CRYPTOSTAR CORP.

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

(Expressed in US dollars)

Notice of No Auditors Review of Condensed Interim Consolidated Financial Statements

Under National Instrument 51-102, if an auditor has not performed a review of condensed interim consolidated financial statements, they must be accompanied by a notice indicating that the condensed interim financial statements have not been reviewed by an auditor.

The accompanying condensed interim consolidated financial statements (unaudited) of CryptoStar Corp. (the “Company”) have been prepared by management and approved by the Audit Committee and the Board of Directors of the Company.

The Company’s independent auditors have not performed a review of these unaudited condensed interim consolidated financial statements in accordance with the standards established by the Canadian Chartered Professional Accountants (CPA) Canada for a review of interim financial statements by an entity’s auditors.

CRYPTOSTAR CORP. CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2021 AND 2020

CRYPTOSTAR CORP. Condensed Interim Consolidated Statements of Financial Position (Unaudited)

(Expressed in US dollars)

The accompanying notes are an integral part of these condensed interim consolidated financial statements

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CRYPTOSTAR CORP.

Condensed Interim Consolidated Statements of Comprehensive Loss (Unaudited) (Expressed in US dollars)

The accompanying notes are an integral part of these condensed interim consolidated financial statements

2

CRYPTOSTAR CORP. Condensed Interim Consolidated Statements of Changes in Equity (Unaudited)

(Expressed in US dollars)

The accompanying notes are an integral part of these condensed interim consolidated financial statements

3

CRYPTOSTAR CORP. Condensed Interim Consolidated Statements of Cash Flows (Unaudited)

(Expressed in US dollars)

The accompanying notes are an integral part of these condensed interim consolidated financial statements

4

CRYPTOSTAR CORP. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended June 30, 2021 and 2020

(Expressed in US dollars)

1. NATURE OF OPERATIONS

CryptoStar Corp. (the “Company” or “CryptoStar”), was incorporated under the Ontario Business Corporations Act on January 6, 2017.

The Company was incorporated under the Business Corporations Act (Ontario) on January 6, 2017. The registered address and head office of the Company is located at 181 Bay Street, Suite 4400, Toronto, Ontario, Canada M5J 2T3. The Company’s common shares are listed on the TSX Venture Exchange (“TSXV”) under the trading symbol “CSTR”. The Company operates in the distributed ledger technology space, utilizing specialized equipment (“Miners”) to perform computationally intensive cryptographic operations to validate transactions on the Blockchain (a process known as “Mining”), receiving digital currencies (primarily Bitcoin and Ethereum).

These condensed interim consolidated financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. As at June 30, 2021, the Company has an accumulated deficit of $30,317,926 (December 31, 2020 – $26,958,729) including a loss for the six months ended June 30, 2021 of $3,359,197 (June 30, 2020 – $1,019,767). These condensed interim consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities which might be necessary should the Company be unable to continue in existence.

2. BASIS OF PRESENTATION

Statement of Compliance

The notes presented in these condensed interim consolidated financial statements include only significant events and transactions and are not fully inclusive of all matters normally disclosed in the annual audited consolidated financial statements; thus, these condensed interim consolidated financial statements are referred to as condensed. These condensed interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the years ended December 31, 2020 and 2019.

These condensed interim consolidated financial statements for the three and six months ended June 30, 2021 are expressed in US dollars and follow the same accounting policies and methods of their application as set out in the audited consolidated financial statements for the years ended December 31, 2020 and 2019. These condensed interim consolidated financial statements comply with International Accounting Standard 34, Interim Financial Reporting of the International Financial Reporting Standards, as issued by the International Accounting Standards Board (“IFRS-IASB”) and reflect all adjustments which are necessary for a fair statement of the results for the interim periods presented.

The condensed interim consolidated financial statements of the Company as at and for the three and six months ended June 30, 2021 comprise the Company and its wholly owned subsidiaries CryptoStar Holdings Inc. (“CHI”) and CryptoStar USA, Inc. (“CryptoStar USA”).

The Board of Directors approved these condensed interim consolidated financial statements for the three and six months ended June 30, 2021 on August 30, 2021.

Basis of Measurement

These condensed interim consolidated financial statements have been prepared on the historical cost basis except for certain financial instruments, which are measured at fair value.

For comparative purposes, the Company has reclassified certain immaterial items on the comparative consolidated statement of financial position, consolidated statement of comprehensive loss and consolidated statement of cash flows to conform with the current period’s presentation.

