As filed with the Securities and Exchange Commission on September 5, 2019January 28, 2021

Registration No. 333-________[____]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

BTCS Inc.

(Exact name of registrant as specified in its charter)

9466 Georgia Avenue #124

Silver Spring, Maryland 2090120910

(202) 430-6576

(Address, including zip code, and telephone number including
area code, of Registrant’s principal executive offices)

Charles W. Allen

Chief Executive Officer of BTCS Inc.

9466 Georgia Avenue #124

Silver Spring, Maryland 2090120910

(202) 430-6576

(Name, address, including zip code, and telephone number

including area code, of agent for service)

With copies to:

Michael D. Harris, Esq.

Brian S. Bernstein, Esq.

Nason, Yeager, Gerson, Harris & Fumero, P.A.

3001 PGA Blvd., Suite 305

Palm Beach Gardens, FL 33410

(561) 686-3307

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [X]

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by checkmark if the registrant has not elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. [  ]

The registrant hereby amends this registration statement on such date or date(s) as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such date as the Commission acting pursuant to said Section 8(a) may determine.

CALCULATION OF REGISTRATION FEE

The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission of which this prospectus is a part becomes effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Subject to Completion, Dated September 5, 2019January 28, 2021

BTCS INC.

PROSPECTUS

5,800,0002,000,000 Shares of common stock

This prospectus relates to the sale of up to 5,800,0002,000,000 shares of our common stock which may be offered by the selling stockholder, Cavalry Fund I, LP which we refer to as “Cavalry.” The shares of common stock being offered by the selling stockholder are outstanding or issuable pursuant to the Cavalry Equity Line Purchase Agreement. See “The Cavalry Transaction” for a description of the Purchase Agreement. Also, pleaseoutstanding. Please refer to “Selling Stockholder” beginning on page 55.35. Such registration does not mean that Cavalry will actually offer or sell any of these shares. We will not receive any proceeds from the sales of the above shares of our common stock by the selling stockholder; however we will receive proceeds under the Purchase Agreement if we sell shares to the selling stockholder.

Our common stock trades on the OTC Markets, Inc., or OTCQB, under the symbol “BTCS”. On September 4, 2019,January 22, 2021, the last reported sale price for our common stock on the OTCQB was $0.183$1.61 per share.

The common stock offered in this prospectus involves a high degree of risk. See “Risk Factors” beginning on page 54 of this prospectus to read about factors you should consider before buying shares of our common stock.

As of the date of this prospectus, the Company had 17,632,36644,411,617 shares of common stock outstanding of which 835 shares were held by affiliates. Therefore, the Company’s public float is 17,631,53144,410,782 shares and the number of shares being registered hereunder is approximately 32.90%4.50% of the public float.

The selling stockholder is an “underwriter” within the meaning of the Securities Act of 1933. The selling stockholder is offering these shares of common stock. The selling stockholder may sell all or a portion of these shares from time to time in market transactions through any market on which our common stock is then traded, in negotiated transactions or otherwise, and at prices and on terms that will be determined by the then prevailing market price or at negotiated prices directly or through a broker or brokers, who may act as agent or as principal or by a combination of such methods of sale. The selling stockholder will receive all proceeds from the sale of the common stock. For additional information on the methods of sale, you should refer to the section entitled “Plan of Distribution.”

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined whether this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is ________________, 2019______, 2021

TABLE OF CONTENTS

You should rely only on information contained in this prospectus. We have not authorized anyone to provide you with information that is different from that contained in this prospectus. The selling stockholder is not offering to sell or seeking offers to buy shares of common stock in jurisdictions where offers and sales are not permitted. We are responsible for updating this prospectus to ensure that all material information is included and will update this prospectus to the extent required by law.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. You should read the entire prospectus carefully including the section entitled “Risk Factors” before making an investment decision. BTCS, Inc., is referred to throughout this prospectus as “BTCS,” “we,” “our” or “us.”

Introduction

We are an early entrant in the Digital Asset market and one of the first U.S. publicly traded companies to be involved with Digital Assets and blockchain technologies. To our knowledge, we are one of a few public companies intending to acquire both Digital Assets and a controlling interest in one or more businesses in the Digital Asset and blockchain industries.

Our Business

Subject to additional financing, theDigital Asset Initiatives

The Company plans to acquire additionalacquires Digital Assets to provide investors with indirect ownership of Digital Assets that are not securities, such as bitcoin and ether. The Company intends to acquireacquires Digital Assets through open market purchases. As of the date of this prospectus the Company owns 14.92 Bitcoin. Additionally, the Company may acquire Digital Assets by resuming its transaction verification services business through outsourced data centers and earning rewards in Digital Assets by securing their respective blockchains. We are not limiting our assets to a single type of Digital Asset and may purchase a variety of Digital Assets that appear to benefit our investors, subject to the limitations contained within this prospectus regarding Digital Securities. TheAs of January 22, 2021, the Company is also seeking to acquire controlling interests in businesses inhad the blockchain industry as further described in this prospectus.following Digital Assets:

The Company has not participated in any initial coin offerings as it believes most of the offerings entail the offering of Digital Securities and require registration under the Securities Act and under state securities laws or can only be sold to accredited investors in the United States. Since about July 2017, initial coin offerings using Digital Securities have been (or should be) limited to accredited investors. Because we cannot qualify as an accredited investor, we do not intend to acquire coins in initial coin offerings or from purchasers in such offerings. Further, the Company does not intend to participate in registered or unregistered initial coin offerings. The Company will carefully review its purchases of Digital Securities to avoid violating the Investment Company Act of 1940 Act(the “1940 Act”) and seek to reduce potential liabilities under the federal securities laws. See “Risk Factors” beginning on page 5 and “Business” beginning on page 34..

Digital asset blockchains are typically maintained by a network of participants which run servers which secure their blockchain. The market is rapidly evolving and there can be no assurances that we will be competitive with industry participants that have or may have greater resources than us.

Blockchain Technology and Digital Asset InitiativesData Analytics Platform

We are also focused on Digital Assets and blockchain technologies. SubjectWe are currently internally developing a digital asset data analytics platform aimed at aggregating users’ information, such as tracking of multiple exchanges and wallets to additional financing,aggregate portfolio holdings into a single platform to view and analyze performance, risk metrics, and potential tax implications. The platform utilizes digital asset exchange APIs to read user data and does not allow for the trading of assets. As a result of the pandemic, we have experienced delays in the development of the platform.

Acquisition Initiatives

The Company is also seeking to acquire controlling interests in businesses in the blockchain industry as further described in this prospectus. We plan to continue to evaluate other strategic opportunities including acquiring controlling interests in business in this rapidly evolving sector in an effort to enhance shareholder value.

Even though the prices of Digital Assets have been subject to substantial volatility and there remains some regulatory uncertainty, we believe that businesses using blockchain technology and those involved with Digital Assets such as bitcoin and ether, offer upside opportunity and are the types of opportunities that we may pursue.

Our current framework or criteria is to seek and evaluate acquisition targets in the blockchain and Digital Asset sector whichwhich: (i) align with our business model of acquiring Digital Assets, orand (ii) acquiring a controlling interest in one or more blockchain technology related business ventures, and (ii) have sufficient capital to provide working capital. As disclosed in this prospectus we have limited cash, and accordingly as a critical framework element are seeking acquisition targets with sufficient capital which may help us sustain our operations without having us rely on toxic funding structures.ventures. Our acquisition activities are spearheaded by Charles Allen, our Chief Executive Officer who regularly communicates with Mr. David Garrity, one of our independent directors who is also seeking acquisition targets.

Transaction Verification Service Business (digital asset mining e.g. bitcoin, Suspended)Officer.

We believe that with additional funding we may be able to resume our transaction verification services business (Digital Asset mining e.g. bitcoin) and believe this may provide revenue growth. However, given the current network difficulties and price levels to mine both ethereum and bitcoin we do not believe mining offers a positive return on investment at present. We plan toalso monitor the blockchain networks and subject to additional funding re-entermay consider re-entering the digital asset mining business if and when we believe a positive return on investment is achievable. If we are successful in resuming our transaction verification services business, we anticipate utilizing outsourced data centers and may diversify operations by securing other blockchains in addition to bitcoins. If we resume our mining operations, we do not intend to actively trade the Digital Assets but rather hold them for our own account and sell them for U.S. dollars or other currencies including virtual currencies.

Transaction verification entails running ASIC (application-specific integrated circuit) servers or other specialized servers which solve a set of prescribed complex mathematical calculations in order to add a block to a blockchain and thereby confirm Digital Asset transactions. A party which is successful in adding a block to the blockchain, is awarded a fixed number of Digital Assets for our effort.

Going Concern

Because of recurring operating losses, net operating cash flow deficits, and an accumulated deficit, our independent auditors have indicated in their report on our December 31, 20182020 financial statements that there is substantial doubt about our ability to continue as a going concern.

The continuation of our business is dependent upon us raising additional funds. The issuance of additional equity or convertible debt securities by us could result in a significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

We continue to incur ongoing administrative and other expenses, including public company expenses, primarily accounting and legal fees, in excess of corresponding (non-financing related) revenue. While we continue to implement our business strategy, we intend to finance our activities through:

Corporate Information

We are a Nevada corporation. Our principal executive offices are located at 9466 Georgia Avenue #124 Silver Spring, MD 20901.20910. Our phone number is (202) 430-6576 and our website can be found atwww.btcs.com. The information on our website is not incorporated into this prospectus.

THE OFFERING

The number of shares of common stock to be outstanding prior to and after this offering excludes:

The Offering

On May 13, 2019, we entered into an equity line purchase agreement with Cavalry (the “Purchase Agreement”) pursuant to which Cavalry has agreed to purchase from us up to $10,000,000 of our common stock (subject to certain limitations) from time to time over a 36-month period. Also on May 13, 2019, we entered into a Registration Rights Agreement (“Registration Rights Agreement”), with Cavalry, pursuant to which we have filed with the Securities and Exchange Commission (the “SEC”), the registration statement that includes this prospectus to register for resale under the Securities Act of 1933 (“the Securities Act”), the shares that have been or may be issued to Cavalry under the Purchase Agreement.

We do not have the right to commence any sales to Cavalry under the Purchase Agreement until the SEC has declared effective the registration statement of which this prospectus forms a part. Thereafter, we may, from time to time and at our sole discretion, direct Cavalry to purchase shares of our common stock during trading hours (“Intraday Puts”) and after trading hours until 7 p.m. New York time (“Aftermarket Puts”) (either an Intraday Put or an Aftermarket Put may be referred to as a “Put”). “Put Date” mean the date when the Put occurs. On May 24, 2019, a registration statement was declared effective and we sold 3,973,809 shares to Cavalry in exchange for $1,158,639 and issued 67,598 shares as additional pro rata commitment shares under that registration statement.

The number of shares that may be sold under an Intraday Put shall be equal to the total daily trading dollar volume (“Daily Trading Dollar Volume”) as reported on the Principal Market for the trading day prior to the applicable Put Date, divided by the Intraday Purchase Price (such shares being the “Intraday Put Share Limit”). The “Intraday Purchase Price” means the lower of: (i) 94% of the lowest sale price on the trading day prior to the applicable Put Date and (ii) 94% of the arithmetic average of the three lowest closing prices for the Company’s common stock during the 12 consecutive trading days ending on the Trading Day immediately preceding such Put Date.

The number of shares that may be sold under an Aftermarket Put shall be equal to the Daily Trading Dollar Volume as reported on the Principal Market, divided by the Aftermarket Put Price (such shares being the “Aftermarket Put Share Limit”). The “Aftermarket Put Price” means: the lower of: (i) the lowest Sale Price on the applicable Put Date and (ii) the arithmetic average of the three lowest closing prices for the Company’s common stock during the 12 consecutive trading days ending on the trading day immediately preceding such Put Date.

Upon mutual agreement of Cavalry and the Company and subject to written confirmation by Cavalry that such agreement will not result in violation of the 4.99% beneficial ownership limitation, the Company may increase the Intraday Put Share Limit or the Aftermarket Put Share Limit, as applicable, for any Put to include an amount equal to $2,000,000 in Put shares at the applicable Purchase Price, in each case in addition to the applicable Intraday Put Share Limit or Aftermarket Put Share Limit. In all instances, we may not sell shares of our common stock to Cavalry under the Purchase Agreement if it would result in Cavalry beneficially owning more than 4.99% of our common stock or if the closing price the trading day immediately preceding the Put date is below $0.005.

See “The Cavalry Transaction” beginning on page 56. The purchase price per share will be equitably adjusted for any reorganization, recapitalization, non-cash dividend, stock split, or other similar transaction occurring during the Trading Days used to compute such price. We may at any time in our sole discretion terminate the Purchase Agreement without fee, penalty or cost upon one business day notice. Cavalry may not assign or transfer its rights and obligations under the Purchase Agreement. When we refer to “Trading Days” in this prospectus we mean a day on which the Company’s principal market is open for business.

As of September 4, 2019, there were 17,632,366 shares of our common stock outstanding, of which approximately 17,631,531 shares were held by non-affiliates. Although the Purchase Agreement provides that we may sell up to $10,000,000 of our common stock to Cavalry, only 5,800,000 shares of our common stock are being offered under this prospectus, which represents (i) 203,000 shares which we are required to issue pro rata in the future as a commitment fee if and when we sell shares to Cavalry under the Purchase Agreement, and (ii) 5,597,000 shares which Cavalry may sell from time to time in accordance with the Purchase Agreement. Cavalry may not assign or transfer its rights and obligations under the Purchase Agreement. If all of the 5,800,000 shares offered by Cavalry under this prospectus were issued and outstanding as of the date hereof, such shares would represent approximately 24.75% of the total number of shares of our common stock outstanding (inclusive of the shares being registered hereunder) and approximately 24.75% of the total number of outstanding shares held by non-affiliates (inclusive of the shares being registered hereunder) and, in each case as of the date hereof. If we elect to issue and sell more than the shares offered under this prospectus to Cavalry, which we have the right, but not the obligation, to do, we must first register for resale under the Securities Act any such additional shares, which could cause additional substantial dilution to our stockholders. The number of shares ultimately offered for resale by Cavalry is dependent upon the number of shares we sell to Cavalry under the Purchase Agreement. Based on the terms of the Purchase Agreement, we will not be able to sell the full amount of shares registered hereunder at an average price of higher than $0.622 per share. In such a case, we will be required to file a new registration statement registering additional pro rata commitment shares before all such shares registered hereunder may be sold to Cavalry, which subsequent registration statement would also include additional Put shares.

Issuances of our common stock in this offering will not affect the rights or privileges of our existing stockholders, except that the economic and voting interests of each of our existing stockholders will be diluted as a result of any such issuance. Although the number of shares of common stock that our existing stockholders own will not decrease, the shares owned by our existing stockholders will represent a smaller percentage of our total outstanding shares after any such issuance to Cavalry.

RISK FACTORS

There are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If any of these risks actually occur, our business, financial condition or results of operation may be materially adversely affected. In such case, the trading price of our common stock could decline and investors could lose all or part of their investment.

Risks Related to Our Company

We need to secure additional financing.

