What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-03-21 compared with 2023-03-31 · 1004 added, 727 removed, 708 unchanged (71% of the section changed)

9 unchanged sentences

31, 2022, 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.

is a Nasdaq listed company operating in the blockchain technology sector since 2014 and is one of the only U.S.

publicly traded

companies with a primary focus on proof-of-stake blockchain infrastructure.

Our core focus is on driving scalable growth through a diverse

range of business streams leveraging and built on top of our core and proven blockchain infrastructure operations.

Infrastructure

Company specializes in operating validator nodes on various delegated proof-of-stake and proof-of-stake based blockchain networks, with

an emphasis on Ethereum.

We earn native token rewards by validating transactions across various blockchain networks by staking our crypto

assets on validator nodes operated by BTCS and third parties.

Subject to available capital and the restrictions of certain blockchains,

BTCS intends to expand its blockchain infrastructure operations to secure other disruptive blockchain protocols that allow for delegating,

which presents a significant growth opportunity for the Company.

evaluation of blockchain networks involves comprehensive due diligence procedures, including assessments of blockchain quality, reward

potential, and the technical challenges associated with running validator nodes.

Criteria for assessing blockchain quality encompass

factors such as i) market and on-chain statistics, ii) liquidity, iii) potential blockchain utility, iv) history and milestones, v) growth

and development roadmap, vi) use cases, vii) community interest, vii) quality of documentation, viii) decentralization, and ix) any other

publicly available information.

– Staking-as-a-Service

Staking-as-a-Service (“StaaS”) business model allows for crypto asset holders to earn token 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, the Company receives a percentage of a crypto asset holders’ staking rewards generated as a validator node fee, for our

ministerial role in hosting the validator node.

This creates an opportunity for scalable revenue and business growth with limited additional

The Company’s StaaS strategy provides a more accessible and cost-effective alternative for crypto asset holders to participate

in blockchain networks’ consensus mechanisms, promoting the growth and adoption of blockchain technology.

Company’s internally-developed “StakeSeeker” platform is a personal finance software and education center with a comprehensive

crypto dashboard for crypto asset holders to connect, monitor, track, and analyze their crypto portfolios across exchanges and wallets

in a single analytics platform.

The StakeSeeker dashboard reads user data from digital wallets and utilizes application programming interfaces

(APIs) to read data from crypto exchanges and does not allow for the trading or custody of crypto assets.

StakeSeeker’s Stake Hub

functions as an educational center, offering users guidance on the delegation of their crypto assets to our non-custodial validator nodes,

along with the ability to monitor such delegation activities through data analysis.

StakeSeeker does not provide or facilitate direct,

crypto asset delegation or transaction execution on our platform.

The Stake Hub’s primary role is to offer instructional support

and tracking capabilities.

There is no active process for crypto asset delegation through the Stake Hub dashboard;

it is primarily a

monitoring tool.

Crypto asset holders are able to delegate to our validator nodes without signing up for our StakeSeeker platform;

crypto asset holders can delegate to validator nodes not operated by the Company and sign up for StakeSeeker to utilize our software

and data analytics.

The StakeSeeker platform is currently free-to-use for registered users so is not currently generating revenue.

Company is not a broker-dealer or an investment advisor and does not provide any such related services.

StaaS provider maintains a ministerial role in validating transactions on a given dPoS network on behalf of its Delegators by (1) arranging

transactions using open-source software to stake the relevant crypto assets;

(2) monitoring the nodes it is operating to ensure the computers

remain online to validate transactions;

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

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.

point during the staking or delegation process.

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

the process of staking, delegated crypto assets remain in the Delegator’s digital wallets.

The blockchain network calculates rewards

earned, which are then distributed directly to the Delegator’s wallet.

At no point does the Validator gain access, control, or

custody of the original staked crypto assets or the earned crypto rewards 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 third parties and have

no exposure to the risks an exchange would have with respect to loans, rehypothecation, or margin.

following table sets forth the number of third-party crypto assets delegated to our non-custodial validator nodes as of December 31,

Crypto Assets

Near protocol

1548,000 ROSE

– Ethereum Block Building

January 2024, we introduced “Builder+”, an Ethereum block builder.

Builder+ utilizes advanced algorithms to maximize validator

earnings by constructing optimized blocks for on-chain validation.

We believe Builder+ should enhance our Ethereum blockchain infrastructure

and create opportunities for new scalable revenue streams on Ethereum’s blockchain.

Builder+ did not have a material impact to 2023 operations.

– AI Analytics

is an under-developed AI-powered blockchain data and analytics platform, designed to allow users to query real-time and historical

on-chain blockchain data.

Through comprehensive indexing of public blockchain data from our Blockchain Infrastructure operations, ChainQ

is intended to provide an intuitive and straightforward platform for users to access on-chain data.

tables below describes BTCS’s quarterly crypto assets holdings as of the end of Fiscal 2022 through the end of Fiscal 2023.

Assets Held at Period End

Infinity (AXS)

Protocol (BAND)

Network (ROSE)

Protocol (NEAR)

Ethereum (ETH)

Cardano (ADA)

Polkadot (DOT)

Cosmos (ATOM)

Polygon (MATIC)

Avalanche (AVAX)

Axie Infinity (AXS)

Band Protocol (BAND)

Oasis Network (ROSE)

NEAR Protocol (NEAR)

Evmos (EVMOS)

Market Value of Crypto Assets at Period End

Bitcoin (BTC)

Ethereum (ETH)

4 unchanged sentences

Avalanche (AVAX)

Algorand (ALGO)

Axie Infinity (AXS)

2 unchanged sentences

NEAR Protocol (NEAR)

Evmos (EVMOS)

of Crypto Assets at Period End

Bitcoin (BTC)

Ethereum (ETH)

4 unchanged sentences

Avalanche (AVAX)

Algorand (ALGO)

Axie Infinity (AXS)

2 unchanged sentences

NEAR Protocol (NEAR)

Evmos (EVMOS)

tables below detail BTCS’s quarterly crypto assets earned as staking rewards during Fiscal 2023.

