to slow or inadequate responses to crises, which may negatively affect our business .

decentralized nature of the governance of crypto asset systems may lead to ineffective decision making that slows development or prevents

a network from overcoming emergent obstacles.

Governance of many Digital Asset systems is by voluntary consensus and open competition

Governance of many crypto asset systems is by voluntary consensus and open competition

with no clear leadership structure or authority.

To the extent lack of clarity in corporate governance of cryptocurrency systems leads

to ineffective decision making that slows development and growth of such Digital Assets, the value of our Common Stock may be

adversely affected.

Asset Exchanges are relatively new and therefore may be more exposed to fraud and failure than established, regulated exchanges for other

To the extent that large Digital Asset Exchanges representing a substantial portion of the Digital Asset volume are involved

in fraud or experience security failures or other operational issues, such Exchanges’ failures may result in a reduction in the

price of Digital Assets and adversely affect an investment in us.

number of Digital Asset Exchanges have been closed due to fraud, failure or security breaches.

In many of these instances, the customers

of such Exchanges were not compensated or made whole for the partial or complete losses of their account balances in such Exchanges.

While smaller Exchanges are less likely to have the infrastructure and capitalization that make larger Exchanges more stable, larger

Exchanges are more likely to be appealing targets for hackers and “malware” (i.e., software used or programmed by attackers

to disrupt computer operation, gather sensitive information or gain access to private computer systems).

A lack of stability in an Exchange

Market and the closure or temporary shutdown of larger Digital Asset Exchanges due to fraud, business failure, hackers or malware, or

government-mandated regulation may reduce confidence in Digital Assets overall and result in greater volatility in Digital Asset values.

These potential consequences of an Exchange’s failure could adversely affect an investment in us.

is a lack of liquid markets, and possible manipulation of blockchain/cryptocurrency-based Digital Assets.

to ineffective decision making that slows development and growth of such crypto assets, the value of our Common Stock may be adversely

Exchanges are relatively new and therefore may be more exposed to fraud and failure than established, regulated exchanges for other products.

To the extent that large Crypto Exchanges representing a substantial portion of the crypto asset volume are involved in fraud or experience

security failures or other operational issues, such Exchanges’ failures may result in a reduction in the price of crypto assets

and adversely affect an investment in us.

number of Crypto Exchanges have been closed due to fraud, failure or security breaches.

In many of these instances, the customers of

such Exchanges were not compensated or made whole for the partial or complete losses of their account balances in such Exchanges.

smaller Exchanges are less likely to have the infrastructure and capitalization that make larger Exchanges more stable, larger Exchanges

are more likely to be appealing targets for hackers and “malware” (i.e., software used or programmed by attackers to disrupt

computer operation, gather sensitive information or gain access to private computer systems).

A lack of stability in an Exchange Market

and the closure or temporary shutdown of larger Crypto Exchanges due to fraud, business failure, hackers or malware, or government-mandated

regulation may reduce confidence in crypto assets overall and result in greater volatility in crypto asset values.

These potential consequences

of an Exchange’s failure could adversely affect an investment in us.

is a lack of liquid markets, and possible manipulation of blockchain/cryptocurrency-based crypto assets.

assets that are represented and trade on a ledger-based platform may not necessarily benefit from viable trading markets.

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Such circumstances could adversely affect an investment in us.

or economic crises may motivate large-scale sales of Digital Assets, which could result in a reduction in Digital Asset values and adversely

or economic crises may motivate large-scale sales of crypto assets, which could result in a reduction in crypto asset values and adversely

affect an investment in us.

or economic crises may motivate large-scale sales of Digital Assets, which could rapidly decrease the price of Digital Assets.

or economic crises may motivate large-scale sales of crypto assets, which could rapidly decrease the price of crypto assets.

market analysts have indicated that in some cases, such as during large scale adverse economic events, trading and market prices of cryptocurrencies

such as Bitcoin and Ethereum have correlated to some extent with the movement of equity markets, regardless of the stock or asset class.

For example, in March 2020, as global shutdowns ramped up in response to the COVID-19 pandemic, the price of Bitcoin plummeted together

For example, in March 2020, as global shutdowns ramped up in response to the COVID-19 pandemic, the price of Bitcoin, Ethereum and other crypto assets plummeted together

with stock prices globally.

This trend is contrary to a commonly held conception that buying and holding cryptocurrencies can be used

as a “hedge” to investing in the more conventional equity markets, and may eventually result in diminished popularity of

cryptocurrencies or Digital Assets in general by the public.

Similarly, in 2022 as the Federal Reserve raised interest rates to combat inflation, crypto asset prices

declined with stock prices in the U.S.

These trends are contrary to a formerly commonly held conception that buying and holding crypto

assets can be used as a “hedge” to investing in the more conventional equity markets, and may eventually result in diminished

popularity of crypto assets in general by the public.

Alternatively, as an emerging asset class with limited acceptance as a payment

system or commodity, global crises and general economic downturn may discourage investment in Digital Assets as investors focus their

system or commodity, global crises and general economic downturn may discourage investment in crypto assets as investors focus their

investment on less volatile asset classes as a means of hedging their investment risk.

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

an alternative to fiat currencies that are backed by central governments, crypto assets such as Bitcoin and Ethereum, which are relatively

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

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Nevertheless, political or

economic crises may motivate large-scale acquisitions or sales of Digital Assets either globally or locally.

Large-scale sales of Digital

Assets would result in a reduction in Digital Asset values and could adversely affect an investment in us.

price of Digital Assets may be affected by the sale of such Digital Assets by other vehicles investing in Digital Assets or tracking

cryptocurrency markets.

global market for Digital Assets is characterized by supply constraints that differ from those present in the markets for commodities

economic crises may motivate large-scale acquisitions or sales of crypto assets either globally or locally.

Large-scale sales of crypto

assets would result in a reduction in crypto asset values and could adversely affect an investment in us.

price of crypto assets may be affected by the sale of such crypto assets by other vehicles investing in crypto assets or tracking cryptocurrency

global market for crypto assets is characterized by supply constraints that differ from those present in the markets for commodities

or other assets such as gold and silver.

The mathematical protocols under which certain cryptocurrencies are mined permit the creation

of a limited, predetermined amount of currency, while others have no limit established on total supply.

To the extent that other vehicles

investing in Digital Assets or tracking Digital Asset markets form and come to represent a significant proportion of the demand for Digital

Assets, large redemptions of the securities of those vehicles and the subsequent sale of Digital Assets by such vehicles could negatively

affect Digital Asset prices and therefore affect the value of our Digital Assets.

