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Item 2. Management’s Discussion and Analysis

2023-08-14 compared with 2023-05-15 · 112 added, 139 removed, 73 unchanged (77% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion

and analysis should be read in conjunction with our unaudited condensed consolidated financial statements, and the notes thereto, and

other financial information appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements

and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

The following discussion and

analysis compares our consolidated results of operations for the three months ended March 31, 2022 (the “2022 Quarter”) with

those for the three months ended March 31, 2023 (the “2023 Quarter”).

analysis should be read in conjunction with our unaudited condensed consolidated financial statements, and the notes thereto, and other

financial information appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and

notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

The following discussion and analysis

compares our consolidated results of operations for the three months ended June 30, 2022 (the “2022 Quarter”) with those for

the three months ended June 30, 2023 (the “2023 Quarter”).

Additionally, the six months ending June 30, 2023 and the six months

ending June 30, 2022 are referred to as the “2023 Period” and “2022 Period” respectively.

Cautionary Note Regarding Forward-Looking Statements

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Factors that could cause or contribute to such differences include, but are not limited to, our ability

to raise capital to buy crypto mining machines we have commitments to purchase, regulatory issues which effect our business model, and

to raise capital to buy crypto mining machines we have commitments to purchase, regulatory issues which affect our business model, and

those discussed under the caption "Risk Factors" in our Form 10-K for the year ended December 31, 2022 and those discussed in

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mining company.

We have established partnerships with third party hosting firms and Bitcoin mining facilities for the sole purpose of

mining Bitcoin.

We have entered into agreements with third party hosting firms and Bitcoin mining facilities for the sole purpose of mining

We require financing to operate the mining of Bitcoin.

We ceased Ethereum mining operations in September 2022 when Ethereum

switched its consensus protocol to proof of stake.

We ceased Ethereum mining operations in September 2022 when Ethereum switched

its consensus protocol to proof of stake.

Our mining platform will be operating with the primary intent of accumulating Bitcoin.

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During late 2022 and early 2023 we have focused on securing a debt facility.

anticipate our first loan from this facility will be completed in May 2023, although we cannot provide any assurances we will receive

any capital under this facility.

This debt facility will be used to finance the purchase of BTC mining hardware and hosting contracts

which, subject to financing, we anticipate will commence between May 2023 and December 2023.

cannot provide any assurances we will receive any capital under a debt facility.

Any debt financing will be used to finance the purchase

of BTC mining hardware and hosting contracts which, subject to financing, we anticipate will commence between October 2023 and December

We believe we have a purchase

order in place to acquire significant high quality additional machines contingent on our ability to raise the funds to acquire such machines.

Subject to receipt of financing, we have secured hosting contracts in the U.S and Egypt for over 540MW of hosting capacity, which will

Subject to receipt of financing, we have secured hosting contracts in Canada and Egypt for over 540MW of hosting capacity, which will

provide us the power supply to operate the 20 Exahash of hardware we have contracted to purchase.

There are no assurances we

will receive adequate financing.

There are no assurances we will

receive adequate financing.

Critical Accounting Policies and Estimates

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Recent Accounting Pronouncements

For information on recent

accounting pronouncements and impacts, see Note 1 to the unaudited condensed consolidated financial statements.

Three Months Ended March 31, 2023 Compared to

the Three Months Ended March 31, 2022

For information on recent accounting

pronouncements and impacts, see Note 1 to the unaudited condensed consolidated financial statements.

Three Months Ended June 30, 2023 Compared to the

Three Months Ended June 30, 2022

Results of operations

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2022 when Ethereum switched its consensus protocol to proof of stake.

We had no cost of revenues

for the 2023 Quarter compared to $423,770 for the 2022 Quarter.

We had no cost of revenues for

the 2023 Quarter compared to $382,908 for the 2022 Quarter.

The reason for the decrease was that we ceased Ethereum mining operations

in September 2022 when Ethereum switched its consensus protocol to proof of stake.

Our operating expenses for

the 2023 Quarter was $1,705,525 compared to $23,429,000, for the 2022 Quarter, a decrease of 93%.

In the 2023 Quarter, the Company incurred

stock-based compensation expense of $1,236,487 compared to $22,385,917 for the 2022 Quarter.

The stock based compensation for both quarters

was primarily related to vesting of the fair value of stock options.

Our other expenses for the

2023 Quarter was $72,486 compared to $44,840 for the 2022 Quarter.

The reason for the increase was a result of the prepayment penalty

on the redemption of the Preferred B shares.

Our operating expenses for the

2023 Quarter was $422,247 compared to $3,565,885, for the 2022 Quarter, a decrease of 88%.

In the 2023 Quarter, the Company incurred stock-based

compensation expense of $0 compared to $1,878,264 for the 2022 Quarter.

The stock based compensation for the 2022 Quarter was related

to vesting of the fair value of stock options.

Our other income for the 2023

Quarter was $484,887 compared to other expense of $34,987 for the 2022 Quarter.

In the 2023 quarter we received $500,000 related to a

refund on an equipment purchase order that was impaired during a previous period.

Six Months Ended June 30, 2023 Compared to the

Six Months Ended June 30, 2022

Results of operations

We had no revenues for the 2023

period compared to $436,237 for the 2022 Period.

The reason for the decrease was that we ceased Ethereum mining operations in September

2022 when Ethereum switched its consensus protocol to proof of stake.

We had no cost of revenues for

the 2023 Period compared to $806,678 for the 2022 Period.

The reason for the decrease was that we ceased Ethereum mining operations in

September 2022 when Ethereum switched its consensus protocol to proof of stake.

Our operating expenses for the

2023 Period was $2,130,375 compared to $26,994,885, for the 2022 Period, a decrease of 92%.

In the 2023 period, the Company incurred stock-based

compensation expense of $1,236,487 compared to $24,264,181 for the 2022 Period.

The stock based compensation for the 2023 Period related

to the difference in fair value on the amendment to outstanding options while the 2022 Period was related to vesting of the fair value

of stock options.

Our other income for the 2023

Period was $414,999 compared to other expense of $79,827 for the 2022 Period.

In the 2023 quarter we received $500,000 related to a refund

on an equipment purchase order that was impaired during a previous period.

We expect that our operating

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Liquidity and Capital Resources

As of March 31, 2023 and

May 15, 2023, the Company had approximately $14,000 and $110,000 of cash, respectively.

Our liquidity was primarily derived from debt

and equity investments from accredited investors and also from selling the crypto that we mined through September 2022.

As of June 30, 2023 and August

14, 2023, the Company had approximately $297,000 and $170,000 of cash, respectively.

Our liquidity was primarily derived from debt and

equity investments from accredited investors and also from selling the crypto that we mined through September 2022.

See “Subsequent

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To grow the business and help fund operations for the next 12 months, the Company is seeking to raise $75 million

in equity capital through private placements.

We can provide no assurances that any such financings will be successful, nor will they

be on terms acceptable to the Company.

If we fail to raise sufficient

additional funds, we will be required to significantly scale back our plan of operations.

On January 25, 2023, we

redeemed our outstanding Series B Preferred shares and paid to the holder a total of $270,549 which included the stated value of $212,500,

$6,190 in accrued dividends and the early redemption premium of $51,859.

The Company has terminated

the agreements for approximately $1.6 million of debt for equipment that the Company was using for mining and returned the equipment to

the vendor to settle the outstanding liabilities.

in debt facility.

Because we have been in the process of seeking to complete a debt facility for over 12 months, we can provide no assurances

that any such debt financings will be successful.

If we fail to close on a debt

facility or raise sufficient additional funds from other sources, we will be required to significantly scale back our plan of operations.

As of August 14, 2023, we have

a total of $1,544,876 of debt outstanding that is due within 12 months.

The Company has terminated the

agreements for approximately $1.6 million of debt for equipment that the Company was using for mining and returned the equipment to the

vendor to settle the outstanding liabilities.

The Company is making no further payments against the potential balance.

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Subsequent Events

April 20, 2023 Promissory Notes

Effective April 20, 2023,

we entered into a securities purchase agreement with an accredited investor, pursuant to which the Company sold the investor an unsecured

promissory note in the principal amount of $60,760.

The promissory note carries a one-time interest charge of 13% which was applied on

the issuance date to the principal (22% upon the occurrence of an event of default) and has a maturity date of March 10, 2024.

The promissory

note included an original issue discount of $6,510 and transaction expenses of $4,250.

We received gross proceeds of $54,250 in consideration

of issuance of the promissory note.

The promissory note requires that the Company make monthly payments for accrued interest and outstanding

principal, which shall be paid in 9 payments each in the amount of $7,628.67 for total repayment to the investor of $68,658.

payment is due May 15, 2023, with 8 subsequent payments each month thereafter.

The Company has right to accelerate payments or prepay

in full at any time with no prepayment penalty.

The investor may in its option,

at any time following an event of default, as defined in the promissory note, convert all or any part of the outstanding and unpaid amount

of the promissory note into fully paid and non-assessable shares of common stock at a conversion price per share equal to 71% of the lowest

closing bid price of the Company’s common stock during the 20 trading days prior to the date of conversion.

In addition, effective April

20, 2023, we entered into a securities purchase agreement with the investor, pursuant to which the Company sold the investor an unsecured

convertible promissory note in the principal amount of $56,962.

The maturity date of the convertible note is April 11, 2024.

The convertible

note shall bear interest at a rate of 8% per annum (22% upon the occurrence of an event of default), which interest shall not be payable

until the convertible note becomes payable, whether at the maturity date or upon acceleration or by prepayment, as described below.

convertible note included an original issue discount of $2,712 and transaction expenses of $4,250.

We received gross proceeds of $54,250

in consideration of issuance of the convertible note.

The investor has the option to convert all or any amount of the principal face amount

of the convertible note, beginning on the date which is 180 days following the date of the convertible note and ending on the later of:

(i) the Maturity Date and (ii) the date of payment of the Default Amount (as defined below), each in respect of the remaining outstanding

amount of the convertible note, to convert all or any part of the outstanding and unpaid amount of the convertible note into common stock

at the then-applicable conversion price.

The conversion price for the convertible note is equal to 65% of the average of the lowest 3

closing bid prices for the common stock during the 15 trading day period prior to the conversion date.

Upon the occurrence and during

the continuation of certain events of default, the convertible note will become immediately due and payable and the Company will pay the

investor in full satisfaction of its obligations in the convertible note an amount equal to 150% of an amount equal to the then outstanding

principal amount of the convertible note plus any interest accrued upon such event of default or prior events of default.

The convertible note may

be prepaid until 180 days from the issuance date.

If the convertible note is prepaid within 60 days of the issuance date, then the prepayment

premium shall be 115% of the face amount plus any accrued interest, if prepaid after 60 days from the issuance date, but less than but

less than 180 days from the issuance date, then the prepayment premium shall be 120% of the face amount plus any accrued interest.

April 25, 2023 Promissory Notes

On April 25, 2023, we entered

into a securities purchase agreement with an accredited investor, pursuant to which the Company sold the investor an unsecured promissory

note in the principal amount of $60,000.

The Company received gross proceeds of $60,000 in consideration of issuance of the promissory

In addition, on April 26, 2023, we entered into a promissory note purchase agreement with another investor, pursuant to which the

Company sold the investor an unsecured convertible promissory note in the principal amount of $57,502.

The Company received gross proceeds

of $57,502 in consideration of issuance of the promissory note.

The promissory notes bear interest at a rate of 10% and have a maturity

date of May 25, 2023 and May 26, 2023, respectively.

The promissory notes are convertible into common shares of the Company beginning

on the 6-month anniversary if not repaid by the maturity date.

The promissory notes have a prepayment percentage of 130% for the period

beginning on the issuance date and ending on the maturity date.

The investors may in their option, at any time following the 180-day anniversary

from the issuance date, as defined in the promissory notes, convert all or any part of the outstanding and unpaid amount of the promissory

notes into fully paid and non-assessable shares of common stock.

If the promissory notes are not repaid on or prior to the maturity date,

the conversion price will be $0.20 or 50% of the preceding five day VWAP on the six month anniversary, which is lower, subject to a floor

conversion price of $0.01 per share.

Furthermore, the notes contain a “most favored nation” provision that allows each

investor to claim any preferable terms from any future securities, excluding certain exempt issuances.

On August 4, 2023, the Company

entered into a securities purchase agreement with 1800 Diagonal Lending, LLC, an accredited investor, pursuant to which the Company sold

the investor an unsecured original issue discount promissory note in the principal amount of $71,450 (the “August Promissory Note”).

The Company received net proceeds of $60,000 in consideration of issuance of the August Promissory Note.

The August Promissory Note bears

interest at a rate of 13% and has a maturity date of May 15, 2024.

The August Promissory Note is convertible into common shares of

the Company at any time following an event of default.

The conversion price shall be 71% of the lowest trading price of the Company’s

common stock during the 20 trading days prior to the conversion date.

The outstanding principal and accrued interest shall be paid in

nine monthly payments of $8,971.

The August Promissory Note provides for standard and customary events of default such as failing to timely

make payments under the August Promissory Note when due, the failure of the Company to timely comply with the Securities Exchange Act

of 1934 reporting requirements and the failure to maintain a listing on the OTC Markets.

The August Promissory Note also contains customary

At no time may the August Promissory Note be converted into shares of the Company’s common stock if such conversion would

result in the investor, or its affiliates owning an aggregate of more than 4.99% of the then outstanding shares of the Company’s

common stock.

Summary of cash flows

March 31, 2023

March 31, 2022

Net cash (used) in operating activities

June 30, 2023

June 30, 2022

Net cash provided by (used in) operating activities

$ (1,824,305 )

Net cash provided by investing activities

Net cash provided by financing activities

During the 2023 Quarter and

2022 Quarter, our sources and uses of cash were as follows:

Net cash provided by (used in) financing activities

During the 2023 Period and 2022

Period, our sources and uses of cash were as follows:

Operating Activities

During the 2023 Quarter,

cash provided by operating activities of $281,586 primarily resulted from the refund of prepaid hosting services, offset by the net loss

of $1,788,011 and stock-based compensation of $1,236,487.

During the 2022 Quarter,

cash used in operating activities of $1,109,921 primarily resulted from its net loss of $23,626,491, offset by stock-based compensation

of $22,385,917 and loss on cryptocurrency transactions of $124,529.

During the 2023 Period, cash

provided by operating activities of $400,994 primarily resulted from the refund of prepaid hosting services, offset by the net loss of

$1,728,966 and stock-based compensation of $1,236,487.

During the 2022 Period, cash

used in operating activities of $1,824,305 primarily resulted from its net loss of $27,445,153, offset by stock-based compensation of

$24,264,181 and loss on cryptocurrency transactions of $157,913.

Investing Activities

Cash provided by investing

activities in the 2023 Quarter of $2,598 resulted from the sale of cryptocurrency assets .

Cash provided by investing

activities in the 2022 Quarter of $399,140 resulted from the $743,513 cash acquired from the reverse merger acquisition and the proceeds

of $26,603 from sale of cryptocurrency assets, offset by the purchase of equipment of $370,976.

Cash provided by investing activities

in the 2023 Period of $20,000 resulted from the sale of cryptocurrency assets.

Cash provided by investing activities

in the 2022 Period of $943,423 resulted from the $743,513 cash acquired from the reverse merger acquisition and the proceeds of $510,886

from sale of cryptocurrency assets, offset by the purchase of equipment of $370,976.

Financing Activities

In the 2023 Quarter, cash

used in financing activities of $270,549 consisted of the repayment of Series B preferred shares.

In the 2022 Quarter, cash

used in financing activities of $822,865 consisted of $663,864 in net proceeds from the issuance of common shares, $380,000 in proceeds

from the issuance of notes payable, offset by payments on equipment notes payable of $220,999.

In the 2023 Period, cash used

in financing activities of $124,051 consisted of the repayment of Series B preferred shares, offset by proceeds from convertible notes

payable of $160,000.

In the 2022 Period, cash provided

by financing activities of $860,712 consisted of $688,864 in net proceeds from the issuance of common shares, $380,000 in proceeds from

the issuance of notes payable, offset by payments on equipment notes payable of $208,152.

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-Q

Item 2. Management’s Discussion and Analysis