NOTE 5 - STOCKHOLDERS’ EQUITY

Series B Convertible Preferred Stock

As of December 31, 2019 and 2018, there was no share of Series B Convertible Preferred Stock outstanding.

Series E Preferred Stock

During the year ended December 31, 2018, 1,378 shares of the Series E Convertible Preferred Stock had been converted to the Company’s Common Stock and there was no Series E Convertible Preferred Stock outstanding as of December 31, 2019 and 2018.

Common Stock

At The Market Offering Agreement

On July 19, 2019, we entered into an At The Market Offering Agreement (the “Agreement”) with H.C. Wainwright & Co., LLC (“H.C. Wainwright”) which establishes an at-the-market equity program pursuant to which we may offer and sell shares of our common stock, par value $0.0001 per share (“Common Stock”), from time to time as set forth in the Agreement. The Agreement provides for the sale of shares of our Common Stock (“Shares”) having an aggregate offering price of up to $7,472,417 (the Company’s ability to offer shares under the Agreement is limited to the amount of shares it may sell pursuant to General Instruction I.B.6. of Form S-3.

Subject to the terms and conditions set forth in the Agreement, H.C. Wainwright will use its commercially reasonable efforts consistent with its normal trading and sales practices to sell the Shares from time to time, based upon our instructions. We have provided H.C. Wainwright with customary indemnification rights, and H.C. Wainwright will be entitled to a commission at a fixed rate equal to three percent (3.0%) of the gross proceeds per Share sold. In addition, we have agreed to pay certain expenses incurred by H.C. Wainwright in connection with the Agreement, including up to $25,000 of the fees and disbursements of their counsel. The Agreement will terminate upon the earlier of sale of all of the Shares under the Agreement or July 19, 2022 unless terminated earlier by either party as permitted under the Agreement.

Sales of the Shares, if any, under the Agreement shall be made in transactions that are deemed to be “at the market offerings” as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), including sales made by means of ordinary brokers’ transactions, including on the Nasdaq Capital Market, at market prices or as otherwise agreed with H.C. Wainwright. We have no obligation to sell any of the Shares, and, at any time, we may suspend offers under the Agreement or terminate the Agreement.

During the year ended December 31, 2019, 172,126 shares of common stock were issued under the At The Market Offering for the total proceeds of $255,893, net of offering cost of $10,399.

Asset Purchase Agreement

On September 30, 2019, the Company consummated the purchase of 6000 S-9 Bitmain 13.5 TH/s Bitcoin Antminers (“Miners”) from SelectGreen Blockchain Ltd., a British Columbia corporation, for which the purchase price was $4,086,250 or 2,335,000 shares of its common stock at a price of $1.75 per share. As a result of an exchange cap requirement imposed in conjunction with the Company’s Listing of Additional Shares application filed with Nasdaq to the transaction, the Company issued 1,276,442 shares of its common stock which represented $2,233,773 of the $4,086,250 (constituting 19.9% of the issued and outstanding shares on the date of the Asset Purchase Agreement) and upon the receipt of shareholder approval, at the Annual Shareholders Meeting to be held on November 15, 2019, the Company can issue the balance of the 1,058,558 unregistered common stock shares. The shareholders did approve the issuance of the additional shares at the Annual Shareholders Meeting. The Company has issued an additional 474,808 at $0.90 per share. The $513,700 set forth on the balance sheet for mining servers payable reflects the fair value of 583,750 shares to be issued at $0.88 per share to conclude the purchase of the Miners at December 31, 2019. The Company recorded change in fair value of mining payable of $507,862 during the year ended December 31, 2019. There is no requirement for the Company to make a payment in cash in lieu of issuing the remaining shares.

Other 2019 Common Stock Activity

On October 1, 2019, the Company issued 150,000 shares of its common stock to a consultant. The fair value of the common stock was $259,500.

2018 Common Stock Activity

During the year ended December 31, 2018, the Company issued 954,871 shares of Common Stock to Note Holders in connection with debt conversions, 54,600 shares of Common Stock were issued to Board members for their services, 1,377,886 shares of Common Stock with respect to the conversion of Series E Convertible Preferred Stock, 4,433 shares of Common Stock in connection with the exercise of a warrant, 62,500 shares of Common Stock issued pursuant to a patent purchase, 56,250 shares of Common Stock issued to consultants and 750,000 to GBV as a termination fee for canceling the merger agreement. The termination fee was valued based upon the closing stock price as of June 28, 2018 or $3.80 per common share.

Common Stock Warrants

A summary of the status of the Company’s outstanding stock warrants and changes during year ended is as follows:

Common Stock Options

On July 22, 2019, the Company’s board has approved to issue 275,000 shares of option to purchase the Company’s common stock to 8 employees and consultants for the service they provided. The options have a five-year term with an exercise price of $2.04, vesting 50% on the date of grant and 25% on each 6 months anniversary of the date of grant. The options were valued based on the Black-Scholes model, using the strike of $2.04 per share, an average expected term of 2.69 years, volatility of 39.46% based on the average volatility of comparable companies over the comparable prior period.

On October 12, 2018, the Company granted its executive officers and board members 1,362,500 option to purchase 1,362,500 shares of the Company’s common stock, with an exercise price of $2.32 per share, vesting 50% on the date of grant and 25% on each 6 months anniversary of the date of grant. The options were valued based on the Black-Scholes model, using the strike of $2.32 per share, an average expected term of 5.19 years, volatility of 39.35% based on the average volatility of comparable companies over the comparable prior period.

The grant date fair value of stock options granted to employees during the years ended December 31, 2019 and 2018 were $163,165 and $1,377,678, respectively. Estimated future stock-based compensation expense relating to unvested stock options is approximately $28,590 as of December 31, 2019 and will be amortized over the remaining 0.8 year.

A summary of the stock options as of December 31, 2019 and changes during the period are presented below:

A summary of the stock options as of December 31, 2018 and changes during the period are presented below: