The following discussion and analysis of the results of operations and financial condition of the Company for the quarters ended November 30, 2022, and 2021, should be read in conjunction with the other sections of this Quarterly Report, including the Financial Statements and notes thereto of the Company included in this Quarterly Report. The various sections of this discussion contain forward-looking statements, all of which are based on our current expectations and could be affected by the uncertainties and risk factors described throughout this Quarterly Report as well as other matters over which we have no control. See "Cautionary Note Regarding Forward-Looking Statements." Our actual results may differ materially. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report.





Overview

Since July 2021, our business has been as a blockchain technology company that is building out industrial scale digital asset mining, equipment sales and hosting operations. The Company's primary business is hosting third-party equipment used in mining of digital asset coins and tokens, specifically Bitcoin, as well as self-mining for its own account. Our state-of-the-art facilities will be specifically designed and constructed for housing advanced mining equipment. Our data centers will provide power, racks, proprietary thermodynamic management (heat dissipation and airflow management), redundant connectivity, 24/7 security, as well as software which provide infrastructure management and custom firmware that boost performance and energy efficiency.

We plan to operate our data centers using immersion cooling technology. Immersion cooling is the process of submerging computer components (or full servers) in a thermally, but not electrically, conductive liquid (dielectric coolant) allowing higher heat transfer performance than air and many other benefits. Immersion cooling can be up to 95% more efficient than standard air cooling, producing an estimated PUE (power usage effectiveness) of 1.05. This cooler environment has been shown to extend machine lives by 30% or longer.

We initially decided to locate our initial facilities in Trinidad, because it has some of the cheapest electricity in the world due to its abundant supplies of oil and gas and because some of our technical staff is located there. We have entered into an agreement with Telecommunications Services of Trinidad & Tobago Limited ("TSTT"), the largest and oldest telecom company in Trinidad, to co-locate up to 125 800 kw containers for hosting digital asset miners. TSTT has up to 93 potential locations for co-location of our containers. Under the agreement, we have the option, but not obligation, to co-locate containers at our own pace. We pay a fixed amount per container, plus the actual electricity costs incurred by our containers in the amount billed to TSTT by the local utility without any markup. The agreement provides that our hosting containers will be billed for electricity usage at the local utility's standard rates, which is the greater of 3.5 cents per kwh or 75% of the declared reserve capacity, which is equal to the customer's highest expected monthly kilovolt-ampere demand at $7.40. The term of the agreement expires on October 14, 2031. We have the right to terminate our agreement with TSTT at any time that the price for electricity consumption exceeds $0.05 per kwh.

Until our permanent hosting facilities are operational, we are temporarily leasing space for a small number of ASIC computers with a co-host. We intend to move all of our currently owned and customer owned miners to our new TSTT hosting facilities once they are operational.

In October 2022, we completed the installation of initial hosting containers under our agreement with TSTT. However, prior to commencing operations, TSTT advised us that the utility had refused to honor its existing agreement with TSTT with respect to electricity supplied to our pilot hosting site, and instead indicated that the rate would be approximately $0.09 per kwh. TSTT has informed us that it does not believe that its contract with the local utility entitles it to vary the rate it charges for the use of electricity and has protested the decision. At this time, we are unable to predict how this dispute between TSTT and the utility will be resolved, what form any resolution may take or how long any resolution may take. Accordingly, we are delaying the installation of additional containers in Trinidad until this dispute is resolved. Until the dispute between TSTT and the utility is resolved, we intend to focus our efforts on purchasing or developing hosting locations in the United States and Canada, either directly or in joint ventures with other industry participants.

In light of the recent developments in Trinidad, we are focusing our efforts in the near term on developing hosting locations in the United States and Canada. We are exploring situations where medium to long-term power agreements may be available at affordable prices, whether using traditional power sources such as coal or natural gas, as well as environmentally friendly sources such as hydroelectric, wind and solar-backed projects, which might allow us to generate collateral revenue from the sale of excess power to the local utility grid and from the generation of saleable carbon credits.









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We recently entered into a joint arrangement whereby we contributed one immersion contain and six transformers, and sold four immersion containers, to a joint venture with a third party that has procured a location and a power purchase agreement in Pecos, Texas.

Our digital asset mining operation is focused on the generation of digital assets by solving complex cryptographic algorithms to validate transactions on specific digital asset network blockchains, which is commonly referred to as "mining." Mining requires the use of specialized computers equipped with application-specific integrated circuit (ASIC) chips (known as "miners") to solve complex cryptographic algorithms in support of the Bitcoin blockchain (in a process known as "solving a block") in exchange for digital asset rewards (primarily bitcoin). Whether we are hosting our client's computers or mining for our own account with our own computers, the miners participate in "mining pools" organized by "mining pool operators" in which we or our clients share mining power (known as "hash rate") with the hash rate generated by other miners participating in the pool to earn digital asset rewards. The mining pool operator provides a service that coordinates the computing power of the independent mining enterprises participating in the mining pool. Fees are paid to the mining pool operator to cover the costs of maintaining the pool. The pool uses software that coordinates the pool members' mining power, identifies new block rewards, records how much hash rate each participant contributes to the pool, and assigns digital asset rewards earned by the pool among its participants in proportion to the hash rate each participant contributed to the pool in connection with solving a block.

Our digital asset self-mining activity competes with a myriad of mining operations throughout the world to complete new blocks in the blockchain and earn the reward in the form of an established unit of a digital asset. Revenue from digital asset mining and hosting third party digital asset miners are impacted by volatility in bitcoin prices, as well as increases in the Bitcoin blockchain's network hash rate resulting from the growth in the overall quantity and quality of miners working to solve blocks on the Bitcoin blockchain and the difficulty index associated with the secure hashing algorithm employed in solving the blocks. Gross profits from digital asset mining are primarily impacted by the cost of electricity to operate the miners and to a lesser extent by other operating costs. While we expect to sell or exchange a portion of the digital assets we mine to fund our growth strategies or for general corporate purposes, we may hold our digital assets as investments in anticipation of continued adoption of digital assets as a "store of value" and a more efficient medium of exchange than traditional fiat currencies.

As the demand for digital assets increases and digital assets become more widely accepted, there is an increasing demand for professional-grade, scalable infrastructure to support growth of the blockchain ecosystem. We expect to continually evaluate the performance of our data centers, including our ability to access additional megawatts of electric power and to expand our total self-mining and customer and related party hosting hash rates.

We also generate revenues from the advantageous purchase and sale of equipment used for digital asset mining and hosting. We have relationships with some suppliers that enable us to acquire highly desired equipment at attractive prices, which we plan to resell to third parties. In most cases, resales of digital asset mining equipment would be to our hosting customers, which have the dual benefit of generating short-term gross profits from the equipment sale as well as growing the customer base of our hosting business. We have recently resold some hosting equipment in Trinidad to third parties that we determined would not be need in the short-term due to the dispute between TSTT and the local utility described above.

The primary factors that will impact future hosting revenues include: (i) the price of bitcoin, since hosting revenues are primarily a percentage of bitcoin mined by clients; (ii) the completion of operational hosting facilities, as potential hosting clients have been reluctant to sign contracts prior to the date the Company has a fully operational hosting facility; and (iii) the availability of attractive electricity prices, since power usage is the primary marginal cost for any mining operation. Our hosting revenues will also be impacted by the resolution of the dispute between TSTT and the local utility regarding the electricity rate that will be charged our co-location facilities in Trinidad, as well as by the timing of the resolution.

The primary factors that will impact proprietary mining revenues include: (i) the price of bitcoin; (ii) the completion of operational facilities to provide us with a cost-effective facility to operate in; (iii) the availability of attractive electricity prices, since power usage is the primary marginal cost for any mining operation; and (iv) the availability of mining equipment suitable for the Company's immersion hosting environment at attractive prices and available capacity in the Company's hosting facilities. Our proprietary mining activities will also be impacted by the resolution of the dispute between TSTT and the local utility regarding the electricity rate that will be charged our co-location facilities in Trinidad, as well as by the timing of the resolution.