We require additional funds since we have very limited operating capital and negative working capital. As of August 26, 2019, we had approximately $482,060 in cash and 14.92 bitcoins. Our cash as of the date of this prospectus is expected, after repaying the $200,000 promissory note due September 18, 2019 which is held by the selling stockholder, to only be sufficient to cover our public company costs through December 2019 depending on expenses.

We anticipate that we will incur operating losses for the foreseeable future.

Our cash burn rate is approximately $80,000 per month, may increase as we continue to spend additional cash on legal and accounting expenses in connection with our public reporting requirements. If we are not successful in securing additional financing including toxic funding, we will likely be required to cease operations.

If we do not raise additional debt or equity capital, we may not be able to pay all of our indebtedness.indebtedness or may have to sell a portion of our Digital Assets.

In May 2019, we signed a Purchase Agreement with Cavalry. We may direct Cavalry to purchase shares of our common stock up to $10,000,000 (of which $3,034,541 has already been sold) under the Purchase Agreement over a 36-month period assuming there is an effective registration statement covering the shares.

The extent we rely on Cavalry as a source of funding will depend on a number of factors including, the prevailing market price of our common stock and volume of trading and the extent to which we are able to secure working capital from other sources. If obtaining sufficient funding from Cavalry does not occur for any reason including Cavalry suffering liquidity issues or is prohibitively dilutive,failure of the Company to keep the registration statement current, we will need to secure another source of funding or sell some of or Digital Assets in order to satisfypay off our working capital needs.indebtedness. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, the consequences could behave a material adverse effect on our business, operating results, financial condition and prospects.

If we do not raise the necessary working capital, we will not be able to remain operational.

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

Our independent auditors have indicated in their report on our December 31, 20182020 and 20172019 financial statements that there is substantial doubt about our ability to continue as a going concern. A “going concern” opinion indicates that the financial statements have been prepared assuming we will continue as a going concern for one year from the date the financial statements are issued and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets, or the amounts and classification of liabilities that may result if we do not continue as a going concern. Therefore, you should not rely on our consolidated balance sheet as an indication of the amount of proceeds that would be available to satisfy claims of creditors, and potentially be available for distribution to shareholders, in the event of liquidation.

We have a limited operating history and a history of operating losses, and expect to incur significant additional operating losses.

We have a limited operating history. Therefore, there is limited historical financial information upon which to base an evaluation of our performance. Our prospects must be considered in light of the uncertainties, risks, expenses, and difficulties frequently encountered by companies in their early stages of operations. We have generated net losses of $0.8$2.6 million and $45.5$1.7 million for the years ended December 31, 20182020 and 2017,2019, respectively. We expect to incur additional net losses over the next several years as we seek to expand operations. The amount of future losses and when, if ever, we will achieve profitability are uncertain. If we are unsuccessful at executing on our business plan, our business, prospects, and results of operations may be materially adversely affected.

We have an evolving business model.

As Digital Assets and blockchain technologies become more widely available, we expect the services and products associated with them to evolve. In 2017, the SECSecurities and Exchange Commission (“SEC”) issued a DAO Report that promoters that use initial coin offerings or token sales to raise capital may be engaged in the offer and sale of securities in violation of the Securities Act and the Securities Exchange Act of 1934 (the “Exchange Act”). This may cause us to potentially change our future business in order to comply fully with the federal securities laws as well as applicable state securities laws. As a result, to stay current with the industry, our business model may need to evolve as well. From time to time we may modify aspects of our business model relating to our product mix and service offerings. We cannot offer any assurance that these or any other modifications will be successful or will not result in harm to the business. We may not be able to manage growth effectively, which could damage our reputation, limit our growth and negatively affect our operating results.

Because we lack effective internal controls and disclosure controls we erroneously accounted for Digital Assets using a fair value methodology which was not consistent with United States generally accepted accounting principles (“US GAAP”) and required us to restate our financial statements for the year ended December 31, 2017 and the three and six months ended March 31, 2018 and June 30, 2018, our failure to establish and maintain effective internal control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations which could have a material adverse effect on our financial condition.

Maintaining effective internal control over financial reporting is necessary for us to produce reliable financial statements. As discussed in this prospectus, our internal controls and disclosure controls were not effective as of December 31, 2018. Because of our ineffective controls and material weaknesses, we did not account for our Digital Assets correctly in our financial statements and recently restated our audited financial statements for the year ended December 31, 2017 and the unaudited financial statements for the quarters ended March 31, 2018 and June 30, 2018.

A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

While the Company is now following U.S. GAAP in accounting for its Digital Assets, it has not remediated its material weaknesses. There can be no assurance as to when these material weaknesses will be remediated or that additional material weaknesses will not arise in the future. Any failure to remediate the material weaknesses, or the development of new material weaknesses in our internal control over financial reporting, could result in material misstatements in our financial statements and cause us to fail to meet our reporting and financial obligations, which in turn could have a material adverse effect on our financial condition and the trading price of our common stock.

The loss of our executive officers Charles Allen, our Chairman, Chief Executive Officer and Chief Financial Officer, and Michal Handerhan, our Chief Operating Officer, could have a material adverse effect on us.

Our success depends solely on the continued services of our executive officers, particularly Charles Allen, our Chairman, Chief Executive Officer and Chief Financial Officer, and Michal Handerhan, our Chief Operating Officer, who have extensive market knowledge and long-standing industry relationships. In particular, our reputation among and our relationships with key Digital Asset industry leaders are the direct result of a significant investment of time and effort by these individuals to build our credibility in a highly specialized industry. The loss of services of either Charles Allen or Michal Handerhan, could diminish our business and growth opportunities and our relationships with key leaders in the Digital Asset industry and could have a material adverse effect on us.

In the past as we suffered liquidity concerns, we were unable to pay these officers. Neither exercised their right to terminate their employment agreement.

As a result of the Company’s past inability to compensate its officers at generally accepted market levels and its historic failure to either make payroll or make payroll on a timely basis, its officers choose to devote a substantial amount of their time to involvement with other companies or on other projects. Although our officers are now receiving compensation their services, we can provide no assurances that we will not suffer liquidity issues in the near future as we implement our business plan. If the Company is unable to pay our officers their compensation, they may again devote time to other projects which may have a material adverse effect on us.

The loss of Charles Allen, our Chairman, Chief Executive Officer and Chief Financial Officer, and Michal Handerhan, our Chief Operating Officer, would have a material adverse effect on us.

The simultaneous loss of services of both Charles Allen and Michal Handerhan, would result in the Company having no officers or employees and would subsequently cease all operations which would have a material adverse effect on us. See the second risk factor below on the loss of our executive officers and employees.

Michal Handerhan our Chief Operating Officer has notified the Company that in the event of the departure of Charles Allen, our Chairman, Chief Executive Officer and Chief Financial Officer from the Company he may terminate his employment and may resign as an officer and director of the Company, which would have a material adverse effect on us.

We have no other officers and only one other director. The simultaneous loss of Charles Allen, our Chairman, Chief Executive Officer and Chief Financial Officer, and Michal Handerhan, our Chief Operating Officer, would have a material adverse effect on us. Their Employment Agreements permit them to resign for Good Reason which includes non-payment of salaries. In the event both of officers terminate their Employment Agreements for Good Reason, this would result in the Company owing them $560,000approximately $611,000 and would leave the Company without officers or employees which may have a material adverse effect upon us.

Any inabilityus, your investment, and hamper the ability of the Company to attract and retain additional personnel could affect our ability to successfully grow our business.

Our future success depends on our ability to identify, attract, hire, train, retain and motivate other highly-skilled technical, managerial, editorial, merchandising, marketing and customer service personnel. Competition for such personnel is intense. Our failure to retain and attract the necessary technical, managerial, editorial, merchandising, marketing, and customer service personnel could harm our business.continue operations.

We may need to implement additional finance and accounting systems, procedures and controls as we grow our business and organization and to satisfy new reporting requirements.

We are required to comply with a variety of reporting, accounting and other rules and regulations. Compliance with existing requirements is expensive. We may need to implement additional finance and accounting systems, procedures and controls to satisfy our reporting requirements and such further requirements may increase our costs and require additional management time and resources. Our internal control over financial reporting is determined to be ineffective. Such failure could cause investors to lose confidence in our reported financial information, negatively affect the market price of our common stock, subject us to regulatory investigations and penalties, and adversely impact our business and financial condition.

Changes in accounting standards and subjective assumptions, estimates and judgments by management related to complex accounting matters could significantly affect our financial results.

Generally accepted accounting principles and related accounting pronouncements, implementation guidelines and interpretations with regard to a wide range of matters that are relevant to our business, including but not limited to revenue recognition, estimating valuation allowances and accrued liabilities (including allowances for returns, credit card chargebacks, doubtful accounts and obsolete and damaged inventory), internal use software and website development (acquired and developed internally), accounting for income taxes, valuation of long-lived and intangible assets and goodwill, stock-based compensation and loss contingencies, are highly complex and involve many subjective assumptions, estimates and judgments by our management. Changes in these rules or their interpretation or changes in underlying assumptions, estimates or judgments by our management could significantly change our reported or expected financial performance.

Natural disasters and geo-political events could adversely affect our business.

Natural disasters, including hurricanes, cyclones, typhoons, tropical storms, floods, earthquakes and tsunamis, weather conditions, including winter storms, droughts and tornados, whether as a result of climate change or otherwise, and geo-political events, including civil unrest or terrorist attacks, that affect us or other service providers could adversely affect our business.

Since there has been limited precedence set for financial accounting of Digital Assets other than Digital Securities, it is unclear how we will be required to account for Digital Asset transactions in the future.

Since there has been limited precedence set for the financial accounting of Digital Assets other than Digital Securities, it is unclear how we will be required to account for Digital Asset transactions or assets. Furthermore, a change in regulatory or financial accounting standards could result in the necessity to restate our financial statements. Such a restatement could negatively impact our business, prospects, financial condition and results of operation.

We are subject to the information and reporting requirements of the Exchange Act), and other federal securities laws, including compliance with the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”).

The costs of preparing and filing annual and quarterly reports and other information with the SEC and furnishing audited reports to shareholders will cause our expenses to be higher than they would have been if we were privately held. It may be time consuming, difficult and costly for us to develop, implement and maintain the internal controls and reporting procedures required by the Sarbanes-Oxley Act. We may need to hire additional financial reporting, internal controls and other finance personnel in order to develop and implement appropriate internal controls and reporting procedures.

IfBecause we faillack effective internal controls and disclosure controls we erroneously accounted for Digital Assets using a fair value methodology which was not consistent with United States generally accepted accounting principles (“U.S. GAAP”) and required us to restate our financial statements for the year ended December 31, 2017 and the three and six months ended March 31, 2018 and June 30, 2018, our failure to establish and maintain an effective system ofinternal control over financial reporting could result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations which could have a material adverse effect on our financial condition.

Maintaining effective internal control over financial reporting is necessary for us to produce reliable financial statements. As discussed herein, our internal controls and disclosure controls were not effective as of December 31, 2018. Because of our ineffective controls and material weaknesses, we maydid not account for our Digital Assets correctly in our financial statements and restated our audited financial statements for the year ended December 31, 2017 and the unaudited financial statements for the quarters ended March 31, 2018 and June 30, 2018.

Further, in April 2020, the Company received an oral comment from the Staff of the SEC regarding the classification of Digital Asset transactions as an Investing Activity in its Cash Flow Statement within the Company’s Form 10-K for the year ended December 31, 2019 (“Form 10-K”). As mentioned above, we previously misclassified Digital Assets in 2017 financial statements and failed to correct this in the Form 10-K. The Company has amended the Form 10-K to reclassify Digital Asset transactions from an Investing Activity to an Operating Activity on the Cash Flow Statement.

A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be ableprevented or detected on a timely basis.

While the Company is now following U.S. GAAP in accounting for its Digital Assets, it has not remediated its material weaknesses. There can be no assurance as to reportwhen these material weaknesses will be remediated or that additional material weaknesses will not arise in the future. Any failure to remediate the material weaknesses, or the development of new material weaknesses in our internal control over financial reporting, could result in material misstatements in our financial results accurately orstatements and cause us to prevent fraud. Any inabilityfail to reportmeet our reporting and filefinancial obligations, which in turn could have a material adverse effect on our financial results accuratelycondition and timely could harm our reputation and adversely impact the trading price of our common stock. During our assessment of the effectiveness of internal control over financial reporting as of December 31, 2018, management identified a significant deficiency in our disclosure controls and procedures which may lead to a failure to prevent or detect misstatements.Common Stock.

Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed. As a result, our small size and any current internal control deficiencies may adversely affect our financial condition, results of operation and access to capital. During our assessment of the effectiveness of internal control over financial reporting as of December 31, 2018, management identified a significant deficiency related to presence of weakness in our disclosure control and procedure resulting from limited internal audit functions. Because of our inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with any policies and procedures may deteriorate.

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

The Sarbanes-Oxley Act and rules implemented by the Securities and Exchange CommissionSEC have required changes in corporate governance practices of public companies. As a public company, we expect these rules and regulations to increase our compliance costs in 2019 and beyond and to make certain activities more time consuming and costly. The impact of the SEC’s July 25, 2017 report on Digital Securities (the “DAO Report”) as well as recent enforcement actions and speeches made by the SEC’s Chairman will increase our compliance and legal costs. More recently, the SEC’s Chairman commented that most initial coin offerings (a type of Digital Asset) involve the offer of a Digital Security. As a public company, we also expect that these rules and regulations will make it more difficult and expensive for us to obtain director and officer liability insurance in the future and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers, and to maintain insurance at reasonable rates, or at all.

Our stock price may be volatile.

The market price of our common stock is likely to be highly volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:

In addition, the securities markets have from time to timetime-to-time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our common stock. As a result, you may be unable to resell your shares at a desired price.

We have not paid cash dividends in the past and do not expect to pay dividends in the future. Any return on investment may be limited to the value of our common stock.

We have never paid cash dividends on our common stock and do not anticipate doing so in the foreseeable future. The payment of dividends on our common stock will depend on earnings, financial condition and other business and economic factors affecting us at such time as our board of directors may consider relevant. If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if our stock price appreciates.

There is currently a limited trading market for our common stock and we cannot ensure that one will be sustained.

Our shares of common stock are not traded on a national securities exchange, and the price, may not reflect our actual or perceived value. There can be no assurance that there will be an active market for our shares of common stock in the future. The market liquidity will be dependent on the perception of our operating business, among other things. We may, in the future, take certain steps, including utilizing investor awareness campaigns, press releases, road shows and conferences to increase awareness of our business and any steps that we might take to bring us to the awareness of investors may require we compensate consultants with cash and/or stock. There can be no assurance that there will be any awareness generated or the results of any efforts will result in any impact on our trading volume. Consequently, investors may not be able to liquidate their investment at a price that reflects the value of the business and trading may be at an inflated price relative to the performance of our company due to, among other things, availability of sellers of our shares. The price of our common stock has been highly volatile. Because there may be a low price for our shares of common stock and because of our involvement in the Digital Asset business, many brokerage firms or clearing firms may not be willing to effect transactions in the securities or accept our shares for deposit in an account. Even if an investor finds a broker willing to effect a transaction in the shares of our common stock, the combination of brokerage commissions, transfer fees, taxes, if any, and any other selling costs may exceed the selling price. Further, many lending institutions will not permit the use of low priced shares of common stock as collateral for any loans.

