CRYPTOSTAR CORP. Management Discussion and Analysis For the Three and Six Months Ended June 30, 2021

(Expressed in U.S. dollars)

This management discussion and analysis (“ MD&A ”) of the results of the operations and financial position of CryptoStar Corp. (the “ Company ” or “ CryptoStar ”) is dated as of August 30, 2021 and should be read in conjunction with the Company’s condensed interim consolidated financial statements (unaudited) and the related notes for the three and six months ended June 30, 2021. All amounts are expressed in United States dollars ($) unless otherwise stated.

Management’s Responsibility

The Company’s management is responsible for the preparation and presentation of the condensed interim consolidated financial statements (unaudited) and the MD&A. This MD&A has been prepared in accordance with the requirements of securities regulators, including National Instrument 51-102 of the Canadian Securities Administrators. Information provided in this report, including the condensed interim consolidated financial statements (unaudited), is the responsibility of management. In the preparation of these statements, estimates and judgements are sometimes necessary to make a determination of future value for certain assets or liabilities. Management believes such estimates and judgements have been based on careful assessments and have been properly reflected in the accompanying condensed interim consolidated financial statements (unaudited). Management maintains a system of internal controls to provide reasonable assurances that the Company’s assets are safeguarded and to facilitate the preparation of relevant and timely information.

Forward Looking Statements

This MD&A contains certain forward-looking statements and information relating to the Company that are based on the beliefs of our management as well as assumptions made by and information currently available to us. When used in this document, the words “anticipate”, “believe”, “estimate”, “expect” and similar expressions, as they relate to our company or our management, are intended to identify forwardlooking statements. This MD&A contains forward-looking statements relating to, among other things, regulatory compliance, the sufficiency of current working capital, the estimated cost and availability of funding for continued research and development of our pharmaceutical products. Such statements reflect the current views of management with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause the actual results, performance or our achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements.

Non-GAAP Measures

This MD&A presents certain non-GAAP (“GAAP” refers to Generally Accepted Accounting Principles) financial measures to assist readers in understanding the Company’s performance. These non-GAAP measures do not have any standardized meaning and therefore are unlikely to be comparable to similar measures presented by other issuers and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

Management uses these non-GAAP measures to supplement the analysis and evaluation of operating performance.

The following terms are used, which are not found in the Chartered Professional Accountants of Canada Handbook and do not have a standardized meaning under GAAP.

EBITDA (Earnings before Interest, Taxes, Depreciation, and Amortization)

• “EBITDA” represents net income or loss excluding net finance income or expense, income tax or recovery, depreciation, and amortization.

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• “Adjusted EBITDA” represents EBITDA adjusted to exclude share-based compensation, fair value loss or gain on remeasurement of foreign currency and digital assets, and costs associated with one-time transactions (such as other income).

Description of Business

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). CryptoStar has cryptocurrency mining operations with data centres located in the U.S.A. and Canada and is currently dedicated to becoming one of the lowest cost cryptocurrency producers in North America. Throughout 2020, the Company transitioned from a self-mining, Bitcoin only, company to a one-stop shop for cryptocurrency mining clients and the inherent risks and exposure associated with self-mining Bitcoin only were significantly reduced. Future growth will be driven through mining Bitcoin and Ethereum in addition to offering high quality GPU and ASIC miners, logistics and shipping and hosting solutions for customers worldwide at low power rate data centres in North America.

The Company was incorporated under the Business Corporations Act (Ontario) on January 6, 2017. The registered 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 under the trading symbol under the trading symbol “CSTR”.

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Q2 2021 Highlights

Significant events and operating highlights for the three months ended June 30, 2021 include the following:

• CryptoStar has positioned itself to become one of the lowest cost cryptocurrency producers in North America by entering into agreements with partners in Newfoundland and Labrador and Alberta, Canada.

• On April 22, 2021, the Company announced that it had closed the private placement announced on March 8, 2021, consisting of the issuance of 30,075,000 units ("Units") of the Company to raise CAD $6,015,000 at a price of CAD $0.20 per Unit by way of a non-brokered private placement (the "Offering").

Each Unit consists of one common share of CryptoStar (a "Common Share") and one common share purchase warrant of CryptoStar (a "Warrant"). Each Warrant entitles the holder to acquire one Common Share at a price of CAD $0.27 per Common Share for a period of 18 months from the date of issue.

The Offering is subject to TSX Venture Exchange approval. The securities issued in connection with the Offering are subject to a four-month hold period, in accordance with applicable securities laws.

ACN, an insider of the Company, participated in the Offering, thereby making the Offering a "related party transaction" as defined under Multilateral Instrument 61-101 ̶ Protection of Minority Security Holders in Special Transactions ("MI 61-101"). ACN purchased 16,157,500 Units, and after the completion of the Private Placement owned 102,624,235 common shares or approximately 26.3% of the total common shares issued and outstanding. The Offering is exempt from the need to obtain minority shareholder and a formal valuation as required by MI 61-101 as neither the fair market value of any units to insiders nor the consideration paid by insiders of the Company exceeds 25% of the Company's market capitalization. No new insiders were created, nor did any change of control result from the Offering.

• On April 26, 2021, the Company announced that it will be featured as a presenting company at the H.C. Wainwright Cryptocurrency, Blockchain & FinTech Conference. The conference was held on April 27, 2021, virtually.

David Jellins, President and Chief Executive Officer of CryptoStar, provided an overview of the Company's business during the presentation. Mr. Jellins was also available to participate in oneon-one meetings with investors who are registered to join the conference.

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• On May 3, 2021, the Company announced the appointment of Sean Harris as Chief Financial Officer, effective immediately.

Sean Harris is a seasoned financial professional with nearly a decade of financial consulting and professional service experience gained at Duff & Phelps and PwC. Sean Harris is a Chartered Professional Accountant/Chartered Accountant (CPA, CA) and a Chartered Business Valuator (CBV).

Sean Harris replaced Jing Peng as Chief Financial Officer.

In connection with Sean Harris’ appointment as Chief Financial Officer of the Company, the Company granted him an aggregate of 2,000,000 stock options under the Company’s stock option plan with an exercise price equal to C$0.28 per stock option. The stock options will vest over a period of two years and are exercisable for a period of ten years from the date of the grant.

• On May 18, 2021, the Company announced that operations had commenced at its data centres in Alberta, Canada and the first containers housing GPU and ASIC miners had been deployed over the prior weeks.

Operations:

• CryptoStar has an aggregate Hashrate of 58,230 MH/s from GPU miners and 13.890 TH/s from ASIC miners running at its data centres.

• The deployment of 58,230 MH/s and 13,890 TH/s of Hashrate using the latest generation GPU and ASIC miners was expected to contribute USD$313,410.95 per month in selfmining revenue for CryptoStar.

• (Source: https://whattomine.com/ Mining metrics are calculated based on and ETH – USD exchange rate of 1 ETH = $3,489.44 and a BTC – USD exchange rate of 1 BTC = $45,015.10 updated at 2021-05-18 08:43:40 UTC).

• An additional 21,200 MH/s of GPU Hashrate has been delivered and will be deployed in CryptoStar’s data centres by the end of May 2021.

Future Growth:

• CryptoStar will continue to further expand its self-mining inventory of mining hardware. Additional miners have been ordered for delivery in June 2021 and further orders for mining hardware will be placed using astute capital management strategies based upon prevailing market conditions for delivery in Q3 2021 and Q4 2021.

• CryptoStar is currently considering and performing diligence on several potential transactions and opportunities.

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Financial Position:

• The Company is in a strong financial position and is well capitalized.

• As at May 18, 2021, CryptoStar held 46.4 ETH, 15.4 BTC and USD$18.7 million (CAD$22.5 million) in cash.

Subsequent Events & Significant Agreements

• On July 15, 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 awardwinning 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:

• Annual hosting revenues for the Company of USD$960,000.

• Initial term of 12 months, renewing month-to-month thereafter.

Operations:

• The Company currently has an aggregate Hashrate of 53,334 MH/s from GPU miners and 21,930 TH/s from ASIC miners running at its data centres.

• The deployment of 53,334 MH/s and 21,930 TH/s of existing Hashrate using the latest generation GPU and ASIC miners currently contributes USD$295,539.59 per month in selfmining revenue for CryptoStar.

• (Source: https://whattomine.com/ Mining metrics are calculated based on and ETH – USD exchange rate of 1 ETH = $1,922.34 and a BTC – USD exchange rate of 1 BTC = $31,640.39 updated at 2021-07-15 20:32:53 UTC).

• An additional 38,500 MH/s of Hashrate from GPU miners is currently being relocated to the Company's data centres in Alberta, Canada and will be deployed by the end of July 2021. In addition, 10,000 TH/s of Hashrate from ASIC miners has been delivered and will be deployed in the Company's data centres by the end of July 2021.

• Once deployed, the total aggregate Hashrate will 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 is continuing to increase its power capacity at the first data centre location in Alberta, Canada under the existing power supply agreement for 30 MW.

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Future Growth:

• The Company will continue to further expand its self-mining inventory of mining hardware. Additional miners have been ordered for delivery in Q3 2021 and further orders for mining hardware will be placed using astute capital management strategies based upon prevailing market conditions for delivery in Q3 2021 and Q4 2021

• The Company plans 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 continues to consider and perform diligence on several potential transactions and opportunities.

Financial Position:

• The Company is in a strong financial position and is 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:

• Annual hosting revenues for the Company of USD$720,000.

• Initial term of 12 months, renewing month-to-month thereafter.

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The LOI sets 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.

It is expected that the Definitive Agreement will include the following terms:

• Annual hosting and power revenues for the Company of up to USD$5.3 million.

• Initial term of 36 months, with the option to renew for an additional 36-month term.

• Hosting services for the Alberta Customer to commence in Q4, 2021.

• 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.

• During the subsequent period from July 1, 2021 to August 27, 2021, the Company issued 5,800,000 common shares upon exercise of warrants at CAD $0.075 and CAD $0.15 for gross proceeds of CAD$585,000.

• As at August 30, 2021, the Company’s self-mining revenue run rate is USD$549,048/month. Further orders for mining hardware will be placed using astute capital management strategies based upon prevailing market conditions for delivery in Q3 2021, Q4 2021 and Q1 2022. (Source: https://whattomine.com/ Mining metrics are calculated based on and ETH – USD exchange rate of 1 ETH = $3,168.59 and a BTC – USD exchange rate of 1 BTC = $48,030.38 updated at 2021-08-30 10:58:28 UTC).

• As at August 30, 2021, the Company is in a strong financial position, is well capitalized and holds 208.22 ETH, 44.35 BTC and USD$15.3 million (CAD$19.4 million) in cash.

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Overall Operational Performance and Results

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Financial and Operational Results

The Company recorded a net comprehensive loss of $1,166,871 in the three months ended June 30,2021.

The Company’s total revenue was $555,280 in the three months ended June 30, 2021. In Q2 2021, the Company progressed in its transition from a self-mining, Bitcoin only, company to a one-stop shop for cryptocurrency mining clients. Future growth will be driven through self-mining Bitcoin and Ethereum, in addition to offering high quality GPU and ASIC miners, logistics and shipping and hosting solutions for customers worldwide, at low power rate data centres in North America.

The Company’s direct cost of revenue was $39,096 in the three months ended June 30, 2021. Direct cost of revenue consisted of site operating costs.

The Company incurred non-cash expenses consisting of depreciation and amortization of $1,082,034 and share based compensation of $99,525 in the three months ended June 30, 2021.

The Company’s operating expenses in the three months ended June 30, 2021 totaled $915,072. Operating expenses were comprised of:

The Company’s revenue from mining digital currencies is highly dependent upon the market price of digital currencies and the Company’s ability to transact with and convert digital currencies. Management monitors the legal and regulatory environment surrounding digital currencies on an ongoing basis.

Outstanding Share Data

As of the date of this MD&A, the Company has the following securities issued and outstanding:

1. 419,427,804 common shares;

2. 139,866,667 common share purchase warrants; and

3. 17,527,110 options to purchase common shares issued.

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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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Segmented Information (continued)

Liquidity and Capital Resources

As at June 30, 2021, the Company had current assets of $20,736,403 and current liabilities of $619,031, resulting in a working capital surplus of $20,117,372 (December 31, 2020 – working capital deficit of $867,897).