Asset Rewards

Crypto assets earned from staking to BTCS validator nodes

Network (ROSE)

Protocol (NEAR)

Crypto assets earned from staking to third-party validator nodes

Axie Infinity (AXS)

Polygon (MATIC)

Polkadot (DOT)

Cardano (ADA)

Value of Crypto Asset Rewards Earned Recognized as Revenue

earned from staking to BTCS validator nodes

Ethereum (ETH)

Cosmos (ATOM)

Evmos (EVMOS)

Avalanche (AVAX)

Oasis Network (ROSE)

NEAR Protocol (NEAR)

Total revenue earned from staking to BTCS validator nodes

earned from staking to third-party validator nodes

Axie Infinity (AXS)

Polygon (MATIC)

Polkadot (DOT)

Cardano (ADA)

Total revenue earned from staking to third-party validator nodes

to the Company’s adoption of ASU No.

2023-08, Intangibles—Goodwill and Other—Crypto Assets during Fiscal 2023,

the Company accounted for all crypto asset holdings as long-lived intangible assets, carrying them at their impaired cost value.

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

balance sheet in Fiscal 2022.

December 31, 2022

Bitcoin (BTC)

Ethereum (ETH)

4 unchanged sentences

Avalanche (AVAX)

Algorand (ALGO)

Axie Infinity (AXS)

2 unchanged sentences

NEAR Protocol (NEAR)

adoption of ASU No.

2023-08 required an adjustment to the Company’s opening Retained Earnings balance, which is included in the

‘Accumulated Deficit’ line on the statement of stockholder’s equity for Fiscal 2023.

This adjustment was made during

the year of adoption (Fiscal 2023) to recognize the cumulative effect of initially applying the change in accounting principle to the

previous periods.

Specifically, it accounted for the difference between the Fiscal 2022 ending book value of crypto assets and their

fair market value, as disclosed in the table above.

of Operations for the Years Ended December 31, 2023 and 2022

following tables reflect our operating results for the years ended December 31, 2023 and 2022:

For the Year Ended

Validator revenue (net of fees)

Total revenues

Cost of revenues

Validator expenses

Operating expenses:

1 unchanged sentence

Research and development

Compensation and related

Compensation and related expenses

Impairment loss on crypto assets

(13,348,874 )

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

Distributions

to warrant holders

other income (expenses)

Realized (gains) losses on crypto asset transactions

Total operating expenses

(13,465,107 )

Other income (expenses):

Change in unrealized appreciation (depreciation) on crypto assets

Change in fair value of warrant liabilities

Distributions to warrant holders

Total other income (expenses)

Net income (loss)

$ (15,892,738 )

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.

decrease in revenue during Fiscal 2023 as compared to Fiscal 2022 is primarily due to a drop in the fair value of our crypto assets earned

as rewards for staking since the market’s highs in the first quarter of 2022.

Despite the late upswing in market prices of crypto

assets at the end of Fiscal 2023, revenue was recognized throughout the year at lower average prices than Fiscal 2022.

Although we believe

the number of crypto assets we earn from staking and revenue recognized may increase as we continue to expand our blockchain infrastructure

efforts, we recognize that volatility in the crypto asset markets may impact the market prices of the crypto assets we earn from staking.

decrease in cost of revenues during Fiscal 2023 as compared to Fiscal 2022 is due to efficiencies realized in our blockchain infrastructure

validating operating costs, including streamlining of web service hosting fees and reduction of services provided by third-party 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 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)

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.

However, we believe gross margin may 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.

and administrative expenses consist of director compensation, legal and professional fees, and other personnel and related costs.

expenses decreased slightly during Fiscal 2023 compared to Fiscal 2022 as a result of cost-cutting measures employed by management in

numerous areas, including investor relation related as the Company focused on cost management and transitioning related efforts in-house

from third-party engagements.

These decreases were partially offset by increases in legal service costs during Fiscal 2023, driven primarily

by services surrounding the Series V Preferred Stock distribution and related listing on Upstream Exchange.

and development expenses increased during Fiscal 2023 as the Company focused on the beta release of our proprietary StakeSeeker platform,

including responding to user feedback and continued planned feature development and incorporation onto the platform.

We anticipate research

and development costs to remain consistent as we continue to expand on technological solutions in the blockchain sector, including the

development of Builder+ and ChainQ with a focus on cost management of our third-party development team.

and related expenses decreased during Fiscal 2023 primarily due to approximately $2,825,000 non-cash equity-based contingent bonuses

granted to employees during Fiscal 2022 for the achievement of performance milestones compared to only approximately $1,643,000 non-cash

equity-based compensation during Fiscal 2023.

We believe our compensation expenses will increase from those reported in Fiscal 2023 as

the Company continues to utilize equity-based compensation incentives as a core part of our compensation strategy.

costs decreased during Fiscal 2023 as the Company focused on cost-reduction efforts.

decrease in operating expenses during Fiscal 2023 can be attributed primarily to the Company’s change in accounting principles

resulting from its adoption of ASU No.

2023-08 in Fiscal 2023.

This accounting change permits the Company to value its crypto assets

at their fair market value and eliminates the necessity to recognize impairment losses on crypto assets, which had been a

significant contributor to net losses in prior years.

Notably, in Fiscal 2022, the Company recorded an impairment loss of

approximately $13,349,000 on crypto assets, which is no longer required under the revised accounting treatment.

Company realized losses on sale of crypto assets during Fiscal 2023, compared to gains realized in Fiscal 2022, primarily resulting

from the Company’s sale of approximately 968 ETH earned as crypto rewards from our staking operations at prices below their

original cost after liquidity was unlocked in April 2023 as part of Ethereum’s Shanghai upgrade.

income (expense)

changes in other income for Fiscal 2023 were primarily attributed to the recognition of the change in unrealized appreciation on

crypto assets resulting from the Company’s adoption of ASU No.

2023-08 for Fiscal 2023.

This adoption allows the Company to

account for its crypto assets at their fair market value.

Prior to its adoption in Fiscal 2023, the Company accounted for its crypto

assets as long-lived intangible assets with carrying values based on the original cost, less any impairment.