Because our common stock does not trade on a national securities exchange, the prices of our common stock may be more volatile and lower than if we were listed.

Our common stock trades on the OTCQB operated by OTC Markets Group Inc. This market is not a national securities exchange. While our common stock trading has been relatively active, generally the OTCQB does not have the same level of activity as a national securities exchange like Nasdaq. Most institutions will not purchase a security unless it is on a national securities exchange. In addition, they do not purchase stocks that trade below $5 per share. We may, in the future, take certain steps, including utilizing investor awareness campaigns, press releases, road shows and conferences to increase awareness of our business and any steps that we might take to bring us to the awareness of investors may require we compensate consultants with cash and/or stock. There can be no assurance that there will be any awareness generated or the results of any efforts will result in any impact on our trading volume. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business and trading may be at an inflated price relative to the performance of our company due to, among other things, availability of sellers of our shares.

Our common stock is deemed a “penny stock,” which would make it more difficult for our investors to sell their shares.

Our common stock is subject to the “penny stock” rules adopted under Section 15(g) of the Exchange Act. The penny stock rules generally apply to companies whose common stock is not listed on the Nasdaq Stock Market or other national securities exchange or trades at less than $5.00 per share. These rules require, among other things, that brokers who trade penny stock to persons other than “established customers” complete certain documentation, make suitability inquiries of investors and provide investors with certain information concerning trading in the security, including a risk disclosure document and quote information under certain circumstances. Many brokers have decided not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number of broker-dealers willing to act as market makers in such securities is limited. If we remain subject to the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for our securities. Because our common stock is subject to the penny stock rules, investors will find it more difficult to dispose of our securities.

Our articles of incorporation allow for our board to create new series of preferred stock without further approval by our shareholders, which could adversely affect the rights of the holders of our common stock.

Our board of directors has the authority to fix and determine the relative rights and preferences of preferred stock. Our board of directors also has the authority to issue preferred stock without further shareholder approval. As a result, our board of directors could authorize the issuance of a series of preferred stock that would grant to holders the preferred right to our assets upon liquidation, provide holders of the preferred anti-dilution protection, the right to receive dividend payments before dividends are distributed to the holders of common stock and the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock. In addition, our board of directors could authorize the issuance of a series of preferred stock that has greater voting power than our common stock or that is convertible into our common stock (for example, the issuance of our outstanding Series C-2 which votes on a 2-for-1 as converted basis), which could decrease the relative voting power of our common stock or result in dilution to our existing shareholders.

Substantial future sales of our common stock by us or by our existing shareholders (including the selling stockholder) could cause our stock price to fall.

Additional equity financings (in addition to the shares issued under the Purchase Agreement) or other share issuances by us, including shares issued in connection with strategic alliances and corporate partnering transactions, and shares issued on the conversion of outstanding notes, could adversely affect the market price of our common stock.Common Stock. Sales by existing shareholders (including the selling stockholder) of a large number of shares of our common stockCommon Stock in the public market or the perception that additional sales could occur could cause the market price of our common stockCommon Stock to drop.

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

We may be subject to legal claims of alleged infringement of the intellectual property rights of third parties. The ready availability of damages, royalties and the potential for injunctive relief has increased the defense litigation costs of patent infringement claims, especially those asserted by third parties whose sole or primary business is to assert such claims. Such claims, even if not meritorious, may result in significant expenditure of financial and managerial resources, and the payment of damages or settlement amounts. Additionally, we may become subject to injunctions prohibiting us from using software or business processes we currently use or may need to use in the future or requiring us to obtain licenses from third parties when such licenses may not be available on financially feasible terms or terms acceptable to us or at all. In addition, we may not be able to obtain on favorable terms, or at all, licenses or other rights with respect to intellectual property we do not own in providing ecommerce services to other businesses and individuals under commercial agreements.

Risks RelatedBanks and financial institutions may not provide banking services, or may cut off services, to the Bitcoin Network and Bitcoins

The following risks relate to our proposed business and the effects upon us assume we obtain financingbusinesses that engage in a sufficient amount to re-enter this business.

The further development and acceptance of the Bitcoin Network and other Digital Asset systems, which represent a new and rapidly changing industry, are subject to a variety of factors that are difficult to evaluate. The slowing or stopping of the development or acceptance of the Bitcoin Network may adversely affect an investment in our Company.cryptocurrency-related activities.

Digital Assets such as bitcoinsA number of companies that engage in bitcoin and/or other cryptocurrency-related activities have been unable to find banks or financial institutions that are willing to provide them with bank accounts and other services. Similarly, a number of companies and individuals or businesses associated with cryptocurrencies may have had and may continue to have their existing bank accounts closed or services discontinued with financial institutions in response to government action, particularly in China, where regulatory response to cryptocurrencies has been to exclude their use for ordinary consumer transactions within China. We also may be used, amongunable to obtain or maintain these services for our business. The difficulty that many businesses that provide bitcoin and/or derivatives on other things,cryptocurrency-related activities have and may continue to buyhave in finding banks and sell goodsfinancial institutions willing to provide them services may be decreasing the usefulness of cryptocurrencies as a payment system and services areharming public perception of cryptocurrencies, and could decrease their usefulness and harm their public perception in the future.

The usefulness of cryptocurrencies as a new and rapidly evolving industry of which the Bitcoin Network is a prominent, but not unique, part. The growth of the Digital Assets industry in general,payment system and the Bitcoin Networkpublic perception of cryptocurrencies could be damaged if banks or financial institutions were to close the accounts of businesses engaging in particular, is subjectbitcoin and/or other cryptocurrency-related activities. This could occur as a result of compliance risk, cost, government regulation or public pressure. The risk applies to securities firms, clearance and settlement firms, national stock and derivatives on commodities exchanges, the over-the-counter market, and the Depository Trust Company, which, if any of such entities adopts or implements similar policies, rules or regulations, could negatively affect our relationships with financial institutions and impede our ability to convert cryptocurrencies to fiat currencies. Such factors could have a high degree of uncertainty. The factors affecting the further development of the Digital Assets industry,material adverse effect on our ability to continue as well as the Bitcoin Network, include:

A decline in the popularitya going concern or acceptance of the Bitcoin Networkto pursue our strategy at all, which could adversely affect an investment in us.have a material adverse effect on our business, prospects or operations and harm investors.

Because Digital Assets may be determined to be Digital Securities, we may inadvertently violate the 1940 Act and incur large losses as a result and potentially be required to register as an investment company or terminate operations.company. This would have a material adverse effect on an investment in us.

We plan to acquire a portfolio of Digital Assets including bitcoin, ethereum and other Digital Assets. There is an increased regulatory examination of Digital Assets and Digital Securities. This has led to regulatory and enforcement activities. As of the date of this filing, we are not aware of any rules that have been proposed to regulate the Digital Assets we hold as securities. We cannot be certain as to how future regulatory developments will impact the treatment of bitcoins, ethereum and other Digital Assets under the law.

Under the 1940 Act, a company may be deemed an investment company under if the value of its investment securities is more than 40% of its total assets (exclusive of government securities and cash items) on a consolidated basis. Digital Assets we may own in the future may be determined to be Digital Securities by the SEC or a court. Additionally, one or more states may conclude bitcoin, ethereum, or other Digital Assets held by us in the future are securities under state securities laws which would require registration under state laws including merit review laws. For example California defines the term “investment contract” more strictly than the SEC.

Future legislation and SEC rulemaking and other regulatory developments, including interpretations released by a regulatory authority, may impact the manner in which bitcoin, ethereum, and other Digital Assets are treated for classification and clearing purposes. The SEC’s July 25, 2017 DAO Report expressed its view that Digital Assets may be securities depending on the facts and circumstances.

If a Digital Asset we were to hold waswere later determined to be a Digital Security, we could inadvertently become an investment company, as defined by the 1940 Act, if the value of the Digital Securities we owned exceeded 40% of our assets excluding cash. We are subject to the following risks:

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

In order to limit our acquisition of Digital Securities to stay within the test,40% threshold, we will examine the manner in which a Digital Assets was initially marketed to determine if it may be deemed a Digital Security and subject to federal and state securities laws. Even if we conclude that a particular Digital Asset is not a security under the 1940 Act, certain states take a stricter view which means the Digital Asset may have one-yearviolated applicable state securities laws.

Should the total value of securities which we hold rise to reducemore than 40% of our assets (exclusive of cash) SEC Rule 3a-2 under the 1940 Act allows an issuer to prevent itself from being deemed an investment company if it reduces its holdings of securities belowto less than 40% of its assets (exclusive of cash) and does not go above the 40% threshold. However, that can only occurthreshold more than once during a three-year period.every three years. Accordingly, if changes in the classification of Digital Assets causes us to exceed the 40% threshold, we may experience large losses when we liquidate digital securities as a result of continued volatility. Further, if

The 40% requirement may limit our ability to make certain investments or enter into joint ventures that could otherwise have a positive impact on our earnings. In any event, we electdo not intend to sellbecome an investment company engaged in the business of investing and trading securities.

To the extent that Digital Assets held by us are deemed by the SEC or a private investment, not only may it be difficultstate legislator to find a buyer but we could incur a significant loss onfall within the saledefinition of a private investment due to not only the lack of liquidity but also the entity’s poor performance. If we are able to come below the 40% threshold and again face the same problem, it is likely we will be forced to terminate operations, sell all assets and distribute cash to our shareholders who will likely suffer very large losses. Further, the cost of distributing cash to our shareholders may exceed the amount of cash on hand in which case we would use our remaining funds to wind down the Company.

If we acquire Digital Securities, even unintentionally,security, we may violatebe required to register and comply with additional regulation under the Investment Company Act, including additional periodic reporting and incur potential third-party liabilities.

We expect that if we obtain sufficient financing, we will acquire a portfoliodisclosure standards and requirements and the registration of Digital Assets including bitcoins, ether and Digital Securities. There isour Company as an increased regulatory examination of Digital Assets and Digital Securities. This has led to regulatory and enforcement activities. In order to limit our acquisition of Digital Securities to stay within the 40% threshold, we will examine the manner in which Digital Assets were initially marketed to determine if they may be deemed Digital Securities and subject to federal and state securities laws. Even if we conclude that a particular Digital Asset is not a security under the Securities Act, certain states including California take a stricter view of the term “investment contract” which means the Digital Asset may have violated applicable state securities laws. This willinvestment company. Such additional registrations: i) would result in increased compliance costsextraordinary, non-recurring expenses, ii) is time consuming and legal fees. Ifrestrictive, iii) would require a restructuring of our operations, and iv) we would be very constrained in the kind of business we could do as a registered investment company, thereby materially and adversely impacting an investment in us. Further, if our examination of a Digital Asset is incorrect, we may incur regulatory penalties and private investor liabilities since Section 5 of the Securities Act is a strict liability statute much like selling spoiled milk and state securities laws generally impose liability for negligence for misrepresentations.

In order to comply with the 1940 Act, we anticipate having increased management time and legal expenses in order to analyze which Digital Assets are securities and periodically analyze our total holdings to ensure that we do not maintain more than 40% of our total assets (exclusive of cash) as securities. If our view that the Digital Assets we hold are not securities is challenged by the SEC and courts uphold the challenge, we may inadvertently violate the 1940 Act and incur substantial legal fees in defending our position. The cost of such compliance would result in the Company incurring substantial additional expenses, and the failure to register if required would have a materially adverse impact to conduct our operations.

Any current or future outbreak of a health epidemic or other adverse public health developments, such as the pneumonia caused by the COVID-19 coronavirus, could disrupt our operations and adversely affect our business.

Our business could be adversely affected by the effects of health epidemics. For example, we rely on our limited staff for our continued operations and have no contingency plans and limited resources if anyone was to be affected by the coronavirus. During 2020, as a result of the COVID-19 pandemic, we experienced significant delays in the development of our digital asset data analytics platform and may experience future delays as the pandemic continues.

Risks Related to Digital Assets

The further development and acceptance of cryptographic and algorithmic protocols governing the issuance of and transactions in cryptocurrencies, which represent a rapidly changing industry, are subject to a variety of factors that are difficult to evaluate.

The use of Digital Assets to, among other things, buy and sell goods and services and complete transactions, is part of a new and rapidly evolving industry that employs cryptocurrency assets based upon a computer-generated mathematical and/or cryptographic protocol. Large-scale acceptance of cryptocurrencies as a means of payment has not, and may never, occur. The growth of the Digital Assets industry in general, and the use of Digital Assets in particular, is subject to a high degree of uncertainty. The factors affecting the further development of the Digital Assets industry, include but are not limited to:

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

The outcome of these factors could have negative effects on our ability to continue as a going concern or to pursue our business strategy at all, which could have a material adverse effect on our business, prospects or operations as well as potentially negative effect on the value of any bitcoin, ethereum or other Digital Assets we hold or acquire, which would harm investors in our securities.

Currently, there is relatively small use of bitcoins in the retail and commercial marketplace in comparison to relatively large use by speculators, thus contributing to price volatility that could adversely affect an investment in us.

As relatively new products and technologies, bitcoins and the Bitcoin Network have only recently become widely accepted as a means of payment for goods and services by many major retail and commercial outlets, and use of bitcoins by consumers to pay such retail and commercial outlets remains limited. Conversely, a significant portion of bitcoin demand is generated by speculators and investors seeking to profit from the short- or long-term holding of bitcoins. A lack of expansion by bitcoins into retail and commercial markets, or a contraction of such use, may result in increased volatility or a reduction in the price of bitcoin, either of which could adversely impact an investment in us.

Because Facebook is seeking to developIf a cryptocurrency, it may adversely affectmalicious actor or botnet obtains control in excess of 50% of the value of bitcoins andprocessing power active on a Digital Assets.

In May 2019, Facebook announced its plans for a cryptocurrency called Libra. The massive social network and 27 other partners are touting the Libra digital coin and Facebook’s corresponding digital wallet, Calibra, as a way to make sending payments around the world as easy asAsset Network, it is to sendpossible that such actor or botnet could manipulate a photo. Because Facebook isblockchain in a leader in social media, when it launches its coins, it couldmanner that adversely affect the value of bitcoins and Digital Assets.

Significant Bitcoin Network contributors could propose amendments to the Bitcoin Network’s protocols and software that, if accepted and authorized by the Bitcoin Network, could adversely affectaffects an investment in us.

A small groupIf a malicious actor or botnet (a volunteer or hacked collection of individuals contributecomputers controlled by networked software coordinating the actions of the computers) obtains a majority of the processing power dedicated to mining a cryptocurrency, it may be able to alter blockchains on which transactions of cryptocurrency reside and rely by constructing fraudulent blocks or preventing certain transactions from completing in a timely manner, or at all. The malicious actor or botnet could control, exclude or modify the Bitcoin Core project on Github. This group of contributors is currently headed by Wladimir J. van der Laan, the current lead maintainer. These individuals can propose refinements or improvements to the Bitcoin Network’s source code through one or more software upgrades that alter the protocols and software that govern the Bitcoin Network and the properties of bitcoin, including the irreversibilityordering of transactions, though it could not generate new units or transactions using such control. The malicious actor could “double-spend” its own cryptocurrency (i.e., spend the same bitcoin in more than one transaction) and limitations onprevent the miningconfirmation of new bitcoin. Proposalsother users’ transactions for upgrades and discussions relating thereto take place on online forums. For example, there is an ongoing debate regarding altering the Blockchain by increasing the size of blocks to accommodate a larger volume of transactions. Although some proponents support an increase, other market participants oppose an increase to the block sizeas long as it may deter miners from confirming transactions and concentrate power into a smaller group of miners.maintained control. To the extent that a significant majoritysuch malicious actor or botnet does not yield its control of the users and minersprocessing power on the Bitcoin Network install such software upgrade(s),network or the Bitcoin Network wouldcryptocurrency community does not reject the fraudulent blocks as malicious, reversing any changes made to blockchains may not be subjectpossible. The foregoing description is not the only means by which the entirety of blockchains or cryptocurrencies may be compromised but is only an example.