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements as at the date of this MD&A.

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Related Party Transactions

During the three months ended June 30, 2021, certain expenses were paid on the Company’s behalf by A.C.N. 117 402 838 PTY LTD (“ACN”), which is a related party by virtue of its shareholdings in the Company and common control.

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 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.

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 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.

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.

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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).

Business Risks and Uncertainties

There are a number of risk factors that could impact the Company’s ability to successfully execute its key strategies and may materially affect future events, performance or results. The risks and uncertainties described herein are not the only ones the Company faces. Additional risks and uncertainties, including those that the Company does not know about now or that it currently deems immaterial, could have a material adverse effect on the Company. If any of the following or other risks occurs, the Company’s business, prospects, financial condition, results of operations and cash flows could be materially adversely impacted. There is no assurance that risk management steps taken will avoid future loss due to the occurrence of the risks described below or other unforeseen risks. Risk factors relating to the Company include, but are not limited to, the factors set out below.

Credit risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist primarily of cash, restricted cash and amounts receivable. The Company limits its exposure to credit loss by placing its cash with high credit quality financial institutions. The carrying amount of financial assets represents the maximum credit exposure.

The Company’s maximum exposure to credit risk at the end of any period is equal to the carrying amount of these financial assets as recorded in the condensed interim consolidated statement of financial position. As at June 30, 2021, no amounts were held as collateral.

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 currently settles its financial obligations out of cash. The ability to do this relies on the Company scaling to become profitable or raising additional equity in excess of anticipated cash needs. The Company’s cash is held in corporate bank accounts available on demand.

Market risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: interest rate risk, currency risk and price risk. These are discussed further below.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is not exposed to significant interest rate risk relating to its loans payable and accounts payable. The interest rate on the loans payable is fixed, and the accounts payable are not subject to any interest. A 10% change in the interest rate would not a result in a material impact on the Company’s operations.

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Foreign currency risk

As at June 30, 2021, portions of the Company’s financial assets are held in USD and CAD. The Company’s objective in managing its foreign currency risk is to minimize its net exposure to foreign currency cash flows by transacting, to the greatest extent possible, with third parties in Canadian dollars. The Company does not currently use foreign exchange contracts to hedge its exposure of its foreign currency cash flows as management has determined that this risk is not significant at this point in time. The following amounts are presented in USD to demonstrate the effect of changes in foreign exchange rates:

Digital currency and risk management

Digital currencies are measured using level one fair values, determined by taking the rate from www.bitcoincharts.com and www.coinmarketcap.com. 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 coins; in addition, the Company may not be able liquidate its inventory of digital currency at its desired price if required. A decline in the market prices for coins could negatively impact the Company’s future operations. The Company has not hedged the conversion of any of its coin sales.

Price risk

Price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate due to changes in market prices, other than those arising from interest rate risk or foreign currency risk. The Company is not exposed to any significant price risks with respect to its financial instruments.

Market risk for securities

The Company is a reporting issuer whose common shares are listed for trading on a stock exchange. There can be no assurance that an active trading market for the Company’s common shares will be sustained in the future. The market price for the Company’s common shares could be subject to wide fluctuations. Factors such as commodity prices, government regulation, interest rates, share price movements of peer companies and competitors, as well as overall market movements, may have a significant impact on the market price of the Company’s securities. The stock market has from time to time experienced extreme price and volume fluctuations, which have often been unrelated to the operating performance of particular companies.

Global economic risk

Economic slowdown and downturn of global capital markets would make raising of capital through equity or debt financing more difficult. The Company will be dependent upon capital markets to raise additional financing in the future. The Company is subject to liquidity risks in meeting developmental and future operating cost requirements in instances where cash positions are unable to be maintained or appropriate financing is unavailable. These factors may impact the Company’s ability to raise equity or obtain loans and other credit facilities in the future and on terms favorable to the Company and its management. If uncertain market conditions persist, the Company’s ability to raise capital could be jeopardized resulting in an adverse impact on the Company’s operations and the price of the Company’s common shares.

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Share price volatility risk

In recent years, the securities markets in Canada have experienced a high level of price and volume volatility, and the market prices of securities of many companies, particularly cryptocurrency companies, like the Company, have experienced wide fluctuations that have not necessarily been related to the operating performance, underlying asset values or prospects of such companies. There can be no assurance that these price fluctuations and volatility will not continue to occur.

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.

Capital Management

The Company’s objectives when managing its capital are:

1. To maintain a flexible capital structure that optimizes the cost of capital at acceptable risk while providing an appropriate return to its shareholders;

2. To maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business;

3. To safeguard the Company’s ability to obtain financing should the need arise; and

4. To maintain financial flexibility in order to have access to capital in the event of future capital acquisitions.

The Company manages its capital structure and makes adjustments to it in accordance with the objectives stated above, as well as responds to changes in economic conditions and the risk characteristics of the underlying assets. The Company monitors the return on capital, which is defined as total shareholders’ equity. The Company is not subject to externally imposed capital requirements.

Current Market Conditions

The weighted price of Bitcoin decreased in Q2 2021, with the weighted price rising from $58,640 as at March 31, 2021 to $34,889 as at June 30, 2021.

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(Source https://bitcoincharts.com/charts/bitstampUSD).

• *The Company holds no liability for any inaccurate data.

The Company is currently evaluating the most optimal financing structure to best take advantage of one of the lowest cost operating environments in the cryptocurrency mining industry.

Bitcoin difficulty decreased slightly in Q2 2021 and is expected to increase for the remainder of 2021.

(Source https://bitinfocharts.com/comparison/bitcoin-difficulty.html).

• *The Company holds no liability for any inaccurate data.

Critical Accounting Policies and Estimates

The Company has prepared the accompanying condensed interim consolidated financial statements (unaudited) in accordance with International Financial Reporting Standards (“IFRS”). Significant accounting policies and estimates are described in Note 2 of the Company’s condensed interim consolidated financial statements (unaudited) as at and for the three and six months ended June 30, 2021.

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The preparation of condensed interim consolidated financial statements (unaudited) in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual outcomes could differ from these estimates.

Significant Accounting Judgments and Estimates

The Company is in the business of digital currencies, many aspects of which are not specifically addressed by current IFRS guidance. The Company is required to make judgments as to its accounting policies under IAS 8. The Company has disclosed its presentation, recognition and derecognition, and measurement of digital currencies, and the recognition of revenue as well as significant assumptions and judgments, however, if specific guidance is enacted by the IASB in the future, the impact may result in changes to the Company’s income and financial position as presented. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period, are described below. The Company based its assumptions and estimates on parameters available when the financial statements were prepared. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur.

Information about estimates made in applying accounting policies that could potentially have an effect on the amounts recognized in the financial statements, are discussed below:

(a) Useful lives and residual values of property and equipment

Management determines the estimated useful lives and residual values of property, plant and equipment for calculating depreciation. This estimate is determined after considering expected usage of the assets or physical wear and tear. Management reviews the useful lives and residual value annually and future depreciation charges are adjusted where management believes the useful lives differ from previous estimates.

(b) Share-based compensation

The Company estimates the cost of equity-settled share-based compensation using the Black-Scholes option pricing model. The model takes into account an estimate of the expected life of the option, the current price of the underlying common share, the expected volatility, an estimate of future dividends on the underlying common share, the risk-free rate of return expected for an instrument with a term equal to the expected life of the option, and the expected forfeiture rate.

(c) Income taxes

At the end of each reporting period, judgment is required by the Company in determining the likelihood of whether the deferred tax assets will be realized from future taxable earnings. Deferred taxes are based on estimates as to the timing over which temporary differences will reverse, substantially enacted income tax rates applicable to future years and the likelihood of assets being realized. The estimate of future capital activities can impact the timing of the reversal of any temporary differences.

Tax interpretations, regulations and legislation in the various jurisdictions in which the Company operates are subject to change. As such, income taxes are subject to measurement uncertainty.

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(d) Revenue recognition

The Company recognizes revenue from the provision of transaction verification services withing digital currency networks, commonly described as “cryptocurrency mining”. As consideration for these services, the Company receives digital currency from each specific network in which it participates (“coins”). Management has exercised significant judgment in determining the completion stage for this revenue stream and examined various factors surrounding the substance of the Company’s operations, and determined the stage of completion being the completion and additional of a blockchain.

For hosting and other services contracts, the Company has determined that the substance of the service contracts is provision of services under IFRS 15 Revenue from Contracts with Customers. Revenue is recognized only when the amount of the contract and separate performance obligations are identified, the transaction can be measured reliably, the transaction price can be allocated to the performance obligations, and the performance obligations is satisfied. Accordingly, the Company has determined that revenue should be recognized as the provision of services under the contract is completed.

The Company recognizes revenue from the sale of mining equipment once the risks and rewards of ownership of equipment are transferred to the customer and it is probable that the economic benefits associated with the sale contract will flow to the Company.

Determination of separate elements under the terms of the contract and completion of performance obligation may be subject to significant judgment exercised by management.

(e) Functional currency

The functional currency of the Company and its subsidiaries has been assessed by management based on consideration of the currency and economic factors that mainly influence the Company’s digital currencies, production and operating costs, financing and related transactions. Specifically, the Company considers the currencies in which digital currencies are most commonly denominated and expenses are settled by each entity as well as the currency in which each entity receives or raises financing. Changes to these factors may have an impact on the judgment applied in the determination of the Company’s functional currency. The application of the Company’s accounting policies requires management to use estimates and judgments that can have significant effect on the revenues, expenses, comprehensive income, assets and liabilities recognized and disclosures made in the condensed interim consolidated financial statements (unaudited).

(f) Impairment of assets

The Company uses judgment in determining the grouping of assets to identify its Cash Generating Units (“CGUs”) for purposes of testing for impairment of property and equipment and intangible assets. In testing for impairment of intangibles with indefinite lives, these assets are allocated to the CGUs to which they relate. Furthermore, on a quarterly basis, judgment has been used in determining whether there has been an indication of impairment, which would require the completion of a quarterly impairment test, in addition to the annual requirement.

The evaluation of asset carrying values for indications of impairment includes consideration of both external and internal sources of information, including such factors as the relationship between mining rewards and the required computing power, digital currency prices, the periodic contribution margin of digital currency mining activities, changes in underlying costs, such as electricity, and technological changes.

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When required, the determination of FVLCD and VIU requires management to make estimates and assumptions about digital currency prices, required computing power, technological changes and operating costs, such as electricity. The estimates and assumptions are subject to risk and uncertainty; hence, there is the possibility that changes in circumstances will alter these projections, which may impact the recoverable amount of the assets. In such circumstances some or all of the carrying value of the assets may be further impaired or the impairment charge reduced with the impact recorded in the statement of comprehensive income.

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.

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.

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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.

Forward-looking Statements

Certain statements contained in this MD&A may constitute forward-looking statements. These statements relate to future events or the Company’s future performance. All statements, other than statements of historical fact, may be forward-looking statements.

Forward-looking statements are often, but not always, identified by the use of words such as “seek”, “anticipate”, “plan”, “continue”, “estimate”, “expect”, “may”, “will”, “project”, “predict”, “propose”, “potential”, “targeting”, “intend”, “could”, “might”, “should”, “believe” and similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. The Company believes that the expectations reflected in those forward-looking statements are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking statements included in this MD&A should not be unduly relied upon by investors as actual results may vary. These statements speak only as of the date of this MD&A and are expressly qualified, in their entirety, by this cautionary statement. The Company’s actual results could differ materially from those anticipated in these forward- looking statements as a result of various risk factors.

Some of the important factors, but certainly not all, that could cause actual results to differ materially from those indicated by such forward-looking statements are:

• i. That the information is of a preliminary nature and may be subject to further adjustment;

• ii. The possible unavailability of financing;

• iii. Start-up risks,

• iv. General operating risks;

• v. Dependence on third parties;

• vi. Changes in government regulation;

• vii. The effects of competition;

• viii. Dependence on senior management;

• ix. Impact of global economic conditions;

• x. Fluctuations in currency exchange rates and interest rates; and

• xi. Fluctuations in cryptocurrency prices.

Additional information relating to the Company is available on SEDAR at www.sedar.com.

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