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CRYPTOSTAR CORP. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended June 30, 2021 and 2020

(Expressed in US dollars)

2. BASIS OF PRESENTATION (continued)

Functional and Presentation Currency

These condensed interim consolidated financial statements are presented in US dollars, which is the functional currency of the Company’s subsidiaries. The functional currency of the Company is the Canadian dollar.

Foreign currency transactions are recorded at the exchange rate as at the date of the transaction. At each statement of financial position date, monetary assets and liabilities are translated using the period end foreign exchange rate. Non-monetary assets and liabilities in foreign currencies other than the functional currency are translated using the historical rate. All gains and losses on translation of these foreign currency transactions are included in the profit and loss.

3. CHANGES IN ACCOUNTING STANDARDS

Standards, Amendments and Interpretations Issued but not yet Adopted

The following new standards, amendments and interpretations have been issued but are not effective for the three and six months ended June 30, 2021 and, accordingly, have not been applied in preparing these condensed interim consolidated financial statements.

Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)

In August 2020, upon completion of the IFRS amendments to facilitate the IBOR reform, the IASB issued Interest Rate Benchmark Reform – Phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (“Phase 2 Amendments”). In relation to changes in financial instruments that are directly required by the IBOR reform, Phase 2 Amendments mainly provide (i) a practical expedient to account for a change in the basis for determining the contractual cash flows of a financial asset or financial liability that is required by the IBOR reform by updating the effective interest rate of the financial asset or financial liability; (ii) exceptions to the hedge accounting requirements providing relief from discontinuing hedge relationships because of changes to hedge documentation required by the IBOR reform; and (iii) certain additional disclosures on additional information about the Company’s exposure to risks arising from the IBOR reform and related risk management activities. IFRS 16 has also been amended to provide a temporary exception addressing situations where lease agreements specifically refer to an IBOR and will need to be amended as a result of the IBOR reform. Lessees are required to remeasure their lease liabilities in a similar fashion to any other change in estimate, rather than as a lease modification. The amount of the remeasurement is recognized as an adjustment to the right-of-use assets. Phase 2 Amendments are effective for annual reporting periods beginning on or after January 1, 2021. Earlier application is permitted. The Company is assessing the potential impact of these amendments.

Insurance Contracts

In May 2017, the International Accounting Standards Board (“IASB”) issued IFRS 17 – Insurance Contracts (“IFRS 17”), which replaces IFRS 4 – Insurance Contracts and establishes a new model for recognizing insurance policy obligations, premium revenue, and claims-related expenses. IFRS 17 is effective for annual periods beginning on or after January 1, 2021. In June 2020, the IASB issued ‘Amendments to IFRS 17’ to address concerns and implementation challenges that were identified after IFRS 17 was published in 2017. The amendment also deferred the effective date for two years to January 1, 2023. Early adoption is permitted. The Company has assessed that there will be no potential impact of this standard.

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(Expressed in US dollars)

CRYPTOSTAR CORP. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended June 30, 2021 and 2020

3. CHANGES IN ACCOUNTING STANDARDS (continued)

Improving Accounting Policy Disclosures and Clarifying Distinction between Accounting Policies and Accounting Estimates (Amendments to IAS 1 and IAS 8)

In February 2021, the IASB issued narrow-scope amendments to IAS 1 Presentation of Financial Statements, IFRS Practice Statement 2 Making Materiality Judgments and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

The amendments to IAS 1 require companies to disclose their material accounting policy information rather than their significant accounting policies. The amendments to IFRS Practice Statement 2 provide guidance on how to apply the concept of materiality to accounting policy disclosures.

The amendments to IAS 8 clarify how companies should distinguish changes in accounting policies from change in accounting estimates. That distinction is important because changes in accounting estimates are applied prospectively only to future transactions and other future events, but changes in accounting policies are generally also applied retrospectively to past transactions and other past events.

The amendments are effective for annual reporting periods beginning on or after January 1, 2023. Earlier application is permitted. The Company is assessing the potential impact of these amendments.

4. DEPOSITS AND PREPAID EXPENSES

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CRYPTOSTAR CORP. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended June 30, 2021 and 2020

(Expressed in US dollars)

5. DIGITAL CURRENCIES

Digital currencies consist of Bitcoin and Ethereum coins. Below is a continuity of digital currencies mined, acquired through purchase, sold and fair valued during the six months ended June 30, 2021.

During the six months ended June 30, 2021, the Company disposed 0.96 bitcoins and 3.44 Ethereum coins for $48,329 in cash and realized a gain of $1,339 (June 30, 2020 – realized loss of $6,320).