Although there are no known reports of malicious activity or control of blockchains achieved through controlling over 50% of the processing power on the network, it is believed that certain mining pools may have exceeded the 50% threshold in bitcoin. The possible crossing of the 50% threshold indicates a greater risk that a single mining pool could exert authority over the validation of bitcoin transactions. To the extent that the bitcoin ecosystem, and the administrators of mining pools, do not act to new protocolsensure greater decentralization of bitcoin mining processing power, the feasibility of a malicious actor obtaining control of the processing power will increase because the botnet or malicious actor could compromise more than 50% mining pool and software thatthereby gain control of blockchain, whereas if the blockchain remains decentralized it is inherently more difficult for the botnet of malicious actor to aggregate enough processing power to gain control of the blockchain, may adversely affect an investment in the Shares. In the eventour common stock. Such lack of controls and responses to such circumstances could have a developer or group of developers proposes a modificationmaterial adverse effect on our ability to the Bitcoin Network that is not accepted by a majority of miners and users, but that is nonetheless accepted by a substantial plurality of miners and users, two or more competing and incompatible Blockchain implementations could result. This is knowncontinue as a “hard fork.” In suchgoing concern or to pursue our new strategy at all, which could have a case,material adverse effect on our business, prospects or operations and potentially the “hard fork” in the Blockchain could materially and adversely affect the perceived value of any bitcoin, as reflected on oneethereum or both incompatible Blockchains, which may adversely affect an investment in us.

other Digital Assets we acquire or hold, and harm investors.

Bitcoin has forked three times and additional forks may occur in the future which may affect the value of bitcoin held by the Company.

Since August 1, 2017, bitcoin’s blockchain was forked three times creating Bitcoin Cash, Bitcoin Gold and Bitcoin SV. The forks resulted in a new blockchain being created with a shared history, and a new path forward. The value of the newly created Bitcoin Cash, Bitcoin Gold and Bitcoin SV may or may not have value in the long run and may affect the price of bitcoin if interest is shifted away from bitcoin to the newly created Digital Assets. The value of bitcoin after the creation of a fork is subject to many factors including the value of the fork product, market reaction to the creation of the fork product, and the occurrence of forks in the future. As such, the value of bitcoin could be materially reduced if existing and future forks have a negative effect on bitcoin’s value.

The open-source structuredecentralized nature of the Bitcoin Network protocol means that the contributorsDigital Asset systems may lead to the protocol are generally not directly compensated for their contributions in maintaining and developing the protocol. A failureslow or inadequate responses to properly monitor and upgrade the protocol could damage the Bitcoin Network and an investment in us.crises, which may negatively affect our business.

The Bitcoin Network operates based on an open-source protocol maintained by contributors, largely on the Bitcoin Core project on GitHub. As an open source project, Bitcoin is not represented by an official organization or authority. As the Bitcoin Network protocol is not sold and its use does not generate revenues for contributors, contributors are generally not compensated for maintaining and updating the Bitcoin Network protocol. Although the MIT Media Lab’s Digital Currency Initiative funds the current maintainer Wladimir J. van der Laan, among others, this type of financial incentive is not typical. The lack of guaranteed financial incentive for contributors to maintain or develop the Bitcoin Network and the lack of guaranteed resources to adequately address emerging issues with the Bitcoin Network may reduce incentives to address the issues adequately or in a timely manner. This may adversely affect an investment in us.

If a malicious actor or botnet obtains control in excess of 50%decentralized nature of the processing power active on the Bitcoin Network, itgovernance of Digital Asset systems may lead to ineffective decision making that slows development or prevents a network from overcoming emergent obstacles. Governance of many Digital Asset systems is possible that such actorby voluntary consensus and open competition with no clear leadership structure or botnet could manipulate the Blockchain in a manner that adversely affects an investment in us.

If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtains a majority of the processing power dedicated to mining on the Bitcoin Network, it may be able to alter the Blockchain on which the Bitcoin Network and all bitcoin transactions rely by constructing alternate blocks if it is able to solve for such blocks faster than the remainder of the miners on the Bitcoin Network can add valid blocks. In such alternate blocks, the malicious actor or botnet could control, exclude or modify the ordering of transactions, though it could not generate new bitcoins or transactions using such control. Using alternate blocks, the malicious actor could “double-spend” its own bitcoins (i.e., spend the same bitcoins in more than one transaction) and prevent the confirmation of other users’ transactions for so long as it maintains control.authority. To the extent lack of clarity in corporate governance of cryptocurrency systems leads to ineffective decision making that slows development and growth of such malicious actor or botnet does not yield its majority controlDigital Assets, the value of the processing power on the Bitcoin Network or the bitcoin community does not reject the fraudulent blocks as malicious, reversing any changes made to the Blockchainour common stock may not be possible. Such changes could adversely affect an investment in us.

In late May and early June 2014, a mining pool known as GHash.io approached and, during a 24- to 48-hour period in early June may have exceeded, the threshold of 50% of the processing power on the Bitcoin Network. To the extent that GHash.io did exceed 50% of the processing power on the network, reports indicate that such threshold was surpassed for only a short period, and there are no reports of any malicious activity or control of the Blockchain performed by GHash.io. Furthermore, the processing power in the mining pool appears to have been redirected to other pools on a voluntary basis by participants in the GHash.io pool, as had been done in prior instances when a mining pool exceeded 40% of the processing power on the Bitcoin Network. The approach to and possible crossing of the 50% threshold indicate a greater risk that a single mining pool could exert authority over the validation of bitcoin transactions. To the extent that the bitcoin ecosystem, including the Core Developers and the administrators of mining pools, do not act to ensure greater decentralization of bitcoin mining processing power, the feasibility of a malicious actor obtaining in excess of 50% of the processing power on the Bitcoin Network (e.g., through control of a large mining pool or through hacking such a mining pool) will increase, which may adversely impact an investment in us.affected.

If the award of bitcoin for solving blocks and transaction fees for recording transactions are not sufficiently high to incentivize miners, miners may cease expending hashrate to solve blocks and confirmations of transactions on the Blockchain could be slowed temporarily. A reduction in the hashrate expended by miners on the Bitcoin Network could increase the likelihood of a malicious actor obtaining control in excess of 50) of the aggregate hashrate active on the Bitcoin Network or the Blockchain, potentially permitting such actor to manipulate the Blockchain in a manner that adversely affects an investment in us.

As the award of new bitcoin for solving blocks declines, and if transaction fees are not sufficiently high, miners may not have an adequate incentive to continue mining and may cease their mining operations. The current fixed reward for solving a new block is 12.5 bitcoin per block; the reward decreased from 25 bitcoin in July 2016. It is estimated that it will halve again in about four years. This reduction may result in a reduction in the aggregate hashrate of the Bitcoin Network as the incentive for miners will decrease. Moreover, miners ceasing operations would reduce the aggregate hashrate on the Bitcoin Network, which would adversely affect the confirmation process for transactions (i.e., temporarily decreasing the speed at which blocks are added to the Blockchain until the next scheduled adjustment in difficulty for block solutions) and make the Bitcoin Network more vulnerable to a malicious actor obtaining control in excess of 50% of the aggregate hashrate on the Bitcoin Network. Periodically, the Bitcoin Network has adjusted the difficulty for block solutions so that solution speeds remain in the vicinity of the expected ten minute confirmation time targeted by the Bitcoin Network protocol. The Company believes that from time to time there will be further considerations and adjustments to the Bitcoin Network regarding the difficulty for block solutions. More significant reductions in aggregate hashrate on the Bitcoin Network could result in material, though temporary, delays in block solution confirmation time. Any reduction in confidence in the confirmation process or aggregate hashrate of the Bitcoin Network may negatively impact the value of bitcoin, which will adversely impact an investment in us.

To the extent that the profit margins of Bitcoin mining operations are not high, operators of Bitcoin mining operations are more likely to immediately sell bitcoins earned by mining in the Bitcoin Exchange Market, resulting in a reduction in the price of bitcoins that could adversely impact an investment in us.

Over the past three years, Bitcoin Network mining operations have evolved from individual users mining with computer processors, graphics processing units and first-generation ASIC servers. Currently, new processing power brought onto the Bitcoin Network is predominantly added by incorporated and unincorporated “professionalized” mining operations. Professionalized mining operations may use proprietary hardware or sophisticated ASIC machines acquired from ASIC manufacturers. They require the investment of significant capital for the acquisition of this hardware, the leasing of operating space (often in data centers or warehousing facilities), incurring of electricity costs and the employment of technicians to operate the mining farms. As a result, professionalized mining operations are of a greater scale than prior Bitcoin Network miners and have more defined, regular expenses and liabilities. These regular expenses and liabilities require professionalized mining operations to more immediately sell bitcoins earned from mining operations on the Bitcoin Exchange Market, whereas it is believed that individual miners in past years were more likely to hold newly mined bitcoins for more extended periods. The immediate selling of newly mined bitcoins greatly increases the supply of bitcoins on the Bitcoin Exchange Market, creating downward pressure on the price of bitcoins.

The extent to which the value of bitcoin mined by a professionalized mining operation exceeds the allocable capital and operating costs determines the profit margin of such operation. A professionalized mining operation may be more likely to sell a higher percentage of its newly mined bitcoin rapidly if it is operating at a low profit margin-and it may partially or completely cease operations if its profit margin is negative. In a low profit margin environment, a higher percentage could be sold into the Bitcoin Exchange Market more rapidly, thereby potentially reducing bitcoin prices. Lower bitcoin prices could result in further tightening of profit margins, particularly for professionalized mining operations with higher costs and more limited capital reserves, creating a network effect that may further reduce the price of bitcoin until mining operations with higher operating costs become unprofitable and remove mining power from the Bitcoin Network. The network effect of reduced profit margins resulting in greater sales of newly mined bitcoin could result in a reduction in the price of bitcoin that could adversely impact an investment in us.

To the extent that any miners cease to record transactions in solved blocks, transactions that do not include the payment of a transaction fee will not be recorded on the Blockchain until a block is solved by a miner who does not require the payment of transaction fees. Any widespread delays in the recording of transactions could result in a loss of confidence in the Bitcoin Network, which could adversely impact an investment in us.

To the extent that any miners cease to record transactions in solved blocks, such transactions will not be recorded on the Blockchain. Currently, there are no known incentives for miners to elect to exclude the recording of transactions in solved blocks; however, to the extent that any such incentives arise (e.g., a collective movement among miners or one or more mining pools forcing bitcoin users to pay transaction fees as a substitute for or in addition to the award of new bitcoins upon the solving of a block), actions of miners solving a significant number of blocks could delay the recording and confirmation of transactions on the Blockchain. Any systemic delays in the recording and confirmation of transactions on the Blockchain could result in greater exposure to double-spending transactions and a loss of confidence in the Bitcoin Network, which could adversely impact an investment in us.

The acceptance of Bitcoin Network software patches or upgrades by a significant, but not overwhelming, percentage of the users and miners in the Bitcoin Network could result in a “fork” in the Blockchain, resulting in the operation of two separate networks until such time as the forked Blockchains are merged. The temporary or permanent existence of forked Blockchains could adversely impact an investment in us.

Bitcoin is an open source project and, although there is an influential group of leaders in the Bitcoin Network community including the Core Developers, there is no official developer or group of developers that formally controls the Bitcoin Network. Any individual can download the Bitcoin Network software and make any desired modifications, which are proposed to users and miners on the Bitcoin Network through software downloads and upgrades, typically posted to the bitcoin development forum on GitHub.com. A substantial majority of miners and bitcoin users must consent to those software modifications by downloading the altered software or upgrade that implements the changes; otherwise, the changes do not become a part of the Bitcoin Network. Since the Bitcoin Network’s inception, changes to the Bitcoin Network have been accepted by the vast majority of users and miners, ensuring that the Bitcoin Network remains a coherent economic system; however, a developer or group of developers could potentially propose a modification to the Bitcoin Network that is not accepted by a vast majority of miners and users, but that is nonetheless accepted by a substantial population of participants in the Bitcoin Network. In such a case, and if the modification is material and/or not backwards compatible with the prior version of Bitcoin Network software, a fork in the Blockchain could develop and two separate Bitcoin Networks could result, one running the pre-modification software program and the other running the modified version (i.e., a second “Bitcoin” network). Such a fork in the Blockchain typically would be addressed by community-led efforts to merge the forked Blockchains, and several prior forks have been so merged. This kind of split in the Bitcoin Network could materially and adversely impact an investment in us and, in the worst case scenario, harm the sustainability of the Bitcoin Network’s economy.

Intellectual property rights claims may adversely affect the operation of the Bitcoin Network.

Third parties may assert intellectual property claims relating to the holding and transfer of Digital Assets and their source code. Regardless of the merit of any intellectual property or other legal action, any threatened action that reduces confidence in the Bitcoin Network’s long-term viability or the ability of end-users to hold and transfer bitcoins may adversely affect an investment in us. Additionally, a meritorious intellectual property claim could prevent us and other end-users from accessing the Bitcoin Network or holding or transferring their bitcoins. As a result, an intellectual property claim against us or other large Bitcoin Network participants could adversely affect an investment in us.

The BitcoinAsset Exchanges on which bitcoins trade are relatively new and in most cases, largely unregulated andtherefore may therefore be more exposed to fraud and failure than established, regulated exchanges for other products. To the extent that the Bitcoinlarge Digital Asset Exchanges representing a substantial portion of the Digital Asset volume in bitcoin trading are involved in fraud or experience security failures or other operational issues, such Bitcoin Exchanges’ failures may result in a reduction in the price of bitcoinDigital Assets and can adversely affect an investment in us.

The Bitcoin Exchanges on which the bitcoins trade are new and, in most cases, largely unregulated. Furthermore, many Bitcoin Exchanges (including several of the most prominent US Dollar denominated Bitcoin Exchanges) do not provide the public with significant information regarding their ownership structure, management teams, corporate practices or regulatory compliance. As a result, the marketplace may lose confidence in, or may experience problems relating to, Bitcoin Exchanges, including prominent exchanges handling a significant portion of the volume of bitcoin trading.

Over the past four years, aA number of BitcoinDigital Asset Exchanges have been closed due to fraud, failure or security breaches. In many of these instances, the customers of such Bitcoin Exchanges were not compensated or made whole for the partial or complete losses of their account balances in such Bitcoin Exchanges. While smaller Bitcoin Exchanges are less likely to have the infrastructure and capitalization that make larger Bitcoin Exchanges more stable, larger Bitcoin Exchanges are more likely to be appealing targets for hackers and “malware” (i.e., software used or programmed by attackers to disrupt computer operation, gather sensitive information or gain access to private computer systems). Further, the collapse of the largest Bitcoin Exchange in 2014 suggests that the failure of one component of the overall Bitcoin ecosystem can have consequences for both users of a Bitcoin Exchange and the Bitcoin industry as a whole.

In 2018, China shut down Bitcoin Exchanges and other virtual currency trading platforms. A Wall Street Journal article reported that China accounted for the bulk of global bitcoin trading as of early 2018. Further, in late January 2018, the Wall Street Journal reported that $530 million of cryptocurrency was missing from a Japanese exchange. On May 7, 2019, Coindesk reported that approximately $41 million in Bitcoin was stolen from crypto exchange Binance.

It has been reported that Bithumb, a South Korea exchange was hacked, resulting in a $180 million loss. This followed its reported loss of $350 million in 2018. In 2019, the Chief Executive Officer of Quadriga, the largest exchange in Canada, died without providing for an alternative way to access its systems causing a reported $200 million loss.

A lack of stability in the Bitcoinan Exchange Market and the closure or temporary shutdown of Bitcoinlarger Digital Asset Exchanges due to fraud, business failure, hackers or malware, or government-mandated regulation may reduce confidence in the Bitcoin NetworkDigital Assets overall and result in greater volatility in bitcoin value.Digital Asset values. These potential consequences of a Bitcoin Exchange’s failure could adversely affect an investment in us.

There is a lack of liquid markets, and possible manipulation of blockchain/cryptocurrency-based Digital Assets.

Digital Assets that are represented and trade on a ledger-based platform may not necessarily benefit from viable trading markets. Stock exchanges have listing requirements and vet issuers; requiring them to be subjected to rigorous listing standards and rules, and monitor investors transacting on such platform for fraud and other improprieties. These conditions may not necessarily be replicated on a distributed ledger platform, depending on the platform’s controls and other policies. The laxer a distributed ledger platform is about vetting issuers of cryptocurrency assets or users that transact on the platform, the higher the potential risk for fraud or the manipulation of the ledger due to a control event. These factors may decrease liquidity or volume or may otherwise increase volatility or other assets trading on a ledger-based system, which may adversely affect us. Such circumstances could adversely affect an investment in us.

Political or economic crises may motivate large-scale sales of Bitcoins,Digital Assets, which could result in a reduction in Bitcoin valueDigital Asset values and adversely affect an investment in us.

Geopolitical crises may motivate large-scale sales of Digital Assets, which could rapidly decrease the price of Digital Assets. Alternatively, as an emerging asset class with limited acceptance as a payment system or commodity, global crises and general economic downturn may discourage investment in Digital Assets as investors focus their investment on less volatile asset classes as a means of hedging their investment risk.

As an alternative to fiat currencies that are backed by central governments, Digital Assets such as bitcoins,bitcoin and ethereum, which are relatively new, are subject to supply and demand forces based upon the desirability of an alternative, decentralized means of buying and selling goods and services, and it is unclear how such supply and demand will be impacted by geopolitical events. Nevertheless, political or economic crises may motivate large-scale acquisitions or sales of bitcoinsDigital Assets either globally or locally. Large-scale sales of bitcoinsDigital Assets would result in a reduction in bitcoin valueDigital Asset values and could adversely affect an investment in us.

Demand for bitcoin is driven, in part, by its status as the most prominent and secure Digital Asset. It is possible that a Digital Asset other than bitcoins could have features that make it more desirable to a material portion of the Digital Asset user base, resulting in a reduction in demand for bitcoins, which could have a negative impact on theThe price of bitcoins and adversely affect an investmentDigital Assets may be affected by the sale of such Digital Assets by other vehicles investing in us.Digital Assets or tracking cryptocurrency markets.

The Bitcoin Networkglobal market for Digital Assets is characterized by supply constraints that differ from those present in the markets for commodities or other assets such as gold and bitcoins, as an asset, hold a “first-to-market” advantage over other Digital Assets. This first-to-market advantage is driven in large part by havingsilver. The mathematical protocols under which certain cryptocurrencies are mined permit the largest user base and, more importantly, the largest combined mining power in use to secure the Blockchain and transaction verification system. Having a large mining network results in greater user confidence regarding the security and long-term stabilitycreation of a Digital Asset’s network and its block chain; as a result, the advantagelimited, predetermined amount of more users and miners makes a Digital Asset more secure, which makes it more attractive to new users and miners, resulting in a network effect that strengthens the first-to-market advantage.

As of August 26, 2019, there were approximately 2,300 alternate Digital Assets (or altcoins) tracked by CoinMarketCap, having acurrency, while others have no limit established on total market capitalization (including the market capitalization of bitcoin) of approximately $272 billion, using market prices and total outstanding supply of each Digital Asset. This included altcoins using a “proof of work” mining structure similar to Bitcoin, and those using a “proof of stake” transaction verification system that is different than Bitcoin’s mining system (e.g., Peercoin, Bitshares and NXT). As of August 26, 2019, bitcoin’s $185 billion market capitalization was approximately nine times the size of the $20 billion market cap of ETH, the second largest Digital Asset. Despite the marked first-mover advantage of the Bitcoin Network over other Digital Assets, it is possible that another Digital Asset could become materially popular due to either a perceived or exposed shortcoming of the Bitcoin Network protocol that is not immediately addressed by the Bitcoin contributor community or a perceived advantage of an altcoin that includes features not incorporated into Bitcoin. If a Digital Asset obtains significant market share (either in market capitalization, mining power or use as a payment technology), this could reduce bitcoin’s market share as well as other Digital Assets we may become involved in and have a negative impact on the demand for, and price of, such Digital Assets and could adversely affect an investment in us.

Our ability to adopt technology in response to changing security needs or trends poses a challenge to the safekeeping of our Digital Assets.

The history of the Bitcoin Exchange Market has shown that Bitcoin Exchanges and large holders of bitcoins must adapt to technological change in order to secure and safeguard their bitcoins and other Digital Assets. We rely on Bitgo Inc.’s multi-signature enterprise storage solution to safeguard our bitcoins from theft, loss, destruction or other issues relating to hackers and technological attack. We believe that it may become a more appealing target of security threats as the size of our bitcoin holdings grow.supply. To the extent that either Bitgo Inc. or we are unable to identify and mitigate or stop new security threats, our bitcoins may be subject to theft, loss, destruction or other attack, which could adversely affect an investmentvehicles investing in us.

Security threats to us could result in, a loss of Company’s Digital Assets or damagetracking Digital Asset markets form and come to the reputation and our brand, each of which could adversely affect an investment in us.

Security breaches, computer malware and computer hacking attacks have beenrepresent a prevalent concern in the Bitcoin Exchange Market since the launchsignificant proportion of the Bitcoin Network. Any security breach caused by hacking, which involves efforts to gain unauthorized access to information or systems, or to cause intentional malfunctions or loss or corruptiondemand for Digital Assets, large redemptions of data, software, hardware or other computer equipment,the securities of those vehicles and the inadvertent transmissionsubsequent sale of computer viruses, could harm our business operations or result in loss of our bitcoins and other Digital Assets. Any breach of our infrastructure could result in damage to our reputation which could adversely affect an investment in us. Furthermore, we believe that, as our assets grow, it may become a more appealing target for security threats such as hackers and malware.

We will primarily rely on Bitgo Inc.’s multi-signature enterprise storage solution to safeguard our bitcoins from theft, loss, destruction or other issues relating to hackers and technological attack. Nevertheless, Bitgo Inc.’s security system may not be impenetrable and may not be free from defect or immune to acts of God, and any loss due to a security breach, software defect or act of God will be borne by us. In January 2018, the Japanese cryptocurrency exchange Coincheck reported that hackers breached Coincheck’s security and stole approximately $530 million worth of cryptocurrency. Our bitcoins and other Digital Assets are also stored with exchangesby such as Itbit, Krakenvehicles could negatively affect Digital Asset prices and Coinbase and others prior to selling them.

On February 1, 2019, a 20 year old hacker pled guilty to stealing more than $5,000,000 worth of crypto currency from 40 victims through SIM swapping. The hacker is the first individual convicted of a crime for SIM swapping, which is growing increasingly popular with criminals as a way to steal crypto currency. In SIM swapping, hackers call a telecoms company posing as their target and claim that their SIM card has been lost, and that they would like their number to be ported to a new card. The criminals can convince phone companies that they are who they claim to be by providing social security numbers or addresses. Once the telecoms company transfers the number to a new SIM, hackers can bypass two-step authentication measures for accounts by using the phone as a recovery method. By using this method and acquiring someone’s phone number, a hacker can get into every account the person owns within minutes and that person cannot do anything about it.

The security system and operational infrastructure may be breached due to the actions of outside parties, error or malfeasance of an employee of ours, or otherwise, and, as a result, an unauthorized party may obtain access to our, private keys, data or bitcoins. Additionally, outside parties may attempt to fraudulently induce employees of ours to disclose sensitive information in order to gain access to our infrastructure. As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, or may be designed to remain dormant until a predetermined event and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of our security system occurs, the market perception of the effectiveness of our security system could be harmed, which could adverselytherefore affect an investment in us.

In the event of a security breach, we may be forced to cease operations, or suffer a reduction in assets, the occurrence of each of which could adversely affect an investment in us.

A loss of confidence in our security system, or a breach of our security system, may adversely affect us and the value of an investment in us.

We will take measures to protect us and our bitcoins and other Digital Assets from unauthorized access, damage or theft; however, it is possible that the security system may not prevent the improper access to, or damage or theft of our bitcoins. A security breach could harm our reputation or result in the loss of some or all of our bitcoins. A resulting perception that our measures do not adequately protect our Digital AssetsAssets. Such events could result inhave a loss of current or potential shareholders, reducing demand for our common stock and causing our shares to decrease in value.

Bitcoin transactions are irrevocable and stolen or incorrectly transferred bitcoins may be irretrievable. As a result, any incorrectly executed Bitcoin transactions could adversely affect an investment in us.

Bitcoin (and other Digital Asset) transactions are not, from an administrative perspective, reversible without the consent and active participation of the recipient of the transaction or, in theory, control or consent of a majority of the processing power on the Bitcoin Network. Once a transaction has been verified and recorded in a block that is added to the Blockchain, an incorrect transfer of Digital Assets or a theft of Digital Assets generally will not be reversible and we may not be capable of seeking compensation for any such transfer or theft. Although our transfers of bitcoins will regularly be made to or from vendors, consultants, services providers, etc. it is possible that, through computer or human error, or through theft or criminal action, our bitcoins could be transferred from us in incorrect amounts or to unauthorized third parties. To the extent that we are unable to seek a corrective transaction with such third party or is incapable of identifying the third party which has received our bitcoins through error or theft, we will be unable to revert or otherwise recover incorrectly transferred Company Digital Assets. To the extent that we are unable to seek redress for such error or theft, such loss couldmaterial adversely affect an investment in us.

Our bitcoins and other Digital Assets may be subject to loss, damage, theft or restriction on access.

There is a risk that part or all of our bitcoins we acquire could be lost, stolen or destroyed. We believe that our bitcoins and other Digital Assets will be an appealing target to hackers or malware distributors seeking to destroy, damage or steal our bitcoin and other Digital Assets. Although we primarily utilize Bitgo Inc.’s enterprise multi-signature storage solution for our bitcoins, to minimize the risk of loss, damage and theft, we cannot guarantee that it will prevent such loss, damage or theft, whether caused intentionally, accidentally or by act of God. Access to our Digital Assets could also be restricted by natural events (such as an earthquake or flood) or human actions (such as a terrorist attack). Any of these events may adversely affect our operations and, consequently, an investment in us.

The limited rights of legal recourse against us, and our lack of insurance protection expose us and our shareholders to the risk of loss of our bitcoins and other Digital Assets for which no person is liable.

The bitcoins and other Digital Assets held by us are not insured. Therefore, a loss may be suffered with respect to our bitcoins which is not covered by insurance and for which no person is liable in damages which could adversely affect our operations and, consequently, an investment in us.

Bitcoins and other Digital Assets held by us are not subject to FDIC or SIPC protections.

We will not hold our bitcoins and other Digital Assets with a banking institution or a member of the Federal Deposit Insurance Corporation (“FDIC”) or the Securities Investor Protection Corporation (“SIPC”) and, therefore, our Digital Assets are not subject to the protections enjoyed by depositors with FDIC or SIPC member institutions.

We may not have adequate sources of recovery if our bitcoins and other Digital Assets are lost, stolen or destroyed.

If our bitcoins or other Digital Assets are lost, stolen or destroyed under circumstances rendering a party liable to us, the responsible party may not have the financial resources sufficient to satisfy our claim. For example, as to a particular event of loss, the only source of recovery for us might be limited, to the extent identifiable, other responsible third parties (e.g., a thief or terrorist), any of which may not have the financial resources (including liability insurance coverage) to satisfy a valid claim of ours.

The sale of our bitcoins or other Digital Assets to pay expenses at a time of low prices could adversely affect an investment in us.

We may sell bitcoins or other Digital Assets to pay expenses on an as-needed basis, irrespective of then-current prices. The extreme volatility of bitcoin and other Digital Assets could mean that prices are low when we need to sell. Consequently, our Digital Assets may be sold at a time when the prices are low, which could adversely affect an investment in us.

Intellectual property rights claims may adversely affect an investment in us.

We are not aware of any intellectual property claims that may prevent us from operating and holding bitcoins or other Digital Assets; however, third parties may assert intellectual property claims relating to the operation of us and the mechanics instituted for the investment in, holding of and transfer of bitcoins or other Digital Assets. Regardless of the merit of an intellectual property or other legal action, any legal expenses to defend or payments to settle such claims would be extraordinary expenses and be borne by us through the sale of our bitcoins and other Digital Assets. Additionally, a meritorious intellectual property claim could prevent us from operating and force us to liquidate our bitcoins and other Digital Assets. As a result, an intellectual property claim against us could adversely affect an investment in us.

Regulatory changes or actions may alter the nature of an investment in us or restrict the use of Digital Assets or the operation of trading markets in a manner that adversely affects an investment in us.our business, prospects or operations.

Until a few years ago, little or no regulatory attention has been directed toward bitcoin, otherAs Digital Assets and the markets where they trade by U.S. federal and state governments, foreign governments and self-regulatory agencies. As bitcoin hashave grown in both popularity and in market size, governments around the world have reacted differently to Digital Assets; certain governments have deemed them illegal, and initial coin offerings which tend to be Digital Securities, the SEC, Federal Reserve Board, U.S. Congressothers have allowed their use and certain other U.S. agencies (e.g., the CFTC, FinCEN and the Federal Bureau of Investigation) have begun to examine the operations of the initial coin offerings, Bitcoin Network, bitcoin users and the Bitcoin Exchange Market.

On July 25, 2017, the SEC issued its DAO Report which concluded that Digital Assets or tokens issued for the purpose of raising funds may be securities within the meaning of the federal securities laws. The DAO Report focused on the activities of a virtual organization which offered tokenstrade without restriction, while in exchange for ether which is the second largest reported digital currency. The DAO Report emphasized that whether Digital Asset is a security is based on the facts and circumstances. Although the Company’s activities are not focused on raising capital or assisting others that do so, the federal securities laws are very broad, and there can be no assurances that the SEC will not take enforcement action against the Companysome jurisdictions, such as in the U.S., subject to extensive, and in some cases overlapping, unclear and evolving regulatory requirements. Ongoing and future including for the sale of unregistered securities in violation of the Securities Actregulatory actions may impact our ability to continue to operate, and such actions could affect our ability to continue as a going concern or acting as an unregistered investment company in violation of the Investment Company Act. The SEC has taken various actions against persons or entities misusing bitcoin in connection with fraudulent schemes (i.e., Ponzi scheme), inaccurate and inadequate publicly disseminated information, and the offering of unregistered securities. More recently, the SEC suspended trading in three Digital Asset public companies. Since issuing the DAO Report the SEC Chairman has stated that the SEC is carefully examining initial coin offerings and similar areas involving Digital Assets for their compliance with the Securities Act. On November 16, 2018, the SEC announced its first civil penalties solely targeting ICO securities registration violators in reference to settled charges against ICO issuers CarrierEQ, Inc., (“Airfox”) and Paragon Coin, Inc. (“Paragon”). Stephanie Avakian, Co-Director of the SEC’s Enforcement Division, stated that “we have made it clear that companies who issue securities through ICOs are required to comply with existing statutes and rules governing the registration of securities.” Unlike Slock.It,pursue our new strategy at all, which faced no penalty, Airfox and Paragon were each ordered to: 1) pay $250,000 in penalties, 2) register their tokens pursuant to the Exchange Act, and 2) to file periodic reports with the SEC for at least a year.

Very recently, it has been publicly reported that the SEC staff has been issuing subpoenas seeking information about initial coin offerings. Although we have never invested in initial coin offering, lawsuits filed by the SEC claiming that initial coin offering issuers and cryptocurrency public companies violate the Securities Act and the Exchange Act and the resulting publicity maycould have a material adverse effect on the prices of Digital Assets we own and otherwise adversely affect opportunities in the Blockchain industry, which in turn will have an adverse impact on our business, and prospects.

The CFTC has determined that bitcoin and other virtual currencies are commodities and the sale of derivatives based on digital currencies must be done in accordance with the provisions of the CEA and CFTC regulations. Also of significance, is that the CFTC appears to have taken the position that bitcoin is not encompassed by the definition of currency under the CEA and CFTC regulations. The CFTC defined bitcoin and other “virtual currencies” as “a digital representation of value that functions as a medium of exchange, a unit of account, and/prospects or a store of value, but does not have legal tender status in any jurisdiction. Bitcoin and other virtual currencies are distinct from ‘real’ currencies, which are the coin and paper money of the United States or another country that are designated as legal tender, circulate, and are customarily used and accepted as a medium of exchange in the country of issuance.” To the extent that bitcoin itself is determined to be a security, commodity future or other regulated asset, or to the extent that a US or foreign government or quasi-governmental agency exerts regulatory authority over the Bitcoin Network or bitcoin trading and ownership, trading or ownership in bitcoin or an investment in us may be adversely affected.

The CFTC affirmed its approach to the regulation of bitcoin and bitcoin-related enterprises on June 2, 2016, when the CFTC settled charges against Bitfinex, a Bitcoin Exchange based in Hong Kong. In its Order, the CFTC found that Bitfinex engaged in “illegal, off-exchange commodity transactions and failed to register as a futures commission merchant” when it facilitated borrowing transactions among its users to permit the trading of bitcoin on a “leveraged, margined or financed basis” without first registering with the CFTC. In 2017 the CFTC stated that it would consider bitcoin and other virtual currencies as commodities or derivatives depending on the facts of the offering. In December 2017, bitcoin futures trading commenced on two CFTC regulated futures markets. In 2018 two federal district courts determined that Digital Assets were commodities and can be regulated by the CFTC as such.

Local state regulators such as the NYSDFS have also initiated examinations of bitcoin, the Bitcoin Network and the regulation thereof. The NYSDFS began requiring New York based companies to have a “BitLicense” in June 2015. The “BitLicense” regulates the conduct of businesses that are involved in “virtual currencies” in New York or with New York customers, and prohibits any person or entity involved in such activity to conduct activities without a license. Out of concern of over regulating cryptocurrency, New York has formed a task force to further study the scope of its regulation.

Additionally, a U.S. federal magistrate judge in the U.S. District Court for the Eastern District of Texas has ruled that “Bitcoin is a currency or form of money,” a Florida circuit court judge determined that bitcoin did not qualify as money or “tangible wealth,” and an opinion from the U.S. District Court for the Northern District of Illinois identified bitcoin as “virtual currency.” Additionally, two CFTC commissioners publicly expressed a belief that derivatives based on bitcoin are subject to the same regulation as those based on commodities, and the IRS released guidance treating bitcoin as property that is not currency for U.S. federal income tax purposes. Taxing authorities of a number of U.S. states have also issued their own guidance regarding the tax treatment of bitcoin for state income or sales tax purposes. On June 28, 2014, the Governor of the State of California signed into law a bill that removed state-level prohibitions on the use of alternative forms of currency or value (including bitcoin). The bill indirectly authorizes bitcoin’s use as an alternative form of money in the state. In February 2015, a bill was introduced in the California State Assembly to establish a licensing regime for businesses engaging in “virtual currencies.” In September 2015, the bill was ordered to become an inactive file and as of the date of this prospectus there hasn’t been further consideration by the California State Assembly. As of August 2016, the bill was withdrawn from consideration for vote for the remainder of the year. In March of 2019, California Assembly Majority Leader Ian Calderon introduced Assembly Bill 1489, which would govern virtual currency business activity that takes place with or on behalf of California residents. The proposes to require companies to go through a regulatory approval process to conduct crypto-related activities in the state by requiring licensure with stipulations on net worth, security, and reserves. Entities would be subject to examination, consolidations and data sharing to maintain compliance. As presently drafted, Bill 1489 does not consider virtual currencies (also known as cryptocurrencies and digital assets) to be legal tender, whether or not it is denominated in legal tender. It states that virtual currency is a representation of value for exchange, storage of value, or unit of account.

Bitcoin currently faces an uncertain regulatory landscape in not only the United States but also in many foreign jurisdictions such as the European Union, China and Russia. While certain governments such as Germany, where the Ministry of Finance has declared bitcoin to be “Rechnungseinheiten” (a form of private money that is recognized as a unit of account, but not recognized in the same manner as fiat currency), have issued guidance as to how to treat bitcoin, most regulatory bodies have not yet issued official statements regarding intention to regulate or determinations on regulation of bitcoin, the Bitcoin Network and bitcoin users.

Among those for which preliminary guidance has been issued in some form, Canada and Taiwan have labeled bitcoin as a digital or virtual currency, distinct from fiat currency, while Sweden and Norway are among those to categorize bitcoin as a form of virtual asset or commodity. In Australia, a GST (similar to the European value added tax (“VAT”)) is currently applied to bitcoin, forcing a ten (10) percent markup on top of market price, essentially preventing the operation of any Bitcoin Exchange. This may be undergoing a change, however, since the Senate Economics References Committee and the Productivity Commission recommended that digital currency be treated as money for GST purposes to remove the double taxation. The United Kingdom determined that the VAT will not apply to bitcoin sales. Since December 2013, China, Iceland, Vietnam and Russia have taken a more restrictive stance toward bitcoin and, thereby, have reduced the rate of expansion of bitcoin use in each country. In May 2014, the Central Bank of Bolivia banned the use of bitcoin as a means of payment. In the summer and fall of 2014, Ecuador announced plans for its own state-backed electronic money, while passing legislation that prohibits the use of decentralized Digital Assets such as bitcoin. In July 2016, economists at the Bank of England advocated that central banks issue their own digital currency, and the House of Lords and Bank of England started discussing the feasibility of creating a national virtual currency, the BritCoin. As of July 2016, Iceland was studying how to create a system in which all money is created by a central bank, and Canada was beginning to experiment with a digital version of its currency called CAD-COIN, intended to be used exclusively for interbank payments. On August 24, 2017, Canada issued guidance stating the sale of cryptocurrency may constitute an investment contract in accordance with Canadian law for determining if an investment constitutes a security. In July 2016, the Russian Ministry of Finance indicated it supports a proposed law that bans bitcoin domestically but allows for its use as a foreign currency. Russia recently issued several releases indicating they may begin regulating bitcoin and licensing miners and entities engaging in initial coin offerings. Conversely, regulatory bodies in some countries such as India and Switzerland have declined to exercise regulatory authority when afforded the opportunity. In April 2015, the Japanese Cabinet approved proposed legal changes that would reportedly treat bitcoin and other Digital Assets as included in the definition of currency. These regulations would, among other things, require market participants, including exchanges, to meet certain compliance requirements and be subject to oversight by the Financial Services Agency, a Japanese regulator. In September 2017 Japan began regulating Bitcoin Exchanges and registered several such exchanges to operate within Japan. In July 2016, the European Commission released a draft directive that proposed applying counter-terrorism and anti-money laundering regulations to virtual currencies, and, in September 2016, the European Banking authority advised the European Commission to institute new regulation specific to virtual currencies, with amendments to existing regulation as a stopgap measure. Various foreign jurisdictions may, in the near future, adopt laws, regulations or directives that affect the Bitcoin Network and its users, particularly Bitcoin Exchanges and service providers that fall within such jurisdictions’ regulatory scope. Such laws, regulations or directives may conflict with those of the United States and may negatively impact the acceptance of bitcoin by users, merchants and service providers outside of the United States and may therefore impede the growth of the bitcoin economy. On September 4, 2017, reports were published that China may begin prohibiting the practice of using cryptocurrency for capital fundraising. Additional reports have surfaced that China is considering regulating Bitcoin Exchanges by enacting a licensing regime wherein Bitcoin Exchanges may legally operate. In April 2019, China’s National Development Reform Commission listed crypto-mining among a variety of industries it intends to eliminate. In October 2018, The Shenzhen Court of International Arbitration of China published a case analysis on contract disputes between parties to a share transfer agreement involving cryptocurrencies and held that cryptocurrency was protected as property in China. In September 2017, the Financial Services Commission of South Korea released a statement that initial coin offerings would be prohibited as a fundraising tool. In December of 2018, the South Korea’s Financial Services Commission, the country’s top financial regulator, stated that six bills related to the regulation of cryptocurrencies had been submitted to the National Assembly. One of the bills would require all persons in charge of a cryptocurrency transfer business - including trading, brokerage and management – to register with the Financial Services Commission. In June 2017, India’s government ruled in favor of regulating bitcoin. In December 2017, India’s finance minister told the media that the government does not consider bitcoin a legal tender. In April 2018, the Reserve Bank of India issued a statement to all entities regulated by the Reserve Bank, stating that they must cease all activities related to cryptocurrency. The Internet and Mobile Association of India challenged the ban via petition to the Supreme Court of India, which ordered the Reserve Bank of India to devise a clear regulation regarding cryptocurrency. The Supreme Court of India will resume hearing the case in July 2019. In 2018, Australia passed legislation which requires digital currency exchange providers to register with AUSTRAC (the Australian Transaction Reports and Analysis Centre). In its budget summary for 2017-2018, the Australian government stated that, as part of its plan to make it easier for digital currency businesses to operate in the country, purchases of digital currency will no longer be subject to the general sales tax.

The effect of any future regulatory change on us, bitcoins, or other Digital Assets is impossible to predict, but such change could be substantial and adverse to us and could adversely affect an investment in us.

It may be illegal now, or in the future, to acquire, own, hold, sell or use bitcoins or other Digital Assets in one or more countries, and ownership of, holding or trading in our Company’s securities may also be considered illegal and subject to sanction.

Although currently bitcoins and other Digital Assets are not regulated or are lightly regulated in most countries, including the United States, one or more countries such as China and Russia may take regulatory actions in the future that severely restricts the right to acquire, own, hold, sell or use bitcoins or other Digital Assets or to exchange Digital Assets for currency. Such an action may also result in the restriction of ownership, holding or trading in our securities. Such restrictions may adversely affect an investment in us.

If we become an inadvertent investment company in violation of the 1940 Act, our failure to register under the 1940 Act will adversely affect us and you will likely lose your entire investment.

Under the 1940 Act, a company may be deemed an investment company under if the value of its investment securities is more than 40% of its total assets (exclusive of government securities and cash items) on a consolidated basis.

In the event that the Digital Assets held by us exceed 40% of our total assets, exclusive of cash, we may inadvertently become an investment company. While we are putting in place policies that we expect will work to keep the investment securities held by us at less than 40% of our total assets, which may include actively monitoring the value of our investment securities, acquiring assets bitcoin with our cash, or liquidating our investment securities.

The Rules under the 1940 Act permit a company to breach the 40% threshold once every three years assuming it reduces its investment securities below 40% within one year. Otherwise registration under the 1940 Act would be required.

The 40% requirement may limit our ability to make certain investments or enter into joint ventures that could otherwise have a positive impact on our earnings. In any event, we do not intend to become an investment company engaged in the business of investing and trading securities. The failure to register when required would likely make our common stock worthless.

If we become an investment company and fail to register, we would have to stop doing almost all business. Registration is time consuming and restrictive and would require a restructuring of our operations, and we would be very constrained in the kind of business we could do as a registered investment company. Further, we would become subject to substantial regulation concerning management, operations, transactions with affiliated persons and portfolio composition, and would need to file reports under the 1940 Act regime. The cost of such compliance would result in the Company incurring substantial additional expenses, and the failure to register if required would have a materially adverse impact to conduct our operations.

If regulatory changes or interpretations of our activities require our registration as a MSB under the regulations promulgated by FinCEN under the authority of the U.S. Bank Secrecy Act, we may be required to register and comply with such regulations. If regulatory changes or interpretations of our activities require the licensing or other registration of us as a money transmitter (or equivalent designation) under state law in any state in which we operate, we may be required to seek licensure or otherwise register and comply with such state law. In the event of any such requirement, to the extent the Company decides to continue, the required registrations, licensure and regulatory compliance steps may result in extraordinary, non-recurring expenses to us. We may also decide to cease the Company’s operations. Any termination of certain Company operations in response to the changed regulatory circumstances may be at a time that is disadvantageous to investors.

To the extent that the activities of the Company cause it to be deemed a MSB under the regulations promulgated by FinCEN under the authority of the U.S. Bank Secrecy Act, the Company may be required to comply with FinCEN regulations, including those that would mandate the Company to implement anti-money laundering programs, make certain reports to FinCEN and maintain certain records.

To the extent that the activities of the Company cause it to be deemed a “money transmitter” (or equivalent designation) under state law in any state in which the Company operates, the Company may be required to seek a license or otherwise register with a state regulator and comply with state regulations that may including the implementation of anti-money laundering programs, maintenance of certain records and other operational requirements. Currently, the NYSDFS has finalized its “BitLicense” framework for businesses that conduct “virtual currency business activity,” the Conference of State Bank Supervisors has proposed a model form of state level “virtual currency” regulation and additional state regulators including those from California, Idaho, Virginia, Kansas, Texas, South Dakota and Washington have made public statements indicating that virtual currency businesses may be required to seek licenses as money transmitters. In July 2016, North Carolina updated the law to define “virtual currency” and the activities that trigger licensure in a business friendly approach that encourages companies to use virtual currency and blockchain technology. Specifically, the North Carolina law does not require miners or software providers to obtain a license for multi-signature software, smart contract platforms, smart property, colored coins and non-hosted, non-custodial wallets. Starting January 1, 2016, New Hampshire requires anyone exchanges a digital currency for another currency must become a licensed and bonded money transmitter. In numerous other states, including Connecticut and New Jersey, legislation is being proposed or has been introduced regarding the treatment of bitcoin and other Digital Assets. The Company will continue to monitor for developments in such legislation, guidance or regulations.

Such additional federal or state regulatory obligations may cause the Company to incur extraordinary expenses, possibly affecting an investment in the Resale Shares in a material and adverse manner. Furthermore, the Company and its service providers may not be capable of complying with certain federal or state regulatory obligations applicable to MSBs and MTs. If the Company is deemed to be subject to and determines not to comply with such additional regulatory and registration requirements, we may act to dissolve and liquidate the Company. Any such action may adversely affect an investment in us.

Current interpretations require the regulation of bitcoins and other Digital Assets under the CEA by the CFTC, we may be required to register and comply with such regulations. To the extent that we decide to continue operations, the required registrations and regulatory compliance steps may result in extraordinary, non-recurring expenses to us. We may also decide to cease certain operations. Any disruption of our operations in response to the changed regulatory circumstances may be at a time that is disadvantageous to investors.

Current and future legislation, CFTC and other regulatory developments, including interpretations released by a regulatory authority, may impact the manner in which bitcoins and other Digital Assets are treated for classification and clearing purposes. In particular, derivatives on these assets are not excluded from the definition of “commodity future” by the CFTC. We cannot be certain as to how future regulatory developments will impact the treatment of bitcoins and other Digital Assets under the law.

Bitcoins have been deemed to fall within the definition of a commodity and, we may be required to register and comply with additional regulation under the CEA, including additional periodic report and disclosure standards and requirements. Moreover, we may be required to register as a commodity pool operator and to register us as a commodity pool with the CFTC through the National Futures Association. Such additional registrations may result in extraordinary, non-recurring expenses, thereby materially and adversely impacting an investment in us. If we determine not to comply with such additional regulatory and registration requirements, we may seek to cease certain of our operations. Any such action may adversely affect an investment in us. No CFTC orders or rulings are applicable to our business.

If regulatory changesOur interactions with a blockchain may expose us to SDN or interpretations require the regulationblocked persons or cause us to violate provisions of bitcoins and other Digital Assets (in contrast to Digital Securities) under the Securities Act and Investment Company Act by the SEC, we may be required to register and comply with such regulations. To the extentlaw that we decide to continue operations, the required registrations and regulatory compliance steps may result in extraordinary, non-recurring expenses to us. We may also decide to cease certain operations. This would likely have a material adverse effect on us and investors may lose their investment.did not contemplate distribute ledger technology.

Current and future legislation and SEC rulemaking and other regulatory developments, including interpretations released by a regulatory authority, may impact the manner in which bitcoins are treated for classification and clearing purposes. The SEC’s July 25, 2017 DAO Report expressed its view that DigitalOffice of Financial Assets may be securities depending on the facts and circumstances. AsControl of the dateUS Department of this prospectus, we are not aware of any rules that have been proposed to regulate the Digital Assets we hold as securities. We cannot be certain as to how future regulatory developments will impact the treatment of bitcoins and other Digital Assets under the law. Such additional registrations may result in extraordinary, non-recurring expenses, thereby materially and adversely impacting an investment in us. If we determine notTreasury requires us to comply with such additional regulatoryits sanction program and registration requirements,not conduct business with persons named on its specially designated nationals (“SDN”) list. However, because of the pseudonymous nature of blockchain transactions we may seekinadvertently and without our knowledge engage in transactions with persons named on OFAC’s SDN list. Our Company’s policy prohibits any transactions with such SDN individuals, but we may not be adequately capable of determining the ultimate identity of the individual with whom we transact with respect to cease certain ofselling cryptocurrency assets. Moreover, federal law prohibits any US person from knowingly or unknowingly possessing any visual depiction commonly known as child pornography. Recent media reports have suggested that persons have imbedded such depictions on one or more blockchains. Because our operations. Anybusiness requires us to download and retain one or more blockchains to effectuate our ongoing business, it is possible that such action may adversely affect an investment in us.

digital ledgers contain prohibited depictions without our knowledge or consent. To the extent government enforcement authorities literally enforce these and other laws and regulations that Digital Assets including bitcoins are deemedimpacted by the SEC to fall within the definition of a security,decentralized distributed ledger technology, we may be requiredsubject to registerinvestigation, administrative or court proceedings, and comply with additional regulation undercivil or criminal monetary fines and penalties, all of which could harm our reputation and affect the Investment Company Act, including additional periodic reporting and disclosure standards and requirements and the registrationvalue of our Company as an investment company. Additionally, one or more states may conclude bitcoins are a security under state securities laws which would require registration under state laws including merit review laws which would adversely impact us since we would likely not comply. As stated earlier in this prospectus, some states including California define the term “investment contract” more strictly than the SEC. Such additional registrations may result in extraordinary, non-recurring expenses of our Company, thereby materially and adversely impacting an investment in our Company. If we determine not to comply with such additional regulatory and registration requirements, we may seek to cease all or certain parts of our operations. Any such action would likely adversely affect an investment in us and investors may suffer a complete loss of their investment.

The Company does not currently have any mining operations but may resume its mining operations through outsourced data centers if it receives additional capital. To the extent that the Company resumes mining operations and acquires Digital Assets as a result of mining, we do not intend to trade the Digital Assets until we determine, with the assistance of legal counsel, that the Digital Assets are not securities, the Digital Assets would only be used for our own account.

As discussed at page 43 and 44 we do not think that bitcoin and ether are securities. As such, we do not intend to acquire securities in amounts that are equal to or greater than 40% of our assets. Should the total value of securities which we hold rise to more than 40% of our assets (exclusive of cash) we note that SEC Rule 3a-2 under the 1940 Act allows an issuer to prevent itself from being deemed an investment company if it reduces its holdings of securities to less than 40% of its assets (exclusive of cash) and does not go above the 40% threshold more than once every three years. In order to comply with the 1940 Act, we anticipate having increased management time and legal expenses in order to analyze which Digital Assets are securities and periodically analyze our total holdings to ensure that we do not maintain more than 40% of our total assets (exclusive of cash) as securities. If our view that ether is not a security is challenged by the SEC and courts uphold the challenge, we may inadvertently violate the 1940 Act and incur substantial legal fees in defending our position. In such case the legal fees may exceed our available assets which could adversely affect an investment in us.common stock.

If federal or state legislatures or agencies initiate or release tax determinations that change the classification of bitcoins, ethereum or other Digital Assets as property for tax purposes (in the context of when such Digital Assets are held as an investment), such determination could have a negative tax consequence on our Company or our shareholders.

Current IRS guidance indicates that Digital Assets such as bitcoins should be treated and taxed as property, and that transactions involving the payment of bitcoins for goods and services should be treated as barter transactions. While this treatment creates a potential tax reporting requirement for any circumstance where the ownership of a bitcoin passes from one person to another, usually by means of bitcoin transactions (including off-Blockchainoff-blockchain transactions), it preserves the right to apply capital gains treatment to those transactions which may have adversely affect an investment in our Company.

On December 5, 2014, the New York State Department of Taxation and Finance issued guidance regarding the application of state tax law to Digital Assets such as bitcoins. The agency determined that New York State would follow IRS guidance with respect to the treatment of Digital Assets such as bitcoins for state income tax purposes. Furthermore, they defined Digital Assets such as bitcoin to be a form of “intangible property,” meaning the purchase and sale of bitcoins for fiat currency is not subject to state income tax (although transactions of bitcoin for other goods and services maybe subject to sales tax under barter transaction treatment). It is unclear if other states will follow the guidance of the IRS and the New York State Department of Taxation and Finance with respect to the treatment of Digital Assets such as bitcoins for income tax and sales tax purposes. If a state adopts a different treatment, such treatment may have negative consequences including the imposition of greater a greater tax burden on investors in bitcoin or imposing a greater cost on the acquisition and disposition of bitcoins, generally; in either case potentially having a negative effect on prices in the Bitcoin Exchange Market and may adversely affect an investment in our Company.

Foreign jurisdictions may also elect to treat Digital Assets such as bitcoins differently for tax purposes than the IRS or the New York State Department of Taxation and Finance. To the extent that a foreign jurisdiction with a significant share of the market of bitcoin users imposes onerous tax burdens on bitcoin users, or imposes sales or value added tax on purchases and sales of bitcoins for fiat currency, such actions could result in decreased demand for bitcoins in such jurisdiction, which could impact the price of bitcoins and negatively impact an investment in our Company.

Security Risks Related to Our Digital Assets Holdings

The loss or destruction of a private key required to access aOur Digital Assets such as bitcoin may be irreversible. Oursubject to loss, of access to our private keysdamage, theft or our experience of a data loss relating to our Company’s Digital Assets could adversely affect an investment in our Company.restriction on access.

Bitcoins are controllable only byThere is a risk that part or all of our Digital Assets could be lost, stolen, destroyed or become inaccessible. We believe that our Digital Assets will be an appealing target to hackers or malware distributors seeking to destroy, damage or steal our Digital Assets. To minimize the possessorrisk of both the unique public keyloss, damage and private key relating to the local or online digital wallet in which the bitcoins are held. We are required by the operation of the Bitcoin Network to publish the public key relating to a digital wallet in use by us when it first verifies a spending transaction from that digital wallettheft, security breaches, and disseminates such information into the Bitcoin Network. We safeguardunauthorized access we hold our Digital Assets at exchanges and keep private the private keys relating to our bitcoins by primarily utilizinghave also relied on Bitgo Inc.’s (“Bitgo”) enterprise multi-signature storage solution;solution. Nevertheless, the exchanges we utilize or Bitgo’s security system may not be impenetrable and may not be free from defect or immune to the extentacts of God, and any loss due to a private key is lost, destroyedsecurity breach, software defect or otherwise compromised and no backupact of the private key is accessible, weGod will be unable to access the bitcoins heldborne by itus. Any of these events may adversely affect our operations and, the private key will not be capable of being restored by the Bitcoin Network. Any loss of private keys relating to digital wallets used to store our bitcoins could adversely affectconsequently, an investment in us.

To the extent that any of our Digital Assets are held by Exchanges, we may face heightened risks from cybersecurity attacks and financial stability of the Exchanges.

The Company will use Digital Asset exchanges to hold certain of the its Digital Assets; the Company’s bitcoin will either be held directly by the Company in a bitcoin wallet utilizing Bitgo Inc.’s enterprise multi-signature storage solution or at Digital Asset exchanges. All Digital Assets not held in thea Company’s Bitgo walletscontrolled wallet such as Bitgo’s will be held at Exchanges and subject to the risks encountered by a Digital Asset exchangethose Exchange including a DDoS Attack orAttacks, other malicious hacking, a sale of the Digital Asset exchange, loss of the Digital Assets by the Digital Asset exchange, security breaches, and other risks similar to those described on page 18 in a risk factor entitled “Security threats to us could result in, a lossunauthorized access of Company’s Digital Assets, or damage to the reputation and our brand, each of which could adversely affect an investment in us.”account by hackers. The Company may not maintain a custodian agreement with the Exchanges that it holds its Digital Asset exchange that holds the Company’s Digital Assets. Exchange typicallyAssets at. Exchanges do not provide insurance and may lack the resources to protect against hacking and theft. In the future we may acquire other Digital Assets that are held by Exchanges. If a material amount of our Digital Assets are held by Exchanges, weWe may be materially and adversely affected if the Exchanges suffer cyberattacks or incur financial problems.

Risks RelatedThe loss or destruction of a private key required to access a Digital Assets may be irreversible. Our Future Transaction Verification Business

If the awardloss of bitcoins for solving blocks and transaction fees for recording transactions are not sufficiently highaccess to cover expenses related to running data center operations it may have adverse affects onour private keys could adversely affect an investment in us.our Company.

IfDigital Assets such as bitcoin are controllable only by the awardpossessor of new bitcoins for solving blocks declinesboth the unique public key and private key relating to the local or online digital wallet in which the Digital Assets are held. We are required by the operation of the Digital Asset Network to publish the public key relating to a digital wallet in use by us when it first verifies a spending transaction fees arefrom that digital wallet and disseminates such information into the Network. We safeguard and keep private the private keys relating to our Digital Assets not sufficiently high,held at exchanges by utilizing Bitgo’s multi-signature storage solution; to the extent a private key is lost, destroyed or otherwise compromised and no backup of the private key is accessible, we maywill be unable to access the Digital Assets held by it and the private key will not have an adequate incentivebe capable of being restored by the Network. Any loss of private keys relating to restartdigital wallets used to store our mining operations, which mayDigital Assets could adversely impactaffect an investment in us.

As the number of bitcoins awarded for solving a block in the Blockchain decreases, the incentive for minersSecurity threats to continue to contribute processing power to the Bitcoin Network will transition from a set reward to transaction fees. Either the requirement from miners of higher transaction fees in exchange for recording transactions in the Blockchain or a software upgrade that automatically charges fees for all transactions may decrease demand for bitcoins and prevent the expansion of the Bitcoin Network to retail merchants and commercial businesses, resultingus could result in, a reduction in the priceloss of bitcoins that could adversely impact an investment in us.Company’s Digital Assets.

In order to incentivize miners to continue to contribute processing power toSecurity breaches, computer malware and computer hacking attacks have been a prevalent concern in the Bitcoin Network,Exchange Market since the launch of the Bitcoin Network may either formallyNetwork. Any security breach caused by hacking, which involves efforts to gain unauthorized access to information or informally transition from a set rewardsystems, or to transaction fees earned upon solving for a block. This transitioncause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment, and the inadvertent transmission of computer viruses, could be accomplished either by miners independently electingharm our business operations or result in loss of our bitcoins and other Digital Assets. Any breach of our infrastructure could result in damage to record in the blocks they solve only those transactions that include payment of a transaction fee or by the Bitcoin Network adopting software upgrades that require the payment of a minimum transaction fee for all transactions. If transaction fees paid for Bitcoin transactions become too high, the marketplace may be reluctant to accept bitcoins as a means of payment and existing users may be motivated to switch from bitcoins to another Digital Asset or back to fiat currency. Decreased use and demand for bitcoins mayour reputation which could adversely affect their value and may adversely impact an investment in us. Furthermore, we believe that, as our assets continues to grow, it may become a more appealing target for security threats such as hackers and malware.

The security system and operational infrastructure may be breached due to the actions of outside parties, error or malfeasance of an employee of ours, or otherwise, and, as a result, an unauthorized party may obtain access to our, private keys, data or bitcoins. Additionally, outside parties may attempt to fraudulently induce employees of ours to disclose sensitive information in order to gain access to our infrastructure. As the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently, or may be designed to remain dormant until a predetermined event and often are not recognized until launched against a target, we may be unable to anticipate these techniques or implement adequate preventative measures. If an actual or perceived breach of our security system occurs, the market perception of the effectiveness of our security system could be harmed, which could adversely affect an investment in us. In the event of a security breach, we may be forced to cease operations, or suffer a reduction in assets, the occurrence of each of which could adversely affect an investment in us.