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Revenues from cryptocurrency mining, whether derived from hosting clients or from proprietary mining, are impacted significantly by volatility in Bitcoin prices, as well as increases in the Bitcoin blockchain's network hash rate resulting from the growth in the overall quantity and quality of miners working to solve blocks on the Bitcoin blockchain and the difficulty index associated with the secure hashing algorithm employed in solving the blocks. Below are changes in key metrics effecting the profitability of mining Bitcoin during the quarter ended November 30, 2022:





                          As of November     As of August 31, 2022    Percent Change
                             30, 2022

Network hash rate           253.48 EH/s           219.86 EH/s            15.2915%
Difficulty index          36.95 trillion        30.98 trillion           19.2834%
Bitcoin market price        $17,168.57            $20,049.76             -14.3702%

The primary factors that will impact resales of mining equipment include the availability of equipment at attractive prices and the number of participants willing to enter the mining business or expand their existing operations, which is highly correlated to the margin from mining, as determined by the market price of bitcoin and prevailing energy costs. Also, our resales of mining equipment will be impacted by the existence of hosting capacity with attractive electricity rates in our hosting operations.





Results of Operations

Comparison of Results of Operations for the Three Months Ended November 30, 2022, and 2021.





Revenues

During the three months ended November 22, 2022, the Company generated $101,716 in revenue, compared to $-0- revenue in the three months ended November 22, 2021.

During the three months ended November 30, 2022, the Company generated $28,916 in Bitcoin revenue from self-mining digital assets, compared to $-0- revenue in the three months ended November 22, 2021. The Company currently owns 362 miners that it plans to use for proprietary mining, the deployment of which will occur when its immersion hosting environment is operational. In addition, the Company is seeing good opportunities to acquire mining equipment at attractive prices, which should create opportunities for additional revenues. Mining revenues in the three months ended November 30, 2022 were adversely impacted by delays in opening the Company's first hosting facility in Trinidad. The facility was completed in October 2022, but its opening has been delayed facility pending resolution of a dispute between our co-location partner in Trinidad and the electricity company in Trinidad over the price that will be charged for electricity provided to our hosting operations. At this time, we do not have any information on when the dispute will be resolved and in what manner. As a consequence, we are currently focusing our efforts on the development of hosting centers in the United States and Canada, both directly and in joint ventures with third parties. Our hosting revenue was derived from the deployment of a minority of our miners at a temporary facility in Trinidad.

During the three months ended November 22, 2022, the Company generated $72,800 in revenue from equipment sales, compared to $-0- revenue in the three months ended November 22, 2021. During the three months ended November 22, 2022, the Company sold four hosting containers to a joint venture that is constructing a hosting facility in Texas for $1,200,000. The purchase price is payable pursuant to a promissory note bearing interest at 5% per annum, and is paid by 41 equal monthly payments of $31,204 commencing December 30, 2022. Under the guidelines of ASC 606, the Company reports revenue from equipment sales which are vendor financed by the Company under the installment sale method.

The Company also expects to generate additional revenues from the resale of certain hosting equipment, primarily containers and transformers.

The Company did not have any revenues from hosting during the three months ended November 22, 2022 or 2021. The lack of hosting revenues in the three months ended November 20, 2022 was because of the Company's decision to cease hosting third party miners, and concentrate on self-mining, during the quarter. In the current market environment, the price of ASIC miners has fallen to the point that we believe self-mining is more profitable than hosting third party miners. During the quarter, the Company reached an agreement to terminate its only hosting client, and repurchased the miners which it had previously sold to the hosting client. The lack of hosting revenues in the three months ended November 20, 2021 was because the Company had not commenced operations at that time.









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The primary factors that will impact our revenues in subsequent periods are described in the "-Overview" above.





Cost of Sales

Cost of sales were $118,476 in the three months ended November 30, 2022, compared to $-0- in the three months ended November 30, 2021, when there was no revenue.