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CRYPTOSTAR CORP. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended June 30, 2021 and 2020

(Expressed in US dollars)

6. PROPERTY AND EQUIPMENT

During the six months ended June 30, 2021, the Company acquired $1,122,031 of mining equipment in exchange of common shares and common share purchase warrants. Please refer to Note 13 for further information on the transaction.

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CRYPTOSTAR CORP. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended June 30, 2021 and 2020

(Expressed in US dollars)

7. INTANGIBLE ASSETS

8. RIGHT-OF-USE ASSETS AND LEASE OBLIGATIONS

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CRYPTOSTAR CORP. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended June 30, 2021 and 2020

(Expressed in US dollars)

8. RIGHT-OF-USE ASSETS AND LEASE OBLIGATIONS (continued)

The following table presents the contractual undiscounted cash flows for lease obligations as at June 30, 2021:

9. SUBSCRIPTION LIABILITY

Subscription liability consists of amounts received pursuant to private placements announced by the Company but not closed as of period end.

10. LOAN

In May 2020, the Company received loan proceeds of $53,117 (the “PPP Loan”) under the Paycheck Protection Program established by the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) administered by the U.S. Small Business Administration (“SBA”). The unsecured PPL Loan is evidenced by a promissory note (the “Note”), between the Company and the lending financial institution (the “Lender”). The Note has a two-year term, bears interest at the rate of 1.0% per annum, and may be repaid at any time without payment of any premium. No payments of principal or interest were originally due during the six-month period beginning on the date of the Note (the “Deferral Period”), but the Payment Protection Flexibility Act of 2020 has effectively extended this period of no payments for the Company to the earliest of loan forgiveness or August 2021. The principal and accrued interest under the Note is forgivable under certain specified circumstances if the Company uses the PPP Loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and otherwise complies with PPP requirements.

On January 26, 2021, the PPP Loan was forgiven by the Lender, and has been included in other income.

11

CRYPTOSTAR CORP. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended June 30, 2021 and 2020 (Expressed in US dollars)

11. DECOMMISSION COST

The Company has recorded the decommissioning liability for the site restoration. The Company has recorded liability with a corresponding adjustment to the cost of the right-of-use assets. The amount and timing of settlement in respect of these provisions are uncertain and dependent on various factors that are not always within management’s control. Reviews of estimated future decommissioning and restoration costs and the discount rate applied are carried out regularly. No accretion expense has been recorded for the three and six months ended June 30, 2021 as the related impact is not significant.

The Company has used the following assumptions:

12. RELATED PARTY TRANSACTIONS AND BALANCES

Payable to Related Party

The balance of $1,966,604 (December 31, 2020 - $3,568,623) payable to related party as at June 30, 2021 represents the amount advanced under a line of credit provided by A.C.N 117 402 838 PTY LTD (“ACN”) on December 22, 2017. The available line of credit totals $4,000,000, is unsecured, bears interest at 12% per annum and is repayable on December 22, 2022. Interest at the time of credit is waived at any point at the sole discretion of ACN. ACN has waived the interest charge on the line of credit for the six months ended June 30, 2021. During the six months ended June 30, 2021, the Company has obtained an additional loan of $76,760 and repaid $1,678,779.

Key Management Remuneration

Management fees, salaries and wages comprise amounts paid to key management personnel, including officers and directors of ACN, for services provided.

On February 3, 2021, the Company granted an aggregate of 10,000,000 stock options under the Company’s stock option plan to directors of the Company. These options have an exercise price of CAD $0.10 per stock option, and an expiry date of February 3, 2031. All of the options vested immediately. Share based compensation of $821,091 was recorded related to these options during the six months ended June 30, 2021.

On May 3, 2021, the Company granted 2,000,000 stock options under the Company’s stock option plan to an officer of the Company. These options have an exercise price of CAD $0.28 per stock option, and an expiry date of May 3, 2031. The options vest in equal 25% tranches in each of August 2021, March 2022, October 2022 and May 2023. Share based compensation of $99,525 was recorded related to these options during the six months ended June 30, 2021.

The Company paid directors fees of $16,529 during the six months period ended June 30, 2021 (June 30: 2020 - $Nil).

The remuneration of key management personnel paid by ACN on the Company’s behalf during the six months ended June 30, 2021 was $78,716 (June 30, 2020 – $65,434).