Such events could have a material adversely affect

an investment in us.

changes or actions may alter the nature of an investment in us or restrict the use of Digital Assets in a manner that adversely affects

our business, prospects or operations.

Digital Assets have grown in both popularity and market size, governments around the world have reacted differently to Digital Assets;

certain governments have deemed them illegal, and others have allowed their use and trade without restriction, while in some jurisdictions,

such as in the U.S., subject to extensive, and in some cases overlapping, unclear and evolving regulatory requirements.

lawmakers and regulators continue to focus in on the evolving world of Digital Assets, with a view towards designing and implementing

an appropriate regulatory framework.

For example, in November 2021, President Biden’s Working Group on Financial Markets, the Federal

Deposit Insurance Corporation, and the Office of the Comptroller of the Currency, issued a joint report that recommended legislation

that would subject issuers and wallet providers for stablecoins, described as Digital Assets that are designed to maintain a stable value

relative to a national currency or other reference asset, to increased federal oversight.

There are substantial uncertainties on how

these or other requirements that may arise would apply in practice, and we may face substantial compliance costs to adjust our current

or future operations and product offerings to react to and comply with any laws and regulations which may result.

Ongoing and future

regulatory actions may impact our ability to continue to operate, and such actions could affect our ability to continue as a going concern

or to pursue our new strategy at all, which could have a material adverse effect on our business, prospects or operations.

interpretations require the regulation of Bitcoins and other Digital Assets under the CEA by the CFTC, we may be required to register

The mathematical protocols under which certain cryptocurrencies are mined or minted permit

the creation of a limited, predetermined amount of currency, while others have no limit established on total supply.

To the extent

that other vehicles investing in crypto assets or tracking cryptocurrency markets form and come to represent a significant

proportion of the demand for crypto assets, large redemptions of the securities of those vehicles and the subsequent sale of crypto

assets by such vehicles could negatively affect crypto asset prices and therefore affect the value of our crypto assets.

could have a material adverse affect on an investment in us.

interpretations require the regulation of Bitcoin, Ethereum, and other crypto assets under the CEA by the CFTC, we may be required to register

and comply with such regulations.

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and future legislation, CFTC and other regulatory developments, including interpretations released by a regulatory authority, may impact

the manner in which Bitcoins and other Digital Assets are treated for classification and clearing purposes.

the manner in which Bitcoin, Ethereum, and other crypto assets are treated for classification and clearing purposes.

In particular, derivatives

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We cannot be certain as to how future

regulatory developments will impact the treatment of Bitcoins and other Digital Assets under the law.

have been deemed to fall within the definition of a commodity and, we may be required to register and comply with additional regulation

under the CEA, including additional periodic report and disclosure standards and requirements.

Moreover, we may be required to register

as a commodity pool operator and to register us as a commodity pool with the CFTC through the National Futures Association.

Such additional

registrations may result in extraordinary, non-recurring expenses, thereby materially and adversely impacting an investment in us.

we determine not to comply with such additional regulatory and registration requirements, we may seek to cease certain of our operations.

regulatory developments will impact the treatment of Bitcoin, Ethereum, and other crypto assets under the law.

and Ethereum have been deemed to fall within the definition of a commodity and, we may be required to register and comply with

additional regulation under the CEA, including additional periodic report and disclosure standards and requirements.

may be required to register as a commodity pool operator and to register us as a commodity pool with the CFTC through the National

Futures Association.

Such additional registrations may result in extraordinary, non-recurring expenses, thereby materially and

adversely impacting an investment in us.

If we determine not to comply with such additional regulatory and registration

requirements, we may seek to cease certain of our operations.

Any such action may adversely affect an investment in us.

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Office of Financial Assets Control of the U.S.

Department of Treasury requires us to comply with its sanction program and not

conduct business with persons named on its specially designated nationals (“SDN”) list.

However, because of the pseudonymous

nature of blockchain transactions we may inadvertently and without our knowledge engage in transactions with persons named on OFAC’s

Our Company’s policy prohibits any transactions with such SDN individuals, but we may not be adequately capable of determining

the ultimate identity of the individual with whom we transact with respect to selling cryptocurrency assets.

Moreover, federal law prohibits

person from knowingly or unknowingly possessing any visual depiction commonly known as child pornography.

reports have suggested that persons have imbedded such depictions on one or more blockchains.

Additionally, the U.S Department

of Treasury recently has added sanctions that prevent U.S.

persons from using cryptocurrencies to circumnavigate financial sanctions

placed on Russia.

Because our business requires us to download

and retain one or more blockchains to effectuate our ongoing business, it is possible that such digital ledgers contain prohibited depictions

without our knowledge or consent.

To the extent government enforcement authorities literally enforce these and other laws and regulations

that are impacted by decentralized distributed ledger technology, we may be subject to investigation, administrative or court proceedings,

and civil or criminal monetary fines and penalties, all of which could harm our reputation and affect the value of our Common Stock.

federal or state legislatures or agencies initiate or release tax determinations that change the classification of Bitcoins, Ethereum

or other Digital Assets as property for tax purposes (in the context of when such Digital Assets are held as an investment), such determination

Department of Treasury requires us to comply with its sanction program and not conduct

business with persons named on its specially designated nationals (“SDN”) list.

However, because of the pseudonymous nature

of blockchain transactions we may inadvertently and without our knowledge engage in transactions, to the extent validation constitutes

a transaction, with persons named on OFAC’s SDN list.

While we don’t believe validation constitutes a transaction we can

provide no assurances regulators will agree with that view.

Our Company’s policy prohibits any transactions with such SDN individuals,

but we may not be adequately capable of determining the ultimate identity of the individual who delegate to our nodes.

Additionally,

the U.S Department of Treasury recently has added sanctions that prevent U.S.

persons from using cryptocurrencies to circumnavigate financial

sanctions placed on Russia.

our business requires us to download and retain one or more blockchains to effectuate our ongoing business, it is possible that such

digital ledgers contain prohibited depictions without our knowledge or consent.

To the extent government enforcement authorities literally

enforce these and other laws and regulations that are impacted by decentralized distributed ledger technology, we may be subject to investigation,

administrative or court proceedings, and civil or criminal monetary fines and penalties, all of which could harm our reputation and affect

the value of our Common Stock.

federal or state legislatures or agencies initiate or release tax determinations that change the classification of Bitcoin, Ethereum

or other crypto assets as property for tax purposes (in the context of when such crypto assets are held as an investment), such determination

could have a negative tax consequence on our Company or our shareholders.