Incorrect or fraudulent Digital Asset transactions may be irreversible.

Digital Asset transactions are not, from an administrative perspective, reversible without the consent and active participation of the recipient of the transaction. Once a transaction has been verified and recorded in a block that is added to a blockchain, an incorrect transfer of Digital Assets or a theft of Digital Assets generally will not be reversible, and we may not be capable of seeking compensation for any such transfer or theft. It is possible that, through computer or human error, or through theft or criminal action, our Digital Assets could be transferred from us in incorrect amounts or to unauthorized third parties. To the extent that we are unable to seek a corrective transaction with such third party or are incapable of identifying the third party which has received our Digital Assets through error or theft, we will be unable to revert or otherwise recover incorrectly transferred Digital Assets. To the extent that we are unable to seek redress for such error or theft, such loss could adversely affect an investment in us.

The limited rights of legal recourse against us, and our lack of insurance protection expose us and our shareholders to the risk of loss of our Digital Assets for which no person is liable.

The Digital Assets held by us are not insured. Therefore, a loss may be suffered with respect to our Digital Assets which is not covered by insurance and for which no person is liable in damages which could adversely affect our operations and, consequently, an investment in us.

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

We do not and will not hold our bitcoins and other Digital Assets with a banking institution or a member of the Federal Deposit Insurance Corporation (“FDIC”) or the Securities Investor Protection Corporation (“SIPC”) and, therefore, our Digital Assets are not subject to the protections enjoyed by depositors with FDIC or SIPC member institutions.

Risks Related to Our Digital Asset Data Analytics Platform Development

There is substantial doubt that we will be able to develop or commercialize our Digital Asset Data Analytics Platform.

We are currently developing a digital asset data analytics platform with the ultimate goal of consolidating users’ information so that it can be more easily accessed and reviewed by users. We may not successfully develop this platform in a cost-efficient manner or at all. If we fail to develop a digital asset data analytics platform as intended, it could have a material adverse effect on our business, especially to the extent that we allocate significant capital, labor and other resources to this endeavor rather than focusing on other business opportunities which may prove to have been more lucrative in hindsight.

Even if we do successfully develop our platform and bring it to the marketplace, there is no guarantee that we will attract enough users to generate revenue or become profitable. Our competitors, most of whom have greater capital and human resources than we do, may develop technologies that are superior to our platform or commercialize comparable technologies before us, in which case our ability to attract users and generate revenue therefrom could be rendered unlikely or even impossible. If we fail to obtain users for our platform or find an alternative means of commercializing our platform to recoup our investment therein, it will have a material adverse effect on our financial condition.

Even if we develop and commercialize our Digital Asset Data Analytics Platform, we may not be able to generate material revenues.

The digital asset data analytics platform that we are currently developing will require significant time and capital. Even if we do develop this platform and acquire a sufficient number of users to generate revenue, we cannot guarantee the revenue would be material or sufficient to justify the costs we anticipate incurring to develop the platform. Our ability to capitalize on any platform we do develop will depend on a variety of factors and uncertainties beyond our control, including the competition we face and similar or superior services that may already exist by the time we begin marketing our platform, the volatile nature of the blockchain industry generally and the unknown demand for the services we plan to offer through our platform as it is currently envisioned, and the advancement of new technologies which could arise in the future and render our platform partially or completely obsolete. If any of these or other risks come to fruition to prevent our platform from generating material revenue to justify its costs of production, it would have a material adverse effect on our business.

The development of our Digital Asset Data Analytics Platform will depend on the successful efforts of our employees.

Our platform development effort is completely dependent on our infrastructure. We use internally developed systems for the platform. Any future difficulties developing aspects of our platform may cause delays in bringing our platform to market. If the location where all of our computer and communications hardware is located is compromised, our platform, prospects, could be harmed. We do not currently have a disaster recovery plan which could result in a loss of the platform software. Despite our implementation of network security measures, our servers are vulnerable to computer viruses, physical or electronic break-ins and similar disruptions, the occurrence of any of which could lead to interruptions, delays, loss of critical data or the inability to launch our platform. The occurrence of any of the foregoing risks could harm our business.

We are subject to cyber security risks and may incur delays in platform development in an effort to minimize those risks and to respond to cyber incidents.

Our digital asset data analytics platform will be entirely dependent on the secure operation of our website and systems as well as the operation of the Internet generally. The platform involves reading user data, and storage of user data, and security breaches could expose us to a risk of loss or misuse of this information, litigation, and potential liability. A number of large Internet companies have suffered security breaches, some of which have involved intentional attacks. From time to time we and many other Internet businesses also may be subject to a denial of service attacks wherein attackers attempt to block customers’ access to our Website. If we are unable to avert a denial of service attack for any significant period, we could sustain delays in the development of the platform and when launched risk losing future users and have user dissatisfaction. We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks. Cyber attacks may target us, our users, or exchanges we read data from in general or the communication infrastructure on which we depend. If an actual or perceived attack or breach of our security occurs, user perception of the effectiveness of our security measures could be harmed and we could lose our future user. Actual or anticipated attacks and risks may cause us to incur increasing costs, and delay development. A person who is able to circumvent our security measures might be able to misappropriate our or our users’ proprietary information, cause interruption in our operations, damage our computers or those of our users, or otherwise damage our reputation and platform. Any compromise of our security could result in a violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, and a loss of confidence in our security measures, which could harm our business.

We may infringe the intellectual property rights of others, which may prevent or delay our product development efforts and stop us from commercializing or increase the costs of commercializing the digital asset data analytics platform.

Our commercial success depends significantly on our ability to operate without infringing the patents and other intellectual property rights of third parties however, we may not always be able to determine that we are using or accessing protected information or software. For example, there could be issued patents of which we are not aware that our products infringe. There also could be patents that we believe we do not infringe, but that we may ultimately be found to infringe. Moreover, patent applications are in some cases maintained in secrecy until patents are issued. The publication of discoveries in scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made and patent applications were filed. Because patents can take many years to issue, there may be currently pending applications of which we are unaware that may later result in issued patents that our products infringe.

Accordingly, we could expend significant resources defending against patent infringement and other intellectual property right claims; which could require us to divert resources away from operations. Any damages we are required to pay or injunctions against our continued use of such intellectual property in resolution of such claims may cause a material adverse effect to our business and operations, which could adversely affect the trading price of our securities and harm our investors.

Risks Related to the Purchase Agreement with Cavalry

The sale or issuance of our common stock to Cavalry may cause dilution and the sale of the shares of common stock acquired by Cavalry, or the perception that such sales may occur, could cause the price of our common stock to fall.

On May 13, 2019, we entered into the Purchase Agreement with Cavalry, pursuant to which Cavalry has committed to purchase up to $10,000,000 of our common stock. As of the date of this prospectus,filing, we have directed Cavalry to purchase 3,973,80919,363,353 shares (excluding the 67,598 pro rata510,388 commitment and pro-rata commitment shares) and have received approximately $1,158,639.$3,034,541. The purchase shares that may be sold pursuant to the Purchase Agreement may be sold by us to Cavalry at our discretion from time to time over a 36-month period commencing after the SEC has declared effective the registration statement that includes this prospectus.covering the respective shares. The purchase price for the shares that we may sell to Cavalry under the Purchase Agreement will fluctuate based on the price of our common stock. Depending on market liquidity at the time, sales of such shares may cause the trading price of our common stock to fall. Additionally, the amount that we may sell to Cavalry will be limited to the Daily Trading Dollar Volume on the day of, or day before, the Put. If the trading volume and/or price of our common stock is low, our ability to raise capital under the Purchase Agreement will be limited and/or take an extensive time to raise capital.

We generally have the right to control the timing and amount of any sales of our shares to Cavalry, except that, pursuant to the terms of our agreements with Cavalry, we would be unable to sell shares to Cavalry on any day when the closing sale price of our common stock is below $0.005 per share, subject to adjustment as set forth in the Purchase Agreement. Cavalry may ultimately purchase all, some or none of the shares of our common stock that may be sold pursuant to the Purchase Agreement in connection with our rights to direct Cavalry’s purchases at our discretion and, after it has acquired shares, Cavalry may sell all, some or none of those shares. Therefore, sales to Cavalry by us could result in substantial dilution to the interests of other holders of our common stock. Additionally, the sale of a substantial number of shares of our common stock to Cavalry, or the anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.

We may not be able to access sufficient funds under the Purchase Agreement with Cavalry when needed.

Our ability to sell shares to Cavalry and obtain funds under the Purchase Agreement is limited by the terms and conditions in the Purchase Agreement, including restrictions on when we may sell shares to Cavalry, restrictions on the amounts we may sell to Cavalry at any one time, and a limitation on our ability to sell shares to Cavalry to the extent that it would cause Cavalry to beneficially own more than 4.99% of our outstanding common stock. In addition, any amounts we sell under the Purchase Agreement may not satisfy all of our funding needs, even if we are able and choose to sell all $10,000,000 under the Purchase Agreement. Assuming all 5.6millionadditional Purchase Shares of our common stock being offered under this prospectus that may be purchased by Cavalry are sold at $0.005 per share (the floor price mentioned herein), we would receive approximately $27,985. If we elect to issue and sell more than the shares offered under thisany one prospectus to Cavalry, which we have the right, but not the obligation, to do, we must first register for resale under the Securities Act any such additional shares.shares on a subsequent prospectus.

We elected to enter into the Purchase Agreement with Cavalry as we expect that amount of capital over the next 12 months will be required for us to fully implement our business, operating and development plans. The extent we rely on Cavalry as a source of funding will depend on a number of factors including, the prevailing market price and trading volume of our common stock and the extent to which we are able to secure working capital from other sources. If obtaining sufficient funding from Cavalry were to prove unavailable or prohibitively dilutive, we will need to secure another source of funding in order to satisfy our working capital needs. Even if we sell all 5.6million remaining Purchase Sharesto Cavalry, we may still need additional capital to fully implement our business, operating and development plans. Should the financing we require to sustain our working capital needs be unavailable or prohibitively expensive when we require it, the consequences could be a material adverse effect on our business, operating results, financial condition and prospects.

The sale of our common stock to Cavalry will cause dilution and the sale of the shares by Cavalry could cause the price of our common stock to decline.

The number of shares ultimately offered for sale by Cavalry is dependent upon the number of shares sold to Cavalry under the Purchase Agreement. The purchase price for the common stock to be sold to Cavalry pursuant to the Purchase Agreement will fluctuate based on the price of our common stock. Depending upon market liquidity at the time, a sale of shares by Cavalry at any given time could cause the trading price of our common stock to decline. After it has acquired such shares, Cavalry may sell all, some or none of such shares. Therefore, sales to Cavalry by us under the Purchase Agreement will result in substantial dilution to the interests of other holders of our common stock. The sale of a substantial number of shares of our common stock, or anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales. However, we have the right to control the timing and amount of any sales of our shares to Cavalry.

FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements including statements regarding our liquidity, anticipated capital expenditures, and expected sales to Cavalry.

All statements other than statements of historical facts contained in this prospectus, including statements regarding our future financial position, liquidity, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions described in “Risk Factors” elsewhere in this prospectus.

Other sections of this prospectus may include additional factors which could adversely affect our business and financial performance. New risk factors emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any risk factor, or combination of risk factors, may cause actual results to differ materially from those contained in any forward-looking statements.

USE OF PROCEEDS

This prospectus relates to shares of our common stock that may be offered and sold from time to time by Cavalry. WeThe Selling Shareholders will receive noall of the proceeds from the sale of shares of common stockthe Resale Shares offered by Cavalry inthem under this offering. However, we mayprospectus. We will not receive grossany proceeds of up to $10,000,000 under the Purchase Agreement. As of the date of this prospectus, we have received $1,158,639 from the sale of the shares of common stock to Cavalry underby the Purchase Agreement. We estimate that the net proceeds to usSelling Shareholders covered by this prospectus. However, on January 15, 2021, we received $400,000 from the saleearly cash exercise of our common stock to Cavalry pursuant to the Purchase Agreement will be up to $10 million over an approximately 36-month period (ending May 13, 2022), assuming that we sell the full amount of our common stock that we have the right, but not the obligation, to sell to Cavalry under that agreement and other estimated fees and expenses. See “Plan of Distribution” elsewhere in this prospectus for more information.

We expect to use any proceeds that we receive under the Purchase Agreement for general corporate purposes, including compensating our management.Series C Warrants.

CAPITALIZATION

The following table details the Company’s capitalization as of January 22, 2021.

The table above describes the shares of common stock which are outstanding and/or are issuable under outstanding securities. The table above does not include a $200,000 12% promissory noteinclude: (i) the 2020 December Promissory Note which was issued on December 16, 2020, (ii) the 2021 Promissory Note which was issued on January 15, 2021, (iii) the Series C-2 Convertible Preferred stock which is subject to ratification by our shareholders, and (iv) the stock Options and RSUs.

The 2020 December Promissory Note is due on October 16, 2021 and is: (i) convertible at a 35% discount to the selling stockholder in December 2018. The promissory note: (i) is not convertible into anyclosing price of the Company’s securities,common stock on the date before exercise with a floor price of $0.04 per share, (ii) is not related to this offering,shall bear interest at 12% per annum (payable at maturity), and (iii) maturesconvertible at the Company’s option subject to certain limitations as set forth in the 2020 December Promissory Note.

The 2021 Promissory Note is due on September 18, 2019.November 15, 2021 and is: (i) convertible at a 35% discount to the closing price of the Company’s common stock on the date before exercise with a floor price of $0.75 per share, (ii) shall bear interest at 12% per annum (payable at maturity), and (iii) convertible at the Company’s option subject to certain limitations as set forth in the 2021 Promissory Note.

MARKET FOR COMMON STOCK

Our common stock is quoted on the OTCQB under the symbol “BTCS”. Our common stock last traded at $0.183$1.61 on September 4, 2019.January 22, 2021. As of that date there were approximately 140 shareholders of record. We believe that additional beneficial owners of our common stock hold shares in street name.

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

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our historical financial statements and the notes to those statements that appear elsewhere in this prospectus. Certain statements in the discussion contain forward-looking statements based upon current expectations that involve risks and uncertainties, such as plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under “Risk Factors.”

Overview

SubjectWe are an early entrant in the Digital Asset market and one of the first U.S. publicly traded companies to additional financing, the Company plansbe involved with Digital Assets and blockchain technologies. To our knowledge, we are one of a few public companies intending to acquire additionalboth Digital Assets and a controlling interest in one or more businesses in the Digital Asset and blockchain industries.

Digital Asset Initiatives

The Company acquires Digital Assets to provide investors with indirect ownership of Digital Assets that are not securities, such as bitcoin and ether. The Company intends to acquireacquires Digital Assets through open market purchases. We are not limiting our assets to a single type of Digital Asset and may purchase a variety of Digital Assets that appear to benefit our investors, subject to the limitations contained within this prospectus regarding Digital Securities. As of the date of this prospectusJanuary 22, 2021, the Company owns 14.92 bitcoin. The Company is also seeking to acquire a controlling interest in one or more companies inhad the blockchain industry.following Digital Assets: