Form 424B3 BTCS Inc.



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Filed
pursuant to Rule 424(b)(3)

Registration
No. 333-239334

 

BTCS
INC.

PROSPECTUS

 

9,045,000
Shares of widespread inventory

 

This
prospectus pertains to the sale of as much as 9,045,000 shares of our widespread inventory which can be provided by the promoting stockholder,
Cavalry Fund I, LP which we seek advice from as “Cavalry.” The shares of widespread inventory being provided by the promoting stockholder
are excellent or issuable pursuant to the Cavalry Fairness Line Buy Settlement. See “The Cavalry Transaction”
for an outline of the Buy Settlement. Additionally, please seek advice from “Promoting Stockholder” starting on web page 50. Such
registration doesn’t imply that Cavalry will truly provide or promote any of those shares. We won’t obtain any proceeds from
the gross sales of the above shares of our widespread inventory by the promoting stockholder; nonetheless we’ll obtain proceeds underneath the Buy
Settlement if we promote shares to the promoting stockholder.

 

Our
widespread inventory trades on the OTC Markets, Inc., or OTCQB, underneath the image “BTCS”. On June 15, 2020, the final reported
sale value for our widespread inventory on the OTCQB was $0.23 per share.

 

The
widespread inventory provided on this prospectus includes a excessive diploma of danger. See “Threat Components” starting on web page 5 of
this prospectus to examine components you must contemplate earlier than shopping for shares of our widespread inventory.

 

As
of the date of this prospectus, the Firm had 27,422,008 shares of widespread inventory excellent of which 835 shares had been held by
associates. Due to this fact, the Firm’s public float is 27,421,173 shares and the variety of shares being registered hereunder
is roughly 32.99% of the general public float.

 

The
Firm bought all of the shares registered on the Kind S-1 (File No. 333-233638) (“Prior S-1”) to the promoting stockholder
on or previous to March 26, 2020 and the promoting stockholder indicated to the Firm that they’d bought considerably the entire
shares underneath the Prior S-1 on or previous to April 13, 2020.

 

The
promoting stockholder is an “underwriter” throughout the that means of the Securities Act of 1933. The promoting stockholder
is providing these shares of widespread inventory. The promoting stockholder might promote all or a portion of those shares every now and then
in market transactions via any market on which our widespread inventory is then traded, in negotiated transactions or in any other case, and
at costs and on phrases that can be decided by the then prevailing market value or at negotiated costs straight or via
a dealer or brokers, who might act as agent or as principal or by a mixture of such strategies of sale. The promoting stockholder
will obtain all proceeds from the sale of the widespread inventory. For extra data on the strategies of sale, you must refer
to the part entitled “Plan of Distribution.”

 

Neither
the Securities and Alternate Fee nor any state securities fee has accredited or disapproved of those securities or
decided whether or not this prospectus is truthful or full. Any illustration on the contrary is a legal offense.

 

The
date of this prospectus is June 26, 2020

 

 

TABLE
OF CONTENTS

 

 

You
ought to rely solely on data contained on this prospectus. Now we have not licensed anybody to offer you data that
is completely different from that contained on this prospectus. The promoting stockholder is just not providing to promote or searching for presents to purchase
shares of widespread inventory in jurisdictions the place presents and gross sales will not be permitted. We’re accountable for updating this prospectus
to make sure that all materials data is included and can replace this prospectus to the extent required by legislation.

 

 

PROSPECTUS
SUMMARY

 

This
abstract highlights data contained elsewhere on this prospectus. It is best to learn your complete prospectus rigorously together with
the part entitled “Threat Components” earlier than investing determination. BTCS, Inc., is referred to all through this
prospectus as “BTCS,” “we,” “our” or “us.”

 

Introduction

 

We
are an early entrant within the Digital Asset market and one of many first U.S. publicly traded corporations to be concerned with Digital
Property and block chain applied sciences. To our information, we’re one of some public corporations intending to amass each Digital
Property and a controlling curiosity in a number of companies within the Digital Asset and blockchain industries.

 

Our
Enterprise

 

Digital
Asset Initiatives

 

Topic
to extra financing, the Firm plans to amass extra Digital Property to offer buyers with oblique possession of
Digital Property that aren’t securities, similar to bitcoin and ether. The Firm intends to amass Digital Property via open
market purchases. We aren’t limiting our belongings to a single sort of Digital Asset and will buy quite a lot of Digital Property
that seem to profit our buyers, topic to the restrictions contained inside this prospectus relating to Digital Securities.
As of June 15, 2020, the Firm had the next Digital Property:

 

Digital
Asset
  Models
Held
    Truthful
Market
Worth
 
Bitcoin (BTC)     37.44     $ 353,190  
Ethereum (ETH)     1644.23     $ 382,367  
Complete           $ 735,557  

 

The
Firm has not participated in any preliminary coin choices because it believes many of the choices entail the providing of Digital
Securities and require registration underneath the Securities Act and underneath state securities legal guidelines or can solely be bought to accredited
buyers in the US. Since about July 2017, preliminary coin choices utilizing Digital Securities have been (or needs to be)
restricted to accredited buyers. As a result of we can’t qualify as an accredited investor, we don’t intend to amass cash in preliminary
coin choices or from purchasers in such choices. Additional, the Firm doesn’t intend to take part in registered or unregistered
preliminary coin choices. The Firm will rigorously assessment its purchases of Digital Securities to keep away from violating the 1940 Act
and search to scale back potential liabilities underneath the federal securities legal guidelines. See “Threat Components” starting on web page 5
and “Enterprise” starting on web page 35.

 

The
market is quickly evolving and there may be no assurances that we’ll be aggressive with business individuals which have or
might have higher assets than us.

 

Digital
Asset Knowledge Analytics Platform

 

We
are additionally centered on Digital Property and blockchain applied sciences. We’re at the moment internally growing a digital asset information analytics
platform aimed toward aggregating customers’ data, similar to monitoring of a number of exchanges and wallets to combination portfolio
holdings right into a single platform to view and analyze efficiency, danger metrics, and potential tax implications. The platform makes use of
digital asset trade APIs to learn person information and doesn’t permit for the buying and selling of belongings.

 

Acquisition
Initiatives

 

The
Firm can also be searching for to amass controlling pursuits in companies within the blockchain business as additional described on this
prospectus. We plan to proceed to judge different strategic alternatives together with buying controlling pursuits in enterprise
on this quickly evolving sector in an effort to boost shareholder worth.

 

Even
although the costs of Digital Property have been topic to substantial volatility and there stays some regulatory uncertainty,
we consider that companies utilizing blockchain expertise and people concerned with Digital Property similar to bitcoin and ether, provide
upside alternative and are the kinds of alternatives that we might pursue.

 

 

Our
present framework or standards is to hunt and consider acquisition targets within the blockchain and Digital Asset sector which (i)
align with our enterprise mannequin of buying Digital Property or buying a controlling curiosity in a number of blockchain expertise
associated enterprise ventures, and (ii) have ample capital to offer working capital. As disclosed on this prospectus we now have
restricted money, and accordingly as a important framework ingredient are searching for acquisition targets with ample capital which can
assist us maintain our operations with out having us depend on poisonous funding buildings. Our acquisition actions are spearheaded
by Charles Allen, our Chief Govt Officer who repeatedly communicates with Mr. David Garrity, considered one of our unbiased administrators
who can also be searching for acquisition targets on behalf of the Firm.

 

We
additionally monitor blockchain networks and will contemplate re-entering the digital asset mining enterprise if and once we consider a constructive
return on funding is achievable. Nonetheless, given the present community difficulties and value ranges to mine each bitcoin and
ethereum we don’t consider mining presents a constructive return on funding at current and don’t have any fast plans to renew mining.

 

Going
Concern

 

As a result of
of recurring working losses, internet working money circulation deficits, and an collected deficit, our unbiased auditors have indicated
of their report on our December 31, 2019 monetary statements that there’s substantial doubt about our skill to proceed as
a going concern.

 

The
continuation of our enterprise relies upon us elevating extra funds. The issuance of extra fairness or convertible debt
securities by us may end in a major dilution within the fairness pursuits of our present stockholders. Acquiring business
loans, assuming these loans can be accessible, will improve our liabilities and future money commitments.

 

We
proceed to incur ongoing administrative and different bills, together with public firm bills, in extra of capital raises. Whereas
we proceed to implement our enterprise technique, we intend to finance our actions via:

 

  managing
present money and money equivalents available from the Firm’s previous debt and fairness choices by controlling prices, and
     
  searching for
extra financing via gross sales of extra securities whether or not via Cavalry or different buyers.

 

Company
Info

 

We
are a Nevada company. Our principal government places of work are situated at 9466 Georgia Avenue #124 Silver Spring, MD 20910. Our
telephone quantity is (202) 430-6576 and our web site may be discovered at www.btcs.com. The data on our web site is just not included
into this prospectus.

 

 

THE
OFFERING

 

Frequent
inventory excellent previous to the providing:
  27,422,008
shares
     
Frequent
inventory provided by the promoting stockholder:
  9,045,000
shares
     
Frequent
inventory excellent instantly following the providing:
  36,467,008
shares
     
Use
of proceeds:
  We
won’t obtain any proceeds from the sale of the shares of widespread inventory.
     
Threat
Components:
  See
“Threat Components” starting on web page 5 of this prospectus for a dialogue of things you must rigorously contemplate
earlier than deciding to spend money on shares of our widespread inventory.
     
Inventory
Image:
  “BTCS”

 

The
variety of shares of widespread inventory to be excellent previous to and after this providing excludes:

 

 
a
complete of 502,915 shares of widespread inventory issuable upon the train of warrants with a weighted common train value of $3.54
per share; and
     
 
a
complete of 196,094 shares of widespread inventory issuable upon the conversion of Sequence C-1 Convertible Most popular Inventory.

 

The
Providing

 

On
Could 13, 2019, we entered into an fairness line buy settlement with Cavalry (the “Buy Settlement”) pursuant to
which Cavalry has agreed to buy from us as much as $10,000,000 of our widespread inventory (topic to sure limitations) from time
to time over a 36-month interval. Additionally on Could 13, 2019, we entered right into a Registration Rights Settlement (“Registration Rights
Settlement”), with Cavalry, pursuant to which we now have filed with the Securities and Alternate Fee (the “SEC”),
the registration assertion that features this prospectus to register for resale underneath the Securities Act of 1933 (the “Securities
Act”), the shares which were or could also be issued to Cavalry underneath the Buy Settlement.

 

We
shouldn’t have the suitable to begin any gross sales to Cavalry underneath the Buy Settlement till the SEC has declared efficient the registration
assertion of which this prospectus types a component. Thereafter, we might, every now and then and at our sole discretion, direct Cavalry
to buy shares of our widespread inventory throughout buying and selling hours (“Intraday Places”) and after buying and selling hours till 7 p.m.
New York time (“Aftermarket Places”) (both an Intraday Put or an Aftermarket Put could also be known as a “Put”).
“Put Date” imply the date when the Put happens. On Could 24, 2019, a registration assertion was declared efficient and
we bought 3,973,809 shares to Cavalry in trade for $1,158,639 and issued 67,598 shares as extra professional rata dedication shares
underneath that registration assertion. On December 20, 2019, a second registration assertion was declared efficient and we bought 6,428,847
shares to Cavalry in trade for $430,997 and issued 25,153 shares as extra professional rata dedication shares underneath that registration
assertion.

 

The
variety of shares that could be bought underneath an Intraday Put shall be equal to the entire every day buying and selling greenback quantity (“Each day
Buying and selling Greenback Quantity”) as reported on the Principal Marketplace for the buying and selling day previous to the relevant Put Date, divided
by the Intraday Buy Value (such shares being the “Intraday Put Share Restrict”). The “Intraday Buy Value”
means the decrease of: (i) 94% of the bottom sale value on the buying and selling day previous to the relevant Put Date and (ii) 94% of the arithmetic
common of the three lowest closing costs for the Firm’s widespread inventory through the 12 consecutive buying and selling days ending
on the Buying and selling Day instantly previous such Put Date.

 

The
variety of shares that could be bought underneath an Aftermarket Put shall be equal to the Each day Buying and selling Greenback Quantity as reported on the
Principal Market, divided by the Aftermarket Put Value (such shares being the “Aftermarket Put Share Restrict”). The
“Aftermarket Put Value” means: the decrease of: (i) the bottom Sale Value on the relevant Put Date and (ii) the arithmetic
common of the three lowest closing costs for the Firm’s widespread inventory through the 12 consecutive buying and selling days ending
on the buying and selling day instantly previous such Put Date.

 

Upon
mutual settlement of Cavalry and the Firm and topic to written affirmation by Cavalry that such settlement won’t end result
in violation of the 4.99% helpful possession limitation, the Firm might improve the Intraday Put Share Restrict or the Aftermarket
Put Share Restrict, as relevant, for any Put to incorporate an quantity equal to $2,000,000 in Put shares on the relevant Buy
Value, in every case along with the relevant Intraday Put Share Restrict or Aftermarket Put Share Restrict. In all cases, we
might not promote shares of our widespread inventory to Cavalry underneath the Buy Settlement if it might end in Cavalry beneficially proudly owning
greater than 4.99% of our widespread inventory or if the closing value the buying and selling day instantly previous the Put date is beneath $0.005.

 

 

See
“The Cavalry Transaction” starting on web page 50. The acquisition value per share can be equitably adjusted for any reorganization,
recapitalization, non-cash dividend, inventory break up, or different related transaction occurring through the Buying and selling Days used to compute
such value. We might at any time in our sole discretion terminate the Buy Settlement with out charge, penalty or value upon one enterprise
day discover. Cavalry might not assign or switch its rights and obligations underneath the Buy Settlement. After we seek advice from “Buying and selling
Days” on this prospectus we imply a day on which the Firm’s principal market is open for enterprise.

 

As
of June 15, 2020, there have been 27,422,008 shares of our widespread inventory excellent, of which roughly 27,421,173 shares had been
held by non-affiliates. Though the Buy Settlement supplies that we might promote as much as $10,000,000 of our widespread inventory to Cavalry,
solely 9,045,000 shares of our widespread inventory are being provided underneath this prospectus, which represents (i) 289,986 shares which we
are required to problem professional rata sooner or later as a dedication charge if and once we promote shares to Cavalry underneath the Buy Settlement,
and (ii) 8,755,014 shares which Cavalry might promote every now and then in accordance with the Buy Settlement. Cavalry might not
assign or switch its rights and obligations underneath the Buy Settlement. If the entire 9,045,000 shares provided by Cavalry
underneath this prospectus had been issued and excellent as of the date hereof, such shares would signify roughly 24.80% of the
complete variety of shares of our widespread inventory excellent (inclusive of the shares being registered hereunder) and roughly
24.80% of the entire variety of excellent shares held by non-affiliates (inclusive of the shares being registered hereunder) and,
in every case as of the date hereof. If we elect to problem and promote greater than the shares provided underneath this prospectus to Cavalry,
which we now have the suitable, however not the duty, to do, we should first register for resale underneath the Securities Act any such extra
shares, which may trigger extra substantial dilution to our stockholders. The variety of shares finally provided for resale
by Cavalry relies upon the variety of shares we promote to Cavalry underneath the Buy Settlement.

 

Issuances
of our widespread inventory on this providing won’t have an effect on the rights or privileges of our present stockholders, besides that the financial
and voting pursuits of every of our present stockholders can be diluted because of any such issuance. Though the quantity
of shares of widespread inventory that our present stockholders personal won’t lower, the shares owned by our present stockholders
will signify a smaller proportion of our complete excellent shares after any such issuance to Cavalry.

 

 

RISK
FACTORS

 

There
are quite a few and diversified dangers, identified and unknown, that will stop us from reaching our targets. If any of those dangers truly
happen, our enterprise, monetary situation or outcomes of operation could also be materially adversely affected. In such case, the buying and selling
value of our widespread inventory may decline and buyers may lose all or a part of their funding.

 

Dangers
Associated to Our Firm

 

We
must safe extra financing.

 

We
require extra funds since we now have very restricted working capital and detrimental working capital. As of June 15, 2020, we had
roughly $280,781 in money and the truthful market worth of our Digital Property was roughly $735,557. Our money as of the
date of this prospectus is predicted, to solely be ample to cowl our public firm prices via November 2020 relying on
bills which excludes: i) the compensation of the $500,000 convertible promissory be aware (the “2020 Promissory Be aware”)
which is held by the promoting stockholder, and ii) the fee of roughly $479,000 owed to our executives.

 

We
anticipate that we’ll incur working losses for the foreseeable future.

 

Our
money burn price is roughly $80,000 monthly, and will improve as we proceed to spend more money on authorized and accounting
bills in reference to our public reporting necessities. If we aren’t profitable in securing extra financing together with
poisonous funding, we’ll possible be required to stop operations.

 

If
we don’t increase extra debt or fairness capital, we might not be capable to pay all of our indebtedness.

 

In
Could 2019, we signed a Buy Settlement with Cavalry. We might direct Cavalry to buy shares of our widespread inventory as much as $10,000,000
(of which $1,589,636 has already been bought) underneath the Buy Settlement over a 36-month interval assuming there’s an efficient
registration assertion protecting the shares.

 

The
extent we depend on Cavalry as a supply of funding will rely on plenty of components together with, the prevailing market value of
our widespread inventory and quantity of buying and selling and the extent to which we’re capable of safe working capital from different sources. If acquiring
ample funding from Cavalry doesn’t happen for any cause together with Cavalry struggling liquidity points or failure of the Firm
to maintain the registration assertion present, we might want to safe one other supply of funding with a view to fulfill our working capital
wants. Ought to the financing we require to maintain our working capital wants be unavailable or prohibitively costly once we
require it, the implications could possibly be a cloth adversarial impact on our enterprise, working outcomes, monetary situation and prospects.

 

If
we don’t increase the required working capital, we won’t be able to stay operational.

 

Our
auditors have issued a “going concern” audit opinion.

 

Our
unbiased auditors have indicated of their report on our December 31, 2019 and 2018 monetary statements that there’s substantial
doubt about our skill to proceed as a going concern. A “going concern” opinion signifies that the monetary statements
have been ready assuming we’ll proceed as a going concern and don’t embrace any changes to mirror the doable future
results on the recoverability and classification of belongings, or the quantities and classification of liabilities that will end result if
we don’t proceed as a going concern. Due to this fact, you shouldn’t depend on our stability sheet as a sign of the quantity of proceeds
that might be accessible to fulfill claims of collectors, and probably be accessible for distribution to shareholders, within the
occasion of liquidation.

 

We
have a restricted working historical past and a historical past of working losses, and anticipate to incur important extra working losses.

 

We
have a restricted working historical past. Due to this fact, there’s restricted historic monetary data upon which to base an analysis
of our efficiency. Our prospects should be thought of in gentle of the uncertainties, dangers, bills, and difficulties incessantly
encountered by corporations of their early levels of operations. Now we have generated internet losses of $1.7 million and $0.Eight million for
the years ended December 31, 2019 and 2018, respectively. We anticipate to incur extra internet losses over the following a number of years
as we search to increase operations. The quantity of future losses and when, if ever, we’ll obtain profitability are unsure. If
we’re unsuccessful at executing on our marketing strategy, our enterprise, prospects, and outcomes of operations could also be materially adversely
affected.

 

We
have an evolving enterprise mannequin.

 

As
Digital Property and blockchain applied sciences develop into extra extensively accessible, we anticipate the companies and merchandise related to them
to evolve. In 2017, the SEC issued a DAO Report that promoters that use preliminary coin choices or token gross sales to boost capital
could also be engaged within the provide and sale of securities in violation of the Securities Act and the Securities Alternate Act of 1934
(the “Alternate Act”). This may occasionally trigger us to probably change our future enterprise with a view to comply totally with the
federal securities legal guidelines in addition to relevant state securities legal guidelines. Because of this, to remain present with the business, our enterprise
mannequin might must evolve as nicely. Sometimes we might modify features of our enterprise mannequin regarding our product combine and
service choices. We can’t provide any assurance that these or some other modifications can be profitable or won’t end in
hurt to the enterprise. We might not be capable to handle development successfully, which may injury our status, restrict our development and
negatively have an effect on our working outcomes.

 

The
lack of our government officers Charles Allen, our Chairman, Chief Govt Officer and Chief Monetary Officer, and Michal Handerhan,
our Chief Working Officer, may have a cloth adversarial impact on us.

 

Our
success relies upon solely on the continued companies of our government officers, notably Charles Allen, our Chairman, Chief Govt
Officer and Chief Monetary Officer, and Michal Handerhan, our Chief Working Officer, who’ve intensive market information and
long-standing business relationships. Particularly, our status amongst and {our relationships} with key Digital Asset business
leaders are the direct results of a major funding of effort and time by these people to construct our credibility in
a extremely specialised business. The lack of companies of both Charles Allen or Michal Handerhan, may diminish our enterprise and
development alternatives and {our relationships} with key leaders within the Digital Asset business and will have a cloth adversarial impact
on us.

 

 

In
the previous as we suffered liquidity considerations, we had been unable to pay these officers. Neither exercised their proper to terminate their
employment settlement.

 

As
a results of the Firm’s previous incapacity to compensate its officers at typically accepted market ranges and its historic
failure to both make payroll or make payroll on a well timed foundation, its officers select to commit a considerable quantity of their
time to involvement with different corporations or on different initiatives. Though our officers are actually receiving compensation for his or her
companies, we are able to present no assurances that we’ll not undergo liquidity points within the close to future as we implement our enterprise
plan. If the Firm is unable to pay our officers their compensation, they might once more commit time to different initiatives which can
have a cloth adversarial impact on us.

 

The
lack of Charles Allen, our Chairman, Chief Govt Officer and Chief Monetary Officer, and Michal Handerhan, our Chief Working
Officer, would have a cloth adversarial impact on us.

 

The
simultaneous lack of companies of each Charles Allen and Michal Handerhan, would end result within the Firm having no officers or staff
and would subsequently stop all operations which might have a cloth adversarial impact on us. See the second danger issue beneath
on the lack of our government officers and staff.

 

Michal
Handerhan our Chief Working Officer has notified the Firm that within the occasion of the departure of Charles Allen, our Chairman,
Chief Govt Officer and Chief Monetary Officer from the Firm he might terminate his employment and will resign as an officer
and director of the Firm, which might have a cloth adversarial impact on us.

 

We
don’t have any different officers and just one different director. The simultaneous lack of Charles Allen, our Chairman, Chief Govt Officer
and Chief Monetary Officer, and Michal Handerhan, our Chief Working Officer, would have a cloth adversarial impact on us. Their
Employment Agreements allow them to resign for Good Purpose which incorporates non-payment of salaries. Within the occasion each of officers
terminate their Employment Agreements for Good Purpose, this may end result within the Firm owing them $585,200 and would go away the
Firm with out officers or staff which can have a cloth adversarial impact upon us, your funding, and the flexibility of the
Firm to proceed operations.

 

Any
incapacity to draw and retain extra personnel may have an effect on our skill to efficiently develop our enterprise.

 

Our
future success will depend on our skill to determine, entice, rent, practice, retain and inspire different highly-skilled technical, managerial,
editorial, merchandising, advertising and customer support personnel. Competitors for such personnel is intense. Our failure to
retain and entice the required technical, managerial, editorial, merchandising, advertising, and customer support personnel may
hurt our enterprise.

 

We
might must implement extra finance and accounting programs, procedures and controls as we develop our enterprise and group
and to fulfill new reporting necessities
.

 

We
are required to adjust to quite a lot of reporting, accounting and different guidelines and rules. Compliance with present necessities
is dear. We might must implement extra finance and accounting programs, procedures and controls to fulfill our reporting
necessities and such additional necessities might improve our prices and require extra administration time and assets. Our inside
management over monetary reporting is set to be ineffective. Such failure may trigger buyers to lose confidence in our
reported monetary data, negatively have an effect on the market value of our widespread inventory, topic us to regulatory investigations
and penalties, and adversely impression our enterprise and monetary situation.

 

Adjustments
in accounting requirements and subjective assumptions, estimates and judgments by administration associated to advanced accounting issues
may considerably have an effect on our monetary outcomes
.

 

Typically
accepted accounting rules and associated accounting pronouncements, implementation tips and interpretations with regard
to a variety of issues which can be related to our enterprise, together with however not restricted to income recognition, estimating valuation
allowances and accrued liabilities (together with allowances for returns, bank card chargebacks, uncertain accounts and out of date
and broken stock), inside use software program and web site growth (acquired and developed internally), accounting for revenue
taxes, valuation of long-lived and intangible belongings and goodwill, stock-based compensation and loss contingencies, are extremely
advanced and contain many subjective assumptions, estimates and judgments by our administration. Adjustments in these guidelines or their interpretation
or adjustments in underlying assumptions, estimates or judgments by our administration may considerably change our reported or anticipated
monetary efficiency.

 

 

Pure
disasters and geo-political occasions may adversely have an effect on our enterprise.

 

Pure
disasters, together with hurricanes, cyclones, typhoons, tropical storms, floods, earthquakes and tsunamis, climate situations, together with
winter storms, droughts and tornados, whether or not because of local weather change or in any other case, and geo-political occasions, together with
civil unrest or terrorist assaults, that have an effect on us or different service suppliers may adversely have an effect on our enterprise.

 

Since
there was restricted priority set for monetary accounting of Digital Property aside from Digital Securities, it’s unclear
how we can be required to account for Digital Asset transactions sooner or later.

 

Since
there was restricted priority set for the monetary accounting of Digital Property aside from Digital Securities, it’s unclear
how we can be required to account for Digital Asset transactions or belongings. Moreover, a change in regulatory or monetary
accounting requirements may end result within the necessity to restate our monetary statements. Such a restatement may negatively impression
our enterprise, prospects, monetary situation and outcomes of operation.

 

We
are topic to the data and reporting necessities of the Alternate Act), and different federal securities legal guidelines, together with compliance
with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).

 

The
prices of getting ready and submitting annual and quarterly reviews and different data with the SEC and furnishing audited reviews to
shareholders will trigger our bills to be greater than they’d have been if we had been privately held. It might be time consuming,
troublesome and dear for us to develop, implement and keep the interior controls and reporting procedures required by the
Sarbanes-Oxley Act. We may have to rent extra monetary reporting, inside controls and different finance personnel so as
to develop and implement acceptable inside controls and reporting procedures.

 

If
we fail to ascertain and keep an efficient system of inside controls, we might not be capable to report our monetary outcomes
precisely or to forestall fraud. Any incapacity to report and file our monetary outcomes precisely and well timed may hurt our status
and adversely impression the buying and selling value of our widespread inventory. Throughout our evaluation of the effectiveness of inside management over
monetary reporting as of December 31, 2019, administration recognized a major deficiency in our disclosure controls and procedures
which can result in a failure to forestall or detect misstatements.

 

Efficient
inside controls are crucial for us to offer dependable monetary reviews and forestall fraud. If we can’t present dependable
monetary reviews or stop fraud, we might not be capable to handle our enterprise as successfully as we might if an efficient management
surroundings existed, and our enterprise and status with buyers could also be harmed. Because of this, our small dimension and any present
inside management deficiencies might adversely have an effect on our monetary situation, outcomes of operation and entry to capital. Throughout
our evaluation of the effectiveness of inside management over monetary reporting as of December 31, 2019, administration recognized
a major deficiency associated to presence of weak spot in our disclosure management and process ensuing from restricted inside
audit capabilities. Due to our inherent limitations, inside management over monetary reporting might not stop or detect misstatements.
Projections of any analysis of effectiveness to future durations are topic to the danger that controls might develop into insufficient as a result of
of adjustments in situations, or that the diploma of compliance with any insurance policies and procedures might deteriorate.

 

 

As a result of
we lack efficient inside controls and disclosure controls we erroneously accounted for Digital Property utilizing a good worth methodology
which was not per United States typically accepted accounting rules (“US GAAP”) and required us to
restate our monetary statements for the yr ended December 31, 2017 and the three and 6 months ended March 31, 2018 and June
30, 2018, our failure to ascertain and keep efficient inside management over monetary reporting may end in materials misstatements
in our monetary statements and a failure to fulfill our reporting and monetary obligations which may have a cloth adversarial
impact on our monetary situation.

 

Sustaining
efficient inside management over monetary reporting is critical for us to provide dependable monetary statements. As mentioned
herein, our inside controls and disclosure controls weren’t efficient as of December 31, 2018. Due to our ineffective controls
and materials weaknesses, we didn’t account for our Digital Property accurately in our monetary statements and restated our audited
monetary statements for the yr ended December 31, 2017 and the unaudited monetary statements for the quarters ended March
31, 2018 and June 30, 2018.

 

Additional,
in April 2020, the Firm obtained an oral remark from the Workers of the SEC relating to the classification of Digital Asset transactions
as an Investing Exercise in its Money Move Assertion throughout the Firm’s Kind 10-Okay for the yr ended December 31, 2019
(“Kind 10-Okay”). As talked about above, we beforehand misclassified Digital Property in 2017 monetary statements and failed
to right this within the Kind 10-Okay. The Firm has amended the Kind 10-Okay to reclassify Digital Asset transactions from an Investing
Exercise to an Working Exercise on the Money Move Assertion.

 

A
materials weak spot is outlined as a deficiency, or a mixture of deficiencies, in inside management over monetary reporting such
that there’s a affordable chance {that a} materials misstatement of our annual or interim monetary statements won’t be
prevented or detected on a well timed foundation.

 

Whereas
the Firm is now following US GAAP in accounting for its Digital Property, it has not remediated its materials weaknesses. There
may be no assurance as to when these materials weaknesses can be remediated or that extra materials weaknesses won’t come up
sooner or later. Any failure to remediate the fabric weaknesses, or the event of recent materials weaknesses in our inside
management over monetary reporting, may end in materials misstatements in our monetary statements and trigger us to fail to fulfill
our reporting and monetary obligations, which in flip may have a cloth adversarial impact on our monetary situation and the
buying and selling value of our Frequent Inventory.

 

Public
firm compliance might make it harder to draw and retain officers and administrators.

 

The
Sarbanes-Oxley Act and guidelines applied by the Securities and Alternate Fee have required adjustments in company governance
practices of public corporations. As a public firm, we anticipate these guidelines and rules to extend our compliance prices in
2019 and past and to make sure actions extra time consuming and dear. The impression of the SEC’s July 25, 2017 report
on Digital Securities (the “DAO Report”) in addition to latest enforcement actions and speeches made by the SEC’s
Chairman will improve our compliance and authorized prices. Extra not too long ago, the SEC’s Chairman commented that the majority preliminary coin
choices (a kind of Digital Asset) contain the provide of a Digital Safety. As a public firm, we additionally anticipate that these guidelines
and rules will make it harder and costly for us to acquire director and officer legal responsibility insurance coverage sooner or later
and we could also be required to simply accept lowered coverage limits and protection or incur considerably greater prices to acquire the identical or
related protection. Because of this, it might be harder for us to draw and retain certified individuals to serve on our board of
administrators or as government officers, and to keep up insurance coverage at affordable charges, or in any respect.

 

Our
inventory value could also be unstable.

 

The
market value of our widespread inventory is prone to be extremely unstable and will fluctuate extensively in value in response to numerous components,
a lot of that are past our management, together with the next:

 

adjustments
in our business together with adjustments which adversely have an effect on bitcoin and different Digital Property;
   
gross sales
by the promoting stockholder;
   
aggressive
pricing pressures;
   
continued
volatility within the inventory costs of Digital Property issuers;
   
continued
volatility within the value of bitcoin and different Digital Property;
   
our
skill to acquire working capital financing;
   
additions
or departures of key personnel together with our government officers;

 

 

gross sales
of our widespread inventory;
   
conversion
of our Sequence C-1 Convertible Most popular Inventory and the next sale of the underlying widespread inventory;
   

train
of our warrants and the next sale of the underlying widespread inventory;

   
conversion
of our convertible notes and the next sale of the underlying widespread inventory;
 

 

our
skill to execute our marketing strategy;
   
working
outcomes that fall beneath expectations;
   
loss
of any strategic relationship;
   
regulatory
developments; and
   
financial
and different exterior components.

 

In
addition, the securities markets have every now and then skilled important value and quantity fluctuations which can be unrelated
to the working efficiency of explicit corporations. These market fluctuations might also materially and adversely have an effect on the market
value of our widespread inventory. Because of this, you might be unable to resell your shares at a desired value.

 

We
haven’t paid money dividends up to now and don’t anticipate to pay dividends sooner or later. Any return on funding could also be restricted
to the worth of our widespread inventory.

 

We
have by no means paid money dividends on our widespread inventory and don’t anticipate doing so within the foreseeable future. The fee of dividends
on our widespread inventory will rely on earnings, monetary situation and different enterprise and financial components affecting us at such
time as our board of administrators might contemplate related. If we don’t pay dividends, our widespread inventory could also be much less precious as a result of
a return in your funding will solely happen if our inventory value appreciates.

 

There
is at the moment a restricted buying and selling marketplace for our widespread inventory and we can’t be sure that one can be sustained.

 

Our
shares of widespread inventory will not be traded on a nationwide securities trade, and the worth, might not mirror our precise or perceived
worth. There may be no assurance that there can be an lively marketplace for our shares of widespread inventory sooner or later. The market
liquidity can be depending on the notion of our working enterprise, amongst different issues. We might, sooner or later, take sure
steps, together with using investor consciousness campaigns, press releases, street exhibits and conferences to extend consciousness of our
enterprise and any steps that we would take to deliver us to the notice of buyers might require we compensate consultants with
money and/or inventory. There may be no assurance that there can be any consciousness generated or the outcomes of any efforts will end result
in any impression on our buying and selling quantity. Consequently, buyers might not be capable to liquidate their funding at a value that displays
the worth of the enterprise and buying and selling could also be at an inflated value relative to the efficiency of our firm attributable to, amongst different
issues, availability of sellers of our shares. The value of our widespread inventory has been extremely unstable. As a result of there could also be a
low value for our shares of widespread inventory and due to our involvement within the Digital Asset enterprise, many brokerage corporations or
clearing corporations might not be keen to impact transactions within the securities or settle for our shares for deposit in an account. Even
if an investor finds a dealer keen to impact a transaction within the shares of our widespread inventory, the mixture of brokerage
commissions, switch charges, taxes, if any, and some other promoting prices might exceed the promoting value. Additional, many lending establishments
won’t allow the usage of low priced shares of widespread inventory as collateral for any loans.