IRS guidance indicates that Digital Assets such as Bitcoins should be treated and taxed as property, and that transactions involving

the payment of Bitcoins for goods and services should be treated as barter transactions.

While this treatment creates a potential tax

reporting requirement for any circumstance where the ownership of a Bitcoin passes from one person to another, usually by means of Bitcoin

transactions (including off-blockchain transactions), it preserves the right to apply capital gains treatment to those transactions which

may have adversely affect an investment in our Company.

IRS guidance indicates that crypto assets such as Ethereum should be treated and taxed as property, and that transactions involving the

payment of Ethereum for goods and services should be treated as barter transactions.

While this treatment creates a potential tax reporting

requirement for any circumstance where the ownership of an Ethereum passes from one person to another, usually by means of Ethereum transactions

(including off-blockchain transactions), it preserves the right to apply capital gains treatment to those transactions which may have

adversely affect an investment in our Company.

December 5, 2014, the New York State Department of Taxation and Finance issued guidance regarding the application of state tax law to

Digital Assets such as Bitcoins.

The agency determined that New York State would follow IRS guidance with respect to the treatment of

Digital Assets such as Bitcoins for state income tax purposes.

Furthermore, they defined Digital Assets such as Bitcoin to be a form

of “intangible property,” meaning the purchase and sale of Bitcoins for fiat currency is not subject to state income tax

(although transactions of Bitcoin for other goods and services maybe subject to sales tax under barter transaction treatment).

unclear if other states will follow the guidance of the IRS and the New York State Department of Taxation and Finance with respect to

the treatment of Digital Assets such as Bitcoins for income tax and sales tax purposes.

If a state adopts a different treatment, such

treatment may have negative consequences including the imposition of greater a greater tax burden on investors in Bitcoin or imposing

a greater cost on the acquisition and disposition of Bitcoins, generally;

in either case potentially having a negative effect on prices

in the Bitcoin Exchange Market and may adversely affect an investment in our Company.

jurisdictions may also elect to treat Digital Assets such as Bitcoins differently for tax purposes than the IRS or the New York State

Department of Taxation and Finance.

To the extent that a foreign jurisdiction with a significant share of the market of Bitcoin users

imposes onerous tax burdens on Bitcoin users, or imposes sales or value added tax on purchases and sales of Bitcoins for fiat currency,

such actions could result in decreased demand for Bitcoins in such jurisdiction, which could impact the price of Bitcoins and negatively

impact an investment in our Company.

crypto assets such as Bitcoin and Ethereum.

The agency determined that New York State would follow IRS guidance with respect to the treatment

of crypto assets for state income tax purposes.

Furthermore, they defined crypto assets to be a form of “intangible property,”

meaning the purchase and sale of crypto assets for fiat currency is not subject to state income tax (although transactions of crypto

assets for other goods and services maybe subject to sales tax under barter transaction treatment).

It is unclear if other states will

follow the guidance of the IRS and the New York State Department of Taxation and Finance with respect to the treatment of crypto assets

for income tax and sales tax purposes.

If a state adopts a different treatment, such treatment may have negative consequences including

the imposition of greater a greater tax burden on investors in crypto assets or imposing a greater cost on the acquisition and disposition

of crypto assets, generally;

in either case potentially having a negative effect on prices in crypto assets and may adversely affect

an investment in our Company.

jurisdictions may also elect to treat crypto assets differently for tax purposes than the IRS or the New York State Department of Taxation

To the extent that a foreign jurisdiction with a significant share of the market of crypto asset users imposes onerous tax

burdens crypto users, or imposes sales or value added tax on purchases and sales of crypto assets for fiat currency, such actions could

result in decreased demand for crypto assets in such jurisdiction, which could impact the price of crypto assets and negatively impact

an investment in our Company.

may suffer losses due to staking, delegating, and other related services.

Digital Assets which utilize

PoS consensus mechanisms enable holders to earn rewards by operating nodes and participating in decentralized governance, bookkeeping

and transaction confirmation activities on their underlying blockchain networks.

We stake certain of our Digital Assets and operate

nodes on blockchain networks through our transaction verification services business segment.

Most PoS networks require Digital Assets

to be transferred into smart contracts on the underlying blockchain networks not under our or anyone’s control.

If our validators,

any third-party service providers, or smart contracts fail to behave as expected, suffer cybersecurity attacks, experience security issues,

or encounter other problems, our Digital Assets may be irretrievably lost.

assets which utilize PoS consensus mechanisms enable holders to earn rewards by operating nodes and participating in decentralized governance,

bookkeeping and transaction confirmation activities on their underlying blockchain networks.

We stake certain of our crypto assets and

operate nodes on blockchain networks through our blockchain infrastructure operations.

Most PoS networks require crypto assets to be

transferred into smart contracts on the underlying blockchain networks not under our or anyone’s control.

If our validators, any

third-party service providers, or smart contracts fail to behave as expected, suffer cybersecurity attacks, experience security issues,

or encounter other problems, our crypto assets may be irretrievably lost.

In addition, most PoS blockchain networks dictate requirements

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transactions, or experience extended downtimes.

Slashing penalties can apply due to prolonged inactivity on the blockchain network and

Slashing penalties can apply due to prolonged inactivity on a blockchain network and

inadvertent errors such as computing or hardware issues, as well as more serious behavior such as intentional malfeasance.

slashed by the underlying blockchain network, our Digital Assets may be confiscated, withdrawn, or burnt by the network, resulting

in permanent losses.

Any penalties or slashing events could damage our brand and reputation, cause us to suffer financial losses, and

adversely impact our business.

slashed by an underlying blockchain network, our crypto assets may be confiscated, withdrawn, or burnt by the network, resulting in permanent

Any penalties or slashing events could damage our brand and reputation, cause us to suffer financial losses, and adversely impact

our business.

blockchain infrastructure operations, including Company owned and run validator nodes on PoS blockchains, are subject to concentration

risk as they are consolidated on Amazon Web Services

development and operation of the Company’s validator nodes for staking, as well as the development of the Digital Asset Platform,

is hosted on cloud computing by Amazon Web Services (“AWS”).

The consolidation of our proprietary technology on AWS subjects

the Company to cyber security and other risks that face AWS.

We have limited control over AWS, the services it provides us and the safety

and security measures related thereto.

If AWS fails to maintain the continuous functionality or security of its networks and related

hardware on which we rely for our operations, we may be unable to meet our continued obligations or generate revenue we otherwise would,

and could suffer substantial losses.