Related Party Transactions

On March 4, 2021, the Company issued 20,000,000 units at a price of CAD $0.10 per unit. Each unit consists of one common share and one common share purchase warrant. Each warrant entitles the holder to acquire one common share at a price of CAD $0.15 per common share for a period of eighteen months from the date of issue.

12

(Expressed in US dollars)

CRYPTOSTAR CORP. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended June 30, 2021 and 2020

12. RELATED PARTY TRANSACTIONS AND BALANCES (continued)

The securities issued in connection with the offering were subject to a four-month hold period, in accordance with applicable securities laws.

ACN acquired 15,000,000 units under the above offering, which constituted as a “related party transaction” as defined under Multilateral Instrument 61-101 Protection of Minority Security holders.

On April 22, 2021, the Company issued 30,075,000 units at a price of CAD $0.20 per unit. Each unit consists of one common share and one common share purchase warrants. Each warrant entitles the holder to acquire one common share at a price of CAD $0.27 per common share for a period of eighteen months following the closing date of private placement. The securities issued in connection with the offering were subject to a four-month hold period, in accordance with applicable securities laws.

ACN acquired 16,157,500 units under the above offering, which constituted as a “related party transaction” as defined under Multilateral Instrument 61-101 Protection of Minority Security holders.

On May 4, 2021, an employee of the Company exercised 10,000,000 stocks options. These options had an exercise price of CAD $0.05 per stock option. As at June 30, 2021, $201,572 was payable by the employee to the Company. The Company has classified the amount receivable as current as the amount shall be repaid in full no later than May 2022, and is included in accounts receivable and others. Interest equal to 2% above the prime rate of interest charged by Royal Bank of Canada on Canadian dollar commercial loans is being charged by the Company to the employee on the amount receivable. During the six months ended June 30, 2021, the Company earned $1,402 of interest income related to this loan.

13. SHARE CAPITAL

Authorized

Unlimited common shares without par value.

Issued and Outstanding

The Company issued a total 164,551,724 common shares during the six months ended June 30, 2021. The total outstanding number of shares as at June 30, 2021, was 407,345,024.

The Company determines the fair values of warrants and equity. The components are then assigned these values; any difference is prorated based on respective market or fair values and allocated to the components.

On January 28, 2021, the Company issued 10,000,000 units at a price of CAD $0.05 per unit. Each unit consists of one common share and one common share purchase warrants. Each warrant entitles the holder to acquire one common share at a price of CAD $0.075 per common share for a period of eighteen months from the date of issue. The securities issued in connection with the offering were subject to a four-month hold period, in accordance with applicable securities laws.

On February 5, 2021, the Company paid cash equal to CAD $33,250, 285,000 common shares and 285,000 Finder’s Warrants to EMD Financial Inc. Each Finders’ Warrant entitles the holder to acquire one common share at a price of CAD $0.075 per common share for a period of twelve months from the date of issue. The securities issued in connection with the offering were subject to a four-month hold period, in accordance with applicable securities laws.

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CRYPTOSTAR CORP. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended June 30, 2021 and 2020

(Expressed in US dollars)

13. SHARE CAPITAL (continued)

On March 4, 2021, the Company issued 20,000,000 units at a price of CAD $0.10 per unit. Each unit consists of one common share and one common share purchase warrants. Each warrant entitles the holder to acquire one common share at a price of CAD $0.15 per common share for a period of eighteen months from the date of issue. The securities issued in connection with the offering were subject to a four-month hold period, in accordance with applicable securities laws.

ACN acquired 15,000,000 units under the above offering, which constituted as a “related party transaction” as defined under Multilateral Instrument 61-101 Protection of Minority Security holders.

On March 15, 2021, the Company issued 83,333,334 units at a price of CAD $0.30 per unit. Each unit consists of one common share and one common share purchase warrants. Each warrant entitles the holder to acquire one common share at a price of CAD $0.40 per common share for a period of three and one half (3.5) years following the closing date of private placement. The securities issued were subject to resale restrictions in the United States under applicable U.S federal and state securities laws with no resale restrictions in Canada.

The Company paid cash equal to 7.0% of the gross proceeds of the above private placement, and 5,833,333 Broker Warrants to H.C. Wainwright & Co. Each Broker Warrant entitles the holder to acquire one common share at a price of CAD $0.375 per common share for a period of three and one half (3.5) years following the closing date of private placement. The securities issued were subject to resale restrictions in the United States under applicable U.S federal and state securities laws with no resale restrictions in Canada.

On April 22, 2021, the Company issued 30,075,000 units at a price of CAD $0.20 per unit. Each unit consists of one common share and one common share purchase warrants. Each warrant entitles the holder to acquire one common share at a price of CAD $0.27 per common share for a period of eighteen months following the closing date of private placement. The securities issued in connection with the offering were subject to a four-month hold period, in accordance with applicable securities laws.

ACN acquired 16,157,500 units under the above offering, which constituted as a “related party transaction” as defined under Multilateral Instrument 61-101 Protection of Minority Security holders.

During the six months ended June 30, 2021, the Company acquired property and equipment in a transaction in exchange for common shares and common share purchase warrants. Upon the closing of the transaction, the Company will issue 5,927,151 units at a price of CAD $0.24. Each unit consists of one common share and one common share purchase warrant. Each warrant entitles the holder to acquire one common share at a price of CAD $0.36 per common share for a period of eighteen months from the date of issue. As at June 30, 2021, the Company had not issued the common shares or common share purchase warrants.

During the six months ended June 30, 2021, the Company issued 20,858,390 common shares upon exercise of warrants and stock options for gross proceeds of $1,042,503 (CAD $1,321,307).

Stock Option Plan

The Company has adopted an incentive stock option plan, which provides that the Board of Directors of the Company may from time to time, in its discretion, and in accordance with the TSX Venture Exchange requirements, grant stock options to key management personnel, including officers and directors.

In connection with the foregoing options, the number of common shares reserved for issuance to any individual will not exceed five percent (5%) of the issued and outstanding common shares and to an Insider will not exceed ten percent (10%) of the issued and outstanding common shares. In the event of consultants and individuals conducting investor relations, the number of common shares reserved for issuance will not exceed two percent (2%) of the issued and outstanding common shares.

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(Expressed in US dollars)

CRYPTOSTAR CORP. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended June 30, 2021 and 2020

13. SHARE CAPITAL (continued)

On February 3, 2021, the Company granted an aggregate of 10,000,000 stock options under the Company’s stock option plan to directors of the Company. These options have an exercise price of CAD $0.10 per stock option, and an expiry date of February 3, 2031. All of the options vested immediately. The fair value of these stock options of $821,091 was determined using the Black Scholes pricing model. Share based compensation of $821,091 was recorded related to these options during the six months ended June 30, 2021.

On May 3, 2021, the Company granted an aggregate of 2,000,000 stock options under the Company’s stock option plan to an officer of the Company. These options have an exercise price of CAD $0.28 per stock option, and an expiry date of May 3, 2031. The options vest equally over four dates in August 2021, March 2022, October 2022 and May 2023. The fair value of these stock options of $456,050 was determined using the Black Scholes pricing model. Share based compensation of $99,525 was recorded related to these options during the six months ended June 30, 2021.

The following table summarizes the stock options exercisable as at June 30, 2021:

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CRYPTOSTAR CORP. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended June 30, 2021 and 2020 (Expressed in US dollars)

13. SHARE CAPITAL (continued)

The fair value of options granted on February 3, 2021 was calculated using the Black-Scholes option pricing model with the following assumptions:

• Share price on grant date – CAD $ 0.105

• Exercise price – CAD $ 0.10

• • Risk-free interest rate – 0.75%

• Forfeiture rate – 0%

• Expected dividend yield – 0%

• • Expected option life (years) – 10

• Expected stock price volatility – 223.70%

The fair value of options granted on May 3, 2021 was calculated using the Black-Scholes option pricing model with the following assumptions:

• Share price on grant date – CAD $ 0.28

• • Exercise price – CAD $ 0.28 • Risk-free interest rate – 1.96%

• Forfeiture rate – 0%

• • Expected dividend yield – 0% • Expected option life (years) – 10

• Expected stock price volatility – 263%

Warrants

During the six months ended June 30, 2021, the Company issued a total of 149,526,667 warrants in connection with the private placement financing described above.

The Company issued a total of 6,118,333 finder/broker warrants in connection with share issuance cost to the private placements on January 28, 2021 and March 15, 2021.

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CRYPTOSTAR CORP. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended June 30, 2021 and 2020

(Expressed in US dollars)

13. SHARE CAPITAL (continued)

The following table summarizes the warrants exercisable as at June 30, 2021:

The fair value of warrants granted on January 28, 2021 was calculated using the Black-Scholes option pricing model with the following assumptions:

• Share price on grant date – CAD $ 0.09

• • Exercise price – CAD $ 0.075 • Risk-free interest rate – 0.17% • Forfeiture rate – 0% • Expected dividend yield – 0% • Expected option life (years) – 1.5 • Expected stock price volatility – 223.70%

The fair value of finder warrants granted on February 5, 2021 was calculated using the Black-Scholes option pricing model with the following assumptions:

• Share price on grant date – CAD $ 0.105

• • Exercise price – CAD $ 0.075 • Risk-free interest rate – 0.17% • Forfeiture rate – 0% • Expected dividend yield – 0% • Expected option life (years) – 1 • Expected stock price volatility – 211.40%

The fair value of warrants granted on March 4, 2021 was calculated using the Black-Scholes option pricing model with the following assumptions:

• Share price on grant date – CAD $ 0.23

• • Exercise price – CAD $ 0.15 • Risk-free interest rate – 0.30% • Forfeiture rate – 0% • Expected dividend yield – 0% • Expected option life (years) – 1.5

• Expected stock price volatility – 223.93%

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CRYPTOSTAR CORP. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended June 30, 2021 and 2020 (Expressed in US dollars)

13. SHARE CAPITAL (continued)

The fair value of warrants granted on March 15, 2021 was calculated using the Black-Scholes option pricing model with the following assumptions:

• Share price on grant date – CAD $ 0.335

• • Exercise price – CAD $ 0.40 • Risk-free interest rate – 0.31% • Forfeiture rate – 0% • Expected dividend yield – 0% • Expected option life (years) – 3.5 • Expected stock price volatility – 223.70%

The fair value of broker warrants granted on March 15, 2021 was calculated using the Black-Scholes option pricing model with the following assumptions:

• Share price on grant date – CAD $ 0.335

• • Exercise price – CAD $ 0.375 • Risk-free interest rate – 0.31% • Forfeiture rate – 0% • Expected dividend yield – 0% • Expected option life (years) – 3.5 • Expected stock price volatility – 223.70%

The fair value of warrants granted on April 22, 2021 was calculated using the Black-Scholes option pricing model with the following assumptions:

• Share price on grant date – CAD $ 0.29

• • Exercise price – CAD $ 0.27 • Risk-free interest rate – 0.30% • Forfeiture rate – 0% • Expected dividend yield – 0% • Expected option life (years) – 1.5 • Expected stock price volatility – 325.01%

14. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT

The Company is exposed, in varying degrees, to a variety of financial related risks. The type of risk exposure and the way in which such exposure is managed is provided as follows:

Credit risk and concentration of credit risk

Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. Credit risk arises from the possibility of asset impairment occurring because counterparties cannot meet their obligations in transactions involving financial instruments. Concentration of credit risk indicates the relative sensitivity of the Company’s performance to developments affecting a particular segment of customers. The bank balances are deposited with high credit rated banks, therefore the credit risk is limited. The Company has established procedures to manage credit exposure including credit approvals and credit limits. These procedures are mainly due to the Company’s internal guidelines.

An allowance for potential doubtful receivables is maintained at a level which, in the judgment of management, is adequate to provide for potential losses on delinquent receivables.

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(Expressed in US dollars)

CRYPTOSTAR CORP. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended June 30, 2021 and 2020

14. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

Liquidity risk

Liquidity risk is the risk that the Company will not be able to meet its financial obligations as they fall due. The Company manages liquidity risk by maintaining cash balances to ensure that it is able to meet its short term and long term obligations as and when they fall due. The Company manages Company-wide cash projections centrally and regularly updates projections for changes in business and fluctuations caused in digital currency prices and exchange rates. In recent years, the cryptocurrency markets experienced wide fluctuations in price which have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. There can be no assurance that continual fluctuations in price will not occur. Any quoted market for the common shares may be subject to market trends generally, notwithstanding any potential success of the Company in creating revenue, cash flows or earnings.

As at June 30, 2021, the contractual maturities of financial liabilities are as follows:

Foreign currency risk

Currency risk relates to the risk that the fair values or future cash flows of the Company’s financial instruments will fluctuate because of changes in foreign exchange rates. Exchange rate fluctuations affect the costs that the Company incurs in its operations as well as the currency in which the Company has historically raised capital.

The Company’s presentation currency is the US dollar and major purchases are transacted in US dollars. Financing incurred to date has been completed in Canadian dollars. The fluctuation of the Canadian dollar in relation to the US dollar will consequently impact the profitability of the Company and may also affect the value of the Company’s assets and liabilities and the amount of shareholders’ equity.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company’s exposure to interest rate risk is limited and only relates to its ability to earn interest income on cash balances at variable rates. Changes in short term interest rates will not have a significant effect on the fair value of the Company’s cash account.

Fair value

The fair values of the Company’s cash, trade payables and payables to related party approximate their carrying values due to the short-term nature of these instruments.

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(Expressed in US dollars)

CRYPTOSTAR CORP. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended June 30, 2021 and 2020

14. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT (continued)

Financial hierarchy

Financial instruments recorded at fair value are classified using a fair value hierarchy that reflects the significance of inputs used in making the measurements. The hierarchy is summarized as follows:

Level 1: Unadjusted quoted prices in active markets for identical assets and liabilities;

Level 2: Inputs other than quoted prices that are observable for the asset or liability either directly or indirectly from observable market data; and

Level 3: Inputs that are not based on observable market data.

The Company’s financial instruments have been classified as follows:

Digital currencies are measured using level two fair values, determined by taking the rates from www.bitcoincharts.com and www.coinmarketcap.com.

15. DIGITAL CURRENCY AND RISK MANAGEMENT

Digital currency prices are affected by various forces including global supply and demand, interest rates, exchange rates, inflation or deflation and the global political and economic conditions. The profitability of the Company is directly related to the current and future market price of digital currencies; in addition, the Company may not be able to liquidate its inventory of digital currency at its desired price if required. A decline in the market prices for digital currencies could negatively impact the Company’s future operations. The Company has not hedged the conversion of any of its digital currency sales.

Digital currencies have a limited history and the fair value historically has been very volatile. Historical performances of digital currencies are not indicative of their future price performance. The Company’s digital currencies currently consist of Bitcoin and Ethereum. The impact of a 25% variance in the price of these digital currencies on the Company’s earnings before tax, based on their closing prices as of June 30, 2021 would be $361,375.

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CRYPTOSTAR CORP. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended June 30, 2021 and 2020

(Expressed in US dollars)

15. DIGITAL CURRENCY AND RISK MANAGEMENT (continued)

COVID-19

The recent outbreak of COVID-19 has spread across the globe and is impacting worldwide economic activity. Conditions surrounding the pandemic continue to rapidly evolve and government authorities have implemented emergency measures to mitigate the spread of the virus. The outbreak and the related mitigation measures may have an adverse impact on global economic conditions as well as on the Company’s business activities. The extent to which the pandemic may impact the Company’s business activities will depend on future developments, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions, business disruptions, and the effectiveness of actions taken in Canada and other countries to contain and treat the disease.

The effect that these events will have on the price of digital currencies, the ability for the Company to raise capital, the ability for the Company to obtain additional power permits and the supply of upgraded equipment are highly uncertain and as such, the Company is unable to determine the corresponding financial impact at this time.

16. CAPITAL MANAGEMENT

The Company manages its capital to maintain its ability to continue as a going concern and to provide returns to shareholders and benefits to other stakeholders. The capital structure of the Company consists of equity comprised of issued share capital, shareholder contribution, warrant and option reserve, subscription receivable and deficit.

The Company manages its capital structure and makes adjustments to it in light of economic conditions. The Company, upon approval from its Board of Directors, will balance its overall capital structure through new share issues or by undertaking other activities as deemed appropriate under the specific circumstances.

The Company is not subject to externally imposed capital requirements and the Company’s overall strategy with respect to capital risk management remains unchanged from the year ended December 31, 2020.

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(Expressed in US dollars)

CRYPTOSTAR CORP. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended June 30, 2021 and 2020

17. SEGMENTED INFORMATION

The Company has three reportable segments related to the two countries in which it operates, Canada and the United States, and its Head Office. The disclosures with regards to the Company’s aforementioned segments are listed below:

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CRYPTOSTAR CORP. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended June 30, 2021 and 2020

(Expressed in US dollars)

17. SEGMENTED INFORMATION (continued)

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CRYPTOSTAR CORP. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended June 30, 2021 and 2020

(Expressed in US dollars)

18. SUBSEQUENT EVENTS

On July 14, 2021, the Company announced that it had executed an equipment hosting agreement (the "Hosting Agreement") effective July 14, 2021 for up to 8 MW of mining capacity at its award-winning data centre facility in Utah, USA. The Company also announced the expansion of its Hashrate and power capacity in Alberta, Canada. Under the terms of the Hosting Agreement, the Company will provide hosting services to the Customer for up to 8 MW of mining capacity at its award-winning data centre in Utah, USA. Highlights of the Hosting Agreement: (i) annual hosting revenues for the Company of USD$960,000; and (ii) initial term of 12 months, renewing month-tomonth thereafter. The Company further announced that it currently had an aggregate Hashrate of 53,334 MH/s from GPU miners and 21,930 TH/s from ASIC miners running at its data centres. An additional 38,500 MH/s of Hashrate from GPU miners was being relocated to the Company's data centres in Alberta, Canada and would be deployed by the end of July 2021. In addition, 10,000 TH/s of Hashrate from ASIC miners had been delivered and would be deployed in the Company's data centres by the end of July 2021. The Company further announced that once deployed, the total aggregate Hashrate would be 91,834 MH/s from GPU miners and 31,930 TH/s from ASIC miners, representing an increase in self-mining Hashrate of 16% and 130% from GPU and ASIC miners, respectively, over the past two months. The Company announced that it was continuing to increase its power capacity at the first data centre location in Alberta, Canada under the existing power supply agreement for 30 MW. The Company further announced that it would continue to further expand its self-mining inventory of mining hardware. Additional miners had been ordered for delivery in Q3 2021 and further orders for mining hardware would be placed using astute capital management strategies based upon prevailing market conditions for delivery in Q3 2021 and Q4 2021. The Company announced that it planned to continue to further expand its data centre operations in Alberta, Canada by partnering with large cryptocurrency miners seeking operating locations in North America. The Company was considering and performing diligence on several potential transactions and opportunities. The Company was in a strong financial position and was well capitalized. As at July 15, 2021, the Company held 136.3 ETH, 35.3 BTC and USD$16.7 million (CAD$20.8 million) in cash.

On July 28, 2021, the Company announced that it had joined the Crypto Climate Accord as a Signatory and Supporter. The Crypto Climate Accord (CCA) is a private sector-led initiative for the entire crypto and blockchain community focused on decarbonizing the cryptocurrency industry. The CCA provides a platform for any organization that wants to inform, develop, test, and implement new solutions that accelerate crypto's transition to renewable energy. By becoming a Signatory and Supporter of the CCA, CryptoStar is making a public commitment to achieve net-zero emissions from electricity consumption associated with all of its crypto-related operations by 2030 and to report progress toward this net-zero emissions target using best industry practices.

On August 12, 2021, the Company announced that it had executed an equipment hosting agreement (the "Hosting Agreement") effective August 11, 2021 for 4 MW of mining capacity at its award-winning data centre facility in Utah, USA. The Company further announced that it and a U.S. based company (the "Alberta Customer") have signed a non-binding letter of intent (the "LOI") effective August 12, 2021 for 10 MW of mining capacity to be deployed in Alberta, Canada. Under the terms of the Hosting Agreement, the Company will provide hosting services to the Utah Customer for 4 MW of mining capacity at its award-winning data centre in Utah, USA. Highlights of the Hosting Agreement: (i) annual hosting revenues for the Company of USD$720,000; and (ii) initial term of 12 months, renewing month-to-month thereafter. The LOI set out the basic terms and conditions under which the Company will provide hosting services and infrastructure to the Alberta Customer for 10 MW of mining capacity at its data centre locations in Alberta, Canada. The transaction terms outlined in the LOI are subject to the parties successfully entering into a definitive agreement (the "Definitive Agreement"), which is expected to occur within 14 days. The Company announced that it was expected that the Definitive Agreement will include the following terms: (i) annual hosting and power revenues for the Company of up to USD$5.3 million; (ii) initial term of 36 months, with the option to renew for an additional 36-month term; and hosting services for the Alberta Customer to commence in Q4, 2021.

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CRYPTOSTAR CORP. Notes to the Condensed Interim Consolidated Financial Statements (Unaudited) For the Three and Six Months Ended June 30, 2021 and 2020

(Expressed in US dollars)

18. SUBSEQUENT EVENTS (continued)

On August 24, 2021, the Company announced that further to its press releases dated March 8, 2021 and March 30, 2021, the Company and a Hong Kong based company (the "Vendor") had closed on the purchase and sale of GPU and ASIC miners capable of a minimum total Hashrate of 25,950 MH/s and 5,510 TH/s respectively. The Company issued 5,927,151 units ("Units") of the Company to the Vendor at a deemed value of CAD$1,422,516.24 (the "Transaction") and an additional 355,629 Units (the "Finder's Fee") to Chen Peifeng in connection with Transaction. Each Unit consisted of one common share and one common share purchase warrant. Each warrant entitles the holder to acquire one common share at a price of CAD $0.36 per common share for a period of 18 months from the date of issue. The Transaction, including payment of the Finder's Fee, is subject to TSX Venture Exchange (the "TSXV") approval.

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