 

 

As a result of
our widespread inventory doesn’t commerce on a nationwide securities trade, the costs of our widespread inventory could also be extra unstable and decrease
than if we had been listed.

 

Our
widespread inventory trades on the OTCQB operated by OTC Markets Group Inc. This market is just not a nationwide securities trade. Whereas our
widespread inventory buying and selling has been comparatively lively, typically the OTCQB doesn’t have the identical degree of exercise as a nationwide securities
trade like Nasdaq. Most establishments won’t buy a safety except it’s on a nationwide securities trade. As well as,
they don’t buy shares that commerce beneath $5 per share. We might, sooner or later, take sure steps, together with using investor
consciousness campaigns, press releases, street exhibits and conferences to extend consciousness of our enterprise and any steps that we would
take to deliver us to the notice of buyers might require we compensate consultants with money and/or inventory. There may be no assurance
that there can be any consciousness generated or the outcomes of any efforts will end in any impression on our buying and selling quantity. Consequently,
buyers might not be capable to liquidate their funding or liquidate it at a value that displays the worth of the enterprise and
buying and selling could also be at an inflated value relative to the efficiency of our firm attributable to, amongst different issues, availability of sellers
of our shares.

 

Our
widespread inventory is deemed a “penny inventory,” which might make it harder for our buyers to promote their shares.

 

Our
widespread inventory is topic to the “penny inventory” guidelines adopted underneath Part 15(g) of the Alternate Act. The penny inventory
guidelines typically apply to corporations whose widespread inventory is just not listed on the Nasdaq Inventory Market or different nationwide securities trade
or trades at lower than $5.00 per share. These guidelines require, amongst different issues, that brokers who commerce penny inventory to individuals
aside from “established clients” full sure documentation, make suitability inquiries of buyers and supply
buyers with sure data regarding buying and selling within the safety, together with a danger disclosure doc and quote data
underneath sure circumstances. Many brokers have determined to not commerce penny shares due to the necessities of the penny inventory
guidelines and, in consequence, the variety of broker-dealers keen to behave as market makers in such securities is restricted. If we stay
topic to the penny inventory guidelines for any important interval, it may have an adversarial impact available on the market, if any, for our securities.
As a result of our widespread inventory is topic to the penny inventory guidelines, buyers will discover it harder to get rid of our securities.

 

Our
articles of incorporation permit for our board to create new sequence of most popular inventory with out additional approval by our shareholders,
which may adversely have an effect on the rights of the holders of our widespread inventory.

 

Our
board of administrators has the authority to repair and decide the relative rights and preferences of most popular inventory. Our board of
administrators additionally has the authority to problem most popular inventory with out additional shareholder approval. Because of this, our board of administrators
may authorize the issuance of a sequence of most popular inventory that might grant to holders the popular proper to our belongings upon
liquidation, the suitable to obtain dividend funds earlier than dividends are distributed to the holders of widespread inventory and the suitable
to the redemption of the shares, along with a premium, previous to the redemption of our widespread inventory. As well as, our board
of administrators may authorize the issuance of a sequence of most popular inventory that has higher voting energy than our widespread inventory or
that’s convertible into our widespread inventory, which may lower the relative voting energy of our widespread inventory or end in dilution
to our present shareholders.

 

Substantial
future gross sales of our widespread inventory by us or by our present shareholders (together with the promoting stockholder) may trigger our inventory
value to fall.

 

Further
fairness financings (along with the shares issued underneath the Buy Settlement) or different share issuances by us, together with shares
issued in reference to strategic alliances and company partnering transactions, and shares issued on the conversion of excellent
notes, may adversely have an effect on the market value of our widespread inventory. Gross sales by present shareholders (together with the promoting stockholder)
of numerous shares of our widespread inventory within the public market or the notion that extra gross sales may happen may
trigger the market value of our widespread inventory to drop.

 

 

We
could also be accused of infringing mental property rights of third events.

 

We
could also be topic to authorized claims of alleged infringement of the mental property rights of third events. The prepared availability
of damages, royalties and the potential for injunctive aid has elevated the protection litigation prices of patent infringement
claims, particularly these asserted by third events whose sole or major enterprise is to say such claims. Such claims, even
if not meritorious, might end in important expenditure of economic and managerial assets, and the fee of damages or
settlement quantities. Moreover, we might develop into topic to injunctions prohibiting us from utilizing software program or enterprise processes
we at the moment use or may have to make use of sooner or later, or requiring us to acquire licenses from third events when such licenses might
not be accessible on financially possible phrases or phrases acceptable to us or in any respect. As well as, we might not be capable to receive
on favorable phrases, or in any respect, licenses or different rights with respect to mental property we don’t personal in offering ecommerce
companies to different companies and people underneath business agreements.

 

Any
present or future outbreak of a well being epidemic or different adversarial public well being developments, such because the pneumonia brought on by the
COVID-19 coronavirus, may disrupt our operations and adversely have an effect on our enterprise.

 

Our
enterprise could possibly be adversely affected by the consequences of well being epidemics. For instance, we depend on our restricted workers for our continued
operations and don’t have any contingency plans and restricted assets if anybody was to be affected by the coronavirus.

 

Dangers
Associated to the Bitcoin Community and Bitcoins

 

The
following dangers relate to our proposed enterprise and the consequences upon us assume we receive financing in a ample quantity to re-enter
this enterprise.

 

The
additional growth and acceptance of the Bitcoin Community and different Digital Asset programs, which signify a brand new and quickly altering
business, are topic to quite a lot of components which can be troublesome to judge. The slowing or stopping of the event or acceptance
of the Bitcoin Community might adversely have an effect on an funding in our Firm.

 

Digital
Property similar to bitcoins that could be used, amongst different issues, to purchase and promote items and companies are a brand new and quickly evolving
business of which the Bitcoin Community is a distinguished, however not distinctive, half. The expansion of the Digital Property business normally,
and the Bitcoin Community particularly, is topic to a excessive diploma of uncertainty. The components affecting the additional growth
of the Digital Property business, in addition to the Bitcoin Community, embrace:

 

continued
worldwide development within the adoption and use of bitcoins and different Digital Property;
   
authorities
and quasi-government regulation of bitcoins and different Digital Property and their use, or restrictions on or regulation of entry
to and operation of the Bitcoin Community or related Digital Property programs;
   
the
upkeep and growth of the open-source software program protocol of the Bitcoin Community;
   
adjustments
in shopper demographics and public tastes and preferences;
   
the
availability and recognition of different types or strategies of shopping for and promoting items and companies, together with new technique of utilizing
fiat currencies;
   
basic
financial situations and the regulatory surroundings regarding Digital Property; and
   
the
impression of regulators specializing in Digital Property and Digital Securities and the prices related to such regulatory oversight.

 

A
decline within the recognition or acceptance of the Bitcoin Community may adversely have an effect on an funding in us.

 

 

As a result of
Digital Property could also be decided to be Digital Securities, we might inadvertently violate the 1940 Act and incur giant losses as
a end result and probably be required to register as an funding firm or terminate operations.

 

Digital
Property we might personal sooner or later could also be decided to be Digital Securities by the SEC or a courtroom. If a Digital Asset we had been to
maintain was later decided to be a Digital Safety, we may inadvertently develop into an funding firm, as outlined by the 1940
Act, if the worth of the Digital Securities we owned exceeded 40% of our belongings excluding money. We’re topic to the next
dangers:

 

Opposite
to authorized recommendation, the SEC or a courtroom might conclude that bitcoin, ether, or different Digital Property we later purchase to be securities;
   
primarily based
on authorized recommendation, we might purchase different Digital Property which we now have been suggested will not be securities however later are held to be
securities;
   
we
might knowingly purchase Digital Property which can be securities and purchase minority investments in companies which investments
are securities; and
   
regardless
of the interior procedures we take to keep away from surpassing the 40% threshold, future volatility through the course of a day might
trigger use to exceed the 40% threshold.

 

If
we exceed the take a look at, we may have one-year to scale back our holdings of securities beneath the 40% threshold. Nonetheless, that may solely
happen as soon as throughout a three-year interval. Accordingly, if adjustments within the classification of Digital Property causes us to exceed the
40% threshold, we might expertise giant losses once we liquidate securities because of continued volatility. Additional, if we
elect to promote a non-public funding, not solely might it’s troublesome to discover a purchaser however we may incur a major loss on the
sale of a non-public funding attributable to not solely the dearth of liquidity but additionally the entity’s poor efficiency. If we’re in a position
to return beneath the 40% threshold and once more face the identical downside, it’s possible we can be pressured to terminate operations, promote
all belongings and distribute money to our shareholders who will possible undergo very giant losses. Additional, the price of distributing
money to our shareholders might exceed the amount of money available through which case we might use our remaining funds to wind down the
Firm.

 

If
we purchase Digital Securities, even unintentionally, we might violate the Funding Firm Act and incur potential third-party
liabilities.

 

We
anticipate that if we receive ample financing, we’ll purchase a portfolio of Digital Property together with bitcoins, ether and Digital
Securities. There’s an elevated regulatory examination of Digital Property and Digital Securities. This has led to regulatory
and enforcement actions. With the intention to restrict our acquisition of Digital Securities to remain throughout the 40% threshold, we’ll
study the style through which Digital Property had been initially marketed to find out if they might be deemed Digital Securities and topic
to federal and state securities legal guidelines. Even when we conclude {that a} explicit Digital Asset is just not a safety underneath the Securities
Act, sure states together with California take a stricter view of the time period “funding contract” which implies the Digital
Asset might have violated relevant state securities legal guidelines. This can end in elevated compliance prices and authorized charges. If our
examination of a Digital Asset is wrong, we might incur regulatory penalties and personal investor liabilities since Part
5 of the Securities Act is a strict legal responsibility statute very like promoting spoiled milk and state securities legal guidelines typically impose
legal responsibility for negligence for misrepresentations.

 

At present,
there’s comparatively small use of bitcoins within the retail and business market compared to comparatively giant use by speculators,
thus contributing to cost volatility that might adversely have an effect on an funding in us.

 

As
comparatively new merchandise and applied sciences, bitcoins and the Bitcoin Community have solely not too long ago develop into extensively accepted as a method
of fee for items and companies by many main retail and business shops, and use of bitcoins by customers to pay such retail
and business shops stays restricted. Conversely, a good portion of bitcoin demand is generated by speculators and buyers
searching for to revenue from the short- or long-term holding of bitcoins. A scarcity of enlargement by bitcoins into retail and business
markets, or a contraction of such use, might end in elevated volatility or a discount within the value of bitcoin, both of which
may adversely impression an funding in us.

 

As a result of
Fb is searching for to develop a cryptocurrency, it might adversely have an effect on the worth of bitcoins and Digital Property.

 

In
Could 2019, Fb introduced its plans for a cryptocurrency known as Libra. The large social community and 27 different companions are
touting the Libra digital coin and Fb’s corresponding digital pockets, Calibra, as a approach to make sending funds round
the world as straightforward as it’s to ship a photograph. In July 2019, Fb introduced that Libra won’t launch till all regulatory considerations
have been met. In October 2019, many companions left the Libra Affiliation together with Paypal, eBay, Mastercard, Stripe, and Visa.
As a result of Fb is a pacesetter in social media, when and if it launches its cash, it may adversely have an effect on the worth of bitcoins
and Digital Property.

 

 

Important
Bitcoin Community contributors may suggest amendments to the Bitcoin Community’s protocols and software program that, if accepted
and licensed by the Bitcoin Community, may adversely have an effect on an funding in us.

 

A
small group of people contribute to the Bitcoin Core venture on Github. This group of contributors is at the moment headed by
Wladimir J. van der Laan, the present lead maintainer. These people can suggest refinements or enhancements to the Bitcoin
Community’s supply code via a number of software program upgrades that alter the protocols and software program that govern the Bitcoin
Community and the properties of bitcoin, together with the irreversibility of transactions and limitations on the mining of recent bitcoin.
Proposals for upgrades and discussions relating thereto happen on on-line boards. For instance, there’s an ongoing debate relating to
altering the Blockchain by growing the dimensions of blocks to accommodate a bigger quantity of transactions. Though some proponents
help a rise, different market individuals oppose a rise to the block dimension as it might deter miners from confirming transactions
and focus energy right into a smaller group of miners. To the extent {that a} important majority of the customers and miners on the
Bitcoin Community set up such software program improve(s), the Bitcoin Community can be topic to new protocols and software program that will
adversely have an effect on an funding within the Shares. Within the occasion a developer or group of builders proposes a modification to the Bitcoin
Community that’s not accepted by a majority of miners and customers, however that’s nonetheless accepted by a considerable plurality of
miners and customers, two or extra competing and incompatible Blockchain implementations may end result. This is named a “arduous
fork.” In such a case, the “arduous fork” within the Blockchain may materially and adversely have an effect on the perceived
worth of bitcoin as mirrored on one or each incompatible Blockchains, which can adversely have an effect on an funding in us.

 

Bitcoin
has forked 3 times and extra forks might happen sooner or later which can have an effect on the worth of bitcoin held by the Firm.

 

Since
August 1, 2017, bitcoin’s blockchain was forked 3 times creating Bitcoin Money, Bitcoin Gold and Bitcoin SV. The forks
resulted in a brand new blockchain being created with a shared historical past, and a brand new path ahead. The worth of the newly created Bitcoin
Money, Bitcoin Gold and Bitcoin SV might or might not have worth in the long term and will have an effect on the worth of bitcoin if curiosity is
shifted away from bitcoin to the newly created Digital Property. The worth of bitcoin after the creation of a fork is topic to
many components together with the worth of the fork product, market response to the creation of the fork product, and the incidence
of forks sooner or later. As such, the worth of bitcoin could possibly be materially lowered if present and future forks have a detrimental
impact on bitcoin’s worth.

 

The
open-source construction of the Bitcoin Community protocol signifies that the contributors to the protocol are typically indirectly compensated
for his or her contributions in sustaining and growing the protocol. A failure to correctly monitor and improve the protocol may
injury the Bitcoin Community and an funding in us.

 

The
Bitcoin Community operates primarily based on an open-source protocol maintained by contributors, largely on the Bitcoin Core venture on GitHub.
As an open supply venture, Bitcoin is just not represented by an official group or authority. Because the Bitcoin Community protocol
is just not bought and its use doesn’t generate revenues for contributors, contributors are typically not compensated for sustaining
and updating the Bitcoin Community protocol. Though the MIT Media Lab’s Digital Forex Initiative funds the present maintainer
Wladimir J. van der Laan, amongst others, one of these monetary incentive is just not typical. The dearth of assured monetary incentive
for contributors to keep up or develop the Bitcoin Community and the dearth of assured assets to adequately deal with rising
points with the Bitcoin Community might scale back incentives to handle the problems adequately or in a well timed method. This may occasionally adversely
have an effect on an funding in us.

 

 

If
a malicious actor or botnet obtains management in extra of 50% of the processing energy lively on the Bitcoin Community, it’s doable
that such actor or botnet may manipulate the Blockchain in a fashion that adversely impacts an funding in us.

 

If
a malicious actor or botnet (a volunteer or hacked assortment of computer systems managed by networked software program coordinating the actions
of the computer systems) obtains a majority of the processing energy devoted to mining on the Bitcoin Community, it could possibly alter
the Blockchain on which the Bitcoin Community and all bitcoin transactions rely by setting up alternate blocks if it is ready to
remedy for such blocks sooner than the rest of the miners on the Bitcoin Community can add legitimate blocks. In such alternate blocks,
the malicious actor or botnet may management, exclude or modify the ordering of transactions, although it couldn’t generate new
bitcoins or transactions utilizing such management. Utilizing alternate blocks, the malicious actor may “double-spend” its
personal bitcoins (i.e., spend the identical bitcoins in a couple of transaction) and forestall the affirmation of different customers’ transactions
for as long as it maintains management. To the extent that such malicious actor or botnet doesn’t yield its majority management of
the processing energy on the Bitcoin Community or the bitcoin group doesn’t reject the fraudulent blocks as malicious, reversing
any adjustments made to the Blockchain might not be doable. Such adjustments may adversely have an effect on an funding in us.

 

In
late Could and early June 2014, a mining pool referred to as GHash.io approached and, throughout a 24- to 48-hour interval in early June might
have exceeded, the edge of 50% of the processing energy on the Bitcoin Community. To the extent that GHash.io did exceed 50%
of the processing energy on the community, reviews point out that such threshold was surpassed for under a brief interval, and there
are not any reviews of any malicious exercise or management of the Blockchain carried out by GHash.io. Moreover, the processing energy
within the mining pool seems to have been redirected to different swimming pools on a voluntary foundation by individuals within the GHash.io pool, as
had been executed in prior cases when a mining pool exceeded 40% of the processing energy on the Bitcoin Community. The method
to and doable crossing of the 50% threshold point out a higher danger {that a} single mining pool may exert authority over the
validation of bitcoin transactions. To the extent that the bitcoin ecosystem, together with the Core Builders and the directors
of mining swimming pools, don’t act to make sure higher decentralization of bitcoin mining processing energy, the feasibility of a malicious
actor acquiring in extra of 50% of the processing energy on the Bitcoin Community (e.g., via management of a giant mining pool
or via hacking such a mining pool) will improve, which can adversely impression an funding in us.

 

If
the award of bitcoin for fixing blocks and transaction charges for recording transactions will not be sufficiently excessive to incentivize
miners, miners might stop expending hashrate to unravel blocks and confirmations of transactions on the Blockchain could possibly be slowed
quickly. A discount within the hashrate expended by miners on the Bitcoin Community may improve the probability of a malicious
actor acquiring management in extra of 50%) of the combination hashrate lively on the Bitcoin Community or the Blockchain, probably
allowing such actor to control the Blockchain in a fashion that adversely impacts an funding in us.

 

As
the award of recent bitcoin for fixing blocks declines, and if transaction charges will not be sufficiently excessive, miners might not have an
sufficient incentive to proceed mining and will stop their mining operations. The present mounted reward for fixing a brand new block
is 6.25 bitcoin per block; the reward decreased from 12.5 bitcoin in Could 2020. It’s estimated that it’s going to halve once more in about
4 years. This discount might end in a discount within the combination hashrate of the Bitcoin Community as the motivation for miners
will lower. Furthermore, miners ceasing operations would scale back the combination hashrate on the Bitcoin Community, which might adversely
have an effect on the affirmation course of for transactions (i.e., quickly lowering the pace at which blocks are added to the Blockchain
till the following scheduled adjustment in problem for block options) and make the Bitcoin Community extra weak to a malicious
actor acquiring management in extra of 50% of the combination hashrate on the Bitcoin Community. Periodically, the Bitcoin Community has
adjusted the issue for block options in order that resolution speeds stay within the neighborhood of the anticipated ten minute affirmation
time focused by the Bitcoin Community protocol. The Firm believes that every now and then there can be additional issues
and changes to the Bitcoin Community relating to the issue for block options. Extra important reductions in combination
hashrate on the Bitcoin Community may end in materials, although momentary, delays in block resolution affirmation time. Any discount
in confidence within the affirmation course of or combination hashrate of the Bitcoin Community might negatively impression the worth of bitcoin,
which can adversely impression an funding in us.

 

 

To
the extent that the revenue margins of Bitcoin mining operations will not be excessive, operators of Bitcoin mining operations are extra
prone to instantly promote bitcoins earned by mining within the Bitcoin Alternate Market, leading to a discount within the value of
bitcoins that might adversely impression an funding in us.

 

Over
the previous 5 years, Bitcoin Community mining operations have advanced from particular person customers mining with pc processors, graphics
processing models and first-generation ASIC servers. At present, new processing energy introduced onto the Bitcoin Community is predominantly
added by included and unincorporated “professionalized” mining operations. Professionalized mining operations
might use proprietary {hardware} or refined ASIC machines acquired from ASIC producers. They require the funding of great
capital for the acquisition of this {hardware}, the leasing of working house (usually in information facilities or warehousing services),
incurring of electrical energy prices and the employment of technicians to function the mining farms. Because of this, professionalized mining
operations are of a higher scale than prior Bitcoin Community miners and have extra outlined, common bills and liabilities. These
common bills and liabilities require professionalized mining operations to extra instantly promote bitcoins earned from mining
operations on the Bitcoin Alternate Market, whereas it’s believed that particular person miners in previous years had been extra prone to maintain
newly mined bitcoins for extra prolonged durations. The fast promoting of newly mined bitcoins enormously will increase the provision of
bitcoins on the Bitcoin Alternate Market, creating downward strain on the worth of bitcoins.

 

The
extent to which the worth of bitcoin mined by a professionalized mining operation exceeds the allocable capital and working
prices determines the revenue margin of such operation. A professionalized mining operation could also be extra prone to promote a better
proportion of its newly mined bitcoin quickly whether it is working at a low revenue margin-and it might partially or fully stop
operations if its revenue margin is detrimental. In a low revenue margin surroundings, a better proportion could possibly be bought into the Bitcoin
Alternate Market extra quickly, thereby probably decreasing bitcoin costs. Decrease bitcoin costs may end in additional tightening
of revenue margins, notably for professionalized mining operations with greater prices and extra restricted capital reserves, creating
a community impact that will additional scale back the worth of bitcoin till mining operations with greater working prices develop into unprofitable
and take away mining energy from the Bitcoin Community. The community impact of lowered revenue margins leading to higher gross sales of newly
mined bitcoin may end in a discount within the value of bitcoin that might adversely impression an funding in us.

 

To
the extent that any miners stop to report transactions in solved blocks, transactions that don’t embrace the fee of a transaction
charge won’t be recorded on the Blockchain till a block is solved by a miner who doesn’t require the fee of transaction
charges. Any widespread delays within the recording of transactions may end in a lack of confidence within the Bitcoin Community, which
may adversely impression an funding in us.

 

To
the extent that any miners stop to report transactions in solved blocks, such transactions won’t be recorded on the Blockchain.
At present, there are not any identified incentives for miners to elect to exclude the recording of transactions in solved blocks; nonetheless,
to the extent that any such incentives come up (e.g., a collective motion amongst miners or a number of mining swimming pools forcing bitcoin
customers to pay transaction charges as an alternative choice to or along with the award of recent bitcoins upon the fixing of a block), actions
of miners fixing a major variety of blocks may delay the recording and affirmation of transactions on the Blockchain.
Any systemic delays within the recording and affirmation of transactions on the Blockchain may end in higher publicity to double-spending
transactions and a lack of confidence within the Bitcoin Community, which may adversely impression an funding in us.

 

The
acceptance of Bitcoin Community software program patches or upgrades by a major, however not overwhelming, proportion of the customers and
miners within the Bitcoin Community may end in a “fork” within the Blockchain, ensuing within the operation of two separate
networks till such time because the forked Blockchains are merged. The momentary or everlasting existence of forked Blockchains may
adversely impression an funding in us.

 

Bitcoin
is an open supply venture and, though there’s an influential group of leaders within the Bitcoin Community group together with the
Core Builders, there isn’t any official developer or group of builders that formally controls the Bitcoin Community. Any particular person
can obtain the Bitcoin Community software program and make any desired modifications, that are proposed to customers and miners on the Bitcoin
Community via software program downloads and upgrades, sometimes posted to the bitcoin growth discussion board on GitHub.com. A considerable
majority of miners and bitcoin customers should consent to these software program modifications by downloading the altered software program or improve
that implements the adjustments; in any other case, the adjustments don’t develop into part of the Bitcoin Community. Because the Bitcoin Community’s
inception, adjustments to the Bitcoin Community have been accepted by the overwhelming majority of customers and miners, making certain that the Bitcoin
Community stays a coherent financial system; nonetheless, a developer or group of builders may probably suggest a modification
to the Bitcoin Community that’s not accepted by a overwhelming majority of miners and customers, however that’s nonetheless accepted by a considerable
inhabitants of individuals within the Bitcoin Community. In such a case, and if the modification is materials and/or not backwards suitable
with the prior model of Bitcoin Community software program, a fork within the Blockchain may develop and two separate Bitcoin Networks may
end result, one operating the pre-modification software program program and the opposite operating the modified model (i.e., a second “Bitcoin”
community). Such a fork within the Blockchain sometimes can be addressed by community-led efforts to merge the forked Blockchains,
and several other prior forks have been so merged. This type of break up within the Bitcoin Community may materially and adversely impression an
funding in us and, within the worst case situation, hurt the sustainability of the Bitcoin Community’s economic system.

 

 

Mental
property rights claims might adversely have an effect on the operation of the Bitcoin Community.

 

Third
events might assert mental property claims regarding the holding and switch of Digital Property and their supply code.
Whatever the benefit of any mental property or different authorized motion, any threatened motion that reduces confidence within the
Bitcoin Community’s long-term viability or the flexibility of end-users to carry and switch bitcoins might adversely have an effect on an
funding in us. Moreover, a meritorious mental property declare may stop us and different end-users from accessing
the Bitcoin Community or holding or transferring their bitcoins. Because of this, an mental property declare towards us or different
giant Bitcoin Community individuals may adversely have an effect on an funding in us.

 

The
Bitcoin Exchanges on which bitcoins commerce are comparatively new and, usually, largely unregulated and will subsequently be extra
uncovered to fraud and failure than established, regulated exchanges for different merchandise. To the extent that the Bitcoin Exchanges
representing a considerable portion of the amount in bitcoin buying and selling are concerned in fraud or expertise safety failures or different
operational points, such Bitcoin Exchanges’ failures might end in a discount within the value of bitcoin and might adversely
have an effect on an funding in us.

 

The
Bitcoin Exchanges on which the bitcoins commerce are new and, usually, largely unregulated. Moreover, many Bitcoin Exchanges
(together with a number of of essentially the most distinguished US Greenback denominated Bitcoin Exchanges) don’t present the general public with important data
relating to their possession construction, administration groups, company practices or regulatory compliance. Because of this, {the marketplace}
might lose confidence in, or might expertise issues regarding, Bitcoin Exchanges, together with distinguished exchanges dealing with a major
portion of the amount of bitcoin buying and selling.

 

Over
the previous 4 years, plenty of Bitcoin Exchanges have been closed attributable to fraud, failure or safety breaches. In lots of of those
cases, the shoppers of such Bitcoin Exchanges weren’t compensated or made complete for the partial or full losses of their
account balances in such Bitcoin Exchanges. Whereas smaller Bitcoin Exchanges are much less prone to have the infrastructure and capitalization
that make bigger Bitcoin Exchanges extra steady, bigger Bitcoin Exchanges usually tend to be interesting targets for hackers and
“malware” (i.e., software program used or programmed by attackers to disrupt pc operation, collect delicate data
or acquire entry to personal pc programs). Additional, the collapse of the most important Bitcoin Alternate in 2014 means that the failure
of 1 element of the general Bitcoin ecosystem can have penalties for each customers of a Bitcoin Alternate and the Bitcoin business
as an entire.

 

In
2018, China shut down Bitcoin Exchanges and different digital foreign money buying and selling platforms. A Wall Avenue Journal article reported that
China accounted for the majority of world bitcoin buying and selling as of early 2018. Additional, in late January 2018, the Wall Avenue Journal
reported that $530 million of cryptocurrency was lacking from a Japanese trade. On Could 7, 2019, Coindesk reported that roughly
$41 million in Bitcoin was stolen from crypto trade Binance.

 

It
has been reported that Bithumb, a South Korea trade was hacked, leading to a $180 million loss. This adopted its reported
lack of $350 million in 2018. In 2019, the Chief Govt Officer of Quadriga, the most important trade in Canada, died with out offering
for an alternate approach to entry its programs inflicting a reported $200 million loss.

 

A
lack of stability within the Bitcoin Alternate Market and the closure or momentary shutdown of Bitcoin Exchanges attributable to fraud, enterprise
failure, hackers or malware, or government-mandated regulation might scale back confidence within the Bitcoin Community and end in higher
volatility in bitcoin worth. These potential penalties of a Bitcoin Alternate’s failure may adversely have an effect on an funding
in us.

 

 

Political
or financial crises might inspire large-scale gross sales of Bitcoins, which may end in a discount in Bitcoin worth and adversely
have an effect on an funding in us.

 

As
a substitute for fiat currencies which can be backed by central governments, Digital Property similar to bitcoins, that are comparatively
new, are topic to produce and demand forces primarily based upon the desirability of an alternate, decentralized means of shopping for and
promoting items and companies, and it’s unclear how such provide and demand can be impacted by geopolitical occasions. Nonetheless,
political or financial crises might inspire large-scale acquisitions or gross sales of bitcoins both globally or domestically. Giant-scale
gross sales of bitcoins would end in a discount in bitcoin worth and will adversely have an effect on an funding in us.

 

Demand
for bitcoin is pushed, partially, by its standing as essentially the most distinguished and safe Digital Asset. It’s doable {that a} Digital Asset
aside from bitcoins may have options that make it extra fascinating to a cloth portion of the Digital Asset person base, ensuing
in a discount in demand for bitcoins, which may have a detrimental impression on the worth of bitcoins and adversely have an effect on an funding
in us.

 

The
Bitcoin Community and bitcoins, as an asset, maintain a “first-to-market” benefit over different Digital Property. This primary-to-market
benefit is pushed largely by having the most important person base and, extra importantly, the most important mixed mining energy in
use to safe the Blockchain and transaction verification system. Having a big mining community leads to higher person confidence
relating to the safety and long-term stability of a Digital Asset’s community and its block chain; in consequence, the benefit
of extra customers and miners makes a Digital Asset safer, which makes it extra engaging to new customers and miners, ensuing
in a community impact that strengthens the first-to-market benefit.

 

As
of June 15, 2020, there have been over 2,600 alternate Digital Property (or altcoins) tracked by CoinMarketCap, having a complete market
capitalization (together with the market capitalization of bitcoin) of roughly $267 billion, utilizing market costs and complete excellent
provide of every Digital Asset. This included altcoins utilizing a “proof of labor” mining construction just like Bitcoin,
and people utilizing a “proof of stake” transaction verification system that’s completely different than Bitcoin’s mining system
(e.g., Peercoin, Bitshares and NXT). As of June 15, 2020, bitcoin’s $174 billion market capitalization was roughly
seven instances the dimensions of the $26 billion market cap of ETH, the second largest Digital Asset. Regardless of the marked first-mover benefit
of the Bitcoin Community over different Digital Property, it’s doable that one other Digital Asset may develop into materially widespread due
to both a perceived or uncovered shortcoming of the Bitcoin Community protocol that’s not instantly addressed by the Bitcoin
contributor group or a perceived benefit of an altcoin that features options not included into Bitcoin. If a Digital
Asset obtains important market share (both in market capitalization, mining energy or use as a fee expertise), this might
scale back bitcoin’s market share in addition to different Digital Property we might develop into concerned in and have a detrimental impression on the
demand for, and value of, such Digital Property and will adversely have an effect on an funding in us.

 

Our
skill to undertake expertise in response to altering safety wants or tendencies poses a problem to the safekeeping of our Digital
Property.

 

The
historical past of the Bitcoin Alternate Market has proven that Bitcoin Exchanges and huge holders of bitcoins should adapt to technological
change with a view to safe and safeguard their bitcoins and different Digital Property. We depend on Bitgo Inc.’s multi-signature
enterprise storage resolution to safeguard our bitcoins from theft, loss, destruction or different points regarding hackers and technological
assault. We consider that it might develop into a extra interesting goal of safety threats as the dimensions of our bitcoin holdings develop. To
the extent that both Bitgo Inc. or we’re unable to determine and mitigate or cease new safety threats, our bitcoins could also be
topic to theft, loss, destruction or different assault, which may adversely have an effect on an funding in us.

 

Safety
threats to us may end in, a lack of Firm’s Digital Property, or injury to the status and our model, every of which
may adversely have an effect on an funding in us.

 

Safety
breaches, pc malware and pc hacking assaults have been a prevalent concern within the Bitcoin Alternate Market for the reason that
launch of the Bitcoin Community. Any safety breach brought on by hacking, which includes efforts to achieve unauthorized entry to data
or programs, or to trigger intentional malfunctions or loss or corruption of knowledge, software program, {hardware} or different pc gear,
and the inadvertent transmission of pc viruses, may hurt our enterprise operations or end in lack of our bitcoins and
different Digital Property. Any breach of our infrastructure may end in injury to our status which may adversely have an effect on an
funding in us. Moreover, we consider that, as our belongings develop, it might develop into a extra interesting goal for safety threats
similar to hackers and malware.

 

 

We
will primarily depend on the exchanges we maintain our digital belongings at and Bitgo Inc.’s multi-signature enterprise storage resolution
to safeguard our bitcoins and different digital belongings from theft, loss, destruction or different points regarding hackers and technological
assault. Nonetheless, the exchanges we make the most of or Bitgo Inc.’s safety system might not be impenetrable and might not be free
from defect or resistant to acts of God, and any loss attributable to a safety breach, software program defect or act of God can be borne by us.
In January 2018, the Japanese cryptocurrency trade Coincheck reported that hackers breached Coincheck’s safety and
stole roughly $530 million value of cryptocurrency. Our bitcoins and different Digital Property are additionally saved with exchanges
similar to Itbit, Kraken and Coinbase and others previous to promoting them.

 

On
February 1, 2019, a 20 yr outdated hacker pled responsible to stealing greater than $5,000,000 value of crypto foreign money from 40 victims via
SIM swapping. The hacker is the primary particular person convicted of against the law for SIM swapping, which is rising more and more widespread
with criminals as a approach to steal crypto foreign money. In SIM swapping, hackers name a telecoms firm posing as their goal and
declare that their SIM card has been misplaced, and that they want their quantity to be ported to a brand new card. The criminals can persuade
telephone corporations that they’re who they declare to be by offering social safety numbers or addresses. As soon as the telecoms firm
transfers the quantity to a brand new SIM, hackers can bypass two-step authentication measures for accounts through the use of the telephone as a restoration
methodology. Through the use of this methodology and buying somebody’s telephone quantity, a hacker can get into each account the individual owns inside
minutes and that individual can’t do something about it.