For example, some PoS networks implement the slashing penalties described above, wherein the Digital

Assets that were staked to allow us to participate in the validation process are taken away from us, if a validator node on which the

Digital Asset is staked is offline for a certain amount of time.

Additionally, if our or our users’ Digital Assets become subject

to unauthorized access or theft due to a cybersecurity breach or any security weaknesses experienced or existing in AWS’s systems,

we could experience significant losses, both directly and/or from resulting claims against us by the customer, as well as reputational

harm and lost customer relationships.

If any of the foregoing or other adverse developments occur as a result of our reliance on a single

service provider for our PoS validating operations, it could have a material adverse effect on our business, financial condition and

results of operations.

development and operation of the Company’s validator nodes for non-custodial staking, as well as the development of the Digital

Asset Platform, is hosted on cloud computing by Amazon Web Services (“AWS”).

The consolidation of our proprietary technology

on AWS subjects the Company to cyber security and other risks that face AWS.

We have limited control over AWS, the services it provides

us and the safety and security measures related thereto.

If AWS fails to maintain the continuous functionality or security of its networks

and related hardware on which we rely for our operations, we may be unable to generate revenue we otherwise would, and could suffer substantial

For example, some PoS networks implement the slashing penalties described above, wherein the crypto assets that were staked to

allow us to participate in the validation process are taken away from us, if a validator node on which the crypto asset is staked is

offline for a certain amount of time.

Additionally, if our Delegators crypto assets become subject to slashing, we could experience significant

losses, from resulting claims against us by them, as well as reputational harm and lost customer relationships.

If any of the foregoing

or other adverse developments occur as a result of our reliance on a single service provider for our PoS validating operations, it could

have a material adverse effect on our business, financial condition and results of operations.

assets staked on Proof of Stake blockchains are locked in smart contracts and may not be accessible and liquid.

Digital Assets which utilize

PoS consensus mechanisms are locked in smart contracts while staked which limits liquidity of the underlying Digital Asset.

This is because

under PoS network protocols, in order to participate in the staking process validators such as us are required to enter into smart contracts

which, among other things, require the validator to continue to keep a specified number of the Digital Assets owned by the validator

“locked-up” in the network for a specified period of time before they can again be sold or transferred by such validator.

assets which utilize PoS consensus mechanisms are locked in smart contracts while staked which limits liquidity of the underlying crypto

This is because under PoS network protocols, in order to participate in the staking process validators such as us are required

to enter into smart contracts which, among other things, require the validator to continue to keep a specified number of the crypto assets

owned by the validator “locked-up” in the network for a specified period of time before they can again be transferred

by such validator.

This lock-up period often extends beyond the time at which the transaction is validated.

We currently stake certain of our Digital

Assets and operate nodes on blockchain networks through our blockchain infrastructure services business.

During times of high volatility

or downturns, which are common among Digital Assets for many reasons including those described elsewhere in these Risk Factors, we may

be unable to liquidate certain Digital Assets to the extent desired.

Further Ethereum staked on Ethereum’s Beacon Chain is locked

in a smart contract until Ethereum transitions to its PoS beacon chain and a market exists.

We currently carry our staked Ethereum as

a non-current long-term asset on our balance sheet.

Staked Digital Assets which can be unlocked from a smart contract in less

than one year are carried as current assets on our balance sheet.

As such we may experience large losses when and if we are able to liquidate

our Digital Assets as a result of continued volatility, further if we are unable to liquidate our Digital Assets or Ethereum

does not transition to its PoS beacon chain we could suffer material financial losses, which would adversely impact our business.

Our obligations to comply with the laws,

rules, regulations, and policies of a variety of jurisdictions is uncertain and untested, and we are subject to uncertainty with respect

to our potential non-custodial Staking-as-a-Service business and we may be subject to investigations and enforcement actions by

We currently stake certain

of our crypto assets and operate nodes on blockchain networks through our blockchain infrastructure services business.

During times of

high volatility or downturns, which are common among crypto assets for many reasons including those described elsewhere in these Risk

Factors, we may be unable to liquidate certain crypto assets to the extent desired.

We currently carry our staked Ethereum as a non-current

long-term asset on our balance sheet until liquidity for staked Ethereum is unlocked.

Staked crypto assets which can be unlocked from

a smart contract in less than one year are carried as current assets on our balance sheet.

As such we may experience large losses when

and if we are able to liquidate our crypto assets as a result of continued volatility, further if we are unable to liquidate our crypto

assets we could suffer material financial losses, which would adversely impact our business.

our current business plan and operations depend on consumers investing in crypto assets and staking and monitoring them using our

non-custodial platform, economic downturns will materially adversely affect us.

non-custodial staking-as-a-service platform depends on consumers purchasing crypto assets from exchanges and holdings them long-term,

and staking them using our platform, as well as using the other functions offered by or envisioned for our platform such as data analytics

and monitoring crypto asset holdings.

Therefore, economic downturns or a recession will cause a reduction in demand for our platform

by causing consumers to reduce spending on investments or non-essential items such as crypto assets.

Similarly, a decline in the popularity

or public perception of such crypto assets would yield a similar result.

In 2022, the U.S.

capital markets in general, and crypto assets

prices in particular, saw significant declines as the Federal Reserve heightened interest rates to combat inflation.

This followed initial

declines earlier in 2022 in response to the Ukraine war and worsening supply chain issues and supply shortages.

As of the date of this

Report, the U.S.

capital markets remain subject to substantial uncertainty, with consumer confidence declining due to a number of factors

including, as a result of the collapse of three major banks in March 2023 and the potential broader implications and financial impact

economy, as well as high inflation and anticipated continued interest rate increases and the enhanced likelihood of a recession

Give these current market conditions, consumers may elect to sell their crypto assets, or decline to increase their holdings,

rather than hold and stake them using our platform.

Because we and our industry depend on consumers holding and staking the crypto assets

long-term, this trend has the potential to materially adversely harm us and our prospects.

Particularly in the event of prolonged or

recurring recessionary conditions.

obligations to comply with the laws, rules, regulations, and policies of a variety of jurisdictions is uncertain and untested, and we

are subject to uncertainty with respect to our potential non-custodial staking-as-a-service business and we may be subject to investigations

and enforcement actions by U.S.

regulators and governmental authorities.

regulating financial services, the internet, mobile technologies, digital, and related technologies inside and outside of the U.S.

impose obligations on us, as well as broader liability.

For example, we are required to comply with laws and regulations related to sanctions

and export controls enforced by U.S.

addition to the securities laws and regulations discussed elsewhere in these Risk Factors, laws regulating financial services, the internet,

mobile technologies, digital, and related technologies inside and outside of the U.S.

may impose obligations on us, as well as broader

For example, we are required to comply with laws and regulations related to sanctions and export controls enforced by U.S.

Department of Treasury’s Office of Foreign Assets Control, or OFAC, and U.S.

anti-money laundering

and counter-terrorist financing laws and regulations, enforced by FinCEN and certain state financial services regulators.

laws and regulations generally restrict dealings by persons subject to U.S.

jurisdiction with certain governments, countries, or territories

that are the target of comprehensive sanctions, currently the Crimea Region of Ukraine, Cuba, Iran, North Korea, Syria, and Venezuela

as well as with persons identified on certain prohibited lists.

In May 2019, FinCEN issued guidance on the application of FinCEN regulations

to certain business models.

While the guidance directly addressed Bitcoin mining, it did not address securing PoS blockchains which while

similar to Bitcoin mining have technical nuanced differences which could alter the analysis.

As such, there can be no guarantee that

securing (mining) on PoS blockchain networks will be viewed as compliant, notwithstanding the May 2019 FinCEN guidance.

In particular,

the nature of blockchains make it technically impossible in all circumstances to prevent or identify transactions with particular

persons or addresses.

If our current or planned activities are found to constitute “facilitating” or assisting the actions

anti-money laundering and counter-terrorist financing

laws and regulations, enforced by FinCEN and certain state financial services regulators.

sanctions laws and regulations generally

restrict dealings by persons subject to U.S.

jurisdiction with certain governments, countries, or territories that are the target of

comprehensive sanctions, currently the Crimea Region of Ukraine, Cuba, Iran, North Korea, Syria, and Venezuela as well as with persons

identified on certain prohibited lists.

In May 2019, FinCEN issued guidance on the application of FinCEN regulations to certain business

While the guidance directly addressed Bitcoin mining, it did not address securing PoS blockchains which while similar to Bitcoin

mining has technical nuanced differences which could potentially alter the analysis.

As such, there can be no guarantee that securing

(mining) on PoS blockchain networks will be viewed as compliant, notwithstanding the May 2019 FinCEN guidance.

In particular, the nature

of blockchains make it technically impossible in all circumstances to prevent or identify transactions with particular persons or addresses.

While our platform, StakeSeeker, utilizes geo-blocking in an effort to prevent its use by persons located in sanctioned jurisdictions,

if notwithstanding these efforts our current or planned activities are found to constitute “facilitating” or assisting the

actions of non-U.S.

persons that would be prohibited for U.S.

persons to perform directly due to U.S.

sanctions, even though we do not take custody

of the Digital Assets nor pay delegators to our pools, that could result in material negative consequences for us, including costs

related to government investigations, harsh financial penalties, and harm to our reputation.

The impact on us related to these matters

could be substantial.

We are seeking legal guidance on what, if any, controls and procedures need to be put in place and whether our

activities could constitute facilitation of any illicit activities under the current regulatory framework.

sanctions, despite the fact we

don’t take custody of staked crypto assets nor pay delegator crypto rewards, it could result in material negative consequences

for us, including costs related to government investigations, harsh financial penalties, and harm to our reputation.

The impact on us

related to these matters could be substantial.

We are seeking legal guidance on what, if any, controls and procedures need to be put

in place and whether our activities could constitute facilitation of any illicit activities under the current regulatory framework.

worldwide frequently study each other’s approaches to the regulation of the digital economy.

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could significantly and adversely affect our continued operations and financial condition.

Risks Related to Our Digital Assets Holdings

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

is a risk that part or all of our Digital Assets could be lost, stolen, destroyed or become inaccessible.

We believe that our Digital

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

the risk of loss, damage and theft, security breaches, and unauthorized access we hold our Digital Assets at exchanges and have also

relied on Bitgo Inc.’s (“Bitgo”) enterprise multi-signature storage solution.

Nevertheless, the exchanges we utilize

or Bitgo’s security systems may not be impenetrable and may not be free from defect or immune to acts of God, and any loss due

to a security breach, software defect or act of God will be borne by us.

Any of these events may adversely affect our operations and,

consequently, an investment in us.

the extent that any of our Digital Assets are held by Exchanges, we may face heightened risks from cybersecurity attacks and financial

Risks Related to Our Crypto Asset Holdings

crypto assets may be subject to loss, damage, theft or restriction on access.

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

We believe that our crypto

assets will be an appealing target to hackers or malware distributors seeking to destroy, damage or steal our crypto assets.

minimize the risk of loss, damage and theft, security breaches, and unauthorized access we primarily hold our crypto assets in

various cryptocurrency digital wallets and hold minimal amounts at exchanges.

Nevertheless, the digital wallets and exchanges we

utilize may not be impenetrable and may not be free from defect or immune to acts of God, and any loss due to a security breach,

software defect or act of God will be borne by us.

Any of these events may adversely affect our operations and, consequently, an

investment in us.

the extent that any of our crypto assets are held by crypto exchanges, we may face heightened risks from cybersecurity attacks and financial

stability of the exchanges.

Digital Assets not held in a Company’s controlled wallet such as Bitgo’s storage solutions will be held at Exchanges and

subject to the risks encountered by those Exchange including DDoS Attacks, other malicious hacking, a sale of the exchange, loss of the

Digital Assets by the exchange, security breaches, and unauthorized access of our account by hackers.

The Company may not maintain a

custodian agreement with the Exchanges that it holds its Digital Assets at.

Exchanges do not provide insurance and may lack the resources

to protect against hacking and theft.

We may be materially and adversely affected if the Exchanges suffer cyberattacks or incur financial

loss or destruction of a private key required to access a Digital Assets may be irreversible.

All crypto assets not held in a Company’s controlled digital wallet

are held at crypto exchanges and subject to the risks encountered by those exchange including DDoS Attacks, other malicious hacking,

a sale of the exchange, loss of the crypto assets by the exchange, security breaches, and unauthorized access of our account by hackers.

The Company may not maintain a custodian agreement with the exchanges with which it holds its crypto assets at.

exchanges do not provide

insurance and may lack the resources to protect against hacking and theft.

Less than 0.1% of the Company’s crypto assets are typically

stored at exchanges, however, this may increase at or around the sales or purchase of crypto assets.