Changes in the

unrealized appreciation or depreciation of crypto assets are directly influenced by the volatility in crypto markets, which can be

challenging for management to predict.

the changes in other income for Fiscal 2022 were primarily driven by the decrease in the fair value of warrant liabilities throughout

This non-cash expense is influenced by the value of our stock price at the end of each quarter, a factor that we cannot predict.

income (loss)

increase in net income for Fiscal 2023, compared to the net loss in Fiscal 2022, is primarily attributable to a change in accounting

principle resulting from the Company’s adoption of ASU No.

2023-08 during Fiscal 2023.

This change had significant

implications for crypto assets, including the elimination of the need for the Company to recognize impairment losses on its crypto

assets, which had been a primary contributor to net losses in previous years.

Additionally, this change allowed the Company to

account for its crypto assets at their fair market value and include the change in fair market value of crypto assets as part of net

income for the fiscal year.

We acknowledge that our net income (loss) may exhibit significant fluctuations due to the volatility in

the crypto asset markets, impacting changes in the fair value of crypto assets during future reporting periods.

AND CAPITAL RESOURCES

3 unchanged sentences

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.

From the period

September 14, 2021 through March 19, 2024, the Company sold a total of 4,346,748 shares of Common Stock under the ATM Agreement for

aggregate total gross proceeds of approximately $17,256,000 at an average selling price of $3.97 per share, resulting in net proceeds

of approximately $16,696,000 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

2 unchanged sentences

on an ongoing basis.

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.

At December 31, 2023, the Company had approximately $1,458,000 of cash and working capital of approximately $26,055,000.

of March 19, 2024, the Company had approximately $870,000 of cash and the fair market value of the Company’s liquid crypto

assets was approximately $35,665,000.

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 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.

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

As of March 19, 2024, the Company also has approximately

$5.5 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.

of our staked crypto assets may be locked up for varying durations, depending on the specific blockchain protocol, and we may be unable

to unstake them in a timely manner in order to liquidate to the extent desired.

Lock-up periods for our staked crypto assets range from

several hours to six months.

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.

used in operating activities was approximately $3,562,000 during Fiscal 2023 compared to approximately $777,000 during Fiscal 2022.

The sale of our remaining bitcoin holdings during 2022 was the primary contributor to the approximately $2,547,000 operating cash

inflows from the sale of non-productive crypto assets during the Fiscal 2022 compared to $0 in Fiscal 2023.

We do not anticipate any

future material cash inflows from the sale of non-productive assets, as our blockchain infrastructure strategy focuses primarily on

acquiring and staking productive proof-of-stake blockchain networks.

Additional non-cash adjustments to our operating cash flows

consisted of approximately $13,349,000 impairment loss on crypto assets (“Crypto Asset Impairment”) during Fiscal 2022

compared to $0 in Fiscal 2023.

Due to the Company’s change in accounting principle resulting from its adoption of ASU No.

2023-08 in Fiscal 2023, the Company will no longer be required to recognize impairment on its crypto assets in future reporting

This is partially offset by the approximately $2,688,000 equity-based contingent bonuses granted to employees during Fiscal

2022 for the achievement of performance milestones compared to only approximately $1,342,000 equity-based compensation in Fiscal

We anticipate similar levels of equity-based compensation in future periods as reported in Fiscal 2023.

provided by investing activities was approximately $186,000 during Fiscal 2023 compared to cash used in investing activities of approximately

$8,973,000 for Fiscal 2022.

Net cash outflows for investing activities were used primarily for the purchase of crypto assets for blockchain

infrastructure operations.

We anticipate purchase activity to remain lower and consistent with the levels reported during Fiscal 2023

as we focus our strategies on technical developments.

Fiscal 2022 included large purchases of productive crypto assets to build on our

blockchain infrastructure operations.

Fiscal 2023 included a higher than typical volume of sales of crypto assets, primarily driven by

the re-allocation of Ethereum rewards earned to other productive crypto assets which were subsequently staked.

provided by financing activities was approximately $2,688,000 during Fiscal 2023 compared to approximately $10,496,000 during Fiscal

The cash inflows from financing activities in Fiscal 2023 and Fiscal 2022 were entirely from proceeds of Common Stock sold pursuant

to the ATM Agreement.

The cash inflows from financing activities during Fiscal 2022 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 needed.

Balance Sheet Transactions

5 unchanged sentences

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,

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

Impairment exists when the carrying amount exceeds its fair value.

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

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

If it is determined that it is not

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

If the Company concludes otherwise,

it is required to perform a quantitative impairment test.

To the extent an impairment loss is recognized, the loss establishes the new

cost basis of the asset.

Value Measurement

Company’s fair value measurement for its crypto assets is guided by Financial Accounting Standards Board (“FASB”) Accounting

Standards Codification (“ASC”) 820 - Fair Value Measurement .

According to ASC 820, fair value is defined as the price

that would be received for an asset in a current sale, assuming an orderly transaction between market participants on the measurement

It requires the Company to assume that its crypto assets are sold in their principal market or, in the absence of a principal market,

the most advantageous market.

In this context, market participants are considered to be independent, knowledgeable, and willing and able

has been identified as the principal market for the Company’s crypto assets, serving as the Company’s primary cryptocurrency

exchange for both purchases and sales.

This determination is based on a comprehensive evaluation process that considers various factors,

including regulatory compliance, trading activity, and price stability.

The Company places significant trust in Kraken’s well-established

reliability and robust capabilities.

determine the fair value of its crypto assets, the Company relies primarily on coinmarketcap.com (“CoinMarketCap”) as the

principal pricing source.

The selection of CoinMarketCap is the result of thorough due diligence, which identified it as the most reliable

source for consistently obtaining timely and accurate crypto asset price data, covering all the crypto assets held by the Company.

real-time pricing from CoinMarketCap is notably aligned with the bid/ask quotes observed on the Company’s primary exchange and

principal market, Kraken.

Kraken is designated as the primary exchange, the Company maintains the flexibility to engage in cryptocurrency transactions on other

exchanges where it maintains accounts.

This flexibility allows the Company to adapt to changing market conditions and explore alternative

platforms when necessary to ensure cost-effective execution and fair value measurement using the most advantageous market.

determination of Kraken as the principal market reflects the Company’s commitment to making informed decisions based on regulatory

compliance, trading activity, and price stability and achieving the most accurate representation of fair value for its crypto assets.

The Company regularly reviews and assesses its choice of principal market to ensure it aligns with its objectives and the evolving landscape

of the cryptocurrency market.

for Crypto Assets

cost basis of the Company’s crypto assets is initially recorded at their fair value using the U.S.

dollar spot price of the related

crypto asset at 4:00 p.m., New York time, on the date of receipt (or “carrying value”).

assets are measured at their fair respective fair market values at each reporting period end on the balance sheets and classified as

either ‘Staked Crypto Assets’ or ‘Crypto Assets’ to distinguish their nature within the respective balances.

Staked crypto assets are presented as current assets if their lock-up periods are less than 12 months, and as long-term other assets

if the lock-up extends beyond one year.

The majority of our crypto assets are staked, typically with lock-up periods of less than 21

days, and are considered current assets in accordance with ASC 210-10-20, Balance Sheet ,

due to the Company’s ability to sell them in a liquid marketplace, as we have a reasonable expectation that they will be

realized in cash or sold or consumed during the normal operating cycle of our business to support operations when needed .

classification of purchases and sales in the statements of cash flows is determined based on the nature of the crypto assets, which can

be categorized as ‘productive’ (i.e.

acquired for purposes of staking) or ‘non-productive’ (e.g.

of non-productive crypto assets are treated as operating activities, while acquisitions of productive crypto assets are classified as

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

Productive crypto assets staked with lock-up periods

of less than 12 months are listed as current assets in the ‘Staked Crypto Assets’ line item on the balance sheet.

crypto assets with lock-up periods exceeding 12 months are categorized as long-term other assets.

Non-productive crypto assets are included

in the ‘Crypto Assets’ line item on the balance sheet.

January 1, 2023, the Company has elected to early adopt ASU No.

2023-08, resulting in a material change in accounting principle related

to the Company’s accounting treatment of crypto assets.

The impacts of the change in accounting principle are discussed further

to the Company’s adoption of ASU No.

2023-08, the Company accounted for its crypto assets as indefinite-lived intangible

assets in accordance with ASC 350, Intangibles –Goodwill and Other .

An intangible asset with an indefinite useful life

is not amortized but assessed for impairment annually, or more frequently, when events or changes in circumstances occur indicating

that it is more likely than not that the indefinite-lived asset is impaired.

Impairment exists when the carrying amount exceeds its

In testing for impairment, the Company has the option to first perform a qualitative assessment to determine whether it

is more likely than not that an impairment exists.

If it is determined that it is not more likely than not that an impairment

exists, a quantitative impairment test is not necessary.

If the Company concludes otherwise, it is required to perform a

quantitative impairment test.

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

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

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

The Company recorded realized gains (losses)

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 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 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.

Company recognizes revenue under Accounting Standards Codification (“ASC”) 606 , Revenue from Contracts with Customers .

to the Company’s adoption of ASU No.

2023-08, on a quarterly basis, crypto assets were measured at carrying value, net of any

impairment losses incurred since receipt.

The Company recorded impairment losses as the fair value fell below the carrying value of

the crypto assets at any time during the period, as determined using the lowest intraday U.S.

dollar spot price of the related

crypto asset subsequent to its acquisition.

The crypto assets could only be marked down when impaired and not marked up when their

value increases.

Impairment losses could not be recovered for any subsequent increase in fair value until the sale or disposal of

Such impairment in the value of crypto assets was recorded as a component of costs and expenses in our statements of

The Company recorded impairment losses of approximately $0 and $13,349,000 related to crypto assets during the years

ended December 31, 2023 and 2022, respectively.

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

The Company recorded realized

gains (losses) on crypto assets of approximately ($604,000) and $507,000 during the years ended December 31, 2023 and 2022, respectively.

Company recognizes revenue under ASC 606 , Revenue from Contracts with Customers .

The core principle of the new revenue standard is that a company should recognize revenue to depict the transfer of promised goods or

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The Company generates revenue through staking rewards

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.

generated from its blockchain infrastructure operations.

transaction consideration the Company receives – the crypto asset awards and gas fees – are a non-cash consideration, which the Company

measures at fair value on the date received.

The fair value of the crypto asset award received is determined using the U.S.

price of the related crypto asset at 4:00 p.m., New York time, on the date of receipt.

Infrastructure

Company engages in network-based smart contracts by running its own crypto asset validator nodes as well as by staking (or “delegating”)

crypto assets directly to both its own validator nodes and nodes run by third-party operators.

Through these contracts, the Company provides

crypto assets to stake to a node for the purpose of validating transactions and adding blocks to a respective blockchain network.

term of a smart contract can vary based on the rules of the respective blockchain and typically last from a few days to several weeks

after it is cancelled (or “un-staked”) by the delegator and requires that the crypto assets staked remain locked up during

the duration of the smart contract.

exchange for staking the crypto assets and validating transactions on blockchain networks, the Company is entitled to all of the fixed

crypto asset award earned from the network when delegating to the Company’s own node and is entitled to a fractional share of the

fixed crypto asset award a third-party node operator receives (less crypto asset transaction fees payable to the node operator, 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 proportionate to the crypto assets staked by the

Company compared to the total crypto assets staked by all Delegators to that node at that time.

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

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

The transaction consideration the Company receives

– 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

The satisfaction of the performance obligation for processing and validating blockchain transactions occurs at a point in time

when confirmation is received from the network indicating that the validation is complete, and the awards are available for transfer.

The satisfaction of the performance obligation

for processing and validating blockchain transactions occurs at a point in time when confirmation is received from the network indicating

that the validation is complete, and the awards are available for transfer.

At that point, revenue is recognized.

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

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

and stock incentive shares.

Under ASC 718 awards result in a cost that is measured at fair value on the awards’ grant date, based

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

Company’s cost of revenue related to its blockchain infrastructure operations primarily includes direct production costs associated

with transaction validation on the network, cloud-based server hosting expenses related to our validator nodes, and allocated employee

salaries dedicated to node maintenance and support.

Additionally, the cost of revenue encompasses fees, including equity compensation

stock-based fees paid to third parties for their assistance in software maintenance and node operations.

These costs directly related to production of revenues are collectively summarized as “Validator expenses” in the

statements of operations.

Company accounts for stock-based compensation in accordance with ASC 718, Compensation – Stock Compensation .

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

stock incentive shares.

Under ASC 718, awards result in a cost that is measured at fair value on the awards’ grant date, based on

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

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

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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

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

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 strategies.

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

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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 a limited operating history, particularly with respect to our blockchain infrastructure solutions business, StakeSeeker,

Builder+, ChainQ and staking-as-a-service operations.

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.

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 any 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

and limited access to banking 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.

of our involvement in staking of crypto assets through delegations as part of our StaaS strategy, 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,

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impose significant regulatory burdens and compliance costs.

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.

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,

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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,

are reliant on a single service provider for cloud computing infrastructure deployed in our blockchain infrastructure 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.

are subject to various other risks and uncertainties relating to our StaaS and other elements of our business, including potential

loss of revenue if we experience excessive removal of delegated crypto assets on our validator nodes, potential shifts in the block

building landscape, and competitive forces for Ethereum and other crypto assets for which our services are offered, technical failures,

bugs, or vulnerabilities in our block builder software, and our efforts with respect to new features and services which were recently

launched or are still under development.

critical accounting policies may prove to be incorrect including due to our adoption of new accounting standards applicable to crypto

assets in 2023, 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 has in the past and may in the future 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 our business plan, our business, prospects, and results of operations may be materially

adversely affected.

have a limited operating history, particularly with respect to our blockchain infrastructure operations, including certain features and

service offerings 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 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.

In addition to the relative novelty of our business and industry generally, we also launched Builder+ which is designed to enhance validator

earnings by deploying algorithms to identify and access optimized blockers to increase reward fees in February 2024.

We are in the process

of developing ChainQ, an AI-powered blockchain data and analytics platform with the goal of launching later in 2024.

The performance

and results of these developments, and their impact on our business and financial condition, has yet to be determined.

Therefore, there

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

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.

While we generated a net gain of $7.8 million for the year ended December 31, 2023, we generated a net loss of $15.9 million for the

year ended December 31, 2022.

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

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

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.

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.

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

with them to evolve.

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

The SEC has also brought enforcement actions with respect to crypto assets and related activities, including custodial staking-as-a-service

models, and the SEC and courts have issued further orders and guidance as the crypto asset industry continues to develop and evolve,

as more particularly described later in these Risk Factors.

These or 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.

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

As the crypto industry and technology surrounding it continues to develop, new market entrants offering the same, similar or

alternative products and services to ours could arise, challenging our business model and market share.

For example, disruptive technologies

such as generative artificial intelligence (AI) may fundamentally alter the use of crypto assets and related infrastructure in unpredictable

of the foregoing realities and uncertainties surrounding our business and industry, we may invest substantial resources towards developing

additional platform features or new offerings such as Builder+ that ultimately fail to achieve the goals or benefits sought, or need

to be suspended, due to competitive, regulatory, technological or other conditions or developments beyond our control.

Further, any success

we have achieved or may in the future achieve towards our goal could be stifled by these forces, particularly if we are unable to adequately

or quickly adapt to them, which could render some or all of our offerings obsolete.

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.

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.

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 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.

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 plan.

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 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

activities, and turmoil among financial institutions arising from or relating

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

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

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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

discontinued with financial institutions in response to government action, including 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.

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

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

1 unchanged sentence

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.

an example of adverse events affecting the crypto landscape, in November 2023 Binance, the world’s largest crypto exchange, undertook

to exit the U.S.

and paid a $4.4 billion fine to settle charges by the U.S.

Department of Justice, Treasury, and the Commodity Futures

Trading Commission that the exchange violated sanctions and facilitated human and narcotics trafficking.

Further, 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.

In response 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, and whether and to what extent they signal a continuing trend

impacting the industry and potentially our business, remain unclear.

usefulness of cryptocurrencies as a payment system and the public perception of cryptocurrencies could be damaged if crypto exchanges

and other industry participants exit the U.S.

markets, and 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 financial crises or criminal activity such as those described above.

This could 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.

Related to Crypto Assets

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federal securities laws.

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.

Legal tests to determine whether a crypto asset is a security have been established by the U.S.

Court case law and the SEC has issued reports, orders, and statements that provide guidance on when a crypto asset may be a security

for purposes of the U.S.

federal securities laws.

The process of determining whether a specific crypto asset qualifies as a security

involves a nuanced analysis open to interpretation, making the outcome uncertain and challenging to predict.

regulatory developments in this field, some ambiguity persists, as the identification of crypto assets as securities or otherwise can

be a complex matter.

Notably, the SEC has identified certain crypto assets as securities in the context of legal actions involving industry

participants, such as Ripple, Coinbase, and Binance.

The Coinbase action involved alleged securities law violations for its custodial

staking-as-a-service activities, which were followed by actions relating to their staking-as-a-service activities by numerous state regulators

The potential for and resolution of ongoing enforcement actions and legal proceedings are still pending, potentially leaving

room for further clarification to be sought regarding the regulatory treatment of specific crypto assets.

based upon decided federal court cases, it appears that the federal courts of appeals, and possibly the U.S.

Supreme Court, may ultimately

settle unresolved legal issues with respect to the identification of certain crypto assets as securities.

regard to the 2023 cases, in separate SEC complaints, the SEC has alleged several crypto assets we hold, specifically Cardano, Tezos,

Solana, Cosmos, Polygon, Axie Infinity, and NEAR Protocol are securities.

The Company has conducted a detailed legal analysis which has

led us to determine that the identification by the SEC of certain crypto assets held by us as securities should not impact our business,

financial condition, and results of operations.

However, if our conclusions or any part thereof turn out to be incorrect, or new adverse

regulatory developments occur, we could be adversely impacted and/or be forced to modify or cease certain aspects of our current and

planned operations and business.

February 2023, the SEC charged Kraken with failing to register the offer and sale of its staking-as-a-service program, whereby investors

transferred 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.

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.

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

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

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of the crypto asset.

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

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

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

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generated therefrom.

To the extent we hold crypto assets allegedly identified as securities by the SEC, it could have a material adverse

effect on our business and our stock price.

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

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

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

There is an increased regulatory

examination of crypto assets and Digital Securities.

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

There is an increased regulatory examination

of crypto assets and Digital Securities.

This has led to regulatory and enforcement activities.

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.

As described elsewhere in these Risk

Factors, the SEC and certain state regulators have in recent years 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

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to be Digital Securities by the SEC or a court.

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

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 review

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

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.

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.

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We are subject to the following

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

SEC or a court may conclude that Ethereum, or other crypto assets we later acquire to be securities, notwithstanding differing conclusions

we may draw on advice of counsel;

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

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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%

of its assets (exclusive of cash) and does not go above the 40% threshold more than once every three years.

Accordingly, if changes in

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.

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% of its

assets (exclusive of cash) and does not go above the 40% threshold more than once every three years.

Accordingly, if changes in 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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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

If the SEC concludes that our non-custodial

staking business involves the offer and sale of a security in violation of Section 5 of the Securities Act of 1933 and the courts conclude

the SEC is correct, we will be required to cease our staking as a service business and seek another business opportunity and may be subject

to monetary and other penalties.

SEC has been successful in litigating against certain companies and individuals who have offered and sold various cryptocurrencies in

violation of the registration provisions of the Securities Act of 1933 (the “Securities Act”) and the anti-fraud provisions

of the Securities Act and the Securities Exchange Act of 1934 (the “Exchange Act”).

While we believe that our non-custodial

staking business does not involve the offer or sale of a security, we do not know if the SEC will agree or whether if we seek relief

from the courts, we will be successful.

If we are also found to have offered and sold securities in violation of the Securities Act and

the Exchange Act, the SEC could sue us for acting as an unregistered dealer.

Further, as discussed in the risk factor noted above, we

may inadvertently violate the 1940 Act.

we voluntarily cease our current business or litigate and lose, we would be required to find another business opportunity whether through

an acquisition or otherwise.

We may also have to pay a civil monetary penalty if the SEC sues us and is successful or as a condition

of any settlement.

We have no plans with regard to another business opportunity and our shareholders may not have any opportunity to

vote on any new business, unless our common stock remains listed on the Nasdaq Capital Market and its rules require it.

of the recent volatility 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.

business is focused on the cryptocurrency industry, particularly blockchain infrastructure and staking-as-a-service.

We also 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 significant decline in the prices of most popular crypto assets such as Bitcoin and Ethereum from

their all-time highs in 2021 has cast doubt on the future of crypto asset-focused businesses such as ours, despite the partial recovery

of those prices as of February 2024.

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, in

March 2023 three major U.S.

banks with involvement in crypto assets collapsed, and in November 2023 Binance settled charges alleging

violation of sanctions and facilitating human and narcotics trafficking which settlement included its forced exit from the United States.

These developments appear to reflect a broader regulatory landscape, wherein regulators have begun reviewing crypto asset-focused companies

and their operations with greater scrutiny, and have brought enforcement actions seeking to restrict or cease such activities.

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 defendants in past regulatory actions such as 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.

Further, 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.

and recent events 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 custodians.

with the collapse of TerraUSD and Luna in 2022 and the bankruptcy filings of FTX and its subsidiaries, Three Arrows Capital, Celsius

Network, Voyager Digital, Genesis Global and BlockFi, as well as alleged violations of law brought against other industry participants,

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 are believed to have also contributed to these trends.

regulatory regime – namely the Federal

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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

releases concerning crypto assets, including Bitcoin and crypto asset markets, and have formed coalitions aimed at addressing the perceived

threats posed by crypto assets and activities involving them.

However, the extent and content of any forthcoming laws, regulations and

government actions 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 as it has sued multiple crypto asset companies for selling, operating

exchanges, and engaging in other prohibited activities involving unregistered securities.

We cannot predict how these and other related

events will affect us or the crypto asset business generally.

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 blockchain infrastructure 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, 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.

discussed above, the cryptocurrency market experienced a critical decline in 2022, although prices of some major crypto assets including

Bitcoin and Ethereum have partially recovered in 2023 and thus far in 2024.

Prospects of a full recovery declined when the FTX controversy

arose and was subsequently followed by other adverse developments involving crypto-focused companies.

Our reliance on staking, which

is expected to increase as we continue to seek to expand our 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 the assets.

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.

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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 obtains control in excess of 50% control of 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 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.

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.

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.

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 Ethereum or other crypto assets we acquire or hold, and harm

decentralized nature of crypto asset systems may lead to slow or inadequate responses to crises, which may negatively affect our business .

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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, Ethereum and other crypto assets plummeted together

with stock prices globally.

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 crypto assets as investors focus their

investment on less volatile asset classes as a means of hedging their investment risk.

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.

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 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, crypto assets such as Bitcoin and Ethereum, which are relatively

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or other assets such as gold and silver.

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.

To the extent that we decide to continue operations, the required registrations and regulatory compliance

steps may result in extraordinary, non-recurring expenses to us.

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.

Such events could have a material adverse effect 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

To the extent that we decide to continue operations, the required registrations and regulatory

compliance steps may result in extraordinary, non-recurring expenses to us.

We may also decide to cease certain operations.

Any disruption of our

operations in response to the changed regulatory circumstances may be at a time that is disadvantageous to investors.

Any disruption

of our operations in response to the changed regulatory circumstances may be at a time that is disadvantageous to investors.

and future legislation, CFTC and other regulatory developments, including interpretations released by a regulatory authority, may impact

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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.

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.

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

If we determine not to comply with such additional regulatory and registration requirements, we may seek to cease certain of our

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, 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.

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.

By way of example our Ethereum

validator nodes only use block builders which remove wallet addresses found on the SDN list and Builder+ also screens out these SDN

wallet addresses.

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

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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 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.

ChainQ, and our 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 non-custodial staking, as well as the development of StakeSeeker,

Builder+, and ChainQ, are 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 losses.

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.

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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.

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 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.

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.

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 staking-as-a-service business plan and operations depend on consumers investing in crypto assets and staking to our nodes

and monitoring them using our non-custodial platform, economic downturns will materially adversely affect us.

non-custodial staking-as-a-service strategy depends on consumers purchasing crypto assets from exchanges and holding them long-term,

and staking them to our validator nodes.

Therefore, economic downturns or a recession will cause a reduction in delegation traffic to

our nods 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.

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.

While the markets have appeared to recover as of February 2024, crypto and stock prices have nonetheless experienced substantial volatility

in recent years, and in the event of adverse market conditions, consumers may elect to sell their crypto assets, or decline to increase

their holdings, rather than hold and stake them to our nodes.

Because we and our industry depend on consumers holding and staking crypto

assets long-term, such a trend has the potential to materially adversely harm us and our prospects.

Particularly in the event of prolonged

or recurring recessionary or turbulent market 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.

are subject to uncertainty with respect to our Ethereum block building and non-custodial staking-as-a-service businesses and we may be

subject to investigations and enforcement actions by U.S.

regulators and governmental authorities.

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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.

comprehensive sanctions, currently the Crimea Region of Ukraine, Russian Federation, 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 has technical nuanced differences which could potentially alter the analysis.

As such, there can be no guarantee

that securing (staking) 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.

Our platform, StakeSeeker, utilizes geo-blocking in an effort to prevent its use by persons located in sanctioned jurisdictions

by employing third-party software, Cloudflare, to automatically identify and restrict log-in attempts to the StakeSeeker platform from

specific countries and jurisdictions These restricted areas include Cuba, Iran, North Korea, the Russian Federation, Syria, and Venezuela.

Any StakeSeeker users detected from these regions will be redirected to a page informing them that their access has been restricted.

In addition, our Builder+ block builder software is equipped with a filtering mechanism that screens transactions initiated by wallet

addresses listed on OFAC’s Specially Designated Nationals And Blocked Persons (SDN) list, ensuring transactions from identified

wallets are not included in the blocks we propose to validators.

We actively monitor sanctioned jurisdictions to ensure that appropriate

restrictions are maintained.

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, despite the fact we

don’t take custody of staked crypto assets nor pay delegator crypto rewards, it could result in material negative consequences

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.

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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.

We’ve sought and are seeking additional 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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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.

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.

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.

To 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

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 the

financial stability of the exchanges.

crypto assets not held in a Company’s controlled digital wallet are held at crypto exchanges and subject to the risks encountered

by those exchanges 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, and such exchanges do not provide insurance and may lack the resources to protect against hacking

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

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.

Our loss of access to our private keys could

adversely affect an investment in our Company.

assets are controllable only by the possessor of both the unique public key and private key relating to the local or online digital wallet

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assets held by us are not subject to FDIC or SIPC protections.

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 (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.

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 Development Efforts

is substantial doubt that we will be able to fully develop or commercialize our StakeSeeker platform as intended.

are continuing to develop our StakeSeeker 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 fail to develop a comprehensive dashboard for StakeSeeker 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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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.

Digital Asset Platform that we are currently developing will require significant time and capital.

Even if we do develop this platform

and acquire a sufficient number of users to generate revenue, we cannot guarantee the revenue would be material or sufficient to justify

the costs we anticipate incurring to develop the platform.

if we develop and commercialize our StakeSeeker platform, we may not be able to generate material revenues.

continued development of StakeSeeker will require significant time and capital.

Even if we do develop this platform and acquire a sufficient

number of users to generate revenue, we cannot guarantee the revenue would be material or sufficient to justify the costs we anticipate

incurring to develop the platform.

While we are pursuing the development of additional features to make our platform more useful and

attractive to consumers involved in crypto assets, we may fail to develop these features effectively in an efficient manner, or within

a timeframe that enables us to be or remain competitive.

Our ability to capitalize on any platform we do develop will depend on a variety

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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.

platform development effort is completely dependent on our infrastructure.

We use internally developed systems for the platform.

future difficulties developing aspects of our platform may cause delays in bringing our platform to market.

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,

our servers are vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, the occurrence of any of which

could lead to interruptions, delays, loss of critical data or the inability to launch our platform.

The occurrence of any of the foregoing

risks could materially harm our business.

may experience loss of revenues resulting from excessive removal of delegated crypto assets from our validator nodes.

the extent the Company successfully executes on its business plan and earns material revenue from customers who delegate their crypto

assets to the Company’s validator nodes and subsequently experiences excessive removal of customer staked crypto assets from its

validator nodes (i.e.

a loss of customers) the Company would lose the related revenue which may have a material adverse impact on the

in the Ethereum block building landscape and market could increase the difficulty of remaining competitive and increase costs.

Ethereum block builder, Builder+, faces competition from existing and potential entrants in the expanding market.

New and existing competitors

may emerge with superior algorithms or strategies, potentially eroding our current market share, potential growth, and revenue generation

Moreover, changes in the Ethereum ecosystem, including network upgrades or shifts to alternative networks, may impact the

demand for our services.

Staying competitive requires continuous innovation and adaptation to market dynamics, which may necessitate

additional investments and resources.

may experience losses resulting from technical failures, bugs, or vulnerabilities in our block builder software.

risk of technical failures, bugs, or vulnerabilities in our block builder software could lead to operational disruptions and potential

financial losses.

Our Ethereum block-building process heavily relies on advanced algorithms and technology.

The risk of technical failures,

bugs, or vulnerabilities in our block builder software could lead to operational disruptions and potential financial losses.

the security of our operation is paramount, as vulnerabilities in smart contracts, blockchain infrastructure, or the Ethereum network

could result in security breaches, data breaches, and financial harm to our clients and us.

Ensuring the ongoing scalability and efficiency

of our algorithms requires continuous investment in research and development.

development of our StakeSeeker and ChainQ platforms will depend on the successful efforts of our employees.

platform development efforts are completely dependent on our infrastructure.

We use internally developed systems for the platforms.

future difficulties in developing aspects of our platforms may cause delays in bringing our platforms to market.

If our data stored on

AWS and the backups thereof are compromised, our platform and prospects could be harmed.

Despite our implementation of network security

measures, our servers are vulnerable to computer viruses, physical or electronic break-ins, and similar disruptions, the occurrence of

any of which could lead to interruptions, delays, loss of critical data, or the inability to launch our platform.

The occurrence of any

of the foregoing 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

to cyber incidents.

Digital Asset Platform is and will continue to be dependent on the secure operation of our website and systems as well as the operation

of the Internet generally.

The platform involves reading user data, and storage of user data, and security breaches could expose us to

a risk of loss or misuse of this information, litigation, and potential liability.

A number of large Internet companies have suffered

security breaches, some of which have involved intentional attacks.

From time to time, we and many other internet businesses also may

be subject to a denial of service attacks wherein attackers attempt to block customers’ access to our website.

If we are unable

to avert a denial of service attack for any significant period, we could sustain delays in the development of the platform and when launched

risk losing future users and have user dissatisfaction.

We may not have the resources or technical sophistication to anticipate or prevent

rapidly evolving types of cyber-attacks.

Cyber-attacks may target us, our users, or exchanges we read data from in general or the communication

infrastructure on which we depend.

If an actual or perceived attack or breach of our security occurs, user perception of the effectiveness

of our security measures could be harmed and we could lose our future user.

Actual or anticipated attacks and risks may cause us to incur

increasing costs, and delay development.

A person who is able to circumvent our security measures might be able to misappropriate our

or our users’ proprietary information, cause interruption in our operations, damage our computers or those of our users, or otherwise

damage our reputation and platform.

Any compromise of our security could result in a violation of applicable privacy and other laws,

significant legal and financial exposure, damage to our reputation, and a loss of confidence in our security measures, which could harm

our business.

may become subject to data privacy and data security laws and regulations by virtue of our Digital Asset Platform, which could force

us to incur significant compliance costs and expose us to liabilities.

is and will continue to be dependent on the secure operation of our website and systems as well as the operation of the Internet generally.

The platform involves reading user data, and storage of user data, and security breaches could expose us to a risk of loss or misuse

of this information, litigation, and potential liability.

A number of large Internet companies have suffered security breaches, some

of which have involved intentional attacks.

From time to time, we and many other internet businesses also may be subject to a denial-of-service attacks wherein attackers attempt to block customers’ access to our website.

If we are unable to avert a denial-of-service

attack for any significant period, we could sustain delays in the development of the platform and when launched risk losing future users

and have user dissatisfaction.

We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types

of cyber-attacks.

Cyber-attacks may target us, our users, or exchanges we read data from in general or the communication infrastructure

on which we depend.

If an actual or perceived attack or breach of our security occurs, user perception of the effectiveness of our security

measures could be harmed and we could lose our future user.

Actual or anticipated attacks and risks may cause us to incur increasing

costs, and delay development.

A person who is able to circumvent our security measures might be able to misappropriate our or our users’

proprietary information, cause interruption in our operations, damage our computers or those of our users, or otherwise damage our reputation

and platform.

Any compromise of our security could result in a violation of applicable privacy and other laws, significant legal and

financial exposure, damage to our reputation, and a loss of confidence in our security measures, which could harm our business.

may become subject to data privacy and data security laws and regulations by virtue of our StakeSeeker platform, which could force us

to incur significant compliance costs and expose us to liabilities.

virtue of our platform, including planned additional functions, we may become subject to the various local, state, federal, and international

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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

with, and other burdens imposed by, the CCPA, and similar laws may limit our prospective customer base or the use and adoption of our

products and services and/or require us to incur substantial compliance costs, which could have an adverse impact on our business.

Additionally,

many foreign countries and governmental bodies in which our users may reside, have laws and regulations concerning the collection, use,

processing, storage, and deletion of personal information obtained from their residents or by businesses operating within their jurisdiction.

These laws and regulations are often more restrictive than those in the United States.

Such laws and regulations may require companies

to implement new privacy and security policies, permit individuals to access, correct, and delete personal information stored or maintained

by such companies, inform individuals of security breaches that affect their personal information, require that certain types of data

be retained on local servers within these jurisdictions, and, in some cases, obtain individuals’ affirmative opt-in consent to

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, 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.

Since the CCPA was enacted, a growing

number of states 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 with, and other burdens imposed by,

the CCPA, and similar laws may limit our prospective customer base or the use and adoption of our products and services and/or require

us to incur substantial compliance costs, which could have an adverse impact on our business.

Additionally, many foreign countries and

governmental bodies in which our users may reside, have laws and regulations concerning the collection, use, processing, storage, and

deletion of personal information obtained from their residents or by businesses operating within their jurisdiction.

These laws and regulations

are often more restrictive than those in the United States.

Such laws and regulations may require companies to implement new privacy

and security policies, permit individuals to access, correct, and delete personal information stored or maintained by such companies,

inform individuals of security breaches that affect their personal information, require that certain types of data be retained on local

servers within these jurisdictions, and, in some cases, obtain individuals’ affirmative opt-in consent to 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, 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.

given the pseudonymous nature of activities involving crypto assets, we may encounter enhanced difficulties in our compliance efforts

that are not present to the same degree in other business types.

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

commercializing or increase the costs of commercializing the Digital Asset Platform.

commercializing or increase the costs of commercializing the StakeSeeker platform.

commercial success depends significantly on our ability to operate without infringing the patents and other intellectual property rights

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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;

expect this risk to increase as we continue to develop and roll-out additional functions for the StakeSeeker 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 amounts.

we could expend significant resources defending against patent infringement and other intellectual property right claims, which could

require us to divert resources away from operations.

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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.

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.

Further, in January 2024 we adopted a

new accounting treatment (ASU No.

2023-08) for our crypto assets, which may pose challenges or added expenses in the preparation of

our financial statements, or render a comparison of our financial performance and condition between periods more difficult or

investors, especially given the novelty of this new accounting method for crypto assets.

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

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As a result, you may be unable to resell your shares at a desired 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.

we paid a cash dividend in 2022, and declared a Series V 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 distributed Series V dividend to shareholders of our Common Stock of record as of May 12,

2023, we do not anticipate paying dividends on a regular or recurring basis for the foreseeable future.

future payment of dividends on our Common Stock will depend on earnings, financial condition and other business and economic factors

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to issue preferred stock without further shareholder approval.

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.

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.

For example, we issued a total of 14,542,803

shares of Series V Preferred Stock in June 2023, which preferred stock comes with a 20% liquidation preference over our Common Stock

and also has certain rights to dividend and distributions at the discretion of the Board.

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.

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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.

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

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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