 

The
safety system and operational infrastructure could also be breached because of the actions of out of doors events, error or malfeasance of
an worker of ours, or in any other case, and, in consequence, an unauthorized occasion might receive entry to our, non-public keys, information or bitcoins.
Moreover, exterior events might try to fraudulently induce staff of ours to reveal delicate data so as
to achieve entry to our infrastructure. Because the methods used to acquire unauthorized entry, disable or degrade service, or sabotage
programs change incessantly, or could also be designed to stay dormant till a predetermined occasion and infrequently will not be acknowledged till
launched towards a goal, we could also be unable to anticipate these methods or implement sufficient preventative measures. If an
precise or perceived breach of our safety system happens, the market notion of the effectiveness of our safety system may
be harmed, which may adversely have an effect on an funding in us.

 

In
the occasion of a safety breach, we could also be pressured to stop operations, or undergo a discount in belongings, the incidence of every
of which may adversely have an effect on an funding in us.

 

A
lack of confidence in our safety system, or a breach of our safety system, might adversely have an effect on us and the worth of an funding
in us.

 

We
will take measures to guard us and our bitcoins and different Digital Property from unauthorized entry, injury or theft; nonetheless,
it’s doable that the safety system might not stop the improper entry to, or injury or theft of our bitcoins. A safety
breach may hurt our status or end result within the lack of some or all of our bitcoins. A ensuing notion that our measures
don’t adequately shield our Digital Property may end in a lack of present or potential shareholders, decreasing demand for
our widespread inventory and inflicting our shares to lower in worth.

 

Bitcoin
transactions are irrevocable and stolen or incorrectly transferred bitcoins could also be irretrievable. Because of this, any incorrectly
executed Bitcoin transactions may adversely have an effect on an funding in us.

 

Bitcoin
(and different Digital Asset) transactions will not be, from an administrative perspective, reversible with out the consent and lively
participation of the recipient of the transaction or, in idea, management or consent of a majority of the processing energy on the
Bitcoin Community. As soon as a transaction has been verified and recorded in a block that’s added to the Blockchain, an incorrect switch
of Digital Property or a theft of Digital Property typically won’t be reversible and we might not be able to searching for compensation
for any such switch or theft. Though our transfers of bitcoins will repeatedly be made to or from distributors, consultants, companies
suppliers, and so on. it’s doable that, via pc or human error, or via theft or legal motion, our bitcoins may
be transferred from us in incorrect quantities or to unauthorized third events. To the extent that we’re unable to hunt a corrective
transaction with such third occasion or is incapable of figuring out the third occasion which has obtained our bitcoins via error
or theft, we can be unable to revert or in any other case recuperate incorrectly transferred Firm Digital Property. To the extent that
we’re unable to hunt redress for such error or theft, such loss may adversely have an effect on an funding in us.

 

 

Our
Digital Property could also be topic to loss, injury, theft or restriction on entry.

 

There
is a danger that half or all of our digital belongings could possibly be misplaced, stolen or destroyed. We consider that our Digital Property can be
an interesting goal to hackers or malware distributors searching for to destroy, injury or steal our Digital Property. Though we make the most of
the exchanges we maintain our Digital Property at and Bitgo Inc.’s enterprise multi-signature storage resolution for our bitcoins,
to reduce the danger of loss, injury and theft, we can’t assure that it’s going to stop such loss, injury or theft, whether or not brought on
deliberately, unintentionally or by act of God. Entry to our Digital Property is also restricted by pure occasions (similar to
an earthquake or flood) or human actions (similar to a terrorist assault). Any of those occasions might adversely have an effect on our operations
and, consequently, an funding in us.

 

The
restricted rights of authorized recourse towards us, and our lack of insurance coverage safety expose us and our shareholders to the danger of
lack of our bitcoins and different Digital Property for which no individual is liable.

 

The
bitcoins and different Digital Property held by us will not be insured. Due to this fact, a loss could also be suffered with respect to our bitcoins which
is just not lined by insurance coverage and for which no individual is liable in damages which may adversely have an effect on our operations and, consequently,
an funding in us.

 

Bitcoins
and different Digital Property held by us will not be topic to FDIC or SIPC protections.

 

We
won’t maintain our bitcoins and different Digital Property with a banking establishment or a member of the Federal Deposit Insurance coverage Company
(“FDIC”) or the Securities Investor Safety Company (“SIPC”) and, subsequently, our Digital Property
will not be topic to the protections loved by depositors with FDIC or SIPC member establishments.

 

We
might not have sufficient sources of restoration if our bitcoins and different Digital Property are misplaced, stolen or destroyed.

 

If
our bitcoins or different Digital Property are misplaced, stolen or destroyed underneath circumstances rendering a celebration liable to us, the accountable
occasion might not have the monetary assets ample to fulfill our declare. For instance, as to a selected occasion of loss, the
solely supply of restoration for us is likely to be restricted, to the extent identifiable, different accountable third events (e.g., a thief or
terrorist), any of which can not have the monetary assets (together with legal responsibility insurance coverage protection) to fulfill a legitimate declare
of ours.

 

The
sale of our bitcoins or different Digital Property to pay bills at a time of low costs may adversely have an effect on an funding in us.

 

We
might promote bitcoins or different Digital Property to pay bills on an as-needed foundation, regardless of then-current costs. The intense
volatility of bitcoin and different Digital Property may imply that costs are low when we have to promote. Consequently, our Digital
Property could also be bought at a time when the costs are low, which may adversely have an effect on an funding in us.

 

Mental
property rights claims might adversely have an effect on an funding in us.

 

We
will not be conscious of any mental property claims that will stop us from working and holding bitcoins or different Digital Property;
nonetheless, third events might assert mental property claims regarding the operation of us and the mechanics instituted for
the funding in, holding of and switch of bitcoins or different Digital Property. Whatever the benefit of an mental property
or different authorized motion, any authorized bills to defend or funds to settle such claims can be extraordinary bills and be borne
by us via the sale of our bitcoins and different Digital Property. Moreover, a meritorious mental property declare may
stop us from working and pressure us to liquidate our bitcoins and different Digital Property. Because of this, an mental property
declare towards us may adversely have an effect on an funding in us.

 

Regulatory
adjustments or actions might prohibit the usage of Digital Property or the operation of buying and selling markets in a fashion that adversely impacts
an funding in us.

 

Till
a number of years in the past, little or no regulatory consideration has been directed towards bitcoin, different Digital Property and the markets the place
they commerce by U.S. federal and state governments, overseas governments and self-regulatory businesses. As bitcoin has grown in recognition
and in market dimension and preliminary coin choices which are typically Digital Securities, the SEC, Federal Reserve Board, U.S. Congress
and sure different U.S. businesses (e.g., the CFTC, FinCEN and the Federal Bureau of Investigation) have begun to look at the operations
of the preliminary coin choices, Bitcoin Community, bitcoin customers and the Bitcoin Alternate Market.

 

 

On
July 25, 2017, the SEC issued its DAO Report which concluded that Digital Property or tokens issued for the aim of elevating funds
could also be securities throughout the that means of the federal securities legal guidelines. The DAO Report centered on the actions of a digital group
which provided tokens in trade for ether which is the second largest reported digital foreign money. The DAO Report emphasised that
whether or not Digital Asset is a safety is predicated on the details and circumstances. Though the Firm’s actions will not be centered
on elevating capital or helping others that achieve this, the federal securities legal guidelines are very broad, and there may be no assurances
that the SEC won’t take enforcement motion towards the Firm sooner or later together with for the sale of unregistered securities
in violation of the Securities Act or appearing as an unregistered funding firm in violation of the Funding Firm Act.
The SEC has taken varied actions towards individuals or entities misusing bitcoin in reference to fraudulent schemes (i.e., Ponzi
scheme), inaccurate and insufficient publicly disseminated data, and the providing of unregistered securities. Extra not too long ago,
the SEC suspended buying and selling in three Digital Asset public corporations. Since issuing the DAO Report the SEC Chairman has said that
the SEC is rigorously analyzing preliminary coin choices and related areas involving Digital Property for his or her compliance with the
Securities Act. On November 16, 2018, the SEC introduced its first civil penalties solely concentrating on ICO securities registration
violators in reference to settled fees towards ICO issuers CarrierEQ, Inc., (“Airfox”) and Paragon Coin, Inc. (“Paragon”).
Stephanie Avakian, Co-Director of the SEC’s Enforcement Division, said that “we now have made it clear that corporations
who problem securities via ICOs are required to adjust to present statutes and guidelines governing the registration of securities.”
In contrast to Slock.It, which confronted no penalty, Airfox and Paragon had been every ordered to: 1) pay $250,000 in penalties, 2) register their
tokens pursuant to the Alternate Act, and a couple of) to file periodic reviews with the SEC for at the least a yr.

 

Very
not too long ago, it has been publicly reported that the SEC workers has been issuing subpoenas searching for details about preliminary coin choices.
Though we now have by no means invested in preliminary coin providing, lawsuits filed by the SEC claiming that preliminary coin providing issuers
and cryptocurrency public corporations violate the Securities Act and the Alternate Act and the ensuing publicity might have a cloth
adversarial impact on the costs of Digital Property we personal and in any other case adversely have an effect on alternatives within the Blockchain business,
which in flip may have an adversarial impression on our enterprise and prospects.

 

The
CFTC has decided that bitcoin and different digital currencies are commodities and the sale of derivatives primarily based on digital currencies
should be executed in accordance with the provisions of the CEA and CFTC rules. Additionally of significance, is that the CFTC seems
to have taken the place that bitcoin is just not encompassed by the definition of foreign money underneath the CEA and CFTC rules. The
CFTC outlined bitcoin and different “digital currencies” as “a digital illustration of worth that capabilities as
a medium of trade, a unit of account, and/or a retailer of worth, however doesn’t have authorized tender standing in any jurisdiction. Bitcoin
and different digital currencies are distinct from ‘actual’ currencies, that are the coin and paper cash of the United
States or one other nation which can be designated as authorized tender, flow into, and are typically used and accepted as a medium of
trade within the nation of issuance.” To the extent that bitcoin itself is set to be a safety, commodity future
or different regulated asset, or to the extent {that a} US or overseas authorities or quasi-governmental company exerts regulatory authority
over the Bitcoin Community or bitcoin buying and selling and possession, buying and selling or possession in bitcoin or an funding in us could also be adversely
affected.

 

The
CFTC affirmed its method to the regulation of bitcoin and bitcoin-related enterprises on June 2, 2016, when the CFTC settled
fees towards Bitfinex, a Bitcoin Alternate primarily based in Hong Kong. In its Order, the CFTC discovered that Bitfinex engaged in “unlawful,
off-exchange commodity transactions and didn’t register as a futures fee service provider” when it facilitated borrowing
transactions amongst its customers to allow the buying and selling of bitcoin on a “leveraged, margined or financed foundation” with out
first registering with the CFTC. In 2017 the CFTC said that it might contemplate bitcoin and different digital currencies as commodities
or derivatives relying on the details of the providing. In December 2017, bitcoin futures buying and selling commenced on two CFTC regulated
futures markets. In 2018 two federal district courts decided that Digital Property had been commodities and may be regulated by the
CFTC as such.

 

Native
state regulators such because the NYSDFS have additionally initiated examinations of bitcoin, the Bitcoin Community and the regulation thereof.
The NYSDFS started requiring New York primarily based corporations to have a “BitLicense” in June 2015. The “BitLicense”
regulates the conduct of companies which can be concerned in “digital currencies” in New York or with New York clients,
and prohibits any individual or entity concerned in such exercise to conduct actions with out a license. Out of concern of over regulating
cryptocurrency, New York has fashioned a process pressure to additional examine the scope of its regulation.

 

 

Moreover,
a U.S. federal Justice of the Peace choose within the U.S. District Court docket for the Jap District of Texas has dominated that “Bitcoin is
a foreign money or type of cash,” a Florida circuit courtroom choose decided that bitcoin didn’t qualify as cash or “tangible
wealth,” and an opinion from the U.S. District Court docket for the Northern District of Illinois recognized bitcoin as “digital
foreign money.” Moreover, two CFTC commissioners publicly expressed a perception that derivatives primarily based on bitcoin are topic
to the identical regulation as these primarily based on commodities, and the IRS launched steering treating bitcoin as property that’s not foreign money
for U.S. federal revenue tax functions. Taxing authorities of plenty of U.S. states have additionally issued their very own steering relating to
the tax therapy of bitcoin for state revenue or gross sales tax functions. On June 28, 2014, the Governor of the State of California
signed into legislation a invoice that eliminated state-level prohibitions on the usage of different types of foreign money or worth (together with bitcoin).
The invoice not directly authorizes bitcoin’s use as a substitute type of cash within the state. In February 2015, a invoice was
launched within the California State Meeting to ascertain a licensing regime for companies participating in “digital currencies.”
In September 2015, the invoice was ordered to develop into an inactive file and as of the date of this prospectus there hasn’t been
additional consideration by the California State Meeting. As of August 2016, the invoice was withdrawn from consideration for vote
for the rest of the yr. In March of 2019, California Meeting Majority Chief Ian Calderon launched Meeting Invoice 1489,
which might govern digital foreign money enterprise exercise that takes place with or on behalf of California residents. The invoice proposes
to require corporations to undergo a regulatory approval course of to conduct crypto-related actions within the state by requiring
licensure with stipulations on internet value, safety, and reserves. Entities can be topic to examination, consolidations and
information sharing to keep up compliance. As presently drafted, Invoice 1489 doesn’t contemplate digital currencies (also referred to as cryptocurrencies
and digital belongings) to be authorized tender, whether or not or not it’s denominated in authorized tender. It states that digital foreign money is a
illustration of worth for trade, storage of worth, or unit of account.

 

Bitcoin
at the moment faces an unsure regulatory panorama in not solely the US but additionally in lots of overseas jurisdictions similar to
the European Union, China and Russia. Whereas sure governments similar to Germany, the place the Ministry of Finance has declared bitcoin
to be “Rechnungseinheiten” (a type of non-public cash that’s acknowledged as a unit of account, however not acknowledged
in the identical method as fiat foreign money), have issued steering as to learn how to deal with bitcoin, most regulatory our bodies haven’t but issued
official statements relating to intention to control or determinations on regulation of bitcoin, the Bitcoin Community and bitcoin
customers.

 

 

Amongst
these for which preliminary steering has been issued in some type, Canada and Taiwan have labeled bitcoin as a digital or digital
foreign money, distinct from fiat foreign money, whereas Sweden and Norway are amongst these to categorize bitcoin as a type of digital asset
or commodity. In Australia, a GST (just like the European worth added tax (“VAT”)) is at the moment utilized to bitcoin,
forcing a ten (10) p.c markup on high of market value, basically stopping the operation of any Bitcoin Alternate. This may occasionally
be present process a change, nonetheless, for the reason that Senate Economics References Committee and the Productiveness Fee really helpful that
digital foreign money be handled as cash for GST functions to take away the double taxation. The UK decided that the VAT
won’t apply to bitcoin gross sales. Since December 2013, China, Iceland, Vietnam and Russia have taken a extra restrictive stance
towards bitcoin and, thereby, have lowered the speed of enlargement of bitcoin use in every nation. In Could 2014, the Central Financial institution
of Bolivia banned the usage of bitcoin as a method of fee. In the summertime and fall of 2014, Ecuador introduced plans for its personal
state-backed digital cash, whereas passing laws that prohibits the usage of decentralized Digital Property similar to bitcoin.
In July 2016, economists on the Financial institution of England advocated that central banks problem their very own digital foreign money, and the Home of
Lords and Financial institution of England began discussing the feasibility of making a nationwide digital foreign money, the BritCoin. As of July
2016, Iceland was learning learn how to create a system through which all cash is created by a central financial institution, and Canada was starting to
experiment with a digital model of its foreign money known as CAD-COIN, supposed for use completely for interbank funds. On
August 24, 2017, Canada issued steering stating the sale of cryptocurrency might represent an funding contract in accordance
with Canadian legislation for figuring out if an funding constitutes a safety. In July 2016, the Russian Ministry of Finance indicated
it helps a proposed legislation that bans bitcoin domestically however permits for its use as a overseas foreign money. Russia not too long ago issued
a number of releases indicating they might start regulating bitcoin and licensing miners and entities participating in preliminary coin choices.
Conversely, regulatory our bodies in some nations similar to India and Switzerland have declined to train regulatory authority when
afforded the chance. In April 2015, the Japanese Cupboard accredited proposed authorized adjustments that might reportedly deal with bitcoin
and different Digital Property as included within the definition of foreign money. These rules would, amongst different issues, require market
individuals, together with exchanges, to fulfill sure compliance necessities and be topic to oversight by the Monetary Companies
Company, a Japanese regulator. In September 2017 Japan started regulating Bitcoin Exchanges and registered a number of such exchanges
to function inside Japan. In July 2016, the European Fee launched a draft directive that proposed making use of counter-terrorism
and anti-money laundering rules to digital currencies, and, in September 2016, the European Banking authority suggested the
European Fee to institute new regulation particular to digital currencies, with amendments to present regulation as a stopgap
measure. Varied overseas jurisdictions might, within the close to future, undertake legal guidelines, rules or directives that have an effect on the Bitcoin
Community and its customers, notably Bitcoin Exchanges and repair suppliers that fall inside such jurisdictions’ regulatory
scope. Such legal guidelines, rules or directives might battle with these of the US and will negatively impression the acceptance
of bitcoin by customers, retailers and repair suppliers exterior of the US and will subsequently impede the expansion of the bitcoin
economic system. On September 4, 2017, reviews had been printed that China might start prohibiting the observe of utilizing cryptocurrency for
capital fundraising. Further reviews have surfaced that China is contemplating regulating Bitcoin Exchanges by enacting a licensing
regime whereby Bitcoin Exchanges might legally function. In April 2019, China’s Nationwide Growth Reform Fee listed
crypto-mining amongst quite a lot of industries it intends to get rid of. In October 2018, The Shenzhen Court docket of Worldwide Arbitration
of China printed a case evaluation on contract disputes between events to a share switch settlement involving cryptocurrencies
and held that cryptocurrency was protected as property in China. In September 2017, the Monetary Companies Fee of South
Korea launched a press release that preliminary coin choices can be prohibited as a fundraising instrument. In December of 2018, the South
Korea’s Monetary Companies Fee, the nation’s high monetary regulator, said that six payments associated to the
regulation of cryptocurrencies had been submitted to the Nationwide Meeting. One of many payments would require all individuals in cost
of a cryptocurrency switch enterprise – together with buying and selling, brokerage and administration – to register with the Monetary Companies
Fee. In June 2017, India’s authorities dominated in favor of regulating bitcoin. In December 2017, India’s finance
minister instructed the media that the federal government doesn’t contemplate bitcoin a authorized tender. In April 2018, the Reserve Financial institution of India
issued a press release to all entities regulated by the Reserve Financial institution, stating that they have to stop all actions associated to cryptocurrency.
The Web and Cellular Affiliation of India challenged the ban by way of petition to the Supreme Court docket of India, which ordered the
Reserve Financial institution of India to plot a transparent regulation relating to cryptocurrency. The Supreme Court docket of India will resume listening to the
case in July 2019. In 2018, Australia handed laws which requires digital foreign money trade suppliers to register with AUSTRAC
(the Australian Transaction Experiences and Evaluation Centre). In its price range abstract for 2017-2018, the Australian authorities said
that, as a part of its plan to make it simpler for digital foreign money companies to function within the nation, purchases of digital foreign money
will not be topic to the final gross sales tax.

 

The
impact of any future regulatory change on us, bitcoins, or different Digital Property is inconceivable to foretell, however such change may
be substantial and adversarial to us and will adversely have an effect on an funding in us.

 

It
could also be unlawful now, or sooner or later, to amass, personal, maintain, promote or use bitcoins or different Digital Property in a number of nations,
and possession of, holding or buying and selling in our Firm’s securities might also be thought of unlawful and topic to sanction.

 

Though
at the moment bitcoins and different Digital Property will not be regulated or are frivolously regulated in most nations, together with the United
States, a number of nations similar to China and Russia might take regulatory actions sooner or later that severely restricts the suitable
to amass, personal, maintain, promote or use bitcoins or different Digital Property or to trade Digital Property for foreign money. Such an motion
might also end result within the restriction of possession, holding or buying and selling in our securities. Such restrictions might adversely have an effect on
an funding in us.

 

If
we develop into an inadvertent funding firm in violation of the 1940 Act, our failure to register underneath the 1940 Act will adversely
have an effect on us and you’ll possible lose your total funding.

 

Below
the 1940 Act, an organization could also be deemed an funding firm underneath if the worth of its funding securities is greater than 40% of
its complete belongings (unique of presidency securities and money objects) on a consolidated foundation.

 

In
the occasion that the Digital Property held by us exceed 40% of our complete belongings, unique of money, we might inadvertently develop into an
funding firm. Whereas we’re putting in insurance policies that we anticipate will work to maintain the funding securities held by
us at lower than 40% of our complete belongings, which can embrace actively monitoring the worth of our funding securities, buying
belongings bitcoin with our money, or liquidating our funding securities.

 

 

 

The
Guidelines underneath the 1940 Act allow an organization to breach the 40% threshold as soon as each three years assuming it reduces its funding
securities beneath 40% inside one yr. In any other case registration underneath the 1940 Act can be required.

 

The
40% requirement might restrict our skill to make sure investments or enter into joint ventures that might in any other case have a constructive
impression on our earnings. In any occasion, we don’t intend to develop into an funding firm engaged within the enterprise of investing and
buying and selling securities. The failure to register when required would possible make our widespread inventory nugatory.

 

If
we develop into an funding firm and fail to register, we must cease doing virtually all enterprise. Registration is time consuming
and restrictive and would require a restructuring of our operations, and we’d be very constrained within the form of enterprise
we may do as a registered funding firm. Additional, we might develop into topic to substantial regulation regarding administration,
operations, transactions with affiliated individuals and portfolio composition, and would wish to file reviews underneath the 1940 Act
regime. The price of such compliance would end result within the Firm incurring substantial extra bills, and the failure to
register if required would have a materially adversarial impression to conduct our operations.

 

If
regulatory adjustments or interpretations of our actions require our registration as a MSB underneath the rules promulgated by
FinCEN underneath the authority of the U.S. Financial institution Secrecy Act, we could also be required to register and adjust to such rules. If regulatory
adjustments or interpretations of our actions require the licensing or different registration of us as a cash transmitter (or equal
designation) underneath state legislation in any state through which we function, we could also be required to hunt licensure or in any other case register and
adjust to such state legislation. Within the occasion of any such requirement, to the extent the Firm decides to proceed, the required
registrations, licensure and regulatory compliance steps might end in extraordinary, non-recurring bills to us. We might also
determine to stop the Firm’s operations. Any termination of sure Firm operations in response to the modified regulatory
circumstances could also be at a time that’s disadvantageous to buyers.

 

To
the extent that the actions of the Firm trigger it to be deemed a MSB underneath the rules promulgated by FinCEN underneath the
authority of the U.S. Financial institution Secrecy Act, the Firm could also be required to adjust to FinCEN rules, together with people who would
mandate the Firm to implement anti-money laundering applications, make sure reviews to FinCEN and keep sure information.

 

To
the extent that the actions of the Firm trigger it to be deemed a “cash transmitter” (or equal designation)
underneath state legislation in any state through which the Firm operates, the Firm could also be required to hunt a license or in any other case register
with a state regulator and adjust to state rules that will together with the implementation of anti-money laundering applications,
upkeep of sure information and different operational necessities. At present, the NYSDFS has finalized its “BitLicense”
framework for companies that conduct “digital foreign money enterprise exercise,” the Convention of State Financial institution Supervisors
has proposed a mannequin type of state degree “digital foreign money” regulation and extra state regulators together with these
from California, Idaho, Virginia, Kansas, Texas, South Dakota and Washington have made public statements indicating that digital
foreign money companies could also be required to hunt licenses as cash transmitters. In July 2016, North Carolina up to date the legislation to outline
“digital foreign money” and the actions that set off licensure in a enterprise pleasant method that encourages corporations
to make use of digital foreign money and blockchain expertise. Particularly, the North Carolina legislation doesn’t require miners or software program suppliers
to acquire a license for multi-signature software program, sensible contract platforms, sensible property, coloured cash and non-hosted, non-custodial
wallets. Beginning January 1, 2016, New Hampshire requires anybody exchanges a digital foreign money for an additional foreign money should develop into
a licensed and bonded cash transmitter. In quite a few different states, together with Connecticut and New Jersey, laws is being
proposed or has been launched relating to the therapy of bitcoin and different Digital Property. The Firm will proceed to watch
for developments in such laws, steering or rules.

 

Such
extra federal or state regulatory obligations might trigger the Firm to incur extraordinary bills, presumably affecting an
funding within the Resale Shares in a cloth and adversarial method. Moreover, the Firm and its service suppliers might not be
able to complying with sure federal or state regulatory obligations relevant to MSBs and MTs. If the Firm is deemed
to be topic to and determines to not adjust to such extra regulatory and registration necessities, we might act to dissolve
and liquidate the Firm. Any such motion might adversely have an effect on an funding in us.

 

 

Present
interpretations require the regulation of bitcoins and different Digital Property underneath the CEA by the CFTC, we could also be required to register
and adjust to such rules. To the extent that we determine to proceed operations, the required registrations and regulatory
compliance steps might end in extraordinary, non-recurring bills to us. We might also determine to stop sure operations. Any
disruption of our operations in response to the modified regulatory circumstances could also be at a time that’s disadvantageous to buyers.

 

Present
and future laws, CFTC and different regulatory developments, together with interpretations launched by a regulatory authority,
might impression the style through which bitcoins and different Digital Property are handled for classification and clearing functions. Particularly,
derivatives on these belongings will not be excluded from the definition of “commodity future” by the CFTC. We can’t be sure
as to how future regulatory developments will impression the therapy of bitcoins and different Digital Property underneath the legislation.

 

Bitcoins
have been deemed to fall throughout the definition of a commodity and, we could also be required to register and adjust to extra regulation
underneath the CEA, together with extra periodic report and disclosure requirements and necessities. Furthermore, we could also be required to
register as a commodity pool operator and to register us as a commodity pool with the CFTC via the Nationwide Futures Affiliation.
Such extra registrations might end in extraordinary, non-recurring bills, thereby materially and adversely impacting
an funding in us. If we decide to not adjust to such extra regulatory and registration necessities, we might search
to stop sure of our operations. Any such motion might adversely have an effect on an funding in us. No CFTC orders or rulings are relevant
to our enterprise.

 

If
regulatory adjustments or interpretations require the regulation of bitcoins and different Digital Property (in distinction to Digital Securities)
underneath the Securities Act and Funding Firm Act by the SEC, we could also be required to register and adjust to such rules.
To the extent that we determine to proceed operations, the required registrations and regulatory compliance steps might end in
extraordinary, non-recurring bills to us. We might also determine to stop sure operations. This might possible have a cloth
adversarial impact on us and buyers might lose their funding.

 

Present
and future laws and SEC rulemaking and different regulatory developments, together with interpretations launched by a regulatory
authority, might impression the style through which bitcoins are handled for classification and clearing functions. The SEC’s July
25, 2017 DAO Report expressed its view that Digital Property could also be securities relying on the details and circumstances. As of the
date of this prospectus, we aren’t conscious of any guidelines which were proposed to control the Digital Property we maintain as securities.
We can’t be sure as to how future regulatory developments will impression the therapy of bitcoins and different Digital Property underneath
the legislation. Such extra registrations might end in extraordinary, non-recurring bills, thereby materially and adversely impacting
an funding in us. If we decide to not adjust to such extra regulatory and registration necessities, we might search
to stop sure of our operations. Any such motion might adversely have an effect on an funding in us.

 

To
the extent that Digital Property together with bitcoins are deemed by the SEC to fall throughout the definition of a safety, we could also be
required to register and adjust to extra regulation underneath the Funding Firm Act, together with extra periodic reporting
and disclosure requirements and necessities and the registration of our Firm as an funding firm. Moreover, a number of
states might conclude bitcoins are a safety underneath state securities legal guidelines which might require registration underneath state legal guidelines together with
benefit assessment legal guidelines which might adversely impression us since we might possible not comply. As said earlier on this prospectus, some
states together with California outline the time period “funding contract” extra strictly than the SEC. Such extra registrations
might end in extraordinary, non-recurring bills of our Firm, thereby materially and adversely impacting an funding in
our Firm. If we decide to not adjust to such extra regulatory and registration necessities, we might search to stop
all or sure components of our operations. Any such motion would possible adversely have an effect on an funding in us and buyers might undergo
a whole lack of their funding.

 

 

The
Firm doesn’t at the moment have any mining operations however displays blockchain networks and will contemplate re-entering the digital
asset mining enterprise if and when it believes a constructive return on funding is achievable. Nonetheless, given the present community
difficulties and value ranges to mine each bitcoin and ethereum the Firm doesn’t consider mining presents a constructive return on
funding at current and has no fast plans to renew mining. To the extent that the Firm resumes mining operations and
acquires Digital Property because of mining, the Firm doesn’t intend to commerce the Digital Property till it determines, with
the help of authorized counsel, that the Digital Property will not be securities, the Digital Property would solely be used for its personal
account.

 

We
don’t consider that bitcoin and ether are securities. As such, we don’t intend to amass securities in quantities which can be equal
to or higher than 40% of our belongings. Ought to the entire worth of securities which we maintain rise to greater than 40% of our belongings (unique
of money) we be aware that SEC Rule 3a-2 underneath the 1940 Act permits an issuer to forestall itself from being deemed an funding firm
if it reduces its holdings of securities to lower than 40% of its belongings (unique of money) and doesn’t go above the 40% threshold
greater than as soon as each three years. With the intention to adjust to the 1940 Act, we anticipate having elevated administration time and authorized
bills with a view to analyze which Digital Property are securities and periodically analyze our complete holdings to make sure that we
don’t keep greater than 40% of our complete belongings (unique of money) as securities. If our view that ether is just not a safety
is challenged by the SEC and courts uphold the problem, we might inadvertently violate the 1940 Act and incur substantial authorized
charges in defending our place. In such case the authorized charges might exceed our accessible belongings which may adversely have an effect on an funding
in us.

 

If
federal or state legislatures or businesses provoke or launch tax determinations that change the classification of bitcoins or
different Digital Property as property for tax functions (within the context of when such Digital Property are held as an funding), such
willpower may have a detrimental tax consequence on our Firm or our shareholders.

 

Present
IRS steering signifies that Digital Property similar to bitcoins needs to be handled and taxed as property, and that transactions involving
the fee of bitcoins for items and companies needs to be handled as barter transactions. Whereas this therapy creates a possible
tax reporting requirement for any circumstance the place the possession of a bitcoin passes from one individual to a different, normally by
technique of bitcoin transactions (together with off-Blockchain transactions), it preserves the suitable to use capital beneficial properties therapy
to these transactions which can have adversely have an effect on an funding in our Firm.

 

On
December 5, 2014, the New York State Division of Taxation and Finance issued steering relating to the applying of state tax
legislation to Digital Property similar to bitcoins. The company decided that New York State would observe IRS steering with respect to the
therapy of Digital Property similar to bitcoins for state revenue tax functions. Moreover, they outlined Digital Property similar to bitcoin
to be a type of “intangible property,” that means the acquisition and sale of bitcoins for fiat foreign money is just not topic
to state revenue tax (though transactions of bitcoin for different items and companies perhaps topic to gross sales tax underneath barter transaction
therapy). It’s unclear if different states will observe the steering of the IRS and the New York State Division of Taxation and
Finance with respect to the therapy of Digital Property similar to bitcoins for revenue tax and gross sales tax functions. If a state adopts
a special therapy, such therapy might have detrimental penalties together with the imposition of higher a higher tax burden
on buyers in bitcoin or imposing a higher value on the acquisition and disposition of bitcoins, typically; in both case probably
having a detrimental impact on costs within the Bitcoin Alternate Market and will adversely have an effect on an funding in our Firm.

 

Overseas
jurisdictions might also elect to deal with Digital Property similar to bitcoins in a different way for tax functions than the IRS or the New York
State Division of Taxation and Finance. To the extent {that a} overseas jurisdiction with a major share of the market of
bitcoin customers imposes onerous tax burdens on bitcoin customers, or imposes gross sales or worth added tax on purchases and gross sales of bitcoins
for fiat foreign money, such actions may end in decreased demand for bitcoins in such jurisdiction, which may impression the worth
of bitcoins and negatively impression an funding in our Firm.

 

Dangers
Associated to Our Digital Property Holdings

 

The
loss or destruction of a non-public key required to entry a Digital Property similar to bitcoin could also be irreversible. Our lack of entry
to our non-public keys or our expertise of a knowledge loss regarding our Firm’s Digital Property may adversely have an effect on an
funding in our Firm.

 

Bitcoins
are controllable solely by the possessor of each the distinctive public key and personal key regarding the native or on-line digital pockets
through which the bitcoins are held. We’re required by the operation of the Bitcoin Community to publish the general public key regarding
a digital pockets in use by us when it first verifies a spending transaction from that digital pockets and disseminates such data
into the Bitcoin Community. We safeguard and preserve non-public the non-public keys regarding our bitcoins not held at exchanges by using
Bitgo Inc.’s enterprise multi-signature storage resolution; to the extent a non-public secret’s misplaced, destroyed or in any other case compromised
and no backup of the non-public secret’s accessible, we can be unable to entry the bitcoins held by it and the non-public key won’t
be able to being restored by the Bitcoin Community. Any lack of non-public keys regarding digital wallets used to retailer our bitcoins
may adversely have an effect on an funding in us.

 

 

To
the extent that any of our Digital Property are held by Exchanges, we might face heightened dangers from cybersecurity assaults and monetary
stability of the Exchanges.

 

The
Firm will use Digital Asset exchanges to carry sure of its Digital Property; the Firm’s bitcoin will both be held
straight by the Firm in a bitcoin pockets using Bitgo Inc.’s enterprise multi-signature storage resolution or at Digital
Asset exchanges. All Digital Property not held within the Firm’s Bitgo wallets can be topic to the dangers encountered by
a Digital Asset trade together with a DDoS Assault or different malicious hacking, a sale of the Digital Asset trade, lack of the
Digital Property by the Digital Asset trade and different dangers just like these described on web page 17 in a danger issue entitled “Safety
threats to us may end in, a lack of Firm’s Digital Property, or injury to the status and our model, every of which
may adversely have an effect on an funding in us.” The Firm might not keep a custodian settlement with the Digital Asset trade
that holds the Firm’s Digital Property. Alternate sometimes don’t present insurance coverage and will lack the assets to guard
towards hacking and theft. Sooner or later we might purchase different Digital Property which can be held by Exchanges. If a cloth quantity
of our Digital Property are held by Exchanges, we could also be materially and adversely affected if the Exchanges undergo cyberattacks
or incur monetary issues.

 

Dangers
Associated to Our Digital Asset Knowledge Analytics Platform Growth

 

There
is substantial doubt that we can develop or commercialize our Digital Asset Knowledge Analytics Platform.

 

We
are at the moment growing a digital asset information analytics platform with the final word objective of consolidating customers’ data
in order that it may be extra simply accessed and reviewed by customers. We might not efficiently develop this platform in a cost-efficient
method or in any respect. If we fail to develop a digital asset information analytics platform as supposed, it may have a cloth adversarial
impact on our enterprise, particularly to the extent that we allocate important capital, labor and different assets to this endeavor
relatively than specializing in different enterprise alternatives which can show to have been extra profitable in hindsight.

 

Even
if we do efficiently develop our platform and produce it to {the marketplace}, there isn’t any assure that we’ll entice sufficient
customers to generate income or develop into worthwhile. Our rivals, most of whom have higher capital and human assets than we
do, might develop applied sciences which can be superior to our platform or commercialize comparable applied sciences earlier than us, through which case
our skill to draw customers and generate income therefrom could possibly be rendered unlikely and even inconceivable. If we fail to acquire
customers for our platform or discover an alternate technique of commercializing our platform to recoup our funding therein, it is going to
have a cloth adversarial impact on our monetary situation.

 

Even
if we develop and commercialize our Digital Asset Knowledge Analytics Platform, we might not be capable to generate materials revenues.

 

The
digital asset information analytics platform that we’re at the moment growing would require important time and capital. Even when we do
develop this platform and purchase a ample variety of customers to generate income, we can’t assure the income can be materials
or ample to justify the prices we anticipate incurring to develop the platform. Our skill to capitalize on any platform
we do develop will rely on quite a lot of components and uncertainties past our management, together with the competitors we face and
related or superior companies that will exist already by the point we start advertising our platform, the unstable nature of the blockchain
business typically and the unknown demand for the companies we plan to supply via our platform as it’s at the moment envisioned,
and the development of recent applied sciences which may come up sooner or later and render our platform partially or fully out of date.
If any of those or different dangers come to fruition to forestall our platform from producing materials income to justify its prices
of manufacturing, it might have a cloth adversarial impact on our enterprise.

 

 

The
growth of our Digital Asset Knowledge Analytics Platform will rely on the profitable efforts of our staff.

 

Our
platform growth effort is totally depending on our infrastructure. We use internally developed programs for the platform.
Any future difficulties growing features of our platform might trigger delays in bringing our platform to market. If the situation
the place all of our pc and communications {hardware} is situated is compromised, our platform, prospects, could possibly be harmed. We
don’t at the moment have a catastrophe restoration plan which may end in a lack of the platform software program. Regardless of our implementation
of community safety measures, our servers are weak to pc viruses, bodily or digital break-ins and related disruptions,
the incidence of any of which may result in interruptions, delays, lack of important information or the shortcoming launch our platform.
The incidence of any of the foregoing dangers may hurt our enterprise.

 

We
are topic to cyber safety dangers and will incur delays in platform growth in an effort to reduce these dangers and to reply
to cyber incidents.

 

Our
digital asset information analytics platform can be fully depending on the safe operation of our web site and programs in addition to
the operation of the Web typically. The platform includes studying person information, and storage of person information, and safety breaches
may expose us to a danger of loss or misuse of this data, litigation, and potential legal responsibility. Quite a lot of giant Web
corporations have suffered safety breaches, a few of which have concerned intentional assaults. Sometimes we and lots of different
Web companies additionally could also be topic to a denial of service assaults whereby attackers try to dam clients’ entry
to our Web site. If we’re unable to avert a denial of service assault for any important interval, we may maintain delays within the
growth of the platform and when launched danger dropping future customers and have person dissatisfaction. We might not have the assets
or technical sophistication to anticipate or stop quickly evolving kinds of cyber-attacks. Cyber assaults might goal us, our
customers, or exchanges we learn information from normally or the communication infrastructure on which we rely. If an precise or perceived
assault or breach of our safety happens, person notion of the effectiveness of our safety measures could possibly be harmed and we
may lose our future person. Precise or anticipated assaults and dangers might trigger us to incur growing prices, and delay growth.
An individual who is ready to circumvent our safety measures may be capable to misappropriate our or our customers’ proprietary data,
trigger interruption in our operations, injury our computer systems or these of our customers, or in any other case injury our status and platform.
Any compromise of our safety may end in a violation of relevant privateness and different legal guidelines, important authorized and monetary
publicity, injury to our status, and a lack of confidence in our safety measures, which may hurt our enterprise.

 

Dangers
Associated to the Buy Settlement with Cavalry

 

The
sale or issuance of our widespread inventory to Cavalry might trigger dilution and the sale of the shares of widespread inventory acquired by Cavalry,
or the notion that such gross sales might happen, may trigger the worth of our widespread inventory to fall.

 

On
Could 13, 2019, we entered into the Buy Settlement with Cavalry, pursuant to which Cavalry has dedicated to buy as much as $10,000,000
of our widespread inventory. As of the date of this prospectus, we now have directed Cavalry to buy 10,402,656 shares (excluding
426,085 dedication and pro-rata dedication shares
) and have obtained roughly $1,589,636. The acquisition shares that
could also be bought pursuant to the Buy Settlement could also be bought by us to Cavalry at our discretion every now and then over a 36-month
interval commencing after the SEC has declared efficient the registration assertion that features this prospectus. The acquisition
value for the shares that we might promote to Cavalry underneath the Buy Settlement will fluctuate primarily based on the worth of our widespread
inventory. Relying on market liquidity on the time, gross sales of such shares might trigger the buying and selling value of our widespread inventory to fall.
Moreover, the quantity that we might promote to Cavalry can be restricted to the Each day Buying and selling Greenback Quantity on the day of, or day
earlier than, the Put. If the buying and selling quantity and/or value of our widespread inventory is low, our skill to boost capital underneath the Buy
Settlement can be restricted and/or take an intensive time to boost capital.

 

 

We
typically have the suitable to regulate the timing and quantity of any gross sales of our shares to Cavalry, besides that, pursuant to the
phrases of our agreements with Cavalry, we might be unable to promote shares to Cavalry on any day when the closing sale value of our
widespread inventory is beneath $0.005 per share, topic to adjustment as set forth within the Buy Settlement. Cavalry might finally buy
all, some or not one of the shares of our widespread inventory that could be bought pursuant to the Buy Settlement in reference to our
rights to direct Cavalry’s purchases at our discretion and, after it has acquired shares, Cavalry might promote all, some or
none of these shares. Due to this fact, gross sales to Cavalry by us may end in substantial dilution to the pursuits of different holders
of our widespread inventory. Moreover, the sale of a considerable variety of shares of our widespread inventory to Cavalry, or the anticipation
of such gross sales, may make it harder for us to promote fairness or equity-related securities sooner or later at a time and at
a value that we would in any other case want to impact gross sales.

 

We
might not be capable to entry ample funds underneath the Buy Settlement with Cavalry when wanted.

 

Our
skill to promote shares to Cavalry and acquire funds underneath the Buy Settlement is restricted by the phrases and situations within the
Buy Settlement, together with restrictions on once we might promote shares to Cavalry, restrictions on the quantities we might promote to Cavalry
at anyone time, and a limitation on our skill to promote shares to Cavalry to the extent that it might trigger Cavalry to beneficially
personal greater than 4.99% of our excellent widespread inventory. As well as, any quantities we promote underneath the Buy Settlement might not fulfill
all of our funding wants, even when we’re in a position and select to promote all $10,000,000 underneath the Buy Settlement. Assuming all 8,755,014
extra Buy Shares of our widespread inventory being provided underneath this prospectus that
could also be bought by Cavalry are bought at $0.005 per share (the ground value talked about herein), we might obtain roughly $43,775.
If we elect to problem and promote greater than the shares provided underneath this prospectus to Cavalry, which we now have the suitable, however not
the duty, to do, we should first register for resale underneath the Securities Act any such extra shares.

 

We
elected to enter into the Buy Settlement with Cavalry as we anticipate that quantity of capital over the following 12 months can be
required for us to totally implement our enterprise, working and growth plans. The extent we depend on Cavalry as a supply of
funding will rely on plenty of components together with, the prevailing market value and buying and selling quantity of our widespread inventory and the
extent to which we’re capable of safe working capital from different sources. If acquiring ample funding from Cavalry had been to
show unavailable or prohibitively dilutive, we might want to safe one other supply of funding to fulfill our working capital wants.
Even when we promote all 8,755,014 remaining Buy Shares to Cavalry, we should want extra
capital to totally implement our enterprise, working and growth plans. Ought to the financing we require to maintain our working
capital wants be unavailable or prohibitively costly once we require it, the implications could possibly be a cloth adversarial impact
on our enterprise, working outcomes, monetary situation and prospects.

 

The
sale of our widespread inventory to Cavalry will trigger dilution and the sale of the shares by Cavalry may trigger the worth of our widespread
inventory to say no.

 

The
variety of shares finally provided on the market by Cavalry relies upon the variety of shares bought to Cavalry underneath the Buy
Settlement. The acquisition value for the widespread inventory to be bought to Cavalry pursuant to the Buy Settlement will fluctuate primarily based
on the worth of our widespread inventory. Relying upon market liquidity on the time, a sale of shares by Cavalry at any given time may
trigger the buying and selling value of our widespread inventory to say no. After it has acquired such shares, Cavalry might promote all, some or none
of such shares. Due to this fact, gross sales to Cavalry by us underneath the Buy Settlement will end in substantial dilution to the pursuits
of different holders of our widespread inventory. The sale of a considerable variety of shares of our widespread inventory, or anticipation of such
gross sales, may make it harder for us to promote fairness or equity-related securities sooner or later at a time and at a value
that we would in any other case want to impact gross sales. Nonetheless, we now have the suitable to regulate the timing and quantity of any gross sales of our
shares to Cavalry.

 

FORWARD-LOOKING
STATEMENTS

 

This
prospectus contains forward-looking statements together with statements relating to our liquidity, anticipated capital expenditures,
and anticipated gross sales to Cavalry.

 

All
statements aside from statements of historic details contained on this prospectus, together with statements relating to our future monetary
place, liquidity, enterprise technique and plans and goals of administration for future operations, are forward-looking statements.
The phrases “consider,” “might,” “estimate,” “proceed,” “anticipate,”
“intend,” “ought to,” “plan,” “may,” “goal,” “potential,”
“is probably going,” “will,” “anticipate” and related expressions, as they relate to us, are supposed
to determine forward-looking statements. Now we have primarily based these forward-looking statements largely on our present expectations and
projections about future occasions and monetary tendencies that we consider might have an effect on our monetary situation, outcomes of operations,
enterprise technique and monetary wants. These forward-looking statements are topic to plenty of dangers, uncertainties and assumptions
described in “Threat Components” elsewhere on this prospectus.

 

 

Different
sections of this prospectus might embrace extra components which may adversely have an effect on our enterprise and monetary efficiency.
New danger components emerge every now and then and it isn’t doable for us to foretell all such danger components, nor can we assess the
impression of all such danger components on our enterprise or the extent to which any danger issue, or mixture of danger components, might trigger
precise outcomes to vary materially from these contained in any forward-looking statements.

 

USE
OF PROCEEDS

 

This
prospectus pertains to shares of our widespread inventory that could be provided and bought every now and then by Cavalry. We are going to obtain no
proceeds from the sale of shares of widespread inventory by Cavalry on this providing. Nonetheless, we might obtain gross proceeds of as much as
$10,000,000 underneath the Buy Settlement. As of the date of this prospectus, we now have obtained $1,589,636 from the sale of shares
of widespread inventory to Cavalry underneath the Buy Settlement. We estimate that the web proceeds to us from the sale of our widespread inventory
to Cavalry pursuant to the Buy Settlement can be as much as $10 million over an roughly 36-month interval (ending Could 13,
2022), assuming that we promote the total quantity of our widespread inventory that we now have the suitable, however not the duty, to promote to Cavalry
underneath that settlement and different estimated charges and bills. See “Plan of Distribution” elsewhere on this prospectus
for extra data.

 

We
anticipate to make use of any proceeds that we obtain underneath the Buy Settlement for basic company functions, together with compensating
our administration.

 

CAPITALIZATION

 

Class
of Safety
 

Shares
of

Frequent

Inventory
as

Transformed

 
Frequent Inventory Issued and
Excellent
    27,422,008  
Sequence C-1 Most popular Inventory     196,094  
Warrants to Buy
Frequent Inventory
    502,915  
Complete Shares Absolutely
Diluted
    28,121,017  

 

The
desk above describes the shares of widespread inventory that are excellent and/or are issuable underneath excellent securities. The desk
above doesn’t embrace the 2020 Promissory Be aware which was issued to the promoting stockholder on April 17, 2020.

 

The
2020 Promissory Be aware is due on February 17, 2021 and is: (i) convertible at a 35% low cost to the closing value of the Firm’s
widespread inventory on the date earlier than train with a flooring value of $0.01 per share, (ii) shall bear curiosity at 12% each year (payable
at maturity), and (iii) convertible on the Firm’s choice topic to sure limitations as set forth within the 2020 Promissory
Be aware. The 2020 Promissory Be aware is just not associated to this providing.

 

MARKET
FOR COMMON STOCK

 

Our
widespread inventory is quoted on the OTCQB underneath the image “BTCS”. Our widespread inventory final traded at $0.23 on June 15, 2020.
As of that date there have been roughly 139 shareholders of report. We consider that extra helpful house owners of our widespread
inventory maintain shares in road identify.

 

 

MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS
OF OPERATIONS

 

The
following dialogue and evaluation of economic situation and outcomes of operations needs to be learn along side our historic
monetary statements and the notes to these statements that seem elsewhere on this prospectus. Sure statements within the dialogue
include forward-looking statements primarily based upon present expectations that contain dangers and uncertainties, similar to plans, goals,
expectations and intentions. Precise outcomes and the timing of occasions may differ materially from these anticipated in these forward-looking
statements because of plenty of components, together with these set forth underneath “Threat Components.”

 

Overview

 

We
are an early entrant within the Digital Asset market and one of many first U.S. publicly traded corporations to be concerned with Digital
Property and block chain applied sciences. To our information, we’re one of some public corporations intending to amass each Digital
Property and a controlling curiosity in a number of companies within the Digital Asset and blockchain industries.

 

Digital
Asset Initiatives

 

Topic
to extra financing, the Firm plans to amass extra Digital Property to offer buyers with oblique possession of
Digital Property that aren’t securities, similar to bitcoin and ether. The Firm intends to amass Digital Property via open
market purchases. We aren’t limiting our belongings to a single sort of Digital Asset and will buy quite a lot of Digital Property
that seem to profit our buyers, topic to the restrictions contained inside this report relating to Digital Securities. As
of June 15, 2020, the Firm had the next Digital Property:

 

Digital
Asset
  Models
Held
   

Truthful
Market

Worth

 
Bitcoin (BTC)     37.44     $ 353,190  
Ethereum (ETH)     1644.23     $ 382,367  
Complete           $ 735,557  

 

The
Firm has not participated in any preliminary coin choices because it believes many of the choices entail the providing of Digital
Securities and require registration underneath the Securities Act and underneath state securities legal guidelines or can solely be bought to accredited
buyers in the US. Since about July 2017, preliminary coin choices utilizing Digital Securities have been (or needs to be)
restricted to accredited buyers. As a result of we can’t qualify as an accredited investor, we don’t intend to amass cash in preliminary
coin choices or from purchasers in such choices. Additional, the Firm doesn’t intend to take part in registered or unregistered
preliminary coin choices. The Firm will rigorously assessment its purchases of Digital Securities to keep away from violating the 1940 Act
and search to scale back potential liabilities underneath the federal securities legal guidelines.

 

The
market is quickly evolving and there may be no assurances that we’ll be aggressive with business individuals which have or
might have higher assets than us.

 

Digital
Asset Knowledge Analytics Platform

 

We
are additionally centered on Digital Property and blockchain applied sciences. We’re at the moment internally growing a digital asset information analytics
platform aimed toward aggregating customers’ data, similar to monitoring of a number of exchanges and wallets to combination portfolio
holdings right into a single platform to view and analyze efficiency, danger metrics, and potential tax implications. The platform makes use of
digital asset trade APIs to learn person information and doesn’t permit for the buying and selling of belongings.

 

Acquisition
Initiatives

 

The
Firm can also be searching for to amass controlling pursuits in companies within the blockchain business as additional described on this
report. We plan to proceed to judge different strategic alternatives together with buying controlling pursuits in enterprise in
this quickly evolving sector in an effort to boost shareholder worth.

 

Even
although the costs of Digital Property have been topic to substantial volatility and there stays some regulatory uncertainty,
we consider that companies utilizing blockchain expertise and people concerned with Digital Property similar to bitcoin and ether, provide
upside alternative and are the kinds of alternatives that we might pursue.

 

 

Our
present framework or standards is to hunt and consider acquisition targets within the blockchain and Digital Asset sector which (i)
align with our enterprise mannequin of buying Digital Property or buying a controlling curiosity in a number of blockchain expertise
associated enterprise ventures, and (ii) have ample capital to offer working capital. As disclosed on this prospectus we now have
restricted money, and accordingly as a important framework ingredient are searching for acquisition targets with ample capital which can
assist us maintain our operations with out having us depend on poisonous funding buildings. Our acquisition actions are spearheaded
by Charles Allen, our Chief Govt Officer who repeatedly communicates with Mr. David Garrity, considered one of our unbiased administrators
who can also be searching for acquisition targets on behalf of the Firm.

 

We
additionally monitor blockchain networks and will contemplate re-entering the digital asset mining enterprise if and once we consider a constructive
return on funding is achievable. Nonetheless, given the present community difficulties and value ranges to mine each bitcoin and
ethereum we don’t consider mining presents a constructive return on funding at current and don’t have any fast plans to renew mining.

 

RESULTS
OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2020 AND 2019

 

The
following desk displays our working outcomes for the three months ended March 31, 2020 and 2019:

 

    Three
Months Ended March 31,
 
    2020     2019  
             
Working bills:                
Normal
and administrative
  $ 270,528     $ 251,964  
Advertising     2,690       535  
Complete
working bills
    273,218       252,499  
                 
Different expense:                
Curiosity expense     (22,628 )     (6,000 )
Impairment
loss on digital currencies
    (74,425 )      
Complete
different bills
    (97,053 )     (6,000 )
                 
Web loss   $ (370,271 )   $ (258,499 )
Deemed dividend
associated to discount of warrant strike value
          (95,708 )
Web
loss attributable to widespread stockholders
  $ (370,271 )   $ (354,207 )

 

Working
Bills

 

Working
bills for the three months ended March 31, 2020 and 2019 had been roughly $0.Three million.

 

Different
Expense

 

Different
expense for the three months ended March 31, 2020 and 2019 was $97,000 and $6,000, respectively. The rise in different expense
primarily pertains to improve in curiosity expense and impairment loss on digital currencies.

 

Web
loss attributable to widespread stockholders

 

We
incurred $Zero and $95,708 of deemed dividend associated to discount of warrant strike value through the three months ended March 31,
2020 and 2019, respectively.

 

 

RESULTS
OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2019 AND 2018

 

    For
the years ended
 
    December
31,
 
    2019     2018  
             
Working bills:                
Normal
and administrative
  $ 1,422,394     $ 986,525  
Advertising     9,989       3,644  
Complete
working bills
    1,432,383       990,169  
                 
Different (expense) revenue:                
Curiosity expense     (86,142 )      
Impairment loss
on digital currencies
    (121,117 )      
Realized
(loss) acquire on digital currencies transactions
    (959 )     163,749  
Complete
different (bills) revenue
    (208,218 )     163,749  
                 
Web loss   $ (1,640,601 )   $ (826,420 )
Deemed dividend
associated to discount of warrant strike value
    (95,708 )     (5,600 )
Web
loss attributable to widespread stockholders
  $ (1,736,309 )   $ (832,020 )

 

Working
bills

 

Working
bills for the years ended December 31, 2019 and 2018 had been roughly $1.Four million and $1.Zero million. The slight improve
in working bills over the prior yr largely pertains to will increase normally and administrative bills because of wage
will increase to our government administration crew.

 

Different
Bills

 

Different
bills for the yr ended 2019 was roughly $208.2 thousand and different revenue for the yr ended 2018 was roughly
$163.7 thousand. The lower in different revenue over the prior yr primarily pertains to lower in realized acquire on sale of digital
currencies, a rise in curiosity expense associated to debt low cost amortization and a rise in impairment loss on digital
currencies.

 

Web
loss attributable to widespread stockholders

 

We
incurred $95,708 and $5,600 of deemed dividend associated to discount of warrant strike value through the yr ended December 31,
2019 and 2018, respectively.

 

LIQUIDITY
AND CAPITAL RESOURCES

 

Liquidity

 

As
of December 31, 2019, the Firm had roughly $143 thousand of money and $253 thousand in Digital Property.

 

As
of June 15, 2020, the Firm had roughly $280,781 thousand of money and $735,557 thousand in Digital Property.

 

We
would require important extra capital to maintain short-term operations and make the investments wanted to execute our longer-term
marketing strategy and repay our present debt of $200,000 which turns into due on August 7, 2020. Our present liquidity is just not ample
to fund operations and anticipated capital expenditures for the foreseeable future, and we won’t have ample money assets
to help our present operations for the following 12 months.

 

 

We
shouldn’t have ample capital to fulfill our bills over the 12 months from the date of this report. Our present money is just not ample
to maintain operations. We would require important extra capital to maintain short-term operations and make the investments
wanted to execute our longer-term marketing strategy. If we try to receive extra debt or fairness financing, we can’t present
assurance that such financing can be accessible to us on favorable phrases, if in any respect.

 

Throughout
2019 via the date of this prospectus, the Firm obtained $1,589,636 in trade for 10,402,656 shares of widespread inventory (excluding
426,085 dedication and pro-rata dedication shares) in reference to the $10 million Buy Settlement with Cavalry Fund I LP.

 

We
would require important extra capital to maintain short-term operations and make the investments wanted to execute our longer-term
marketing strategy. Our present liquidity is just not ample to fund operations and anticipated capital expenditures for the foreseeable
future, and we shouldn’t have ample money assets to help our present operations for the following 12 months, and can want extra
funding, whether or not via our $10 million Buy Settlement or different sources. If we try to receive extra debt or fairness
financing or are unable to depend on the $10 million Buy Settlement for any cause, we can’t present assurance that such financing
can be accessible to us on favorable phrases, if in any respect.

 

As a result of
of recurring working losses, internet working money circulation deficits, and an collected deficit, there’s substantial doubt about
our skill to proceed as a going concern. The audited monetary statements have been ready assuming we’ll proceed as a
going concern. Now we have not made changes to the accompanying audited monetary statements to mirror the potential results
on the recoverability and classification of belongings or liabilities ought to we be unable to proceed as a going concern.

 

We
proceed to incur ongoing administrative and different bills, together with public firm bills, primarily accounting and authorized
charges, in extra of corresponding (non-financing associated) income. Whereas we proceed to implement its enterprise technique, it intends
to finance its actions via:

 

managing
present money and money equivalents available from the Firm’s previous fairness choices, and
searching for
extra funds raised via the sale of extra securities sooner or later.

 

 

GOING
CONCERN

 

The
audited monetary statements for the yr ended December 31, 2019, had been ready on a going concern foundation, which means that
we’ll proceed to understand our belongings and discharge our liabilities and commitments within the regular course of enterprise. Now we have
not generated revenues through the years ended December 31, 2019 and 2018 and have by no means paid any dividends and are unlikely to
pay dividends or generate substantial earnings within the fast or foreseeable future. Our continuation as a going concern is
dependent upon the continued monetary help from our shareholders, the flexibility of our firm to acquire crucial financing
to realize our working goals, and the attainment of worthwhile operations. As of December 31, 2019, we had an collected
deficit of roughly $117 million since inception. As we shouldn’t have ample funds for our deliberate or new operations, we
might want to increase extra funds for operations. These components, amongst others, increase substantial doubt about our skill to
proceed as a going concern.

 

The
continuation of our enterprise relies upon us elevating extra monetary help. The issuance of extra fairness or convertible
debt securities by us may end in a major dilution within the fairness pursuits of our present stockholders. Acquiring business
loans, assuming these loans can be accessible, will improve our liabilities and future money commitments.

 

Off
Stability Sheet Preparations

 

As
of December 31, 2019, there have been no off-balance sheet preparations.

 

CRITICAL
ACCOUNTING POLICIES AND ESTIMATES

 

We
consider that the next accounting insurance policies are essentially the most important to help you in totally understanding and evaluating this administration
dialogue and evaluation:

 

Accounting
Remedy of Digital Property

 

Digital
Property are included in present belongings within the stability sheets. Digital Property are recorded at value much less impairment.

 

An
intangible asset with an indefinite helpful life is just not amortized however assessed for impairment yearly, or extra incessantly, when
occasions or adjustments in circumstances happen indicating that it’s extra possible than not that the indefinite-lived asset is impaired.
Impairment exists when the carrying quantity exceeds its truthful worth. In testing for impairment, the Firm has the choice to first
carry out a qualitative evaluation to find out whether or not it’s extra possible than not that an impairment exists. Whether it is decided
that it isn’t extra possible than not that an impairment exists, a quantitative impairment take a look at is just not crucial. If the Firm
concludes in any other case, it’s required to carry out a quantitative impairment take a look at. To the extent an impairment loss is acknowledged,
the loss establishes the brand new value foundation of the asset that’s amortized over the remaining helpful lifetime of that asset, if any. Subsequent
reversal of impairment losses is just not permitted.

 

Realized
acquire (loss) on sale of Digital Property are included in different revenue (expense) within the statements of operations.

 

The
Firm assesses impairment of Digital Property quarterly if the truthful worth of digital belongings was lower than its value foundation on any
day through the quarter. The Firm acknowledges impairment losses on Digital Property brought on by decreases in truthful worth utilizing the
common U.S. greenback spot value of the associated Digital Asset as of every impairment date. Such impairment within the worth of Digital
Property are recorded as a element of prices and bills in our statements of operations. There have been no impairment losses associated
to Digital Property through the yr ended December 31, 2018. The Firm recorded an impairment lack of roughly $121 thousand
associated to Digital Property through the yr ended December 31, 2019.

 

 

Current
Accounting Pronouncements

 

See
Be aware Four to the monetary statements for a dialogue of latest accounting requirements and pronouncements.

 

BUSINESS

 

Overview

 

We
are an early entrant within the Digital Asset market and one of many first U.S. publicly traded corporations to be concerned with Digital
Property and block chain applied sciences. To our information, we’re one of some public corporations intending to amass each Digital
Property and a controlling curiosity in a number of companies within the Digital Asset and blockchain industries.

 

Digital
Asset Initiatives

 

Topic
to extra financing, the Firm plans to amass extra Digital Property to offer buyers with oblique possession of
Digital Property that aren’t securities, similar to bitcoin and ether. The Firm intends to amass Digital Property via open
market purchases. We aren’t limiting our belongings to a single sort of Digital Asset and will buy quite a lot of Digital Property
that seem to profit our buyers, topic to the restrictions contained inside this report relating to Digital Securities. As
of June 15, 2020, the Firm had the next Digital Property:

 

Digital
Asset
  Models
Held
   

Truthful
Market

Worth

 
Bitcoin (BTC)     37.44     $ 353,190  
Ethereum (ETH)     1644.23     $ 382,367  
Complete           $ 735,557  

 

The
Firm has not participated in any preliminary coin choices because it believes many of the choices entail the providing of Digital
Securities and require registration underneath the Securities Act and underneath state securities legal guidelines or can solely be bought to accredited
buyers in the US. Since about July 2017, preliminary coin choices utilizing Digital Securities have been (or needs to be)
restricted to accredited buyers. As a result of we can’t qualify as an accredited investor, we don’t intend to amass cash in preliminary
coin choices or from purchasers in such choices. Additional, the Firm doesn’t intend to take part in registered or unregistered
preliminary coin choices. The Firm will rigorously assessment its purchases of Digital Securities to keep away from violating the 1940 Act
and search to scale back potential liabilities underneath the federal securities legal guidelines.

 

The
market is quickly evolving and there may be no assurances that we’ll be aggressive with business individuals which have or
might have higher assets than us.

 

Digital
Asset Knowledge Analytics Platform

 

We
are additionally centered on Digital Property and blockchain applied sciences. We’re at the moment internally growing a digital asset information analytics
platform aimed toward aggregating customers’ data, similar to monitoring of a number of exchanges and wallets to combination portfolio
holdings right into a single platform to view and analyze efficiency, danger metrics, and potential tax implications. The platform makes use of
digital asset trade APIs to learn person information and doesn’t permit for the buying and selling of belongings.

 

Acquisition
Initiatives

 

The
Firm can also be searching for to amass controlling pursuits in companies within the blockchain business as additional described on this
report. We plan to proceed to judge different strategic alternatives together with buying controlling pursuits in enterprise in
this quickly evolving sector in an effort to boost shareholder worth.

 

 

Even
although the costs of Digital Property have been topic to substantial volatility and there stays some regulatory uncertainty,
we consider that companies utilizing blockchain expertise and people concerned with Digital Property similar to bitcoin and ether, provide
upside alternative and are the kinds of alternatives that we might pursue.

 

Our
present framework or standards is to hunt and consider acquisition targets within the blockchain and Digital Asset sector which (i)
align with our enterprise mannequin of buying Digital Property or buying a controlling curiosity in a number of blockchain expertise
associated enterprise ventures, and (ii) have ample capital to offer working capital. As disclosed on this prospectus we now have
restricted money, and accordingly as a important framework ingredient are searching for acquisition targets with ample capital which can
assist us maintain our operations with out having us depend on poisonous funding buildings. Our acquisition actions are spearheaded
by Charles Allen, our Chief Govt Officer who repeatedly communicates with Mr. David Garrity, considered one of our unbiased administrators
who can also be searching for acquisition targets on behalf of the Firm.

 

We
additionally monitor blockchain networks and will contemplate re-entering the digital asset mining enterprise if and once we consider a constructive
return on funding is achievable. Nonetheless, given the present community difficulties and value ranges to mine each bitcoin and
ethereum we don’t consider mining presents a constructive return on funding at current and don’t have any fast plans to renew mining.

 

Going
Concern

 

As a result of
of recurring working losses, internet working money circulation deficits, and an collected deficit, our unbiased auditors have indicated
of their report on our December 31, 2019 monetary statements that there’s substantial doubt about our skill to proceed as
a going concern.

 

The
continuation of our enterprise relies upon us elevating extra funds. The issuance of extra fairness or convertible debt
securities by us may end in a major dilution within the fairness pursuits of our present stockholders. Acquiring business
loans, assuming these loans can be accessible, will improve our liabilities and future money commitments.

 

We
proceed to incur ongoing administrative and different bills, together with public firm bills, in extra of capital raises. Whereas
we proceed to implement our enterprise technique, we intend to finance our actions via:

 

managing
present money and money equivalents available from the Firm’s previous debt and fairness choices by controlling prices, and
searching for
extra financing via gross sales of extra securities whether or not via Cavalry or different buyers.

 

INDUSTRY
AND MARKET OVERVIEW (BITCOIN AND BLOCKCHAIN TECHNOLOGIES)

 

Introduction
to Bitcoins and the Bitcoin Community

 

A
bitcoin is one sort of a Digital Asset that’s issued by, and transmitted via, an open supply, math-based protocol platform
utilizing cryptographic safety that is named the “Bitcoin Community.” The Bitcoin Community is an internet, peer-to-peer
person community that hosts the general public transaction ledger, referred to as the “Blockchain,” and the supply code that contains
the idea for the cryptography and math-based protocols governing the Bitcoin Community. No single entity owns or operates the Bitcoin
Community, the infrastructure of which is collectively maintained by a decentralized person base. Bitcoins can be utilized to pay for
items and companies or may be transformed to fiat currencies, such because the US Greenback, at charges decided on Bitcoin Exchanges or
in particular person end-user-to-end-user transactions underneath a barter system.

 

Bitcoins
are “saved” or mirrored on the digital transaction ledger referred to as the “Blockchain,” which is a digital
file saved in a decentralized method on the computer systems of every Bitcoin Community person. The Blockchain information the transaction historical past
of all bitcoins in existence and, via the clear reporting of transactions, permits the Bitcoin Community to confirm the
affiliation of every bitcoin with the digital pockets that owns them. The Bitcoin Community and Bitcoin software program applications can interpret
the Blockchain to find out the precise bitcoin stability, if any, of any digital pockets listed within the Blockchain as having taken
half in a transaction on the Bitcoin Community.

 

 

The
Blockchain is comprised of a digital file, downloaded and saved, in complete or partially, on all bitcoin customers’ software program applications.
The file contains all blocks which were solved by miners and is up to date to incorporate new blocks as they’re solved. As every
newly solved block refers again to and “connects” with the instantly prior solved block, the addition of a brand new block
provides to the Blockchain in a fashion just like a brand new hyperlink being added to a sequence. Every new block information excellent bitcoin transactions,
and excellent transactions are settled and validated via such recording, the Blockchain represents a whole, clear
and unbroken historical past of all transactions on the Bitcoin Community.

 

The
Bitcoin Community is decentralized and doesn’t depend on both governmental authorities or monetary establishments to create, transmit
or decide the worth of bitcoins. Quite, bitcoins are created and allotted by the Bitcoin Community protocol via a “mining”
course of topic to a strict, well-known issuance schedule. The worth of bitcoins is set by the provision of and demand for
bitcoins within the Bitcoin Alternate Market (and in non-public end-user-to-end-user transactions), in addition to the variety of retailers
that settle for them. As bitcoin transactions may be broadcast to the Bitcoin Community by any person’s bitcoin software program and bitcoins
may be transferred with out the involvement of intermediaries or third events, there are little or no transaction prices in direct
peer-to-peer transactions on the Bitcoin Community. Third occasion service suppliers similar to Bitcoin Exchanges and bitcoin third occasion
fee processing companies might cost important charges for processing transactions and for changing, or facilitating the conversion
of, bitcoins to or from fiat foreign money.

 

Overview
of the Bitcoin Community’s Operations

 

In
order to personal, switch or use bitcoins, an individual typically should have Web entry to connect with the Bitcoin Community. Bitcoin
transactions between events happen very quickly (inside a number of seconds) and could also be made straight between end-users with out the
want for a third-party middleman, though there are entities that present third-party middleman companies. To stop the
chance of double-spending a single bitcoin, a person should notify the Bitcoin Community of the transaction by broadcasting the
transaction information to its community friends. The Bitcoin Community supplies affirmation towards double-spending by memorializing each
transaction within the Blockchain, which is publicly accessible and clear. This memorialization and verification towards double-spending
is achieved via the bitcoin mining course of, which provides “blocks” of knowledge, together with latest transaction data,
to the Blockchain.

 

Temporary
Description of Bitcoin Transfers

 

Prior
to participating in bitcoin transactions, a person typically should first set up on its pc or cell system a bitcoin software program program
that may permit the person to generate a digital “pockets” (analogous to a bitcoin account). Alternatively, a person might
retain a 3rd occasion to create a digital pockets for use for a similar objective. Every such pockets contains a number of distinctive
digital addresses and verification system consisting of a “public key” and a “non-public key,” that are
mathematically associated.

 

In
a bitcoin transaction, the bitcoin recipient should present its digital deal with, which serves as a routing quantity to the recipient’s
digital pockets on the Blockchain, to the occasion initiating the switch. The recipient, nonetheless, doesn’t make public or present
to the sender its associated non-public key. The payor, or “spending” occasion, does reveal its public key in signing and verifying
its spending transaction to the Blockchain.

 

Neither
the recipient nor the sender reveal their digital pockets’s non-public key in a transaction, as a result of the non-public key authorizes
entry to, and switch of, the funds in that digital pockets to different customers. Within the information packets propagated from a person’s
bitcoin software program program onto the Bitcoin Community to permit transaction affirmation, the sending occasion should “signal”
its transaction with a knowledge code derived from coming into the non-public key right into a “hashing algorithm.” The hashing algorithm
converts the non-public key right into a digital signature, which signature serves as validation that the transaction has been licensed
by the holder of the digital pockets’s non-public key.

 

 

Mathematically
Managed Provide

 

The
methodology for creating new bitcoins is mathematically managed in a fashion in order that the provision of bitcoins grows at a restricted price
pursuant to a pre-set schedule. The variety of bitcoins awarded for fixing a brand new block is robotically halved each 210,000 blocks.
Thus, the present mounted reward for fixing a brand new block is 6.25 bitcoins per block and the reward will lower by half to develop into
3.125 bitcoins round February 2024 (primarily based on estimates of the speed of block resolution calculated by BitcoinClock.com). This intentionally
managed price of bitcoin creation signifies that the variety of bitcoins in existence won’t ever exceed 21 million and that bitcoins
can’t be devalued via extreme manufacturing except the Bitcoin Community’s supply code (and the underlying protocol for
bitcoin issuance) is altered. The Firm displays the Blockchain community and, as of June 15, 2020, primarily based on the data we
collected from our community entry, roughly 18.Four million bitcoins have been mined.

 

Modifications
to the Bitcoin Protocol

 

Bitcoin
is an open supply venture (i.e., a product whose supply code is freely accessible to the general public and that makes use of crowdsourcing
to determine doable points, issues and defects) and there’s no official developer or group of builders that controls the
Bitcoin Community. The Bitcoin Community’s growth is overseen by a core group of builders, which varies from time to
time (“Core Builders”). The Core Builders are capable of entry and might suggest alterations to the Bitcoin Community
supply code hosted on GitHub, an internet service and discussion board used to share and develop open supply code. Different programmers have entry
to and might suggest adjustments to the bitcoin supply code on GitHub, however the Core Builders have an elevated degree of affect over
the method. Because of this, the Core Builders are accountable for quasi-official releases of updates and different adjustments to the
Bitcoin Community’s supply code. Customers and miners should settle for any adjustments made to the Bitcoin Community (together with these proposed
by the Core Builders) by downloading the proposed modification of the supply code.

 

A
modification of the supply code is simply efficient with respect to the bitcoin customers and miners that obtain it. Consequently,
as a sensible matter, a modification to the supply code (e.g., a proposal to extend the 21 million complete restrict on bitcoins
or to scale back the common affirmation time goal from 10 minutes per block) solely turns into a part of the Bitcoin Community if accepted
by individuals collectively having a considerable majority of the processing energy on the Bitcoin Community. If a modification is
accepted solely by a proportion of customers and miners, a division within the Bitcoin Community will happen such that one community will run
the pre-modification supply code and the opposite community will run the modified supply code; such a division is named a “fork”
within the Bitcoin Community. It needs to be famous that, though their energy to amend the supply code is successfully topic to the approval
of customers and miners, the Core Builders have substantial affect over the event of the Bitcoin Community and the route
of the bitcoin group.

 

Different
Blockchain Applied sciences

 

Core
Growth of the bitcoin supply code has more and more centered on modifications of the bitcoin protocol to permit non-financial
and subsequent era makes use of (generally known as Bitcoin 2.Zero initiatives). These makes use of embrace sensible contracts and distributed registers
constructed into, constructed atop or pegged alongside the Blockchain. For instance, the white paper for Blockstream, a program of which Core
Builders Jeff Garzik and Gregory Maxwell are a component, requires the usage of “pegged sidechains” to develop programming
environments which can be constructed inside block chain ledgers that may work together with and depend on the safety of the Bitcoin Community
and Blockchain, whereas remaining unbiased thereof. We’re actively evaluating different Blockchain applied sciences that relate to Bitcoin
2.Zero initiatives. At the moment, Bitcoin 2.Zero initiatives stay in early levels and haven’t been materially built-in into the Blockchain
or Bitcoin Community.

 

Bitcoin
Worth

 

Bitcoins
are an instance of a Digital Asset that’s not a fiat foreign money (i.e., a foreign money that’s backed by a central financial institution or a nationwide,
supra-national or quasi-national group) and will not be backed by arduous belongings or different credit score. Because of this, the worth of bitcoins
is set by the worth that varied market individuals place on bitcoins via their transactions.

 

Alternate
Valuation

 

Due
to the peer-to-peer framework of the Bitcoin Community and the protocols thereunder, transferors and recipients of bitcoins are
capable of decide the worth of the bitcoins transferred by mutual settlement or barter with respect to their transactions. As a
end result, the most typical technique of figuring out the worth of a bitcoin is by surveying a number of Bitcoin Exchanges the place bitcoins
are publicly purchased, bought and traded (i.e., the Bitcoin Alternate Market).

 

 

On
every Bitcoin Alternate, bitcoins are traded with publicly disclosed valuations for every transaction, measured by a number of fiat
currencies such because the U.S. Greenback, the Euro or the Chinese language Yuan. Bitcoin Exchanges sometimes report publicly on their web site the
valuation of every transaction and bid and ask costs for the acquisition or sale of bitcoins. Though every Bitcoin Alternate has
its personal market value, it’s anticipated that the majority Bitcoin Exchanges’ market costs needs to be comparatively per the
Bitcoin Alternate Market common since market individuals can select the Bitcoin Alternate on which to purchase or promote bitcoins (i.e.,
trade purchasing). Arbitrage between the costs on varied Bitcoin Exchanges is feasible, however the imposition of charges and fiat
foreign money deposit/withdrawal insurance policies seems to have, at instances, prevented an lively arbitrage mechanism amongst customers on some Bitcoin
Exchanges. For instance, delayed fiat foreign money withdrawals imposed by Mt. Gox resulted in Mt. Gox buying and selling at a premium of as much as
10 to 20 p.c for a number of months via January 2014. In February 2014, Mt. Gox suspended buying and selling, closed its web site and
trade service, and filed for a type of chapter safety from collectors known as minjisaisei, or civil rehabilitation, to
permit courts to hunt a purchaser. In April 2014, Mt. Gox started liquidation proceedings.

 

Even
within the absence of huge buying and selling charges and fiat foreign money deposit/withdrawal insurance policies, value differentials throughout Bitcoin Exchanges
stay. For disclosure on the accounting of Digital Property, see “Administration’s Dialogue and Evaluation of Monetary
Situation and Outcomes of Operations” starting on web page 30.

 

Kinds
of Assault Towards the Bitcoin Community

 

Exploitation
of Flaws within the Bitcoin Community’s Supply Code

 

As
with some other pc code, the Bitcoin Community supply code might include sure flaws. A number of errors and defects have been
discovered and corrected, together with people who disabled some performance for customers, uncovered customers’ data, or allowed
customers to create a number of views of the Bitcoin Community. Such flaws have been found and rapidly corrected by the Core Builders
or the bitcoin group, thus demonstrating one of many benefits of open supply codes which can be accessible to the general public: open
supply codes depend on transparency to advertise community-sourced identification and resolution of issues throughout the code.

 

Experiences
of flaws in or exploitations of the supply code that permit malicious actors to take or create cash in contravention of identified
Bitcoin Community guidelines have been exceedingly uncommon. For instance, in 2010, a hacker or group of hackers exploited a flaw within the Bitcoin
Community supply code that allowed them to generate 184 billion bitcoins in a transaction and ship them to 2 digital pockets addresses.
Nonetheless, the bitcoin group and builders recognized and reversed the manipulated transactions inside roughly 5 hours,
and the flaw was corrected with an up to date model of the bitcoin protocol. One other addressed problem with the Bitcoin Community supply
code, “transaction malleability” was addressed by the Core Builders in a March 2013 software program replace. The Core Builders,
along side different builders and miners, work repeatedly to make sure that flaws are rapidly mounted or eliminated.

 

Higher
than Fifty % of Community Computational Energy

 

Malicious
actors can construction an assault whereby such actor beneficial properties management of greater than half of the Bitcoin Community’s processing energy
or “hashrate.” Laptop scientists and cryptographers consider that the immense collective processing energy of the
Bitcoin Community makes it impracticable for an actor to achieve management of computer systems representing a majority of the processing energy
on the Bitcoin Community. Throughout Could and June 2014, mining pool GHash.io’s hashing energy approached 50 p.c of the processing
energy on the Bitcoin Community. Throughout a short interval in early June 2014, the mining pool might have managed in extra of one-half
of the Bitcoin Community’s processing energy. Though no malicious exercise or irregular transaction recording was noticed,
the incident establishes that it’s doable {that a} substantial mining pool might accumulate near or greater than a majority of
the processing energy on the Bitcoin Community.

 

If
a malicious actor acquired ample computational energy crucial to regulate the Bitcoin Community (which quantity can be nicely
in extra of fifty p.c), it might be capable to have interaction in double-spending, or stop some or all transactions from being confirmed,
and forestall some or all different miners from mining any legitimate new blocks. The malicious actor or group of actors, nonetheless, would
not be capable to reverse different folks’s transactions, change the mounted variety of bitcoins generated per new block, or switch
beforehand present bitcoins that belong to different customers.

 

 

Most cancers
Nodes

 

This
type of assault includes a malicious actor propagating “most cancers nodes” to isolate sure customers from the official
Bitcoin Community. A goal person functionally surrounded by most cancers nodes can be placed on a separate “community,” permitting
the malicious actor to relay solely blocks created by the separate community and thus opening the goal person to double-spending assaults.
Through the use of most cancers nodes, a malicious actor can also disconnect the goal person from the bitcoin economic system fully by refusing to
relay any blocks or transactions. Bitcoin software program applications make these assaults harder by limiting the variety of outbound
connections via which customers are linked to the Bitcoin Community.

 

Manipulating
Blockchain Formation

 

A
malicious actor might try to double-spend bitcoins by manipulating the formation of the Blockchain relatively than via management
of the Bitcoin Community. In one of these assault, a miner creates a legitimate new block containing a double-spend transaction and schedules
the discharge of such assault block in order that it’s added to the Blockchain earlier than a goal person’s official transaction can
be included in a block. Variations of this type of assault embrace the “Finney assault,” “race assault,”
and “vector76 assault.” All double-spend assaults require that the miner sequence and execute the steps of its assault
with ample pace and accuracy. Customers and retailers can dramatically scale back the danger of a double-spend assault by ready for
a number of confirmations from the Bitcoin Community earlier than settling a transaction. The Bitcoin Community nonetheless could also be used to execute
instantaneous, low-value transactions with out affirmation to the extent the recipient of bitcoins determines {that a} malicious
miner can be unwilling to hold out a double-spend assault for low-value transactions as a result of the reward from mining can be
greater than the small revenue gained from double-spending. Customers and retailers can take extra precautions by adjusting their
Bitcoin Community software program applications to attach solely to different well-connected nodes and to disable incoming connections. These precautions
scale back the danger of double-spend assaults involving manipulation of a goal’s connectivity to the Bitcoin Community (as is
the case with vector76 and race assaults).

 

Historic
Chart of the Value of Bitcoins, 2019-2020

 

The
value of bitcoins is unstable and fluctuations are anticipated. Actions could also be influenced by varied components, together with, however not
restricted to, authorities regulation, safety breaches skilled by service suppliers, in addition to political and financial uncertainties
around the globe. Since our Transaction Verification Companies enterprise information income primarily based on the worth of earned bitcoins and
we might retain such bitcoins as an asset or as fee for future bills, the relative worth of such revenues might fluctuate,
as will the worth of any bitcoins we retain. The next chart illustrates the fluctuating worth of the US Greenback trade price
for bitcoins for the one-year interval ending June 15, 2020, as reported by blockchain.com:

 

Form 424B3 BTCS Inc. 1 

 

Makes use of
of Bitcoins

 

International
Bitcoin Market

 

International
commerce in bitcoins consists of particular person end-user-to-end-user transactions, along with facilitated exchange-based bitcoin buying and selling.
A restricted market at the moment exists for bitcoin-based derivatives. There’s at the moment no dependable information on the entire quantity or demographic
composition of customers or miners on the Bitcoin Community.

 

Items
and Companies

 

Bitcoins
additionally can be utilized to buy items and companies, both on-line or at bodily places, though dependable information is just not readily
accessible concerning the retail and business market penetration of the Bitcoin Community. There are millions of on-line retailers that
settle for bitcoins, and the number of items and companies for which bitcoins may be exchanged is growing. At present, native, regional
and nationwide companies, settle for bitcoin. Bitcoin service suppliers similar to BitPay, Coinbase and GoCoin and on-line reward card retailers
Gyft and eGifter present different means to spend bitcoin for items and companies at extra retailers. This contains reward playing cards
for notable retailers like Dunkin Donuts, Finest Purchase, Goal and Residence Depot. There are additionally web sites that preserve a operating archive
of companies that settle for Bitcoin and permits customers to go looking on a digital map to find these places. www.Coinmap.org
hosts and updates a digital map that permits folks so as to add their companies and edit data. Customers can see for themselves
which companies settle for bitcoin, in addition to the situation of these companies. To this point, the speed of shopper adoption and use of
bitcoin in paying retailers has trailed the broad enlargement of retail and business acceptance of bitcoin. Nonetheless, there
will possible be a robust correlation between continued enlargement of the Bitcoin Community and its retail and business market penetration.

 

Anonymity
and Illicit Use

 

The
Bitcoin Community was not designed to make sure the anonymity of customers, regardless of a typical misperception on the contrary. All bitcoin
transactions are logged on the Blockchain and any particular person or authorities can hint the circulation of bitcoins from one deal with to
one other. Off-Blockchain transactions occurring off the Bitcoin Community will not be recorded and don’t signify precise bitcoin transactions
or the switch of bitcoins from one digital pockets deal with to a different, although data relating to individuals in an Off-Blockchain
transaction could also be recorded by the events facilitating such Off-Blockchain transactions. Digital pockets addresses are randomized
sequences of 27-34 alphanumeric characters that, standing alone, don’t present ample data to determine customers; nonetheless,
varied strategies could also be used to attach an deal with to a selected person’s identification, together with, amongst different issues, easy
Web looking, digital surveillance and statistical community evaluation and information mining. Anonymity can also be lowered to the
extent that sure Bitcoin Exchanges and different service suppliers gather customers’ private data, as a result of such Bitcoin
Exchanges and repair suppliers could also be required to provide customers’ data with a view to adjust to authorized necessities.
In lots of instances, a person’s personal exercise on the Bitcoin Community or on Web boards might reveal details about the person’s
identification.

 

Customers
might take sure precautions to boost the probability that they and their transactions will stay nameless. As an example, a
person might ship its bitcoins to completely different addresses a number of instances to make monitoring the bitcoins via the Blockchain harder
or, extra merely, have interaction a so-called “mixing” or “tumbling” service to change its bitcoins with these of
different customers. Nonetheless, these precautions don’t assure anonymity and are unlawful to the extent that they represent cash laundering
or in any other case violate the legislation.

 

As
with some other asset or medium of trade, bitcoins can be utilized to buy unlawful items or fund illicit actions. For instance,
Silk Highway, an nameless on-line market that bought unlawful substances previous to its seizure and the arrest of its founder and
operator in October 2013, accepted solely bitcoins. The usage of bitcoins for illicit functions, nonetheless, is just not promoted by the Bitcoin
Community or the person group as an entire. Moreover, we don’t consider our ecommerce platform, which we not help or
are growing, has publicity to such makes use of as a result of the merchandise bought in our market had been curated by our administration and the
sellers of these merchandise are huge field retailers with credible merchandise and retail operations.

 

 

Different
Digital Property

 

Bitcoins
will not be the one sort of Digital Property based on math-based algorithms and cryptographic safety, though it’s thought of
essentially the most distinguished. Over, 2,600 different Digital Property (generally known as “altcoins”, “tokens”, “protocol
tokens”, or “Digital Property”), have been developed for the reason that Bitcoin Community’s inception, together with Ethereum,
Ripple, Litecoin, Sprint, and Monero. The Bitcoin Community, nonetheless, possesses the “first-to-market” benefit and thus
far has captured the vast majority of the business’s market share and is secured by a mining community with considerably extra
processing energy than that of some other Digital Asset. The Firm is analyzing and can proceed to look at these different Digital
Property together with Digital Securities and purchase them, topic to financing, present market situations and regulatory compliance.

 

Authorities
Oversight

 

The
Bitcoin Community is a latest technological innovation and the regulatory schemes to which bitcoin and the Bitcoin Community could also be
topic haven’t been totally explored or developed. Current actions taken by the SEC in its DAO Report that sure Digital Property
could also be securities and actions taken by the CFTC together with its July 24, 2017 order approving the primary by-product clearing group
for digital foreign money swaps displays that we might face elevated authorities regulation and oversight. As said earlier on this
prospectus, the SEC’s July 25, 2017 DAO Report, its Chairman’s latest remarks and considerations concerning the “Wild West”
nature of the Digital Property market and reviews that its workers is issuing subpoenas will adversely have an effect on the Firm’s
future acquisition of Digital Property by limiting the quantity of Digital Securities it might purchase and creating elevated compliance
and authorized prices. Sooner or later earlier than we purchase Digital Property, we could also be required to look at how they had been initially provided
to find out in the event that they had been provided as an funding contract or safety. Due to authorized uncertainties, cautious examination of
the outcomes of our compliance assessment can be required by skilled securities counsel. As a result of we should keep underneath the Funding
Firm’s 40% provisions, we’ll restrict the quantity of Digital Securities we purchase and set up procedures designed to
shield us from fast fluctuations in worth of our Digital Property portfolio. If our compliance procedures and authorized critiques show
to be incorrect, we might incur the probability of prohibitive SEC penalties and/or non-public lawsuit protection prices and adversarial rulings.

 

Following
the issuance of the DAO Report, promoters sought to evade it by callings cash “utility tokens” even the place the developer
retained materials future companies that affected the profitability and future worth of the cash. The SEC rapidly stopped one such
preliminary coin providing, which clearly was supposed to ship a message.

 

Topic
to extra funding the Firm intends to amass extra digital belongings. The Firm at the moment personal and plans to increase
its digital asset holdings. With the intention to keep away from being an inadvertent funding firm throughout the that means of the 1940 Act, we actively
concentrate on insuring that our possession of belongings that aren’t securities will all the time exceed 60% of our complete belongings excluding money.
See “Threat Components” starting on web page 5 and “Enterprise” starting on web page 35. The possession of Digital Property
together with digital securities might change primarily based on the definition of a safety underneath the Securities Act and relevant courtroom selections.
The important thing definition is the time period “funding contract” and what’s an funding contract. In 1946 the U.S. Supreme
Court docket held that an funding in an orange grove operated and managed by a 3rd occasion was an funding contract and subsequently
a safety topic to numerous provisions of the federal securities legal guidelines.

 

In
the long run if we purchase Digital Property that could be deemed a safety, we’ll analyze whether or not our possession of the Digital Property
are securities underneath the funding contract evaluation from the main case and the decrease courtroom instances which have adopted it.
The take a look at for figuring out if an asset is an funding contract primarily based upon whether or not there was: (i) an funding of cash, (ii)
in a typical enterprise, (iii) with the expectation of income, (iv) primarily via the efforts of others.

 

As
each the regulatory panorama develops and journalistic familiarity with bitcoin will increase, mainstream media’s understanding
of Digital Property and the regulation thereof might enhance. Regulation of Digital Property varies from nation to nation as nicely
as inside nations. A rise within the regulation of Digital Property might have an effect on our proposed enterprise by growing compliance
prices or prohibiting sure or all of our proposed actions.

 

 

COMPETITION

 

Digital
Property Initiative

 

The
Firm’s Digital Asset initiative will compete with different business individuals that target investing in and securing
the Blockchains of bitcoin and different Digital Property. Market and monetary situations, and different situations past the Firm’s
management, might make it extra engaging to spend money on different entities, or to spend money on bitcoin or Digital Property straight. Firms
have raised substantial capital this yr searching for to enter Digital Asset companies. Our lack of capital is a aggressive drawback.

 

Digital
Asset Knowledge Analytics Platform

 

The
Firm’s present and future competitors for our digital asset information analytics platform is centered on the next areas:

 

  Exchanges
which at the moment provide extra sturdy digital asset information analytics or will select to boost their platforms sooner or later such
as eToro;
  different
cell purposes, web sites, area of interest aggregation websites, which supply related companies, similar to BNCpro;
  suppliers
of cell purposes and web sites, that provide safe storage options for digital belongings;
  present
monetary service corporations and information analytics corporations serving conventional asset markets that select to supply information analytic options
for digital belongings; and
  digital
asset centered corporations that provide trade, fee processing, and monetary companies that allow customers to trade
or digital belongings.

 

Many
of our present and potential rivals have higher assets, longer histories, extra customers, and higher model recognition.
They might commit extra assets to expertise, infrastructure, advertising and could possibly extra quickly develop their options.
Different corporations additionally might enter into enterprise mixtures or alliances that strengthen their aggressive positions. Our small
crew and lack of capital is a aggressive drawback.

 

ASSETS

 

The
Firm’s sole asset (aside from its money stability and Digital Property) is its human capital particularly Mr. Allen and Mr.
Handerhan, who’ve intensive market information and long-standing enterprise relationships throughout the business. Our success relies upon
solely on their continued service. See “Threat Components”.

 

INTELLECTUAL
PROPERTY AND TRADE SECRETS

 

We
don’t have any mental property belongings or licenses and rely on the expertise of our two government officers within the Digital Property
enterprise because it has advanced. Nonetheless, we consider this will change as we proceed to develop our digital asset information analytics platform.

 

GROWTH
STRATEGY

 

Digital
Property Initiative

 

As
we proceed to boost capital we plan to increase and diversify our Digital Asset holdings with a concentrate on disruptive protocol layer
verticals similar to sensible contracts, information storage and Web of issues (IoT); supplied, nonetheless that we don’t intent to amass
digital belongings which can represent digital securities. We additionally plan to extend our holdings of bitcoin and ethereum.

 

Digital
Asset Knowledge Analytics Platform Growth

 

The
Firm is at the moment internally growing a digital asset information analytics platform to combination person’s digital asset holdings
information derived from read-only API calls to linked exchanges. The platform resolution can also be being designed with a group focus
that will permit customers to share their commerce historical past with different platform customers. Our technique has three key phases: first develop
a sturdy platform and open it to public beta testing, second as soon as the platform is open purchase customers, and third monetize the platform.
Our present focus is on growing the platform. Given our restricted assets we are able to present no definitive timeline as to when
the platform can be open to beta testing although we anticipated this occurring in 2020.

 

 

EMPLOYEES

 

We
at the moment have two staff and no half time staff.

 

MANAGEMENT

 

The
following desk presents data with respect to our officers and administrators as of the date of this prospectus:

 

Title
and Handle
  Age  

Date
First Elected or

Appointed

  Place(s)
Charles
W. Allen
  44   February
5, 2014
  Chief
Govt Officer, Chief Monetary Officer and Chairman
Michal
Handerhan
  43   February
5, 2014
  Chief
Working Officer, Secretary and Director
David
Garrity
  59   October
16, 2017
  Unbiased
Director 

 

Every
director serves till our subsequent annual assembly of the stockholders or except they resign earlier. The Board of Administrators elects
officers and their phrases of workplace are on the discretion of the Board of Administrators.

 

Background
of Officers and Administrators

 

The
following is a short account of the schooling and enterprise expertise throughout at the least the previous 5 years of our officers and
administrators, indicating the individual’s principal occupation throughout that interval, and the identify and principal enterprise of the group
through which such occupation and employment had been carried out.

 

Charles
W. Allen,
age 44, has served as our Chief Govt Officer and Chief Monetary Officer since February 5, 2014 and as
our Chairman of the Board since September 11, 2014. Mr. Allen is accountable for our total company technique and route
in addition to managing our company funds. Since January 12, 2018 Mr. Allen has been the CEO of International Bit Ventures Inc. (“GBV”),
which has discontinued its operations. From October 10, 2017, Mr. Allen has been a director of GBV. Mr. Allen can also be on the advisory
board of GoCoin LLC, a number one Digital Asset fee processor. Mr. Allen has intensive expertise in enterprise technique and structuring
and executing quite a lot of funding banking and capital markets transactions, together with financings, IPO’s and mergers
and acquisitions. From February, 2012 via January, 2014 Mr. Allen was a Managing Director at RK Fairness Capital Markets LLC
(“RK”) and centered on pure assets funding banking and added to RK’s capital markets efforts. In August,
2012 Mr. Allen co-founded RK Fairness Funding Corp. (“RKEIC”) and served as a member of its board from inception
via September 7, 2014. Mr. Allen has intensive expertise in enterprise technique, funding banking and capital markets transactions.
Previous to his work within the blockchain business he labored domestically and internationally on initiatives in expertise, media, pure
assets, logistics, medical companies and monetary companies. He has served as a Managing Director at quite a few boutique funding
banks centered on advising and elevating capital for small and mid-size corporations. Mr. Allen obtained a B.S. in Mechanical Engineering
from Lehigh College and a M.B.A. from the Mason Faculty of Enterprise on the School of William & Mary. The Board concludes
that Mr. Allen’s background and management experiences within the business qualify him to serve on the Board.

 

Michal
Handerhan,
age 43, has served as our Chief Working Officer since February 5, 2014 and was appointed as our Secretary
on March 11, 2014. Mr. Handerhan served as our Chairman of the Board from February 5, 2014 to September 11, 2014 and was a co-founder
of BitcoinShop.us LLC. Mr. Handerhan helps each our enterprise and growth technique throughout the administration crew. Since January
12, 2018 Mr. Handerhan has been the Secretary and a director of GBV. From February, 2011 via February, 2014 Mr. Handerhan
served as an unbiased IT and internet companies marketing consultant to the Nationwide Aeronautics and Area Administration (“NASA”).
From October, 2005 till February, 2014 Mr. Handerhan was the President and Chief Govt Officer of Meesha Media Group, LLC
which supplied high-definition video manufacturing companies, Internet 2.Zero growth, database administration, and social media options.
From March, 2002 via October, 2006 Mr. Handerhan served as a crew chief for NASA of their Peer Evaluate Companies group. Prior
to working at NASA’s Peer Evaluate Companies group Mr. Handerhan served as the online developer for Folio Investments. Mr. Handerhan
obtained a B.S. in Laptop Science from Czech Technical College. The Board concludes that Mr. Handerhan’s intensive
experiences in IT qualify him to serve on the Board.

 

 

David
Garrity
, age 59, has served as our unbiased Director since October 16, 2017. Mr. Garrity has over 25 years’ expertise
within the monetary companies business, he has held senior roles together with CFO and board of director positions for each publicly-held
and personal corporations, and has intensive expertise in a number of disciplines together with working, advisory and analysis, and is
CEO of New York Metropolis primarily based consulting agency, GVA Analysis. Mr. Garrity is a Accomplice at BTblock, a blockchain and cybersecurity
consultancy agency, and a senior advisor at Quantum1Net which additionally has a concentrate on blockchain expertise. Throughout 2008 and 2009, Mr.
Garrity served as CFO and a director at Interclick, Inc., a behavioral concentrating on web promoting community. From June 9, 2011
to Could 14, 2013, Mr. Garrity was Chief Monetary Officer of Aspen Group, Inc., an internet for-profit college. From Could 14, 2013
via October 31, 2013, he was Govt Vice President Company Growth for Aspen Group, Inc. From February 1, 2017, via
January 2018, Mr. Garrity was appearing CFO of Mutualink, Inc., a non-public firm growing safe distributed networking applied sciences
to help communications interoperability for public & private-sector purchasers. Mr. Garrity seems repeatedly on CNBC, BNN,
Bloomberg, The Monetary Occasions, Asia Occasions, Yahoo Finance, and different media shops.

 

CONFLICTS
OF INTEREST

 

Mr.
Garrity, a director, is a Accomplice at BTblock, a blockchain consultancy agency, and a senior advisor at Quantum1Net which additionally has
a concentrate on blockchain expertise. It’s doable that these actions will create conflicts sooner or later. Given our small dimension
and lack of economic assets, we could also be hampered in recruiting unbiased administrators.

 

BOARD
LEADERSHIP STRUCTURE AND ROLE IN RISK OVERSIGHT

 

Our
Board of Administrators is primarily accountable for overseeing our danger administration processes. The Board of Administrators receives and
critiques periodic reviews from administration, auditors, authorized counsel, and others, as thought of acceptable relating to the Firm’s
evaluation of dangers. The Board of Administrators focuses on essentially the most important dangers going through us and our basic danger administration technique,
and likewise ensures that dangers undertaken by us are per the Board of Administrators’ urge for food for danger. Whereas the Board
of Administrators oversees the Firm, our administration is accountable for day-to-day danger administration processes. We consider this division
of tasks is the simplest method for addressing the dangers going through the Firm and that our board management construction
helps this method.

 

CODE
OF ETHICS

 

We
haven’t but adopted a code of ethics that applies to our principal government officers, principal monetary officer, principal
accounting officer or controller, or individuals performing related capabilities, since we now have been focusing our efforts on rising
our enterprise and acquiring financing for our Firm. We anticipate to undertake a code as we additional develop our enterprise.

 

FAMILY
RELATIONSHIPS

 

There
are not any household relationships between any of our administrators, government officers or administrators.

 

COMMITTEES
OF THE BOARD OF DIRECTORS

 

Due
to our dimension, we now have not formally designated a nominating committee, an audit committee, a compensation committee, or committees
performing related capabilities.

 

The
Board at the moment acts as our audit committee. Since we’re nonetheless a growing firm, the Board of Administrators continues to be within the course of
of discovering an “audit committee monetary knowledgeable” as outlined in Regulation S-Okay.

 

 

EXECUTIVE
COMPENSATION

 

The
following abstract compensation desk units forth data regarding compensation for companies rendered in all capacities throughout
the fiscal years ended December 31, 2019 and 2018 awarded to, earned by or paid to our administrators and government officers. The numbers
within the abstract compensation desk signify the precise quantity of compensation accrued underneath Typically Accepted Accounting Ideas.
The footnotes signify money truly paid.

 

SUMMARY
COMPENSATION TABLE

 

Title
and Principal Place
  12 months     Wage
($)
    Bonus
($)
    Complete
($)
 
Charles W. Allen, CEO     2019       345,000       256,025       601,025  
      2018       256,025 (1)           256,025  
Michal Handerhan, COO     2019       215,000       150,000       365,000  
      2018       198,550 (2)           198,550  

 

(1) Mr.
Allen obtained money compensation of $189,519 for the yr ended December 31, 2018. The $256,025 contains accrued and unpaid
wage of $66,506 as of December 31, 2018.
   
(2) Mr.
Handerhan obtained money compensation of $146,412 for the yr ended December 31, 2018. The $198,550 contains accrued and unpaid
wage of $52,138 as of December 31, 2018.

 

Employment
Agreements with Govt Officers

 

To
obtain our compensation goal of retaining and motivating certified executives, we consider that we have to present our government
officers with severance and alter of management protections which can be aggressive with the protections provided by different corporations.
Providing our government officers these funds and advantages facilitates the operation of our enterprise, permits them to raised focus
their time, consideration and capabilities on our enterprise, supplies for a transparent and constant method to managing involuntary departures
with mutually understood separation advantages, and aligns with market observe.

 

Charles
W. Allen

 

On
June 22, 2017, we entered into an employment settlement with Charles Allen (the “Allen Employment Settlement”), whereby
Mr. Allen agreed to function our Chief Govt Officer and Chief Monetary Officer for a interval of two years, topic to renewal,
in consideration for an annual wage of $245,000, which shall be elevated yearly by 4.5% (the “Annual Enhance”).
Moreover, underneath the phrases of the Allen Employment Settlement, Mr. Allen shall be eligible for an annual bonus if we meet sure
standards, as established by the Board of Administrators. Mr. Allen shall be entitled to take part in all advantages plans we offer
to our senior government. We will reimburse Mr. Allen for all affordable bills incurred in the middle of his employment. The
Firm shall pay the Mr. Allen $500 monthly to cowl phone and web bills. If the Firm doesn’t present workplace
house to Mr. Allen the Firm can pay him an extra $500 monthly to cowl bills in reference to their workplace house
wants.

 

On
February 6, 2019 we amended the Allen Employment Settlement whereby the annual wage was elevated to $345,000 per yr efficient
January 1, 2019, all different phrases of the Allen Employment Settlement remained unchanged together with the Annual Enhance.

 

Michal
Handerhan

 

On
June 22, 2017, we entered into an employment settlement with Michal Handerhan (the “Handerhan Employment Settlement”),
whereby Mr. Handerhan agreed to function our Chief Working Officer and Secretary for a interval of two years, topic to renewal,
in consideration for an annual wage of $190,000, which shall be elevated by the Annual Enhance. Moreover, underneath the phrases
of the Handerhan Employment Settlement, Mr. Handerhan shall be eligible for an annual bonus if we meet sure standards, as established
by the Board of Administrators. Mr. Handerhan shall be entitled to take part in all advantages plans we offer to our senior government.
We will reimburse Mr. Handerhan for all affordable bills incurred in the middle of his employment. The Firm shall pay Mr.
Handerhan $500 monthly to cowl phone and web bills. If the Firm doesn’t present workplace house to Mr. Handerhan
the Firm can pay him an extra $500 monthly to cowl bills in reference to their workplace house wants.

 

 

 

On
February 6, 2019 we amended the Handerhan Employment Settlement whereby the annual wage was elevated to $215,000 per yr efficient
on January 1, 2019, all different phrases of the Handerhan Employment Settlement remained unchanged together with the Annual Enhance.

 

The
phrases of the Allen Employment Settlement and Handerhan Employment Settlement (collectively the “Employment Agreements”)
present every of Messrs. Allen and Handerhan (the “Executives”) sure, severance and alter of management advantages if
the Govt resigns from the Firm for good cause or the Firm terminates him aside from for trigger. In such circumstances,
the Govt can be entitled to a lump sum fee equal to (i) the Govt’s then-current base wage, and (ii) fee
on a pro-rated foundation of any bonus or different funds earned in reference to any bonus plan to which the Govt was a participant.
As well as, the severance profit for the Executives the employment agreements embrace the Firm persevering with to pay for medical
and life insurance coverage protection for as much as one yr following termination. If, inside eighteen months following a change of management
(as outlined beneath), the Govt’s employment is terminated by the Firm with out trigger or he resigns from the Firm
for good cause, the Govt will obtain sure severance compensation. In such circumstances, the money profit to the Govt
can be a lump sum fee equal to 2 instances (i) his then-current base wage and (ii) his prior yr money bonus and incentive
compensation. Upon the incidence of a change of management, regardless of whether or not his employment with the Firm terminates,
every Govt’s inventory choices and equity-based awards will instantly vest.

 

A
“change of management” for functions of the Employment Agreements means any of the next: (i) the sale or partial
sale of the Firm to an un-affiliated individual or entity or group of un-affiliated individuals or entities pursuant to which such
occasion or events purchase shares of capital inventory of the Firm representing at the least twenty 5 (25%) of the totally diluted capital
inventory (together with warrants, convertible notes, and most popular inventory on an as transformed foundation) of the Firm; (ii) the sale of the
Firm to an un-affiliated individual or entity or group of such individuals or entities pursuant to which such occasion or events purchase
all or considerably the entire Firm’s belongings decided on a consolidated foundation, or (iii) Incumbent Administrators (Mr. Allen
and Mr. Handerhan) stop for any cause, together with, with out limitation, because of a young provide, proxy contest, merger or
related transaction, to represent at the least a majority of the board of administrators of the Firm.

 

Moreover,
pursuant to the phrases of the Employment Agreements, we now have entered into an indemnification settlement with every Govt Officer.

 

On
December 14, 2017, the Firm agreed to pay Charles Allen, its CEO, and Michal Handerhan, its COO, money bonuses of $75,000 and
$35,000, respectively for 2017. The Firm additional agreed to pay Mr. Allen and Mr. Handerhan contingent money bonuses of $175,000
and $75,000 respectively (the “2017 Contingent Bonuses”) which can be deemed earned on the sooner of i) the closing
of a merger accredited by the Board, ii) the closing of 1 or many financings in 2018 totaling over $1.25 million in gross proceeds,
or iii) the Firm having money and the truthful market worth of Digital Property valued at over $1.5 million. Supplied additional that
the 2017 Contingent Bonuses if deemed earned will solely be payable if the Firm has at the least $1.25 million in money and the truthful
market worth of Digital Property previous to paying the bonuses. The 2017 Contingent Bonuses will not be conditioned upon the continued
service of both Mr. Allen or Mr. Handerhan and don’t expire. As of the date of this report the situations to earn the 2017
Contingent Bonuses haven’t but been achieved.

 

On
February 6, 2019, the Firm agreed to pay Charles Allen, its CEO, and Michal Handerhan, its COO, contingent money bonuses of
$256,025 and $150,000, respectively for 2018 (the “2018 Contingent Bonuses”) which can be deemed earned and payable
upon the compensation and / or settlement of the $200,000 Promissory Be aware issued on December 18, 2018. On September 18, 2019, the
Firm exchanged the $200,000 Promissory Be aware and accrued curiosity of $17,973 for a $217,973 Convertible Promissory Be aware due
on December 18, 2019 (the “New Be aware”). From September 18, 2019 via October 16, 2019 the Firm issued 1,931,788
shares of the Firm’s Frequent Inventory for the conversion of all $217,973 principal on the New Be aware. The Firm subsequently
paid all of the accrued curiosity expense of $905 on the New Be aware as such the situations to earn the 2018 Contingent Bonuses have
been achieved and the 2018 Contingent Bonuses are at the moment owing however unpaid.

 

 

On
January 19, 2020, the Firm agreed to pay Charles Allen, its CEO, and Michal Handerhan, its COO, money bonuses of $15,000 and
$10,000, respectively for 2019. The Firm additionally agreed to pay Mr. Allen and Mr. Handerhan contingent money bonuses of $462,000
and $235,750 (collectively the “2019 Contingent Bonuses”). The Contingent Money Bonuses can be earned and payable
upon the achievement or satisfaction of any one of many following efficiency targets or standards: 1) The Firm both: i) consummates
a merger with one other firm which might represent a change of management, or ii) indicators a letter of intent (an “LOI”),
accredited by the board, to merge with one other firm which might represent a change of management, 2) the mixed worth of the
Firm’s money and truthful market worth of digital belongings (collectively the “Property”) at any cut-off date are:
i) higher than or equal to $1.25 million, then 25% of the Contingent Money Bonuses can be deemed earned and payable, ii) higher
than or equal to $1.75 million (excluding any portion of Contingent Money Bonuses beforehand earned whether or not paid or accrued), then
25% of the Contingent Money Bonuses can be deemed earned and payable, iii) higher than or equal to $2 million (excluding any
portion of Contingent Money Bonuses beforehand earned whether or not paid or accrued), then the remaining 50% of the Contingent Money Bonuses
can be deemed earned and payable, and three) supplied additional if the Firm and Mr. Allen or Mr. Handerhan conform to trade their
respective Contingent Money Bonus or a portion thereof for fairness securities (not debt) then the above efficiency standards do
not should be achieved with respect to the portion of Contingent Money Bonuses exchanged for fairness. The Contingent Money Bonuses
will not be conditioned upon the continued service of Mr. Allen or Mr. Handerhan and don’t expire.

 

The
amendments to the Employment Agreements, the 2018 Contingent Bonuses and 2019 Contingent Bonuses had been accredited unanimously by
the Board.

 

On
March 31, 2020, Charles Allen, the Firm’s Chief Govt Officer and Chief Monetary Officer, and Michal Handerhan,
the Firm’s Chief Working Officer, agreed to defer 35% of their money compensation through the second quarter 2020 (the
“Interval”) and chorus from making any funds through the Interval on accrued and unpaid compensation owed previous to
the Interval.

 

DIRECTOR
COMPENSATION

 

The
following abstract compensation desk units forth data regarding compensation for companies rendered in all capacities throughout
the fiscal years ended December 31, 2019 and 2018 awarded to, earned by or paid to our administrators excluding government officers.
The numbers within the abstract compensation desk signify the precise quantity of compensation accrued underneath Typically Accepted Accounting
Ideas.

 

Title
and Principal Place
  12 months     Charges
Earned or Paid in Money ($)
    Complete
($)
 
David
Garrity, Director
    2019       75,000       75,000  

 

On
January 1, 2018 the Firm entered right into a one-year consulting settlement with GVA Analysis LLC (“GVA”) whereby it
can pay GVA a quarterly consulting charge of $13,750. David Garrity is the proprietor and principal of GVA and that is regardless of
and never included within the Director compensation. The Firm didn’t renew the GVA consulting settlement for 2019.

 

On
February 6, 2019 the Firm reevaluated the extent of compensation for its sole director and agreed to an annual director charge
of $18,750 per quarter or $75,000 per yr efficient January 1, 2019.

 

On
March 31, 2020, the Firm lowered the unbiased director money charge from $75,000 to $18,750 for 2020 and to $15,000 per yr
thereafter.

 

OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END TABLE

 

There
are not any excellent fairness awards issued to our Named Govt Officers as of December 31, 2019.

 

PRINCIPAL
SHAREHOLDERS

 

The
following desk units forth sure data relating to helpful possession of our widespread inventory and C-1 Convertible Most popular
Inventory as of the date of this prospectus: (i) by every of our administrators, (ii) by every of the Named Govt Officers, (iii) by
all of our government officers and administrators as a gaggle, and (iv) by every individual or entity identified by us to beneficially personal extra
than 5% of any class of our excellent voting shares. Until in any other case famous, the deal with is c/o BTCS Inc., 9466 Georgia Avenue
#124, Silver Spring, MD 20910.

 

 

Title
of sophistication
  Title
and deal with of helpful proprietor
  Quantity
and nature of helpful possession (1)
    %
of sophistication (1)
 
Frequent
Inventory
  Charles
W. Allen
    0       0 %
Frequent
Inventory
  Michal
Handerhan
    0       0 %
Frequent
Inventory
  David
Garrity
    835        *
 
    All
officers and administrators as a gaggle (three individuals)
    835        *
 
Sequence
C-1 Convertible Most popular Inventory
                   
                     
Most popular
Inventory
  Cavalry
Fund I LP (2)
    14,707       50 %
Most popular
Inventory
  DiamondRock
LLC (3)
    14,707       50 %

 

*
Lower than 1%

 

(1) Proportion
possession of widespread inventory information solely is set primarily based on shares owned along with securities exercisable or convertible
into shares of widespread inventory inside 60 days of June 15, 2020, for every shareholder. Helpful possession is set in accordance
with the principles of the SEC and usually contains voting or funding energy with respect to securities. Shares of widespread inventory
topic to securities exercisable or convertible into shares of widespread inventory which can be at the moment exercisable or exercisable
inside 60 days of the date of June 15, 2020, are deemed to be beneficially owned by the individual holding such securities for
the aim of computing the share of possession of such individual, however will not be handled as excellent for the aim of
computing the share possession of some other individual. As of June 15, 2020, there have been 27,422,008 shares of our widespread inventory
issued and excellent. The holders of the excellent most popular inventory have blockers which restrict their voting and conversion
privileges to 4.99% of excellent widespread inventory throughout the foregoing 60 day durations. The chances mirror their possession
of every sequence of most popular inventory, which isn’t topic to any blocker.
   
 (2) Cavalry
Fund I Administration LLC, the funding supervisor of Cavalry Fund I LP, has voting and funding energy over these securities.
Thomas Walsh is the managing member of Cavalry Fund I Administration LLC, which is the final companion of Cavalry Fund I LP. Thomas
Walsh disclaims helpful possession over these securities. Cavalry is the promoting stockholder. Handle is: 61 Kinderkamack
Highway Woodcliff Lake, NJ 07677.
   
(3) Neil
Rock has voting and dispositive energy over shares held by DiamondRock, LLC. Handle is 425 East 63rd Avenue, New
York, NY 10065.

 

RELATED
PERSON TRANSACTIONS

 

Evaluate
of Associated Particular person Transactions

 

We
shouldn’t have a proper written coverage for the assessment and approval of transactions with associated events. Our Board of Administrators is
accountable for reviewing and approving or ratifying related-persons transactions.

 

Associated
Particular person Transactions

 

None

 

DIRECTOR
INDEPENDENCE

 

Our
widespread inventory is quoted on the OTCQB citation system, which doesn’t have director independence necessities. Utilizing the definition
of independence set forth within the guidelines of the NASDAQ Inventory Market, neither Mr. Allen nor Mr. Handerhan can be thought of an
unbiased director; nonetheless, Mr. Garrity can be deemed an unbiased director.

 

 

SELLING
STOCKHOLDER

 

This
prospectus pertains to the doable resale by the promoting stockholder, Cavalry, of shares of widespread inventory which were or might
be issued to Cavalry pursuant to the Buy Settlement. We’re submitting the registration assertion of which this prospectus types
a component pursuant to the provisions of the Registration Rights Settlement, which we entered into with Cavalry on Could 13, 2019 concurrently
with our execution of the Buy Settlement, through which we agreed to offer sure registration rights with respect to gross sales
by Cavalry of the shares of our widespread inventory which were or could also be issued to Cavalry underneath the Buy Settlement.

 

Cavalry,
because the promoting stockholder, might, every now and then, provide and promote pursuant to this prospectus any or the entire shares that we
have bought or might promote to Cavalry underneath the Buy Settlement. The promoting stockholder might promote some, all or none of its shares.
We have no idea how lengthy the promoting stockholder will maintain the shares earlier than promoting them, and we at the moment don’t have any agreements,
preparations or understandings with the promoting stockholder relating to the sale of any of the shares.

 

The
following desk presents data relating to the promoting stockholder and the shares that it might provide and promote from time to
time underneath this prospectus. The desk is ready primarily based on data provided to us by the promoting stockholder, and displays
its holdings as of June 15, 2020. Neither Cavalry nor any of its associates has held a place or workplace, or had some other materials
relationship, with us or any of our predecessors or associates. As used on this prospectus, the time period “promoting stockholder”
contains Cavalry and any donees, pledgees, transferees or different successors in curiosity promoting shares obtained after the date
of this prospectus from Cavalry as a present, pledge or different non-sale associated switch. Helpful possession is set in accordance
with Rule 13d-3(d) promulgated by the SEC underneath the Alternate Act. The share of shares beneficially owned previous to the providing
is predicated on 27,422,008 shares of our widespread inventory truly excellent as of June 15, 2020.

 

Promoting
Stockholder
  Shares
Beneficially Owned Earlier than this Providing
    Proportion
of Excellent Shares Beneficially Owned Earlier than this Providing
    Quantity
of Shares being Registered to be Bought within the Providing
    Proportion
of Excellent Shares Beneficially Owned After this Providing
 
Cavalry Fund I, LP(1)     98,047 (2)         *       9,045,000           *  

 

*Much less
than 1%.

 

(1) Cavalry
Fund I Administration LLC, the funding supervisor of Cavalry Fund I LP, has voting and funding energy over these securities.
Thomas Walsh is the managing member of Cavalry Fund I Administration LLC, which is the final companion of Cavalry Fund I LP.
(2) Represents
98,047 shares issuable upon the conversion of Sequence C-1 which aren’t registered hereby. See the outline underneath the heading
“The Cavalry Transaction” for extra details about the Buy Settlement.

 

THE
CAVALRY TRANSACTION

 

Normal

 

On
Could 13, 2019, we entered into the Buy Settlement and the Registration Rights Settlement with Cavalry. Pursuant to the phrases
of the Buy Settlement, Cavalry has agreed to buy from us as much as $10,000,000 of our widespread inventory (topic to sure limitations)
every now and then over a 36-month interval. Pursuant to the phrases of the Registration Rights Settlement, we now have filed with the SEC
the registration assertion that features this prospectus to register for resale underneath the Securities Act the shares which have
been or could also be issued to Cavalry underneath the Buy Settlement.

 

Concurrently
with the execution of the Buy Settlement on Could 13, 2019, we issued to Cavalry 333,334 shares of our widespread inventory as a charge
for its dedication to buy extra shares of our widespread inventory underneath the Buy Settlement. Apart from the shares of our
widespread inventory that we now have already issued to Cavalry as described above, we shouldn’t have the suitable to begin any gross sales to Cavalry
underneath the Buy Settlement till the SEC has declared efficient the registration assertion of which this prospectus types a
half. Thereafter and upon satisfaction of the opposite situations set forth within the Buy Settlement, we might, every now and then
and at our sole discretion, elect to direct Intraday Places and Aftermarket Places. On Could 24, 2019, a registration assertion was
declared efficient and since then we bought 3,973,809 Put shares to Cavalry underneath the Buy Settlement for $1,158,639 and issued
67,598 shares as extra professional rata dedication shares.

 

 

The
variety of shares that could be bought underneath an Intraday Put shall be equal to the Each day Buying and selling Greenback Quantity as reported on the Principal
Marketplace for the buying and selling day previous to the relevant Put Date, divided by the Intraday Buy Value. The “Intraday Buy
Value” means the decrease of: (i) 94% of the bottom sale value on the buying and selling day previous to the relevant Put Date and (ii)
94% of the arithmetic common of the three lowest closing costs for the Firm’s widespread inventory through the 12 consecutive
buying and selling days ending on the Buying and selling Day instantly previous such Put Date.

 

The
variety of shares that could be bought underneath an Aftermarket Put shall be equal to the Each day Buying and selling Greenback Quantity as reported on the
Principal Market, divided by the Aftermarket Put Value. The “Aftermarket Put Value” means: the decrease of: (i) the bottom
Sale Value on the relevant Put Date and (ii) the arithmetic common of the three lowest closing costs for the Firm’s
widespread inventory through the 12 consecutive buying and selling days ending on the buying and selling day instantly previous such Put Date.

 

Upon
mutual settlement of Cavalry and the Firm and topic to written affirmation by Cavalry that such settlement won’t end result
in violation of the 4.99% helpful possession limitation, the Firm might improve the Intraday Put Share Restrict or the Aftermarket
Put Share Restrict, as relevant, for any Put to incorporate an quantity equal to $2,000,000 in Put shares on the relevant Buy
Value, in every case along with the relevant Intraday Put Share Restrict or Aftermarket Put Share Restrict. In all cases, we
might not promote shares of our widespread inventory to Cavalry underneath the Buy Settlement if it might end in Cavalry beneficially proudly owning
greater than 4.99% of our widespread inventory.

 

The
buy value per share can be equitably adjusted for any reorganization, recapitalization, non-cash dividend, inventory break up,
or different related transaction occurring through the Buying and selling Days used to compute such value. We might at any time in our sole discretion
terminate the Buy Settlement with out charge, penalty or value upon one enterprise day discover. Cavalry might not assign or switch
its rights and obligations underneath the Buy Settlement.

 

We
issued 333,334 shares of our inventory to Cavalry as a dedication charge for coming into into the Buy Settlement and we’re obligated
to problem as much as an extra 583,334 shares professional rata (of which 67,598 have been issued) as Cavalry purchases as much as $10,000,000
of our widespread inventory as directed by us. Cavalry might not assign or switch its rights and obligations underneath the Buy Settlement.

 

Minimal
Buy Value

 

Below
the Buy Settlement, we now have set a flooring value of $0.005 per share. Cavalry shall not buy any shares of our widespread inventory
on any day that the latest closing sale value of our widespread inventory is beneath the ground value.

 

Occasions
of Default

 

Occasions
of default underneath the Buy Settlement embrace the next:

 

  the
effectiveness of the registration assertion of which this prospectus types a component lapses for any cause (together with, with out
limitation, the issuance of a cease order), or any required prospectus complement and accompanying prospectus are unavailable
for the resale by Cavalry of our widespread inventory provided hereby, and such lapse or unavailability continues for a interval of 10
consecutive Buying and selling Days or for greater than an combination of 30 enterprise days in any 365-day interval;
     
  suspension
by our principal market of our widespread inventory from buying and selling for a interval of three consecutive Buying and selling Days;
     
  the
de-listing of our widespread inventory from our principal market, supplied our widespread inventory is just not instantly thereafter buying and selling
on the New York Inventory Alternate, The NASDAQ Capital Market, The NASDAQ International Market, The NASDAQ International Choose Market, the
NYSE MKT, the NYSE Arca, the OTC Pink or the OTCQX operated by the OTC Markets Group, Inc. (or nationally acknowledged successor
to any of the foregoing);
     
  the
switch agent’s failure for 3 Buying and selling Days to problem to Cavalry shares of our widespread inventory which Cavalry is entitled
to obtain underneath the Buy Settlement;
     
  any
breach of the representations or warranties or covenants contained within the Buy Settlement or any associated settlement which
has or which may have a cloth adversarial impact on us topic to a remedy interval of 5 Buying and selling Days;
     
  any
participation in insolvency or chapter proceedings by or towards us; or
     
  ceasing
to be DTC eligible.

 

 

Cavalry
doesn’t have the suitable to terminate the Buy Settlement upon any of the occasions of default set forth above. Throughout an occasion
of default, all of that are exterior of Cavalry’s management, shares of our widespread inventory can’t be bought by us or bought
by Cavalry underneath the Buy Settlement.

 

Our
Termination Rights

 

We
have the unconditional proper, at any time, for any cause and with none fee or legal responsibility to us, to present discover to Cavalry
to terminate the Buy Settlement. Within the occasion of chapter proceedings by or towards us, the Buy Settlement will robotically
terminate with out motion of any occasion.

 

No
Quick-Promoting or Hedging by Cavalry

 

Cavalry
has agreed that neither it nor any of its associates shall have interaction in any direct or oblique short-selling or hedging of our widespread
inventory throughout any time previous to the termination of the Buy Settlement.

 

Impact
of Efficiency of the Buy Settlement on Our Stockholders

 

All
of the shares registered on this providing which can be bought by us to Cavalry underneath the Buy Settlement are anticipated to be freely
tradable. It’s anticipated that shares registered on this providing can be bought over a interval of as much as 36 months commencing on
the date that the registration assertion together with this prospectus turns into efficient. The sale by Cavalry of a major quantity
of shares registered on this providing at any given time may trigger the market value of our widespread inventory to say no and to be
extremely unstable. Cavalry might finally buy all, some or not one of the shares of widespread inventory registered on this providing.
If we promote these shares to Cavalry, Cavalry might promote all, some or none of such shares. Due to this fact, gross sales to Cavalry by us underneath
the Buy Settlement might end in substantial dilution to the pursuits of different holders of our widespread inventory. As well as,
if we promote a considerable variety of shares to Cavalry underneath the Buy Settlement, or if buyers anticipate that we’ll achieve this,
the precise gross sales of shares or the mere existence of our association with Cavalry might make it harder for us to promote fairness
or equity-related securities sooner or later at a time and at a value that we would in any other case want to impact such gross sales. Nonetheless,
we now have the suitable to regulate the timing and quantity of any gross sales of our shares to Cavalry and the Buy Settlement could also be terminated
by us at any time at our discretion with none value to us.

 

Pursuant
to the phrases of the Buy Settlement, we now have the suitable, however not the duty, to direct Cavalry to buy as much as $10,000,000
of our widespread inventory. We could also be licensed to problem and promote to Cavalry underneath the Buy Settlement extra shares of our widespread
inventory than are provided underneath this prospectus. If we select to take action, we should first register for resale underneath the Securities Act
any such extra shares, which may trigger extra substantial dilution to our stockholders. The variety of shares finally
provided for resale by Cavalry underneath this prospectus relies upon the variety of shares we direct Cavalry to buy underneath
the Buy Settlement.

 

 

The
following desk units forth the quantity of gross proceeds we might obtain from Cavalry from our sale of shares to Cavalry underneath
the Buy Settlement at various buy costs:

 

Assumed
Common Buy Value Per Share ($)
    Quantity
of Registered Shares to be Issued if Full Buy (1)
    Quantity
of Registered Shares We Will Obtain Proceeds From
    Proportion
of Excellent Shares After Giving Impact to the Issuance to Cavalry (2)
    Proceeds
from the Sale of Shares to Cavalry Below the $10M Buy Settlement ($)
 
 0.005
(3)     9,045,000       8,755,014       24.80 %     43,775  
 0.23
(4)     9,045,000       8,755,014       24.80 %     2,013,653  

 

(1)
Though
the Buy Settlement supplies that we might promote as much as $10,000,000 of our widespread inventory to Cavalry, we’re solely registering
9,045,000 buy shares underneath this prospectus, inclusive of 225,890 professional rata dedication shares. Because of this, we now have included
on this column solely these shares that we’re registering on this providing together with the professional rata dedication shares issuable
to Cavalry which no proceeds can be attributable to.
   
(2)
The
denominator is predicated on 27,422,008 shares excellent, and contains the variety of shares set forth within the adjoining column
which incorporates the dedication charge issued professional rata as much as the extra $10,000,000 million of our inventory if bought by Cavalry
and 4,374,741 shares beforehand issued to Cavalry underneath the Buy Settlement. The numerator is predicated on the variety of shares
issuable underneath the Buy Settlement. The variety of shares in such column doesn’t embrace shares that could be issued to Cavalry
underneath the Buy Settlement which aren’t registered on this providing.
   
(3)
Below
the Buy Settlement, Cavalry shall not buy any shares of our widespread inventory on any day that the latest closing
sale value of our widespread inventory is or was beneath $0.005.
   
(4)
The
closing sale value of our shares of widespread inventory on June 15, 2020.

 

DESCRIPTION
OF SECURITIES

 

We
are licensed to problem 975,000,000 shares of widespread inventory, par worth $0.001 per share, and 20,000,000 shares of most popular inventory,
par worth $0.001 per share.

 

Frequent
Inventory

 

The
holders of widespread inventory are entitled to at least one vote per share on all issues submitted to a vote of shareholders, together with the election
of administrators. There is no such thing as a cumulative voting within the election of administrators. The holders of widespread inventory are entitled to any dividends
that could be declared by the board of administrators out of funds legally accessible for fee of dividends topic to the prior rights
of holders of most popular inventory and any contractual restrictions we now have towards the fee of dividends on widespread inventory. Within the
occasion of our liquidation or dissolution, holders of widespread inventory are entitled to share ratably in all belongings remaining after fee
of liabilities and the liquidation preferences of any excellent shares of most popular inventory. Holders of widespread inventory don’t have any preemptive
rights and don’t have any proper to transform their widespread inventory into some other securities.

 

Most popular
Inventory

 

We
are licensed to problem 20,000,000 shares of $0.001 par worth most popular inventory in a number of sequence with such designations, voting
powers, if any, preferences and relative, collaborating, non-obligatory or different particular rights, and such {qualifications}, limitations
and restrictions, as are decided by decision of our board of administrators. The issuance of most popular inventory might have the impact
of delaying, deferring or stopping a change answerable for our firm with out additional motion by shareholders and will adversely
have an effect on the rights and powers, together with voting rights, of the holders of widespread inventory. In sure circumstances, the issuance
of most popular inventory may depress the market value of the widespread inventory.

 

 

Sequence
C-1 Most popular Inventory

 

We
have 29,414 shares of excellent Sequence C-1 Convertible Most popular Inventory (the “Sequence C-1”). Every share of Sequence
C-1 converts into roughly 6.667 shares of widespread inventory. The Certificates of Designation incorporates what is usually referred
to as a blocker which limits the variety of shares of widespread inventory which the holder might “beneficially personal” to 4.99%
of the widespread inventory issued and excellent. Below Rule 13d-Three of the Alternate Act, in figuring out helpful possession the holder
should contemplate shares of widespread inventory that could be issued upon conversion or train of different securities inside 60-days of the
date of calculation and which aren’t topic to any limitation on conversion or train. The Sequence C-1 additionally incorporates a provision
requiring the Firm to deal with all holders equally.

 

Anti-takeover
Results of Nevada Legislation and of Our Constitution and Bylaws

 

In
addition to the options of our constitution associated to the issuance of most popular inventory, that are described above, the NRS include
a number of provisions which can make a hostile take-over or change of management of our Firm harder to perform. They embrace
the next:

 

Nevada
legislation, anyone or the entire administrators of an organization could also be eliminated by the holders of not lower than two-thirds of the voting
energy of an organization’s issued and excellent inventory. All vacancies on the board of administrators of a Nevada company might
be crammed by a majority of the remaining administrators, although lower than a quorum, except the articles of incorporation present in any other case.
As well as, except in any other case supplied within the articles of incorporation, the board might fill the vacancies for your complete the rest
of the time period of workplace of the resigning director or administrators. Our Articles of Incorporation don’t present in any other case.

 

In
addition, Nevada legislation supplies that except in any other case supplied in an organization’s articles of incorporation or bylaws, shareholders
shouldn’t have the suitable to name particular conferences. Our Articles of Incorporation and our Bylaws don’t give shareholders this proper.
In accordance with Nevada legislation, we additionally require advance discover of any shareholder proposals.

 

Nevada
legislation supplies that, except in any other case prohibited by any bylaws adopted by the shareholders, the board of administrators might amend any
bylaw, together with any bylaw adopted by the shareholders. Pursuant to Nevada legislation, our Articles of Incorporation grant the authority
to undertake, amend or repeal bylaws completely to our administrators.

 

Nevada’s
“mixtures with stockholders” statutes prohibit sure enterprise “mixtures” between
sure Nevada companies and any individual deemed to be an “ stockholder” for 2 years after the such individual
first turns into an “ stockholder” except (i) the company’s board of administrators approves the mixture
(or the transaction by which such individual turns into an “ stockholder”) upfront, or (ii) the mixture
is accredited by the board of administrators and sixty p.c of the company’s voting energy not beneficially owned by the
stockholder, its associates and associates. Moreover, within the absence of prior approval, sure restrictions might
apply even after such two-year interval. For functions of those statutes, an “ stockholder” is any one who
is (x) the helpful proprietor, straight or not directly, of ten p.c or extra of the voting energy of the excellent voting shares
of the company, or (y) an affiliate or affiliate of the company and at any time throughout the two earlier years was the
helpful proprietor, straight or not directly, of ten p.c or extra of the voting energy of the then excellent shares of the company.
Topic to sure timing necessities set forth within the statutes, an organization might elect to not be ruled by these statutes.
Nonetheless, we now have not included any such provision in our Articles of Incorporation or Bylaws, which implies these provisions apply
to us.

 

Nevada’s
“acquisition of controlling curiosity” statutes include provisions governing the acquisition of a controlling curiosity
in sure Nevada companies. These “management share” legal guidelines present typically that any one who acquires a “controlling
curiosity” in sure Nevada companies could also be denied sure voting rights, except a majority of the disinterested stockholders
of the company elects to revive such voting rights. These statutes present that an individual acquires a “controlling curiosity”
at any time when an individual acquires shares of a topic company that, however for the applying of those provisions of the NRS, would
allow that individual to train (1) one-fifth or extra, however lower than one-third, (2) one-third or extra, however lower than a majority
or (3) a majority or extra, of the entire voting energy of the company within the election of administrators. As soon as an acquirer crosses
considered one of these thresholds, shares which it acquired within the transaction taking it over the edge and throughout the 90 days instantly
previous the date when the buying individual acquired or provided to amass a controlling curiosity develop into “management shares”
to which the voting restrictions described above apply. Our Articles of Incorporation and Bylaws at the moment include no provisions
relating to those statutes, and except our Articles of Incorporation or Bylaws in impact on the tenth day after the acquisition
of a controlling curiosity had been to offer in any other case, these legal guidelines would apply to us if we had been to (i) have 200 or extra stockholders
of report (at the least 100 of which have addresses within the State of Nevada showing on our inventory ledger) and (ii) do enterprise in
the State of Nevada straight or via an affiliated company. As of the date of this prospectus, we now have lower than 100 report
stockholders with Nevada addresses. Nonetheless, if these legal guidelines had been to use to us, they may discourage corporations or individuals
in buying a major curiosity in or management of the corporate, no matter whether or not such acquisition could also be within the curiosity
of our shareholders.

 

 

Dividends

 

We
haven’t paid dividends on our widespread inventory since inception and don’t plan to pay dividends on our widespread inventory within the foreseeable
future.

 

Switch
Agent

 

We
have appointed Fairness Inventory Switch as our inventory switch agent. Its deal with is 237 W 37th Avenue, Suite 602, New York, NY 10018
and its phone quantity is (212) 575-5757 and e-mail deal with is: information@equitystock.com

 

PLAN
OF DISTRIBUTION

 

The
promoting stockholder named above and any of their transferees, pledgees and successors-in-interest might, every now and then, promote
all or any of their shares of widespread inventory on OTC Markets or some other inventory trade, market or buying and selling facility on which the
shares of our widespread inventory are traded or in non-public transactions. These gross sales could also be at mounted costs and prevailing market costs
on the time of sale, at various costs or at negotiated costs. The promoting stockholder might use any a number of of the next
strategies when promoting shares:

 

  Atypical
brokerage transactions and transactions through which the broker-dealer solicits purchasers;
     
  Block
trades through which the broker-dealer will try to promote the shares as agent however might place and resell a portion of the block
as principal to facilitate the transaction;
     
  Purchases
by a broker-dealer as principal and resale by the broker-dealer for its account;
     
  Privately
negotiated transactions;
     
  Dealer-dealers
might agree with the promoting stockholder to promote a specified variety of such shares at a stipulated value per share; or
     
  A
mixture of any such strategies of sale.

 

Dealer-dealers
engaged by the promoting stockholder might prepare for different brokers-dealers to take part in gross sales. Dealer-dealers might obtain commissions
or reductions from the promoting stockholder (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser)
in quantities to be negotiated, however, besides as set forth in a complement to this prospectus, within the case of an company transaction
not in extra of a customary brokerage fee in compliance with FINRA Rule 2440; and within the case of a principal transaction
a markup or markdown in compliance with FINRA IM-2440.

 

The
promoting stockholder is an underwriter throughout the that means of the Securities Act and any broker-dealers or brokers which can be concerned
in promoting the shares could also be deemed to be “underwriters” throughout the that means of the Securities Act in reference to
such gross sales. In such occasion, any commissions obtained by such broker-dealers or brokers and any revenue on the resale of the shares
bought by them could also be deemed to be underwriting commissions or reductions underneath the Securities Act. The promoting stockholder
has knowledgeable us that it doesn’t have any written or oral settlement or understanding, straight or not directly, with any individual
to distribute the widespread inventory of our firm. Pursuant to a requirement by FINRA, the utmost fee or low cost to be obtained
by any FINRA member or unbiased broker-dealer might not be higher than 8% of the gross proceeds obtained by us for the sale
of any securities being registered pursuant to Rule 415 promulgated underneath the Securities Act.

 

 

Reductions,
concessions, commissions and related promoting bills, if any, attributable to the sale of shares can be borne by the promoting
stockholder. The promoting stockholder might conform to indemnify any agent, vendor, or broker-dealer that participates in transactions
involving gross sales of the shares if liabilities are imposed on that individual underneath the Securities Act.

 

We
are required to pay sure charges and bills incurred by us incident to the registration of the shares lined by this prospectus.
Now we have agreed to indemnify the promoting stockholder towards sure losses, claims, damages and liabilities, together with liabilities
underneath the Securities Act. We won’t obtain any proceeds from the resale of any of the shares of our widespread inventory by the promoting
stockholder. We might, nonetheless, obtain proceeds from the sale of our widespread inventory underneath the Buy Settlement with the promoting
stockholder.

 

The
shares can be bought solely via registered or licensed brokers or sellers if required underneath relevant state securities legal guidelines.
As well as, in sure states, the shares might not be bought except they’ve been registered or certified on the market within the relevant
state or an exemption from the registration or qualification requirement is on the market and is complied with.

 

Below
relevant guidelines and rules underneath the Alternate Act, any individual engaged within the distribution of the resale shares might not concurrently
have interaction in market making actions with respect to the widespread inventory for the relevant restricted interval, as outlined in Regulation
M, previous to the graduation of the distribution. As well as, the promoting stockholder can be topic to relevant provisions
of the Alternate Act and the principles and rules thereunder, together with Regulation M, which can restrict the timing of purchases
and gross sales of shares of the widespread inventory by the promoting stockholder or some other individual. We are going to make copies of this prospectus
accessible to the promoting stockholder.

 

Though
the promoting stockholder has agreed to not enter into any “quick gross sales” of our widespread inventory, gross sales after supply of
a put discover of plenty of shares fairly anticipated to be bought underneath a put discover shall not be deemed a “quick sale.”
Accordingly, the promoting stockholder might enter into preparations it deems acceptable with respect to gross sales of shares of our widespread
inventory after it receives a put discover underneath the Buy Settlement as long as such gross sales or preparations don’t contain greater than
the variety of put shares fairly anticipated to be bought by the promoting stockholder underneath such put discover.

 

Insofar
as indemnification for liabilities arising underneath the Securities Act could also be permitted to administrators, officers or individuals controlling
BTCS pursuant to the foregoing provisions, we now have been knowledgeable that within the opinion of the SEC, such indemnification is towards
public coverage as expressed within the Securities Act and is subsequently unenforceable.

 

LEGAL
MATTERS

 

The
validity of the securities provided hereby can be handed upon for us by Nason, Yeager, Gerson, Harris & Fumero, P.A., Palm
Seashore Gardens, Florida.

 

EXPERTS

 

The
monetary statements showing on this prospectus and registration assertion for the 12 months ended December 31, 2019 and 2018
have been audited by RBSM LLP, an unbiased registered public accounting agency as set forth of their report showing elsewhere
herein, and are included in reliance upon such report given on the authority of such agency as specialists in accounting and auditing.

 

ADDITIONAL
INFORMATION

 

We
have filed with the SEC a registration assertion on Kind S-1, together with the reveals, schedules, and amendments to this registration
assertion, underneath the Securities Act with respect to the shares of widespread inventory to be bought on this providing. This prospectus, which
is a part of the registration assertion, doesn’t include all the data set forth within the registration assertion. For additional
data with respect to us and the shares of our widespread inventory to be bought on this providing, we make reference to the registration
assertion.

 

We
are an Alternate Act reporting firm and are required to file periodic reviews on Kind 10-Okay and 10-Q and present reviews on Kind
8-Okay. You could learn and replica all or any portion of the registration assertion or some other data, on the SEC’s Web
web site, which is situated at www.sec.gov and which additionally incorporates reviews, proxy and data statements and different data
relating to issuers that file electronically with the SEC.

 

 

INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS

 

  Web page
No.
Report
of Unbiased Registered Public Accounting Corporations
F-1
Stability
Sheet as of December 31, 2019 and December 31, 2018
F-2
Assertion
of Operations for the Years Ended December 31, 2019 and 2018
F-3
Assertion
of Stockholders’ Fairness for the Years Ended December 31, 2019 and 2018
F-4
Assertion
of Money Flows for the Years Ended December 31, 2019 and 2018
F-5
Notes
to Monetary Statements
F-6
   
Condensed
Stability Sheets as of March 31, 2020 (unaudited) and December 31, 2019
F-16
Condensed
Statements of Operations for the Three Months Ended March 31, 2020 and 2019 (unaudited)
F-17
Condensed
Statements of Adjustments in Stockholders’ Fairness (Deficit) for the Three Months Ended March 31, 2020 and 2019 (unaudited)
F-18
Condensed
Statements of Money Flows for the Three Months Ended March 31, 2020 and 2019 (unaudited)
F-19
Notes
to the Unaudited Condensed Monetary Statements
F-20

 

 

REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To
the Board of Administrators and Stockholders of

BTCS
Inc.

 

Opinion
on the Monetary Statements

 

We
have audited the accompanying stability sheets of BTCS Inc. (The “Firm”) as of December 31, 2019 and 2018 and the
associated statements of operations, stockholders’ (deficit), and money flows for every of the years within the two-year interval ended
December 31, 2019, and the associated notes (collectively known as the monetary statements). In our opinion, the monetary
statements current pretty, in all materials respects, the monetary place of the Firm as of December 31, 2019 and 2018, and
the outcomes of its operations and its money flows for every of the years within the two-year interval ended December 31, 2019, in conformity
with accounting rules typically accepted in the US of America.

 

The
Firm’s Skill to Proceed as a Going Concern

 

The
accompanying monetary statements have been ready assuming the Firm will proceed as a going concern. As mentioned in Be aware
Three to the accompanying monetary statements, the Firm has suffered recurring losses from operations, generated detrimental money
flows from working actions, and has an collected deficit that raises substantial doubt concerning the Firm’s skill
to proceed as a going concern. Administration’s analysis of the occasions and situations and administration’s plan in regard
to those issues are additionally described in Be aware 3. The monetary statements don’t embrace any changes that may end result from
the end result of this uncertainty.

 

Foundation
for Opinion

 

These
monetary statements are the duty of the Firm’s administration. Our duty is to specific an opinion on
the Firm’s monetary statements primarily based on our audits. We’re a public accounting agency registered with the Public Firm
Accounting Oversight Board (United States) (PCAOB) and are required to be unbiased with respect to the Firm in accordance
with the U.S. federal securities legal guidelines and the relevant guidelines and rules of the Securities and Alternate Fee and the
PCAOB.

 

We
carried out our audits in accordance with the requirements of the PCAOB. These requirements require that we plan and carry out the audit
to acquire affordable assurance about whether or not the monetary statements are free of fabric misstatement, whether or not attributable to error
or fraud. The Firm is just not required to have, nor had been we engaged to carry out, an audit of its inside management over monetary
reporting. As a part of our audits, we’re required to acquire an understanding of inside management over monetary reporting, however
not for the aim of expressing an opinion on the effectiveness of the Firm’s inside management over monetary reporting.
Accordingly, we specific no such opinion.

 

Our
audits included performing procedures to evaluate the dangers of fabric misstatement of the monetary statements, whether or not attributable to
error or fraud, and performing procedures that reply to these dangers. Such procedures included analyzing, on a take a look at foundation, proof
relating to the quantities and disclosures within the monetary statements. Our audits additionally included evaluating the accounting rules
used and important estimates made by administration, in addition to evaluating the general presentation of the monetary statements.
We consider that our audits present an inexpensive foundation for our opinion.

 

/s/
RBSM LLP
 
   
We
have served because the Firm’s auditor since 2016.
 
   
Henderson,
Nevada
 
March
23, 2020
 
   

Besides
for Be aware 2, as to which the date is June 22, 2020

 

 

 

BTCS
Inc.

Stability
Sheets

 

    December
31,
    December
31,
 
    2019     2018  
             
Property:                
Present
belongings:
               
Money   $ 143,098     $ 52,117  
Digital
currencies
    252,903        
Pay as you go
expense
    24,008       8,333  
Complete
present belongings
    420,009       60,450  
                 
Different
belongings:
               
Property
and gear, internet
    1,344       2,703  
Complete
different belongings
    1,344       2,703  
                 
Complete
Property
  $ 421,353     $ 63,153  
                 
Liabilities
and Stockholders’ Deficit:
               
Accounts
payable and accrued expense
  $ 28,324     $ 14,244  
Accrued
compensation
    416,935       104,902  
Convertible
notes payable, internet
    159,854        
Quick
time period mortgage
          200,000  
Complete
present liabilities
    605,113       319,146  
                 
Stockholders’
deficit:
               
Most popular
inventory; 20,000,000 shares licensed at $0.001 par worth:
               
Sequence
B Convertible Most popular inventory: Zero shares issued and excellent at December 31, 2019 and 2018; Liquidation desire $0.001
per share
           
Sequence
C-1 Convertible Most popular inventory: 29,414 shares issued and excellent at December 31, 2019 and 2018; Liquidation desire
$0.001 per share
    29       29  
Frequent
inventory, 975,000,000 shares licensed at $0.001 par worth, 19,831,521 and 12,515,201 shares issued and excellent at December
31, 2019 and 2018, respectively
    19,830       12,515  
Further
paid in capital
    116,780,174       115,074,655  
Amassed
deficit
    (116,983,793 )     (115,343,192 )
Complete
stockholders’ deficit
    (183,760 )     (255,993 )
                 
Complete
Liabilities and stockholders’ deficit
  $ 421,353     $ 63,153  

 

The
accompanying notes are an integral a part of these monetary statements.

 

 

BTCS
Inc.

Statements
of Operations

 

    For
the years ended
 
    December
31,
 
    2019     2018  
             
Working
bills:
               
Normal
and administrative
  $ 1,422,394     $ 986,525  
Advertising     9,989       3,644  
Complete
working bills
    1,432,383       990,169  
                 
Different
(expense) revenue:
               
Curiosity
expense
    (86,142 )      
Impairment
loss on digital currencies
    (121,117 )      
Realized
(loss) acquire on digital currencies transactions
    (959 )     163,749  
Complete
different (bills) revenue
    (208,218 )     163,749  
                 
Web
loss
  $ (1,640,601 )   $ (826,420 )
Deemed
dividend associated to discount of warrant strike value
    (95,708 )     (5,600 )
Web
loss attributable to widespread stockholders
  $ (1,736,309 )   $ (832,020 )
                 
Web
loss per share attributable to widespread stockholders, primary and diluted
  $ (0.11 )   $ (0.07 )
                 
Weighted
common variety of widespread shares excellent, primary and diluted
    15,885,129       12,385,402  

 

The
accompanying notes are an integral a part of these monetary statements.

 

 

BTCS
Inc.

Consolidated
Assertion of Stockholders’ Deficit

For
the years ended December 31, 2019 and 2018

 

    Sequence
B Convertible
    Sequence
C-1 Convertible
                Further           Complete  
    Most popular
Inventory
    Most popular
Inventory
    Frequent
Inventory
    Paid-in     Amassed     Stockholders’  
    Shares     Quantity     Shares     Quantity     Shares     Quantity     Capital     Deficit     Fairness
(Deficit)
 
Stability
January 1, 2018 (Restated)
    25,877     $ 25       50,004     $ 50       12,101,462     $ 12,101     $ 115,018,023     $ (114,516,772 )   $ 513,427  
Conversion
of Sequence B Convertible Most popular inventory to widespread inventory
    (25,877 )     (25 )                 172,513       173       (148 )            
Conversion
of Sequence C-1 Convertible Most popular inventory to widespread inventory
                (20,590 )     (21 )     137,266       137       (116 )            
Cashless
warrant train
                            8,961       9       (9 )            
Warrant
train
                            94,999       95       56,905             57,000  
Web
loss
                                              (826,420 )     (826,420 )
Stability
December 31, 2018
        $       29,414     $ 29       12,515,201     $ 12,515     $ 115,074,655     $ (115,343,192 )   $ (255,993 )
Frequent
inventory issued together with fairness dedication charge, internet
                            4,642,108       4,642       1,157,358             1,162,000  
Conversion
of convertible notes
                            1,931,788       1,931       216,040             217,971  
Helpful
conversion options related to convertible notes payable
                                        104,493             104,493  
Fractional
shares adjusted for reverse break up
                                16,860       17       (17 )            
Warrant
train
                            725,564       725       227,645             228,370  
Web
loss
                                              (1,640,601 )     (1,640,601 )
Stability
December 31, 2019
        $       29,414     $ 29       19,831,521     $ 19,830     $ 116,780,174     $ (116,983,793 )   $ (183,760 )

 

The
accompanying notes are an integral a part of these consolidated monetary statements.

 

 

BTCS
Inc.

Consolidated
Statements of Money Flows

 

    For
the years ended
 
    December
31,
 
    2019     2018  
     (RESTATED)        
Web
Money flows used from working actions:
               
Web
loss
  $ (1,640,601 )   $ (826,420 )
Changes
to reconcile internet loss to internet money utilized in working actions:
               
Depreciation
bills
    1,359       1,130  
Amortization
on debt low cost
    64,345          
Realized
loss (acquire) on digital currencies transactions
    959       (163,749 )
Proceeds
from sale of digital currencies
          380,868  

Buy
of digital currencies

   

(374,979

)      
Curiosity
expense
    20,630          
Impairment
loss on digital currencies
    121,117        
Adjustments
in working belongings and liabilities:
               
Pay as you go
bills and different present belongings
    (15,675 )     59,403  
Accounts
payable and accrued bills
    11,423       43,149  
Accrued
compensation
    312,033        
Web
money utilized in working actions
    (1,499,389 )     (505,619 )
                 
Web
money utilized in investing actions:
               
Buy
of property and gear
          (2,598 )
Web
money utilized in investing actions
        (2,598 )
                 
Web
money supplied by financing actions:
               
Proceeds
from quick time period mortgage
    200,000       200,000  
Proceeds
from train of warrants
    228,370       57,000  
Web
proceeds from issuance of widespread inventory
    1,162,000        
Web
money supplied by financing actions
    1,590,370       257,000  
                 
Web
improve (lower) in money
    90,981       (251,217 )
Money,
starting of interval
    52,117       303,334  
Money,
finish of interval
  $ 143,098     $ 52,117  
                 
Money
paid for curiosity and taxes
  $ 905     $  
                 
Supplemental
disclosure of non-cash financing and investing actions:
               
Conversion
of Sequence B Convertible Most popular Inventory to widespread inventory
  $     $ 5,175  
Conversion
of Sequence C-1 Convertible Most popular Inventory to widespread inventory
  $     $ 4,118  
Conversion
of convertible be aware to widespread inventory
  $ 217,971     $  
Alternate
of promissory be aware and accrued curiosity into convertible be aware
  $ 217,973     $  
Cashless
warrant train
  $     $ 269  
Fractional
shares adjusted for reverse break up
  $ 17     $  
Deemed
dividend
  $ 95,708     $ 5,600  
Helpful
conversion options related to convertible notes payable
  $ 104,493     $  

 

The
accompanying notes are an integral a part of these consolidated monetary statements.

 

 

BTCS
Inc.

NOTES
TO FINANCIAL STATEMENTS

 

Be aware
1 – Group and Description of Enterprise and Current Developments

 

BTCS
Inc. (previously Bitcoin Store, Inc.), a Nevada company (the “Firm”) was included in 2008. In February 2014,
the Firm entered the enterprise of internet hosting an internet ecommerce market the place customers should buy merchandise utilizing Digital
Property, together with bitcoin and is at the moment centered on blockchain and digital foreign money ecosystems. In January 2015, the Firm
started a rebranding marketing campaign utilizing its BTCS.COM area (shorthand for Blockchain Expertise Client Options) to raised mirror
its broadened technique. The Firm launched its new web site which included broader data on its technique. In late 2014
we shifted our focus in the direction of our transaction verification service enterprise, also referred to as bitcoin mining, although in mid-2016 we
ceased our transaction verification companies operation at our North Carolina facility attributable to capital constraints.

 

Topic
to extra financing, the Firm plans to amass extra Digital Property to offer buyers with oblique possession of
Digital Property that aren’t securities, similar to bitcoin and ether. The Firm intends to amass Digital Property via open
market purchases. We aren’t limiting our belongings to a single sort of Digital Asset and will buy quite a lot of Digital Property
that seem to profit our buyers, topic to the sure limitations relating to Digital Securities. The Firm can also be searching for
to amass controlling pursuits in companies within the blockchain business.

 

The
Firm has not participated in any preliminary coin choices because it believes many of the choices entail the providing of Digital
Securities and require registration underneath the Securities Act and underneath state securities legal guidelines or can solely be bought to accredited
buyers in the US. Since about July 2017, preliminary coin choices utilizing Digital Securities have been (or needs to be)
restricted to accredited buyers. As a result of we can’t qualify as an accredited investor, we don’t intend to amass cash in preliminary
coin choices or from purchasers in such choices. Additional, the Firm doesn’t intend to take part in registered or unregistered
preliminary coin choices. The Firm will rigorously assessment its purchases of Digital Securities to keep away from violating the 1940 Act
and search to scale back potential liabilities underneath the federal securities legal guidelines.

 

Digital
asset blockchains are sometimes maintained by a community of individuals which run servers which safe their blockchain.

 

The
Firm can also be internally growing a digital asset information analytics platform to offer data to customers, similar to monitoring
of a number of exchanges and wallets to combination portfolio holdings right into a single platform to view and analyze efficiency, danger
metrics, and potential tax implications.

 

The
market is quickly evolving and there may be no assurances that we’ll be aggressive with business individuals which have or
might have higher assets than us.

 

Modification
to Articles of Incorporation

 

On
April 5, 2019, the Firm filed a Certificates of Modification to its Articles of Incorporation (the “Modification”) with
the Nevada Secretary of State to impact a one-for 30 reverse break up of the Firm’s class of widespread inventory. The Modification
took impact on April 9, 2019. No fractional shares had been or can be issued or distributed because of the Modification. Fractional
shares ensuing from the reverse break up had been rounded as much as the closest complete share. Numbers of shares of the Firm’s most popular
inventory weren’t affected by the Reverse Inventory Cut up; nonetheless, the conversion ratios have been adjusted to mirror the Reverse Inventory
Cut up. The monetary statements have been retroactively restated to mirror the reverse inventory break up.

 

Be aware
2 – Foundation of Presentation and Restatement of the Consolidated Monetary Statements

 

Foundation
of Presentation

 

The
accompanying monetary statements embrace the accounts of the Firm and its wholly-owned subsidiaries, DM. DM was dissolved
on Could 2, 2018. The Firm maintains its books of account and prepares monetary statements in accordance with Typically Accepted
Accounting Ideas in the US of America (“U.S. GAAP”). The Firm’s fiscal yr ends on December
31. All important intercompany balances and transactions have been eradicated in consolidation.

 

Restatement
of the Consolidated Monetary Statements

 

The
objective of this modification is to right an error within the Firm’s beforehand issued monetary statements for the interval
ended December 31, 2019 in reference to the classification of the $374,979 buy of digital currencies within the assertion
of money flows. The $374,979 buy of digital currencies has now been re-classified from an investing exercise to an working
exercise within the assertion of money flows.

 

There
was no impact of the restatement to the Firm’s consolidated stability sheet, consolidated assertion of operations and consolidated
assertion of adjustments in stockholders’ deficit for the yr ended December 31, 2019.

 

In
accordance with the steering supplied by the SEC’s Workers Accounting Bulletin 99, Materiality (“SAB 99”) and
Workers Accounting Bulletin 108, Contemplating the Results of Prior 12 months Misstatements when Quantifying Misstatements in Present 12 months
Monetary Statements (“SAB 108”), the Firm has decided that the impression of changes regarding the correction
of this accounting error will not be materials to beforehand issued annual audited monetary statements.

 

The
impact of the restatement on the Firm’s consolidated assertion of money flows for the yr ended December 31, 2019 are
as follows:

 

    For
the years ended December 31, 2019
 
    As
Beforehand Reported
    Restatement
Adjustment
    As
Restated
 
Web
money utilized in working actions
  $ (1,124,410 )   $ (374,979 )   $ (1,499,389 )
Web
money utilized in investing actions
    (374,979 )     374,979        
Web
money supplied by financing actions
    1,590,370             1,590,370  
Web
improve in money
    90,981             90,981  

 

There
was no impression to internet money supplied by financing actions inside our consolidated assertion of money flows nor was there an impression
on the web improve in money ensuing from restatement.

 

The
impacts of the restatement has been mirrored all through these monetary statements, together with the relevant footnotes, as acceptable.

 

Be aware
3 – Liquidity, Monetary Situation and Administration’s Plans

 

The
Firm has commenced its deliberate operations however has restricted working actions to this point. The Firm has financed its operations
since inception utilizing proceeds obtained from capital contributions made by its officers and proceeds in financing transactions.

 

However,
the Firm has restricted revenues, restricted capital assets and is topic to the entire dangers and uncertainties which can be typical
of an early stage enterprise. Important uncertainties embrace, amongst others, whether or not the Firm will be capable to increase the capital
it must finance its longer-term operations and whether or not such operations, if launched, will allow the Firm to maintain operations
as a worthwhile enterprise.

 

 

BTCS
Inc.

NOTES
TO FINANCIAL STATEMENTS

 

Our
working capital wants are influenced by our degree of operations, and usually lower with greater ranges of income. The Firm
used roughly $1.1 million of money in its working actions for the yr ended December 31, 2019. The Firm incurred
$1.6 million internet loss for the yr ended December 31, 2019. The Firm had money of roughly $0.1 million and a detrimental
working capital of roughly $0.2 million at December 31, 2019. The Firm expects to incur losses into the foreseeable future
because it undertakes its efforts to execute its enterprise plans.

 

The
Firm would require important extra capital to maintain its short-term operations and make the investments it must
execute its longer-term marketing strategy. The Firm’s present liquidity is just not ample to fund its operations and anticipated
capital expenditures for the foreseeable future. The Firm is at the moment searching for to acquire extra fairness financing, primarily
via the Fairness Line Buy Settlement with Cavalry and searching for to acquire extra fairness linked debt financing, nonetheless
there are at the moment no different commitments of debt or fairness in place for additional financing neither is there any assurance that such
financing can be accessible to the Firm on favorable phrases, if in any respect.

 

As a result of
of recurring working losses, internet working money circulation deficits, and an collected deficit, there’s substantial doubt about
the Firm’s skill to proceed as a going concern for one yr from the issuance of the monetary statements. The monetary
statements have been ready assuming the Firm will proceed as a going concern. The Firm has not made changes to the
accompanying monetary statements to mirror the potential results on the recoverability and classification of belongings or liabilities
ought to the Firm be unable to proceed as a going concern.

 

The
Firm continues to incur ongoing administrative and different working bills, together with public firm bills, in extra of
revenues. Whereas the Firm continues to implement its enterprise technique, it intends to finance its actions by:

 

managing
present money and money equivalents available from the Firm’s previous debt and fairness choices by controlling prices,
   
searching for
extra financing via gross sales of extra securities whether or not via Cavalry or different buyers.

 

Be aware
4- Abstract of Important Accounting Insurance policies

 

A
abstract of the numerous accounting insurance policies utilized within the preparation of the accompanying monetary statements is as follows:

 

Focus
of Money

 

The
Firm maintains money balances at two monetary establishments in checking accounts and cash market accounts. The Firm considers
all extremely liquid investments with unique maturities of six months or much less when bought to be money and money equivalents. As
of December 31, 2019 and 2018, the Firm had roughly $143,000 and $52,000 in money. The Firm has not skilled any
losses in such accounts and believes it isn’t uncovered to any important credit score danger on money.

 

Monetary
devices that probably topic the Firm to focus of credit score danger consist principally of money deposits. Accounts
at every establishment are insured by the Federal Deposit Insurance coverage Company (“FDIC”) as much as $250,000. As of December
31, 2019 and 2018, the Firm had $Zero in extra of the FDIC insured restrict.

 

Digital
Property Translations and Remeasurements

 

Digital
Property are included in present belongings within the stability sheets. Digital Property are recorded at value much less impairment.

 

An
intangible asset with an indefinite helpful life is just not amortized however assessed for impairment yearly, or extra incessantly, when
occasions or adjustments in circumstances happen indicating that it’s extra possible than not that the indefinite-lived asset is impaired.
Impairment exists when the carrying quantity exceeds its truthful worth. In testing for impairment, the Firm has the choice to first
carry out a qualitative evaluation to find out whether or not it’s extra possible than not that an impairment exists. Whether it is decided
that it isn’t extra possible than not that an impairment exists, a quantitative impairment take a look at is just not crucial. If the Firm
concludes in any other case, it’s required to carry out a quantitative impairment take a look at. To the extent an impairment loss is acknowledged,
the loss establishes the brand new value foundation of the asset. Subsequent reversal of impairment losses is just not permitted.

 

Realized
acquire (loss) on sale of Digital Property are included in different revenue (expense) within the statements of operations.

 

 

BTCS
Inc.

NOTES
TO FINANCIAL STATEMENTS

 

The
Firm assesses impairment of Digital Property quarterly if the truthful worth of digital belongings is lower than its value foundation. The Firm
acknowledges impairment losses on Digital Property brought on by decreases in truthful worth utilizing the common U.S. greenback spot value of the
associated Digital Asset as of every impairment date. Such impairment within the worth of Digital Property are recorded as a element of
prices and bills in our statements of operations.

 

Property
and Gear

 

Property
and gear consists of leasehold enhancements, pc, gear and workplace furnishings and fixtures, all of that are recorded
at value. Depreciation and amortization is recorded utilizing the straight-line methodology over the respective helpful lives of the belongings
starting from three to 5 years. Lengthy-lived belongings are reviewed for impairment at any time when occasions or circumstances point out that
the carrying quantity of those belongings might not be recoverable.

 

Truthful
Worth of Monetary Devices

 

Monetary
devices, together with money and money equivalents, accounts payable and accrued liabilities are carried at value, which administration
believes approximates truthful worth because of the short-term nature of those devices. The Firm measures the truthful worth of economic
belongings and liabilities primarily based on the trade value that might be obtained for an asset or paid to switch a legal responsibility (an exit
value) within the principal or most advantageous marketplace for the asset or legal responsibility in an orderly transaction between market individuals
on the measurement date. The Firm maximizes the usage of observable inputs and minimizes the usage of unobservable inputs when
measuring truthful worth.

 

The
Firm makes use of three ranges of inputs that could be used to measure truthful worth:

 

Degree
1 – quoted costs in lively markets for similar belongings or liabilities

 

Degree
2 – quoted costs for related belongings and liabilities in lively markets or inputs which can be observable

 

Degree
3 – inputs which can be unobservable (for instance, money circulation modeling inputs primarily based on assumptions)

 

Use
of Estimates

 

The
accompanying monetary statements have been ready in conformity with accounting rules typically accepted within the United
States of America (“US GAAP”). This requires administration to make estimates and assumptions that have an effect on sure reported
quantities of belongings and liabilities and disclosures of contingent belongings and liabilities on the date of the monetary statements,
and the reported quantities of income and bills through the interval. The Firm’s important estimates and assumptions
embrace the recoverability and helpful lives of indefinite life intangible belongings, stock-based compensation, the valuation of by-product
liabilities, and the valuation allowance associated to the Firm’s deferred tax belongings. Sure of the Firm’s estimates,
together with the carrying quantity of the indefinite life intangible belongings, could possibly be affected by exterior situations, together with these
distinctive to the Firm and basic financial situations. It’s fairly doable that these exterior components may have an impact
on the Firm’s estimates and will trigger precise outcomes to vary from these estimates and assumptions.

 

Earnings
Taxes

 

The
Firm acknowledges revenue taxes on an accrual foundation primarily based on tax positions taken or anticipated to be taken in its tax returns. A
tax place is outlined as a place in a beforehand filed tax return or a place anticipated to be taken in a future tax submitting
that’s mirrored in measuring present or deferred revenue tax belongings and liabilities. Tax positions are acknowledged solely when it
is extra possible than not (i.e., probability of higher than 50%), primarily based on technical deserves, that the place can be sustained
upon examination by taxing authorities. Tax positions that meet the extra possible than not threshold are measured utilizing a probability-weighted
method as the most important quantity of tax profit that’s higher than 50% possible of being realized upon settlement. Earnings taxes
are accounted for utilizing an asset and legal responsibility method that requires the popularity of deferred tax belongings and liabilities for
the anticipated future tax penalties of occasions which were acknowledged within the Firm’s monetary statements or tax returns.
A valuation allowance is established to scale back deferred tax belongings if all, or some portion, of such belongings will greater than possible
not be realized. Ought to they happen, the Firm’s coverage is to categorise curiosity and penalties associated to tax positions
as revenue tax expense. Because the Firm’s inception, no such curiosity or penalties have been incurred.

 

Worker
Inventory-Primarily based Compensation

 

The
Firm accounts for stock-based compensation in accordance with ASC 718 Compensation – Inventory Compensation (“ASC 718”).
ASC 718 addresses all types of share-based fee (“SBP”) awards together with shares issued underneath worker inventory buy
plans and inventory incentive shares. Below ASC 718 awards end in a price that’s measured at truthful worth on the awards’ grant
date, primarily based on the estimated variety of awards which can be anticipated to vest and can end in a cost to operations.

 

 

BTCS
Inc.

NOTES
TO FINANCIAL STATEMENTS

 

Promoting
Expense

 

Commercial
prices are expensed as incurred and included in advertising bills. Promoting bills amounted to roughly $10,000 and
$4,000 for the years ended December 31, 2019 and 2018, respectively.

 

Web
Loss per Share

 

Primary
loss per share is computed by dividing the web revenue or loss relevant to widespread shares by the weighted common variety of widespread
shares excellent through the interval. Diluted earnings per share is computed utilizing the weighted common variety of widespread shares
and, if dilutive, potential widespread shares excellent through the interval. Potential widespread shares include the Firm’s
convertible most popular inventory, convertible notes and warrants. Diluted loss per share excludes the shares issuable upon the conversion
of most popular inventory, notes and warrants from the calculation of internet loss per share if their impact can be anti-dilutive.

 

The
following monetary devices weren’t included within the diluted loss per share calculation as of December 31, 2019 and 2018 as a result of
their impact was anti-dilutive:

 

    As
of December 31,
 
    2019     2018  
Warrants
to buy widespread inventory
    937,904       1,955,264  
Sequence
C-1 Convertible Most popular inventory
    196,093       196,093  
Convertible
notes
    3,676,471        
Complete     4,810,468       2,151,357  

 

Most popular
Inventory

 

The
Firm applies the steering enumerated in ASC 480 “Distinguishing Liabilities from Fairness” when figuring out the classification
and measurement of most popular inventory. Most popular shares topic to necessary redemption (if any) are categorized as legal responsibility devices
and are measured at truthful worth. The Firm classifies conditionally redeemable most popular shares (if any), which incorporates most popular
shares that function redemption rights which can be both throughout the management of the holder or topic to redemption upon the incidence
of unsure occasions not solely throughout the Firm’s management, as momentary fairness. In any respect different instances, the Firm classifies
its most popular shares in stockholders’ fairness. The Firm’s most popular shares don’t function any redemption rights
throughout the holders’ management or conditional redemption options not throughout the Firm’s management as of December 31,
2019 and 2018. Accordingly, all issuances of most popular inventory are introduced as a element of stockholders’ fairness.

 

Convertible
Devices

 

The
Firm has evaluated the Sequence A Convertible Most popular Inventory (“Most popular Inventory”) element of the Non-public Placement
and decided it needs to be thought of an “fairness host” and never a “debt host” as outlined by ASC 815, Derivatives
and Hedging. This analysis is critical with a view to decide if any embedded options require bifurcation and, subsequently, separate
accounting as a by-product legal responsibility. The Firm’s evaluation adopted the “complete instrument method,” which
compares a person function towards your complete most popular inventory instrument which incorporates that function. The Firm’s
evaluation was primarily based on a consideration of the Most popular Inventory’s financial traits and dangers and extra particularly
evaluated all of the said and implied substantive phrases and options together with (i) whether or not the Most popular Inventory included redemption
options, (ii) whether or not the popular stockholders had been entitled to dividends, (iii) the voting rights of the Most popular Inventory and
(iv) the existence and nature of any conversion rights. On account of the Firm’s willpower that the Most popular Inventory
is an “fairness host,” the embedded conversion function is just not thought of a by-product legal responsibility.

 

Helpful
Conversion Characteristic of Convertible Notes Payable

 

The
Firm accounts for convertible notes payable in accordance with the rules established by the FASB Accounting Requirements
Codification (“ASC”) Matter 470-20, Debt with Conversion and Different Choices. The helpful conversion function of a
convertible be aware is often characterised because the convertible portion or function of sure notes payable that present a price
of conversion that’s beneath market worth or in-the-money when issued. The Firm information a helpful conversion function associated
to the issuance of a convertible be aware when issued.

 

 

BTCS
Inc.

NOTES
TO FINANCIAL STATEMENTS

 

The
discounted face worth is then used to measure the efficient conversion value of the be aware. The efficient conversion value and the
market value of the Firm’s widespread inventory are used to calculate the intrinsic worth of the conversion function. The intrinsic
worth is recorded within the monetary statements as a debt low cost from the face quantity of the be aware and such low cost is amortized
over the anticipated time period of the convertible be aware (or to the conversion date of the be aware, if sooner) and is charged to curiosity expense.