We may be materially and adversely

affected if the exchanges suffer cyberattacks or incur financial problems.

loss or destruction of a private key required to access a crypto asset may be irreversible.

Our loss of access to our private keys

could adversely affect an investment in our Company.

Assets such as Bitcoin are controllable only by the possessor of both the unique public key and private key relating to the local or

online digital wallet in which the Digital Assets are held.

We are required by the operation of the Digital Asset Network to publish

the public key relating to a digital wallet in use by us when it first verifies a spending transaction from that digital wallet and disseminates

such information into the Network.

We safeguard and keep private the private keys relating to our Digital Assets not held at exchanges

by utilizing Bitgo’s multi-signature storage solution;

to the extent a private key is lost, destroyed or otherwise compromised

and no backup of the private key is accessible, we will be unable to access the Digital Assets held by it and the private key will not

be capable of being restored by the Network.

Any loss of private keys relating to digital wallets used to store our Digital Assets could

adversely affect an investment in us.

threats to us could result in, a loss of Company’s Digital Assets.

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

of the Bitcoin Network.

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

or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, and the inadvertent

transmission of computer viruses, could harm our business operations or result in loss of our Bitcoins and other Digital Assets.

breach of our infrastructure could result in damage to our reputation which could adversely affect an investment in us.

we believe that, as our assets continues to grow, it may become a more appealing target for security threats such as hackers and malware.

assets are controllable only by the possessor of both the unique public key and private key relating to the local or online digital wallet

in which the crypto assets are held.

We are required by the operation of the crypto asset network to publish the public key relating

to a digital wallet in use by us when it first verifies a spending transaction from that digital wallet and disseminates such information

into the network.

We safeguard and keep private the private keys relating to our crypto assets not held at exchanges by utilizing key

sharing and multi-signature storage techniques;

to the extent a private key is lost, destroyed or otherwise compromised and no backup

of the private key is accessible, we will be unable to access the crypto assets held by it and the private key will not be capable of

being restored by the network.

Any loss of private keys relating to digital wallets used to store our crypto assets could adversely affect

an investment in us.

threats to us could result in a loss of Company’s crypto assets.

security breach caused by hacking, which involves efforts to gain unauthorized access to information or systems, or to cause intentional

malfunctions or loss or corruption of data, software, hardware or other computer equipment, and the inadvertent transmission of computer

viruses, could harm our business operations or result in loss of our Ethereum and other crypto assets.

Any breach of our infrastructure

could result in damage to our reputation which could adversely affect an investment in us.

Furthermore, we believe that, as our assets

continue to grow, it may become a more appealing target for security threats such as hackers and malware.

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

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

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

Additionally,

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of which could adversely affect an investment in us.

or fraudulent Digital Asset transactions may be irreversible.

or fraudulent crypto asset transactions may be irreversible.

asset transactions are not, from an administrative perspective, reversible without the consent and active participation of the recipient

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

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

of crypto assets or a theft of crypto assets generally will not be reversible, and we may not be capable of seeking compensation for

any such transfer or theft.

It is possible that, through computer or human error, or through theft or criminal action, our Digital Assets

It is possible that, through computer or human error, or through theft or criminal action, our crypto assets

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

To the extent that we are unable to seek a corrective

transaction with such third party or are incapable of identifying the third party which has received our Digital Assets through error

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

transaction with such third party or are incapable of identifying the third party which has received our crypto assets through error

or theft, we will be unable to revert or otherwise recover incorrectly transferred crypto assets.

To the extent that we are unable to

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

of our Digital Assets for which no person is liable.

Digital Assets held by us are not insured.

Therefore, a loss may be suffered with respect to our Digital Assets which is not covered

by insurance and for which no person is liable in damages which could adversely affect our operations and, consequently, an investment

of our crypto assets for which no person is liable.

crypto assets held by us are not insured.

Therefore, a loss may be suffered with respect to our crypto assets which are not covered by

insurance and for which no person is liable in damages which could adversely affect our operations and, consequently, an investment in

assets held by us are not subject to FDIC or SIPC protections.

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

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

do not and will not hold our Ethereum and other crypto assets with a banking institution or a member of the FDIC or the Securities Investor Protection Corporation (“SIPC”) and, therefore, our crypto assets

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

Related to Our Digital Asset Platform Development

is substantial doubt that we will be able to develop or commercialize our Digital Asset Platform.

are currently developing a Digital Asset Platform with the ultimate goal of consolidating users’ information so that it can be

more easily accessed and reviewed by users.

We may not successfully develop this platform in a cost-efficient manner, to the extent sought

If we fail to develop a Digital Asset Platform as intended, it could have a material adverse effect on our business, especially

to the extent that we allocate significant capital, labor and other resources to this endeavor rather than focusing on other business

opportunities which may prove to have been more lucrative in hindsight.

Related to Our Digital Asset Platform (StakeSeeker) Development

is substantial doubt that we will be able to fully develop or commercialize our Digital Asset Platform.

are continuing to develop our Digital Asset Platform with the ultimate goal of consolidating users’ information so that it can

be more easily accessed and reviewed by users.

We may not successfully fully develop this platform as planned, in a cost-efficient manner,

to the extent sought or at all.

If we fail to develop a Digital Asset Platform as intended, it could have a material adverse effect on

our business, especially to the extent that we allocate significant capital, labor and other resources to this endeavor rather than focusing

on other business opportunities which may prove to have been more lucrative in hindsight.

if we do successfully develop our platform and bring it to the marketplace, there is no guarantee that we will attract enough users to

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financial condition.

Finally, even if we do fully develop the platform and attract users, events outside of our control such as regulatory

actions against us or crypto assets on which our platform depend, or economic downturns, could force us to cease operating our platform

or render it obsolete.

If we fail to fully develop and commercialize our platform in a timely and effective manner, your investment in

us could lose some or all of its value.

if we develop and commercialize our Digital Asset Platform, we may not be able to generate material revenues.

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exist by the time we begin marketing our platform, the volatile nature of the blockchain industry generally and the unknown demand for

the services we plan to offer through our platform as it is currently envisioned, and the advancement of new technologies which could

arise in the future and render our platform partially or completely obsolete.

If any of these or other risks come to fruition to prevent

our platform from generating material revenue to justify its costs of production, it would have a material adverse effect on our business.

the services we plan to offer through our platform as it is currently envisioned, regulatory developments that have arisen or may arise

in the future, and the advancement of new technologies which could arise in the future and render our platform partially or completely

If any of these or other risks come to fruition to prevent our platform from generating material revenue to justify its costs

of production, it would have a material adverse effect on our business.

development of our Digital Asset Platform will depend on the successful efforts of our employees.