Cost of sales related to mining was $75,395 in the three months ended November 30, 2022, compared to $-0- in the three months ended November 30, 2021, when there was no revenue from mining. Cost of sales normally includes electricity, utilities, facilities costs, depreciation and supplies. For the three months ended November 30, 2022, major components of cost of sales include rent to house mining and hosting equipment in temporary facilities, electricity, and supplies. The Company believes that cost of sales related to mining as a percentage of revenues were greater in the three months ended November 30, 2022 than what it expects to incur in future periods, as cost of sales in the most recent period were inflated by costs associated with maintaining temporary hosting facilities while our permanent hosting facility was being completed, and costs from the completion of our new hosting facility that we determined not to capitalize. Furthermore, our temporary hosting facilities carried electricity costs that were materially higher than the electricity costs that we expect to incur in our permanent facilities.

Cost of sales related to sales of mining equipment was $43,080 for the three months ended November 30, 2022, compared to $-0- in the three months ended November 30, 2021 when there was no revenue from equipment sales. Cost of sales consists of the purchase price of equipment sold, plus shipping and value added tax on the equipment.

Since we are in the early stages of setting up our infrastructure to generate higher levels of revenues, we expect that our cost of sales to generate revenue from hosting or mining for our own account will exceed the revenue we generate until we achieve sufficient economies of scale by deploying more miners. In future periods, the largest component of our cost of sales from mining will consist of electricity costs.





Operating Expenses

During the three months ended November 30, 2022, the Company incurred $491,921 in operating expenses, compared to $664,043 in operating expenses during the three months ended November 30, 2021. Major components of operating expenses for the 2022 period as compared to the 2021 period were:





                                             Three months       Three months
                                                ended              ended           Percentage
                                             November 30,       November 30,
                                                 2022               2021             Change

General and administrative expenses         $       77,532     $       28,538              172%
Professional fees                                  161,738            623,505              (74% )
Related party compensation                         109,393             12,000              912%
Impairment of fixed assets                         122,950                  -               N/A
Impairment of cryptocurrency                         3,523                  -               N/A
Total operating expenses                    $      475,136     $      664,043              (28% )

The lower level of operating expenses in the 2022 period as compared to the 2021 period is primarily attributable to reduced professional fees in 2022 as compared to 2021. Included in operating expenses in the three months ended November 30, 2022 was $75,429 in non-cash expenses due to the issuance of common stock for professional services and to related parties as compensation, as compared to $550,000 in the three months ended November 30, 2021. We also incurred $122,950 in impairment expenses in the three months ended November 30, 2022 to write-down certain mining equipment to current market prices. Additionally, we incurred $3,523 in impairment expenses on our cryptocurrency holdings due to the decline in the price of Bitcoin we are holding. The Company expects that operating expenses will trend materially higher in future periods as the Company begins paying regular compensation to existing officers and directors, hires additional employees, and incurs other costs associated with the commencement of operations.









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Other Income (Expense)

During the three months ended November 30, 2022, the Company incurred $21,230 in other income, as compared to ($44,713) of other expense in the three months ended November 30, 2021. The significant change in other income (expense) was mainly attributable to lower interest expense in the three months ended November 30, 2022 of ($4,808), as compared to ($44,713) in the three months ended November 30, 2021, which was due to lower outstanding loan balances during the 2022 period. In addition, the Company recorded other income of $16,939 attributable to the termination of a hosting contract, and interest income of $9,099 in te three months ended November 30, 2022, as compared to $-0- and $-0- in the three months ended November 30, 2021. The Company expect interest income to trend higher as it finances the sale of more equipment.





Net (Loss)

As a result of the foregoing, during the three months ended November 30, 2022, the Company incurred a net loss of ($470,665), or ($0.01) per share, as compared to a net loss of ($708,756) or $(0.02) per share during the three months ended November 30, 2021. The decrease in the Company's net loss in the three months ended November 30, 2022, compared to the three months ended November 30, 2021, is attributable to the factors discussed above.

Liquidity and Capital Resources

As of November 30, 2022, the Company had $180,646 in cash on hand.

During the three months ended November 30, 2022, the Company had a net loss of ($470,665).

Cash flows used in operating activities were ($1,182,918) for the three months ended November 30, 2022, compared to cash flows used of ($69,518) for the three months ended November 30, 2021. The substantial increase in cash flows used in operating activities for the three months ended November 30, 2022 was primarily attributable to an increase in notes receivable of $1,197,450 from the sale of equipment, which was offset by a decrease in non-cash stock-based compensation from $550,000 in 2021 as compared to $75,429 in 2022, an increase in impairment losses from $-0- in 2021 to $122,950 in 2022, an increase in deferred revenues from $-0- in 2021 to $255,673 in 2022, and an increase in depreciation from $-0- in 2021 to $59,053 in 2022, as well as minor changes in other balance sheet accounts.

Cash flows generated by investing activities were $571,014 for the three months ended November 30, 2022, compared to cash flows used in investing activities of ($1,477,148) for the three months ended November 30, 2021. Cash flows from investing activities were mainly impacted by purchases of equipment for $1,477,148 in the three months ended November 30, 2021, as compared to sales of $1,558,443 of equipment in the three months ended November 30, 2022, which was offset by the contribution of $987,429 of equipment to a joint venture in the three months ended November 30, 2022.

Cash flows provided by financing activities were $400,000 for the three months ended November 30, 2022, compared to cash flows provided by financing activities of $1,470,000 for the three months ended November 30, 2021. The cash flows provided by financing activities in both periods were entirely provided by draws under a line of credit with Innovative Digital Investors Emerging Technology, L.P. ("IDI"), a limited partnership controlled by Jonathan Bates, our Chairman, and Raymond Mow, our chief financial officer, and the reduction in cash flows in 2022 was due to lower draws in the 2022 period as compared to the 2021 period.

On October 19, 2022, the Company entered into a new Line of Credit Agreement with IDI (the "2022 LOC Agreement"), under which the Company has the right to borrow up to $1,000,000 to finance the purchase of equipment necessary for the operation of the Company's business, and related working capital. Loans under the 2022 LOC Agreement accrue interest at twelve percent (12%) per annum, compounded on a 30/360 monthly basis until the loans have been repaid in full. The Company has the right to submit draw requests under the 2022 LOC Agreement until April 15, 2023. Each draw request is subject to the approval of IDI in its sole discretion. The amount drawn, plus all accrued interest therein, is repayable in full on December 1, 2023. As of the date of this Report the amount borrowed under the 2022 LOC Agreement amounted to $400,000.









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The Company believes that cash on hand, amounts that may borrow under the 2022 LOC Agreement, and expected receipts from the sale of equipment, and revenue from self-mining will provide it with sufficient liquidity to fund its operations for the next 12 months. The Company expects to receive approximately $41,000 monthly from the sale of two immersion containers in August 2022, and approximately $31,000 per month from the sale of four immersion containers to a joint venture in which the Company will be both lender to and equity investor. Currently, the Company owns 362 miners which it plans to use for self-mining. Assuming neither the price of bitcoin nor the difficulty index changes, and based on the Company's expected electricity costs, the Company estimates that it could generate approximately $19,500 in monthly gross profit from the miners once they are moved to a permanent location in Trinidad. Other sources of revenue that the Company expects to receive include equity distributions from the ROC Digital joint venture once it becomes operational in late 2022. The Company does not budget to include any proceeds from the exercise of its outstanding warrants because it is not able to predict when or if the market price of its common stock will exceed the exercise price of its warrants.

Nevertheless, while the Company does not need additional capital to maintain operations, it will need additional capital to expand its digital asset hosting and mining business, and take advantage of opportunities in the marketplace that currently exist due to the recent decline in digital asset prices. Therefore, the Company has engaged an investment banker and is pursuing additional capital-raising alternatives, including the potential issuance of common stock in a private placement, or the issuance of convertible notes or preferred stock. There is no assurance that the Company will be able to raise additional capital or that the terms of any capital raise are not dilutive to current shareholders or carry other terms that are unfavorable to the Company and its shareholders.

Critical Accounting Policies and Estimates

Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles, or "GAAP." The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are fully described in Note 1 to our financial statements appearing elsewhere in this Quarterly Report, and we believe those accounting policies are critical to the process of making significant judgments and estimates in the preparation of our financial statements.

Off-Balance Sheet Arrangements

None.

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