 

Current
Accounting Pronouncements

 

In
Could 2014, the FASB issued ASU No. 2014-09, “Income from Contracts with Prospects (Matter 606)” (ASU 2014-09) as modified
by ASU No. 2015-14, “Income from Contracts with Prospects (Matter 606): Deferral of the Efficient Date,” ASU 2016-08,
“Income from Contracts with Prospects (Matter 606): Principal versus Agent Issues (Reporting Income Gross versus
Web),” ASU No. 2016-10, “Income from Contracts with Prospects (Matter 606): Figuring out Efficiency Obligations and
Licensing,” and ASU No. 2016-12, “Income from Contracts with Prospects (Matter 606): Slender-Scope Enhancements and
Sensible Expedients.” The income recognition precept in ASU 2014-09 is that an entity ought to acknowledge income to depict
the switch of products or companies to clients in an quantity that displays the consideration to which the entity expects to be
entitled in trade for these items or companies. As well as, new and enhanced disclosures can be required. Firms might undertake
the brand new customary both utilizing the total retrospective method, a modified retrospective method with sensible expedients, or
a cumulative impact upon adoption method. The Firm adopted ASU 2014-09 on January 1, 2018, utilizing the modified retrospective
method. As a result of the Firm doesn’t have any buyer contracts as of January 1, 2018, the adoption of ASU 2014-09 did
not have a cloth impression on the Firm’s monetary place, outcomes of operations, fairness or money flows.

 

In
December 2019, the FASB issued ASU No. 2019-12, “Earnings Taxes (Matter 740): Simplifying the Accounting for Earnings Taxes (“ASU
2019-12”), which is meant to simplify varied features associated to accounting for revenue taxes. ASU 2019-12 removes sure
exceptions to the final rules in Matter 740 and likewise clarifies and amends present steering to enhance constant utility.
This steering is efficient for fiscal years, and interim durations inside these fiscal years, starting after December 15, 2020,
with early adoption permitted. The Firm is at the moment evaluating the impression of this customary on its monetary statements and
associated disclosures.

 

Be aware
5 – Be aware Payable

 

2018
Be aware

 

On
December 18, 2018, the Firm issued a $200,000 promissory be aware to at least one institutional investor (the “Promissory Be aware”).
The Promissory Be aware was due on September 18, 2019 and bears curiosity at a price of 12%. Within the occasion of default, the Promissory
Be aware bears curiosity at a price of 20%. By the maturity date of the Promissory Be aware, the Firm made no fee in reference to
this Promissory Be aware and accrued curiosity expense of $17,973. On September 18, 2019, the Firm and holder of the Promissory
Be aware agreed to trade the Promissory Be aware, together with $17,973 accrued and unpaid curiosity for a brand new $217,973 Convertible Be aware
dated September 18, 2019 (the “Convertible Be aware”). The Convertible Be aware is due December 18, 2019 and is convertible
at a 20% low cost to the closing value of the Firm’s widespread inventory on the principal buying and selling market on the date earlier than
train, supplied nonetheless that the conversion value shall by no means be lower than $0.10 per share. The Convertible Be aware shall bear
curiosity at 12% each year (payable at maturity) and could also be pay as you go by the Firm. From September 18, 2019 to September 30, 2019,
the Firm issued a complete of 1,252,058 shares of the Firm’s Frequent Inventory for the conversion of $150,000 of principal
on the Convertible Be aware and made no fee in reference to this Convertible Be aware and accrued curiosity expense. On October
16, 2019, the Firm issued a complete of 679,730 shares of the Firm’s Frequent Inventory for the conversion of the remaining
$67,973 of principal on the Convertible Be aware and subsequently paid all of the accrued curiosity expense of $905 on the Convertible
Be aware. The trade of the Promissory Be aware into the Convertible Be aware met the definition of an extinguishment. Nonetheless, the carrying
quantity of the Promissory Be aware and the truthful worth of the Convertible Be aware had been comparable. Due to this fact, no acquire or loss was recorded
on the extinguishment. As well as, the Convertible Be aware doesn’t include any embedded options that require bifurcation pursuant
to ASC 815-15. On the issuance date, the Convertible Be aware was convertible into 1,746,579 shares of widespread inventory at $0.12 per share,
however the Firm’s truthful worth of underlying widespread inventory was $0.16 per share. As such, the Firm acknowledged a helpful
conversion function, leading to a reduction to the Notes of roughly $54,000 with a corresponding credit score to extra paid-in
capital. Through the yr ended December 31, 2019, the Firm recorded roughly $54,000 in curiosity expense associated to amortization
on debt low cost associated to the Convertible Be aware.

 

2019
Be aware

 

On
November 7, 2019, the Firm issued a $200,000 promissory be aware (the “2019 Promissory Be aware”). The 2019 Promissory
Be aware is due on August 7, 2020 and is: (i) convertible at a 20% low cost to the closing value of the Firm’s widespread inventory
on the date earlier than train with a flooring value of $0.02 per share, (ii) shall bear curiosity at 12% each year (payable at maturity)
and within the occasion of default bears curiosity at a price of 20%, (iii) convertible on the Firm’s choice topic to sure
limitations as set forth within the 2019 Promissory Be aware, and (iv) could also be pay as you go by the Firm. Through the yr ended December 31,
2019, the Firm recorded roughly $10,000 in curiosity expense associated to amortization on debt low cost associated to the 2019
Promissory Be aware. As of December 31, 2019, the Convertible Be aware had principal stability of $0.2 million, accrued curiosity on the
be aware payable of roughly $4,000 and roughly $40,000 remaining unamortized debt low cost. As well as, the Convertible
Be aware doesn’t include any embedded options that require bifurcation pursuant to ASC 815-15. On the issuance date, the Convertible
Be aware was convertible into 2,173,913 shares of widespread inventory at $0.09 per share, however the Firm’s truthful worth of underlying
widespread inventory was $0.12 per share. As such, the Firm acknowledged a helpful conversion function, leading to a reduction to
the Notes of roughly $50,000 with a corresponding credit score to extra paid-in capital.

 

 

BTCS
Inc.

NOTES
TO FINANCIAL STATEMENTS

 

Be aware
6 – Stockholders’ Fairness

 

Modification
to Articles of Incorporation

 

On
April 5, 2019, the Firm filed a Certificates of Modification to its Articles of Incorporation (the “Modification”) with
the Nevada Secretary of State to impact a one-for 30 reverse break up of the Firm’s class of widespread inventory. The Modification
took impact on April 9, 2019. No fractional shares had been or can be issued or distributed because of the Modification. Fractional
shares ensuing from the reverse break up had been rounded as much as the closest complete share. Numbers of shares of the Firm’s most popular
inventory weren’t affected by the Reverse Inventory Cut up; nonetheless, the conversion ratios have been adjusted to mirror the Reverse Inventory
Cut up. The monetary statements have been retroactively restated to mirror the reverse inventory break up.

 

2019
Actions

 

On
April 18, 2019, the Firm issued 16,860 shares of Frequent Inventory in reference to the one-for 30 reverse break up ensuing from
the rounding up of fractional shares of Frequent Inventory to the entire shares of Frequent Inventory.

 

Throughout
2019, the Firm issued 4,374,741 shares of Frequent Inventory (together with 333,334 dedication shares and 68,532 pro-rata dedication
shares) underneath the Buy Settlement with Cavalry leading to combination proceeds of roughly $1.16 million.

 

Throughout
2019, the Firm issued 725,564 shares of Frequent Inventory for the money train of Sequence A Warrants, Further Warrants, and Bonus
Warrants leading to combination proceeds of $228 thousand to the Firm.

 

Throughout
2019, the Firm issued a complete of 1,931,788 shares of the Firm’s Frequent Inventory for the conversion of roughly $218,000
of principal on the Convertible Be aware.

 

Fairness
Line Buy Settlement

 

On
Could 13, 2019, the Firm entered into an fairness line buy settlement with Cavalry Fund I LP (“Cavalry”) (the “Buy
Settlement”) pursuant to which Cavalry agreed to buy from the Firm, at Firm’s sole discretion, as much as $10,000,000
of widespread inventory (topic to sure limitations) every now and then over a 36-month interval. In consideration for coming into into
the $10 million Buy Settlement, the Firm issued to Cavalry 333,334 shares of widespread inventory as a dedication charge and can
problem as much as 583,334 shares of widespread inventory professional rata as Cavalry purchases extra shares.

 

Concurrently
with the execution of the Buy Settlement on Could 13, 2019, the Firm and Cavalry additionally entered right into a registration rights
settlement (the “Registration Rights Settlement”), pursuant to which the Firm agreed, amongst different issues, to file
a registration assertion (the “Registration Assertion”) with the Securities and Alternate Fee (the “SEC”),
no later than Could 23, 2019 to register for resale by Cavalry underneath the Securities Act of 1933 (the “Act”), the shares
of widespread inventory that the Firm might elect to problem and promote to Cavalry every now and then underneath the Buy Settlement. The Registration
Rights Settlement supplies that within the occasion the Firm is unable to register ample shares underneath the Registration Assertion,
the Firm can be required to file extra registration statements such that ample registered shares can be found for
issuance and sale to Cavalry underneath the Buy Settlement.

 

The
Firm filed a Registration Assertion on Kind S-1 searching for to register 4,374,741 shares. The Registration Assertion was declared
efficient by the SEC on Could 28, 2019. Supplied the Registration Assertion stays present and efficient and the situations set
forth within the Buy Settlement are happy, the Firm might, every now and then and at its sole discretion, direct Cavalry to
buy shares of the Firm’s widespread inventory throughout buying and selling hours (“Intraday Places”) and after buying and selling hours
till 7 p.m. New York time (“Aftermarket Places”) (both an Intraday Put or an Aftermarket Put could also be known as
a “Put”). The Firm might make a number of Places every day topic to supply of the shares related to prior Places.

 

The
variety of shares that could be bought underneath an Intraday Put shall be equal to the entire every day buying and selling greenback quantity (“Each day
Buying and selling Greenback Quantity”) for the buying and selling day previous to the relevant Put date, divided by the Intraday Buy Value (such
shares being the “Intraday Put Share Restrict”). The “Intraday Buy Value” means the decrease of: (i) 94%
of the bottom sale value on the buying and selling day previous to the relevant Put date, and (ii) 94% of the arithmetic common of the three
lowest closing costs for the Firm’s widespread inventory through the 12 consecutive buying and selling days ending on the Buying and selling Day instantly
previous such Put date.

 

 

BTCS
Inc.

NOTES
TO FINANCIAL STATEMENTS

 

The
variety of shares that could be bought underneath an Aftermarket Put shall be equal to the Each day Buying and selling Greenback Quantity, divided by the Aftermarket
Put Value (such shares being the “Aftermarket Put Share Restrict”). The “Aftermarket Put Value” means: the
decrease of: (i) the bottom Sale Value on the relevant Put date, and (ii) the arithmetic common of the three lowest closing costs
for the Firm’s widespread inventory through the 12 consecutive buying and selling days ending on the buying and selling day instantly previous such
Put date.

 

Upon
mutual settlement of Cavalry and the Firm and topic to written affirmation by Cavalry that such settlement won’t end result
in violation of the 4.99% helpful possession limitation, the Firm might improve the Intraday Put Share Restrict or the Aftermarket
Put Share Restrict, as relevant, for any Put to incorporate an quantity equal to $2,000,000 in Put shares on the relevant Buy
Value, in every case along with the relevant Intraday Put Share Restrict or Aftermarket Put Share Restrict. In all cases, the
Firm might not promote shares of its widespread inventory to Cavalry underneath the Buy Settlement if it might end in Cavalry beneficially
proudly owning greater than 4.99% of the Firm’s widespread inventory or if the closing value the buying and selling day instantly previous the Put
date is beneath $0.005.

 

As
of December 31, 2019, the Firm bought all 4,374,741 shares accessible on the market underneath the Registration Assertion for complete proceeds
of $1,162,000, internet of value of $12,625.

 

On
September 5, 2019, the Firm filed a second Registration Assertion on Kind S-1 searching for to register 6,454,000 shares. The second
Registration Assertion was declared efficient by the SEC on December 20, 2019. As of December 31, 2019, the Firm bought 267,367
shares accessible on the market underneath the second Registration Assertion for complete proceeds of $15,986.

 

2018
Actions

 

On
January 1, 2018, the Firm issued 172,513 shares of Frequent Inventory upon the conversion of 25,877 shares of Sequence B Convertible
Most popular inventory.

 

On
April 20, 2018, the Firm issued 13,073 shares of Frequent Inventory upon the conversion of 1,961 shares of Sequence C-1 Convertible
Most popular inventory.

 

On
April 23, 2018, the Firm issued 39,220 shares of Frequent Inventory upon the conversion of 5,883 shares of Sequence C-1 Convertible
Most popular inventory.

 

On
April 24, 2018, the Firm issued 84,973 shares of Frequent Inventory upon the conversion of 12,746 shares of Sequence C-1 Convertible
Most popular inventory.

 

On
July 23, 2018, the Firm issued 8,961 shares of Frequent Inventory for the cashless train of 18,518 warrants.

 

On
October 11, 2018 the Firm issued 4 buyers every 458,333 Sequence C Warrants or 1,833,333 warrants in combination. These Sequence
C Warrants weren’t lawfully issued in accordance with the Nevada Revised Statutes (“NRS”).

 

On
October 25, 2018 the Firm and every of the 4 buyers who maintain the Sequence C Warrants agreed to cancel the Sequence C Warrants
for no consideration. Accordingly, the Sequence C Warrants will not be excellent.

 

On
November 13, 2018, pursuant to the Modification to Securities Settlement dated December 7, 2017, the Firm quickly lowered the
train value of 133,333 Sequence A Warrants from $0.085 to $0.02 (the “Supply”). The provide was made to all 4 buyers
who’re report holders of the Sequence A Warrants on similar phrases. Every investor had the choice to train as much as 33,333 Sequence
A Warrants on the decrease train value.

 

Over
the course of November 13 via November 16, 2018, the Firm issued 95,000 shares of Frequent Inventory for the money train of
Sequence A Warrants via the Supply leading to combination proceeds of $57,000 to the Firm.

 

 

BTCS
Inc.

NOTES
TO FINANCIAL STATEMENTS

 

Inventory
Buy Warrants

 

The
following is a abstract of warrant exercise for the yr ended December 31, 2019 and 2018:

 

    Quantity
of Warrants
 
Excellent
as of December 31, 2017
    2,068,831  
Issuance
of Sequence C Warrants
    1,833,333  
Cancellation
of Sequence C Warrants for no consideration
    (1,833,333 )
Cashless
warrant train
    (18,519 )
Warrants
train for money
    (94,999 )
Expiration
of warrant
    (39 )
Excellent
as of December 31, 2018
    1,955,274  
Warrants
train for money
    (725,564 )
Expiration
of warrant
    (291,806 )
Excellent
as of December 31, 2019
    937,904  

 

Be aware
7 – Employment Agreements

 

Charles
W. Allen

 

On
June 22, 2017, we entered into an employment settlement with Charles Allen (the “Allen Employment Settlement”), whereby
Mr. Allen agreed to function our Chief Govt Officer and Chief Monetary Officer for a interval of two (2) years, topic to
renewal, in consideration for an annual wage of $245,000. Moreover, underneath the phrases of the Allen Employment Settlement, Mr.
Allen shall be eligible for an annual bonus if we meet sure standards, as established by the Board of Administrators. Mr. Allen shall
be entitled to take part in all advantages plans we offer to our senior government. The Firm accrued roughly $256,000
in bonuses through the yr ended December 31, 2019 and didn’t pay or accrue any quantity for bonuses through the yr ended December
31, 2018. We will reimburse Mr. Allen for all affordable bills incurred in the middle of his employment. The Firm shall
pay the Govt $500 monthly to cowl phone and web bills. If the Firm doesn’t present workplace house to the
Govt the Firm can pay the Govt an extra $500 monthly to cowl bills in reference to their workplace house
wants.

 

On
February 6, 2019 we amended the Allen Employment Settlement whereby the annual wage was elevated to $345,000 per yr efficient
January 1, 2019.

 

Michal
Handerhan

 

On
June 22, 2017, we entered into an employment settlement with Michal Handerhan (the “Handerhan Employment Settlement”),
whereby Mr. Handerhan agreed to function our Chief Working Officer and Secretary for a interval of two (2) years, topic to renewal,
in consideration for an annual wage of $190,000. Moreover, underneath the phrases of the Handerhan Employment Settlement, Mr. Handerhan
shall be eligible for an annual bonus if we meet sure standards, as established by the Board of Administrators. Mr. Handerhan shall
be entitled to take part in all advantages plans we offer to our senior government. The Firm accrued roughly $150,000
in bonuses through the yr ended December 31, 2019 and didn’t pay or accrue any quantity for bonuses through the yr ended December
31, 2018. We will reimburse Mr. Handerhan for all affordable bills incurred in the middle of his employment. The Firm shall
pay the Govt $500 monthly to cowl phone and web bills. If the Firm doesn’t present workplace house to the
Govt the Firm can pay the Govt an extra $500 monthly to cowl bills in reference to their workplace house
wants.

 

On
February 6, 2019 we amended the Handerhan Employment Settlement whereby the annual wage was elevated to $215,000 per yr efficient
on January 1, 2019.

 

The
phrases of the Allen Employment Settlement and Handerhan Employment Settlement (collectively the “Employment Agreements”)
present every of Messrs. Allen and Handerhan (the “Executives”) sure, severance and alter of management advantages if
the Govt resigns from the Firm for good cause or the Firm terminates him aside from for trigger. In such circumstances,
the Govt can be entitled to a lump sum fee equal to (i) the Govt’s then-current base wage, and (ii) fee
on a pro-rated foundation of any bonus or different funds earned in reference to any bonus plan to which the Govt was a participant.
As well as, the severance profit for the Executives the employment agreements embrace the Firm persevering with to pay for medical
and life insurance coverage protection for as much as one yr following termination. If, inside eighteen months following a change of management
(as outlined beneath), the Govt’s employment is terminated by the Firm with out trigger or he resigns from the Firm
for good cause, the Govt will obtain sure severance compensation. In such circumstances, the money profit to the Govt
can be a lump sum fee equal to 2 instances (i) his then-current base wage and (ii) his prior yr money bonus and incentive
compensation. Upon the incidence of a change of management, regardless of whether or not his employment with the Firm terminates,
every Govt’s inventory choices and equity-based awards will instantly vest.

 

 

BTCS
Inc.

NOTES
TO FINANCIAL STATEMENTS

 

A
“change of management” for functions of the Employment Agreements means any of the next: (i) the sale or partial
sale of the Company to an un-affiliated individual or entity or group of un-affiliated individuals or entities pursuant to which such
occasion or events purchase shares of capital inventory of the Company representing at the least twenty 5 (25%) of the totally diluted
capital inventory (together with warrants, convertible notes, and most popular inventory on an as transformed foundation) of the Company; (ii) the
sale of the Company to an un-affiliated individual or entity or group of such individuals or entities pursuant to which such occasion
or events purchase all or considerably the entire Company’s belongings decided on a consolidated foundation, or (iii) Incumbent
Administrators (Mr. Allen and Mr. Handerhan) stop for any cause, together with, with out limitation, because of a young provide, proxy
contest, merger or related transaction, to represent at the least a majority of the board of administrators of the Firm.

 

Moreover,
pursuant to the phrases of the Employment Agreements, we now have agreed to execute and ship in favor of the Executives an indemnification
settlement and to keep up administrators’ and officers’ insurance coverage with phrases and within the quantities commensurate with our senior
government.

 

Be aware
8 – Earnings Taxes
 

 

The
Firm had no revenue tax expense attributable to working loss incurred for the years ended December 31, 2019 and 2018.

 

The
tax results of momentary variations and tax loss and credit score carry forwards that give rise to important parts of deferred
tax belongings and liabilities at December 31, 2019 and 2018 are comprised of the next:

 

    As
of December 31,
 
    2019     2018  
Deferred
tax belongings:
               
Web-operating
loss carryforward
  $

1,436,050

    $

1,117,532

 
Different            
                 
Complete
Deferred Tax Property
   

1,436,050

     

1,117,532

 
Valuation
allowance
   

(1,436,050

)     (1,117,532 )
Deferred
Tax Asset, Web of Allowance
  $     $  

 

At
December 31, 2019, the Firm had internet working loss carry forwards for federal and state tax functions of roughly $6.84
million which begins to run out in 2034. For tax years starting after December 31, 2017, NOLs generated can offset solely 80% of
taxable revenue in any given tax yr. The 20-year carryforward interval has been changed with an indefinite carryforward interval
for these NOLs generated in 2018 and future years. Previous to the merger, the Firm had generated internet working losses, which
the Firm’s preliminary evaluation signifies can be topic to important limitations pursuant to Inside Income Code
Part 382. The Firm has not accomplished its IRC Part 382 Valuation, as required and the NOL’s due to potential
Change of Ownerships is likely to be fully nugatory. Due to this fact, Administration of the Firm has recorded a Full Valuation Reserve,
since it’s extra possible than not that no profit can be realized for the Deferred Tax Property.

 

In
assessing the conclusion of deferred tax belongings, administration considers whether or not it’s extra possible than not that some portion or
the entire deferred tax belongings can be realized. The last word realization of deferred tax belongings relies upon the era
of future taxable revenue through the interval through which these momentary variations develop into deductible. Administration considers the scheduled
reversal of deferred tax liabilities, projected future taxable revenue and taxing methods in making this evaluation. In case
the deferred tax belongings won’t be realized in future durations, the Firm has supplied a valuation allowance for the total quantity
of the deferred tax belongings at December 31, 2019. The valuation allowance elevated by roughly $0.32 million as of December
31, 2019.

 

The
anticipated tax expense (profit) primarily based on the U.S. federal statutory price is reconciled with precise tax expense (profit) as follows:

 

 

BTCS
Inc.

NOTES
TO FINANCIAL STATEMENTS

 

    For
the years ended December 31,
 
    2019     2018  
Statutory
Federal Earnings Tax Fee
    (21.0 )%     (21.0 )%
State
Taxes, Web of Federal Tax Profit
    (6.3 )%     (6.3 )%
Federal
tax price change
    0.0 %     0.0  
Different     27.3 %     27.3  
Change
in Valuation Allowance
    (0.0 )%     (0.0 )%
                 
Earnings
Taxes Provision (Profit)
    %     %

 

The
Firm has not recognized any unsure tax positions requiring a reserve as of December 31, 2019.

 

Be aware
9 – Subsequent Occasions

 

From
January 1, 2020 via March 9, 2020 the Firm bought 4,363,744 shares and issued 17,786
pro-rata dedication shares
accessible on the market underneath the second Registration Assertion for complete proceeds of $304,785.

 

The
Firm evaluates occasions which have occurred after the stability sheet date however earlier than the monetary statements are issued. Primarily based
upon the analysis, the Firm didn’t determine any acknowledged or non-recognized subsequent occasions that might have required
adjustment or disclosure within the monetary statements aside from disclosed.

 

 

BTCS
Inc.

Condensed
Stability Sheets

 

    March
31,
    December
31,
 
    2020     2019  
    (Unaudited)        
Property:                
Present
belongings:
               
Money   $ 278,566     $ 143,098  
Digital
currencies
    178,478       252,903  
Pay as you go
expense
    8,268       24,008  
Complete
present belongings
    465,312       420,009  
                 
Different
belongings:
               
Property
and gear, internet
    1,005       1,344  
Complete
different belongings
    1,005       1,344  
                 
Complete
Property
  $ 466,317     $ 421,353  
                 
Liabilities
and Stockholders’ Deficit:
               
Accounts
payable and accrued expense
  $ 23,351     $ 28,324  
Accrued
compensation
    407,526       416,935  
Convertible
notes payable, internet
    176,460       159,854  
Complete
present liabilities
    607,337       605,113  
                 
Stockholders’
deficit:
               
Most popular
inventory; 20,000,000 shares licensed at $0.001 par worth:
               
Sequence
B Convertible Most popular inventory: Zero shares issued and excellent at March 31, 2020 and December 31, 2019; Liquidation desire
$0.001 per share
           
Sequence
C-1 Convertible Most popular inventory: 29,414 shares issued and excellent at March 31, 2020 and December 31, 2019; Liquidation
desire $0.001 per share
    29       29  
Frequent
inventory, 975,000,000 shares licensed at $0.001 par worth, 26,018,154 and 19,831,521 shares issued and excellent at March
31, 2020 and December 31, 2019, respectively
    26,017       19,830  
Further
paid in capital
    117,186,998       116,780,174  
Amassed
deficit
    (117,354,064 )     (116,983,793 )
Complete
stockholders’ deficit
    (141,020 )     (183,760 )
                 
Complete
Liabilities and stockholders’ deficit
  $ 466,317     $ 421,353  

 

The
accompanying notes are an integral a part of these unaudited condensed monetary statements.

 

 

BTCS
Inc.

Condensed
Statements of Operations

(Unaudited)

 

    Three
Months Ended March 31,
 
    2020     2019  
             
Working
bills:
               
Normal
and administrative
  $ 270,528     $ 251,964  
Advertising     2,690       535  
Complete
working bills
    273,218       252,499  
                 
Different
expense:
               
Curiosity
expense
    (22,628 )     (6,000 )
Impairment
loss on digital currencies
    (74,425 )      
Complete
different bills
    (97,053 )     (6,000 )
                 
Web
loss
  $ (370,271 )   $ (258,499 )
Deemed
dividend associated to discount of warrant strike value
          (95,708 )
Web
loss attributable to widespread stockholders
  $ (370,271 )   $ (354,207 )
                 
Web
loss per share attributable to widespread stockholders, primary and diluted
  $ (0.02 )   $ (0.03 )
                 
Weighted
common variety of widespread shares excellent, primary and diluted
    23,004,360       13,033,038  

 

The
accompanying notes are an integral a part of these unaudited condensed monetary statements.

 

 

BTCS
Inc.

Statements
of Adjustments in Stockholders’ Deficit

(Unaudited)

 

For
the Three Months Ended March 31, 2020

 

    Sequence
C-1
Convertible
                Further           Complete  
    Most popular
Inventory
    Frequent
Inventory
    Paid-in     Amassed     Stockholders’  
    Shares     Quantity     Shares     Quantity     Capital     Deficit     Deficit  
Stability
December 31, 2019
    29,414     $ 29       19,831,521     $ 19,830     $ 116,780,174     $ (116,983,793 )   $ (183,760 )
Frequent
inventory issued together with fairness dedication charge, internet
                6,186,633       6,187       406,824               413,011  
Web
loss
                                  (370,271 )     (370,271 )
Stability
March 31, 2020
    29,414     $     29       26,018,154     $  26,017     $  117,186,998     $  (117,354,064 )   $ (141,020 )

 

For
the Three Months Ended March 31, 2019

 

   

Sequence
C-1

Convertible

Most popular
Inventory

    Frequent
Inventory
   

Further

Paid-in

    Amassed    

Complete

Stockholders’

 
    Shares     Quantity     Shares     Quantity     Capital     Deficit     Deficit  
Stability
December 31, 2018
    29,414     $ 29       12,515,201     $ 12,515     $ 115,074,655     $ (115,343,192 )   $ (255,993 )
Warrant
train
                725,564       725       227,645             228,370  
Web
loss
                                  (258,499 )     (258,499 )
Stability
March 31, 2019
    29,414     $      29       13,240,765     $ 13,240     $  115,302,300     $  (115,601,691 )   $ (286,122 )

 

The
accompanying notes are an integral a part of these unaudited condensed monetary statements.

 

 

BTCS
Inc.

Condensed
Statements of Money Flows

(Unaudited)

 

Related posts

    For
the Three Months Ended
 
    March
31,
 
    2020     2019  
             
Web
Money flows used from working actions:
               
Web
loss
  $ (370,271 )   $ (258,499 )
Changes
to reconcile internet loss to internet money utilized in working actions:
               
Depreciation
bills
    339       335  
Amortization
on debt low cost
    16,606        
Impairment
loss on digital currencies
    74,425        
Adjustments
in working belongings and liabilities:
               
Pay as you go
bills and different present belongings
    15,740       5,000  
Accounts
payable and accrued bills
    (4,973 )     49,763  
Accrued
compensation
    (9,409 )      
Web
money utilized in working actions
    (277,543 )     (203,401 )
                 
Web
money supplied by financing actions:
               
Proceeds
from train of warrants
          228,370  
Web
proceeds from issuance of widespread inventory
    413,011        
Web
money supplied by financing actions
    413,011       228,370  
                 
Web
improve in money
    135,468       24,969  
Money,
starting of interval
    143,098       52,117  
Money,
finish of interval
  $ 278,566     $ 77,086  

 

The
accompanying notes are an integral a part of these unaudited condensed monetary statements.

 

 

BTCS
Inc.

Notes
to Unaudited Condensed Monetary Statements

 

Be aware
1 – Enterprise Group and Nature of Operations

 

BTCS
Inc. (previously Bitcoin Store, Inc.), a Nevada company (the “Firm”) was included in 2008. In February 2014,
the Firm entered the enterprise of internet hosting an internet ecommerce market the place customers should buy merchandise utilizing Digital
Property, together with bitcoin and is at the moment centered on blockchain and digital foreign money ecosystems. In January 2015, the Firm
started a rebranding marketing campaign utilizing its BTCS.COM area (shorthand for Blockchain Expertise Client Options) to raised mirror
its broadened technique. The Firm launched its new web site which included broader data on its technique. In late 2014
we shifted our focus in the direction of our transaction verification service enterprise, also referred to as bitcoin mining, although in mid-2016 we
ceased our transaction verification companies operation at our North Carolina facility attributable to capital constraints.

 

Topic
to extra financing, the Firm plans to amass extra Digital Property to offer buyers with oblique possession of
Digital Property that aren’t securities, similar to bitcoin and ether. The Firm intends to amass Digital Property via open
market purchases. We aren’t limiting our belongings to a single sort of Digital Asset and will buy quite a lot of Digital Property
that seem to profit our buyers, topic to the sure limitations relating to Digital Securities. The Firm can also be searching for
to amass controlling pursuits in companies within the blockchain business.

 

The
Firm has not participated in any preliminary coin choices because it believes many of the choices entail the providing of Digital
Securities and require registration underneath the Securities Act and underneath state securities legal guidelines or can solely be bought to accredited
buyers in the US. Since about July 2017, preliminary coin choices utilizing Digital Securities have been (or needs to be)
restricted to accredited buyers. As a result of we can’t qualify as an accredited investor, we don’t intend to amass cash in preliminary
coin choices or from purchasers in such choices. Additional, the Firm doesn’t intend to take part in registered or unregistered
preliminary coin choices. The Firm will rigorously assessment its purchases of Digital Securities to keep away from violating the 1940 Act
and search to scale back potential liabilities underneath the federal securities legal guidelines.

 

Digital
asset blockchains are sometimes maintained by a community of individuals which run servers which safe their blockchain.

 

The
Firm can also be internally growing a digital asset information analytics platform to offer data to customers, similar to monitoring
of a number of exchanges and wallets to combination portfolio holdings right into a single platform to view and analyze efficiency, danger
metrics, and potential tax implications.

 

The
market is quickly evolving and there may be no assurances that we’ll be aggressive with business individuals which have or
might have higher assets than us.

 

Be aware
2 – Foundation of Presentation

 

The
accompanying unaudited condensed monetary statements have been ready in accordance with accounting rules typically accepted
in the US (“GAAP”) for interim monetary data, the directions to Kind 10-Q and the principles and rules
of the SEC. Accordingly, since they’re interim statements, the accompanying unaudited condensed monetary statements don’t embrace
the entire data and notes required by GAAP for annual monetary statements, however within the opinion of the Firm’s administration,
mirror all changes consisting of regular, recurring changes, which can be crucial for a good presentation of the monetary
place, outcomes of operations and money flows for the interim durations introduced. Interim outcomes will not be essentially indicative
of outcomes for a full yr. The unaudited condensed monetary statements and notes needs to be learn along side the monetary
statements and notes for the yr ended December 31, 2019.

 

Be aware
3 – Liquidity, Monetary Situation and Administration’s Plans

 

The
Firm has commenced its deliberate operations however has restricted working actions to this point. The Firm has financed its operations
since inception utilizing proceeds obtained from capital contributions made by its officers and proceeds in financing transactions.

 

However,
the Firm has restricted revenues, restricted capital assets and is topic to the entire dangers and uncertainties which can be typical
of an early stage enterprise. Important uncertainties embrace, amongst others, whether or not the Firm will be capable to increase the capital
it must finance its longer-term operations and whether or not such operations, if launched, will allow the Firm to maintain operations
as a worthwhile enterprise.

 

 

BTCS
Inc.

Notes
to Unaudited Condensed Monetary Statements

 

Our
working capital wants are influenced by our degree of operations, and usually lower with greater ranges of income. The Firm
used roughly $0.Three million of money in its working actions for the three months ended March 31, 2020. The Firm incurred
$0.Four million internet loss for the three months ended March 31, 2020. The Firm had money of roughly $0.Three million and a detrimental
working capital of roughly $0.1 million at March 31, 2020. The Firm expects to incur losses into the foreseeable future
because it undertakes its efforts to execute its enterprise plans.

 

The
Firm would require important extra capital to maintain its short-term operations and make the investments it must
execute its longer-term marketing strategy. The Firm’s present liquidity is just not ample to fund its operations and anticipated
capital expenditures for the foreseeable future. The Firm is at the moment searching for to acquire extra fairness financing, primarily
via the Fairness Line Buy Settlement with Cavalry and searching for to acquire extra fairness linked debt financing, nonetheless
there are at the moment no different commitments of debt or fairness in place for additional financing neither is there any assurance that such
financing can be accessible to the Firm on favorable phrases, if in any respect.

 

As a result of
of recurring working losses, internet working money circulation deficits, and an collected deficit, there’s substantial doubt about
the Firm’s skill to proceed as a going concern for one yr from the issuance of the monetary statements. The monetary
statements have been ready assuming the Firm will proceed as a going concern. The Firm has not made changes to the
accompanying monetary statements to mirror the potential results on the recoverability and classification of belongings or liabilities
ought to the Firm be unable to proceed as a going concern.

 

The
Firm continues to incur ongoing administrative and different working bills, together with public firm bills, in extra of
revenues. Whereas the Firm continues to implement its enterprise technique, it intends to finance its actions by:

 

managing
present money and money equivalents available from the Firm’s previous debt and fairness choices by controlling prices,
   
searching for
extra financing via gross sales of extra securities whether or not via Cavalry or different buyers.

 

Be aware
4 – Abstract of Important Accounting Insurance policies

 

There
have been no materials adjustments within the Firm’s important accounting insurance policies to these beforehand disclosed within the 2019
Annual Report.

 

Digital
Property Translations and Remeasurements