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future difficulties developing aspects of our platform may cause delays in bringing our platform to market.

If the location where all

of our computer and communications hardware is located is compromised, our platform, prospects, could be harmed.

We do not currently

have a disaster recovery plan which could result in a loss of the platform software.

If our data stored on AWS

and the backups thereof are compromised, our platform, prospects, could be harmed.

Despite our implementation of network security measures,

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The occurrence of any of the foregoing

risks could harm our business.

risks could materially harm our business.

are subject to cyber security risks and may incur delays in platform development in an effort to minimize those risks and to respond

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breaches that may increase security breach litigation.

Potential uncertainty surrounding the CCPA and CPRA may increase our compliance

costs and potential liability, particularly in the event of a data breach, and could have a material adverse effect on our business,

including how we use personal information, our financial condition, the results of our operations or prospects.

Since the CCPA was enacted,

other states including Nevada, Maine, Colorado and Virginia have enacted similar legislation designed to protect the personal information

of consumers and penalize companies that fail to comply, and other states have also proposed similar legislation.

Potential uncertainty surrounding the CCPA may increase our compliance costs and

potential liability, particularly in the event of a data breach, and could have a material adverse effect on our business, including

how we use personal information, our financial condition, the results of our operations or prospects.

Since the CCPA was enacted, other

states including Nevada, Maine, Colorado and Virginia have enacted similar legislation designed to protect the personal information of

consumers and penalize companies that fail to comply, and other states have also proposed similar legislation.

The costs of compliance

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collect and use personal information for certain purposes.

is a risk that as we develop and offer our platform and other services, we may become subject to one or more of these data privacy and

security laws.

Despite our efforts to comply with applicable laws, regulations and other obligations relating to privacy, data protection,

and information security, it is possible that our practices, offerings, or platform, or third parties on which we rely, could fail.

instance, the overall regulatory framework governing the application of privacy laws to blockchain technology is still highly undeveloped

and likely to evolve.

Our failure, or the failure by our third-party providers or partners, to comply with applicable laws or regulations

and to prevent unauthorized access to, or use or release of personal data, or the perception that any of the foregoing types of failure

has occurred, even if unfounded, could subject us to audits, inquiries, whistleblower complaints, adverse media coverage, investigations,

potential severe criminal or civil sanctions, fines or damages, reputational harm, or expensive and time-consuming proceedings by governmental

agencies and private claims and litigation, any of which could materially adversely affect our business, operating results, and financial

is a risk that as we develop and offer our platform and other services, we may become subject to one or more of these data privacy

and security laws.

Despite our efforts to comply with applicable laws, regulations and other obligations relating to privacy, data

protection, and information security, including by deploying geo-blocking features to limit the jurisdictions from which our

platform can be accessed, it is possible that our practices, offerings, or platform, or third parties on which we rely, could fail.

For instance, the overall regulatory framework governing the application of privacy laws to blockchain technology is still highly

undeveloped and likely to evolve.

Our failure, or the failure by our third-party providers or partners, to comply with applicable

laws or regulations and to prevent unauthorized access to, or use or release of personal data, or the perception that any of the

foregoing types of failure has occurred, even if unfounded, could subject us to audits, inquiries, whistleblower complaints, adverse

media coverage, investigations, potential severe criminal or civil sanctions, fines or damages, reputational harm, or expensive and

time-consuming proceedings by governmental agencies and private claims and litigation, any of which could materially adversely

affect our business, operating results, and financial condition.

may infringe the intellectual property rights of others, which may prevent or delay our product development efforts and stop us from

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there may be currently pending applications of which we are unaware that may later result in issued patents that our products infringe.

of the foregoing, we may be subject to legal claims of alleged infringement of the intellectual property rights of third parties.

expect this risk to increase as we continue to develop and roll-out additional functions in our Digital Asset Platform and potential

StaaS operations in the future.

The ready availability of damages, royalties and the potential for injunctive relief has increased the

defense litigation costs of patent infringement claims, especially those asserted by third parties whose sole or primary business is

to assert such claims.

Such claims, even if not meritorious, may result in significant expenditure of financial and managerial resources,

and the payment of damages or settlement amounts.

we could expend significant resources defending against patent infringement and other intellectual property right claims;

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affect the trading price of our securities and harm our investors.

Additionally, we may become subject to injunctions prohibiting us

from using software or business processes we currently use or may need to use in the future or requiring us to obtain licenses from third

parties when such licenses may not be available on financially feasible terms or terms acceptable to us or at all.

In addition, we may

not be able to obtain on favorable terms, or at all, licenses or other rights with respect to intellectual property we do not own in

providing ecommerce services to other businesses and individuals under commercial agreements.

Related to Our Public Company Reporting Requirements and Accounting Matters

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

to satisfy new reporting requirements .

are required to comply with a variety of reporting, accounting and other rules and regulations.

Compliance with existing requirements

is expensive.

We may need to implement additional finance and accounting systems, procedures and controls to satisfy our reporting requirements

and such further requirements may increase our costs and require additional management time and resources.

For example, many crypto assets,

including those on PoS blockchain networks with which we are or may become involved, demonstrate novel and unique accounting challenges,

including due to smart contracts affecting the underlying crypto assets.

Any deficiencies in our internal control over financial reporting,

should they arise, could cause investors to lose confidence in our reported financial information, negatively affect the market price

of our Common Stock, subject us to regulatory investigations and penalties, and adversely impact our business and financial condition.

in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could

significantly affect our financial results .

accepted accounting principles and related accounting pronouncements, implementation guidelines and interpretations with regard to a

wide range of matters that are relevant to our business, including but not limited to revenue recognition, estimating valuation allowances

and accrued liabilities (including allowances for returns, credit card chargebacks, doubtful accounts and obsolete and damaged inventory),

internal use software and website development (acquired and developed internally), accounting for income taxes, valuation of long-lived

and intangible assets and goodwill, stock-based compensation and loss contingencies, are highly complex and involve many subjective assumptions,

estimates and judgments by our management.

Additional complexities can arise with respect to crypto asset operations.

Changes in these

rules or their interpretation or changes in underlying assumptions, estimates or judgments by our management could significantly change

our reported or expected financial performance.

there has been limited precedence set for financial accounting of crypto assets, it is unclear how we will

be required to account for crypto asset transactions in the future.

there has been limited precedence set for the financial accounting of crypto assets, it is unclear how

we will be required to account for crypto asset transactions or assets.

Furthermore, a change in regulatory or financial accounting standards

could result in the necessity to restate our financial statements as has happened in the past.

Such a restatement could negatively impact

our business, prospects, financial condition and results of operation.

our estimates or judgment relating to our critical accounting policies prove to be incorrect, our operating results could be adversely

preparation of financial statements in conformity with generally accepted accounting principles, or GAAP, requires management to make

estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

We base our estimates

on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the

section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting

Policies and Estimates” in Part II, Item 7 of this Annual Report on Form 10-K.

The results of these estimates form the basis for

making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses that are not readily

apparent from other sources.

Significant estimates and judgments involve the identification of performance obligations in revenue recognition,

evaluation of tax positions, and the valuation of stock-based awards and crypto assets we hold, among others.

Our operating results may

be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our

operating results to fall below the expectations of analysts and investors, resulting in a decline in the trading price of our Common

are subject to the information and reporting requirements of the Exchange Act), and other federal securities laws, including compliance

with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).

costs of preparing and filing annual and quarterly reports and other information with the SEC and furnishing audited reports to shareholders

will cause our expenses to be higher than they would have been if we were privately held.

It may be time-consuming, difficult and costly

for us to develop, implement and maintain the internal controls and reporting procedures required by the Sarbanes-Oxley Act.

to hire additional financial reporting, internal controls and other finance personnel in order to develop and implement appropriate internal

controls and reporting procedures.

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

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

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

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

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

As a public company, we also expect

that these rules and regulations will make it more difficult and expensive for us to obtain director and officer liability insurance

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

or similar coverage.

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

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

Related to our Common Stock

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

in our industry including changes which adversely affect Bitcoin, Ethereum, and other Digital Assets;

volatility in the price of Bitcoin, Ethereum, and other Digital Assets;

in our industry including changes which adversely affect crypto assets;

regulatory developments such as the recent actions brought by securities regulators on crypto assets activities;

announcements and corporate events;

volatility in the price of crypto assets;

ability to obtain working capital financing;

of our securities or those of other companies, or of Digital Assets, due to external forces such as geopolitical turmoil, inflation,

of our securities or those of other companies, or of crypto assets, due to external forces such as geopolitical turmoil, inflation,

federal interest rate adjustments or other events;

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of any strategic relationship;

regulatory developments;

and other external factors.

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As a result, you may be unable to resell your shares at a desired price.

have not paid cash dividends in the past and, while we have declared a cash dividend in 2022, we do not expect to pay regular or recurring

dividends in the future.

Any return on investment may be limited to the value of our Common Stock.

have never paid cash dividends on our Common Stock and, while we declared a cash dividend (which may be paid in Bitcoin if elected

by the shareholder) payable to holders of our Common Stock as of March 17, 2022, we do not anticipate paying dividends on a regular

or recurring basis for the foreseeable future.

Any future payment of dividends on our Common Stock will depend on earnings, financial

condition and other business and economic factors affecting us at such time as our board of directors may consider relevant.

not pay dividends, our Common Stock may be less valuable because a return on your investment will only occur if our stock price

we paid a cash dividend in 2022, and declared a Series V Convertible Preferred stock (“Series V”) dividend in 2023, we

do not expect to pay regular or recurring dividends in the future.

Any return on investment may be limited to the value of our

Common Stock.

we declared and paid a cash dividend (which came with the option to be paid in Bitcoin if elected by the shareholder) payable to

holders of our Common Stock as of March 17, 2022, and recently declared a planned Series V dividend distribution to shareholders of

our Common Stock of record as of March 27, 2023, which has since been delayed due to anticipated changes to the structure, as described elsewhere in this Report, we do not anticipate paying dividends on a

regular or recurring basis for the foreseeable future.

For information on the risks and uncertainties inherent in the Series V

dividend, see the Company’s Current Report on Form 8-K filed on January 31, 2023 disclosing certain risks and uncertainties

and other information about the dividend including but not limited to the payment of the Series V dividend.

future payment of dividends on our Common Stock will depend on earnings, financial condition and other business and economic factors

affecting us at such time as our board of directors may consider relevant.

If we do not pay dividends, our Common Stock may be less valuable

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

articles of incorporation allow for our Board to create new series of preferred stock without further approval by our shareholders, which

could adversely affect the rights of the holders of our Common Stock.

Our board of directors has the

authority to fix and determine the relative rights and preferences of preferred stock.

Our board of directors also has the authority

Board has the authority to fix and determine the relative rights and preferences of preferred stock.

Our Board also has the authority

to issue preferred stock without further shareholder approval.

As a result, our board of directors could authorize the issuance of a

series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, provide holders of the preferred

anti-dilution protection, the right to receive dividend payments before dividends are distributed to the holders of Common Stock

and the right to the redemption of the shares, together with a premium, prior to the redemption of our Common Stock.

our board of directors could authorize the issuance of a series of preferred stock that has greater voting power than our Common Stock

or that is convertible into our Common Stock, which could decrease the relative voting power of our Common Stock or

result in dilution to our existing shareholders.

For example, our Board approved the Series V in the first

quarter of 2023.

As a result, our Board could authorize the issuance of a series of preferred stock that would grant to holders the preferred

right to our assets upon liquidation, provide holders of the preferred anti-dilution protection, the right to receive dividend payments

before dividends are distributed to the holders of Common Stock and the right to the redemption of the shares, together with a premium,

prior to the redemption of our Common Stock.

In addition, our Board could authorize the issuance of a series of preferred stock that

has greater voting power than our Common Stock or that is convertible into our Common Stock, which could decrease the relative voting

power of our Common Stock or result in dilution to our existing shareholders.

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

equity financings (in addition to the shares issued under the ATM Agreement) or other share issuances by us, including shares

issued in connection with strategic alliances and corporate partnering transactions, and shares issued on the conversion of outstanding

notes, could adversely affect the market price of our Common Stock.

Sales by existing shareholders of a large number of shares of our

Common Stock in the public market or the perception that additional sales could occur could cause the market price of our Common Stock

equity financings (in addition to the shares issued under the ATM Agreement) or other share issuances by us, including shares issued

in connection with strategic alliances and corporate partnering transactions, could adversely affect the market price of our Common Stock.

Sales by existing shareholders of a large number of shares of our Common

Stock in the public market or the perception that additional sales could occur could cause the market price of our Common Stock to drop.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information

under this item.

are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

2 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis