The following discussion and analysis should be read in conjunction with our
consolidated financial statements and the related notes and other financial
information included elsewhere in this Quarterly Report and with our audited
consolidated financial statements for the fiscal year ended December 31, 2020,
as included in our 2020 Annual Report on Form 10-K. In addition to historical
consolidated financial information, the following discussion includes
forward-looking statements about our business, financial condition and results
of operations, including discussions about management's expectations for our
business. These statements represent projections, beliefs and expectations based
on current circumstances and conditions and our actual results could differ
materially from those discussed in these forward-looking statements. Further,
these forward-looking statements should not be construed either as assurances of
performance or as promises of a given course of action. You should review the
sections entitled "Cautionary Note Regarding Forward-Looking Statements" and
"Item 1A. Risk Factors" of this Quarterly Report for a discussion of factors
that could cause actual results to differ materially - and potentially adversely
- from the results described in or implied by the forward-looking statements
contained in the following discussion and analysis and elsewhere in this
Quarterly Report.



Overview:



The Company's current focus is on growing its cryptocurrency mining operation,
primarily with the goal of mining Bitcoin utilizing specialized ASIC miners
manufactured by Bitmain, known as Antminers. During 2020 and into 2021, the
Company continued an ongoing process of upgrading and expanding its existing
miner fleet and evaluating its mining operations, with the objective to increase
the Company's operational efficiency and performance. With the May 2021
acquisition of Whinstone, the Company expanded its operations into hosting
services for Bitcoin miners and providing expanded capacity for Riot's
self-mining operations.



Cryptocurrency Mining:

The Company's current focus is on its cryptocurrency mining operation, and during the nine months ended September 30, 2021, it continued to expand its quantity of miners with the objective of increasing the Company's operational efficiency and performance.





During the nine months ended September 30, 2021, the Company received 18,603
additional Antminer model S19-Pro miners related to its 2020 purchase contracts
with Bitmain and, as of September 30, 2021, had deployed a total of 25,646
miners in its mining operation.



During the nine months ended September 30, 2021, the Company entered into two
additional purchase agreements with Bitmain to acquire 43,500 Antminer model
S19j (90 Terahash per second) ("TH/s") miners, for a total purchase price of
approximately $145.7 million. Pursuant to these agreements, approximately $56.0
million of the total purchase price was initially paid by the Company to Bitmain
as refundable deposits, with the remainder payable in installments in advance of
shipment of the miners, which is scheduled to occur on a monthly basis between
October 2021 and October 2022.

Subsequent to September 30, 2021, in October 2021, the Company entered into a
purchase agreement with Bitmain to acquire 9,000 S19j Pro (100 TH/s) miners, for
a total purchase price of approximately $54 million, with an anticipated
delivery and deployment schedule set for May 2022 through October 2022.



During the year ended December 31, 2020, the Company purchased 33,646 Antminer
series of miners from Bitmain, including 12,000 model S19j-Pro miners, 20,606
model S19-Pro miners and 1,040 model S19 miners. As of December 31, 2020, the
Company had received and deployed 7,043 total miners at the Company's mining
operation at the Coinmint Facility in New York, including 4,000 model S17-Pro
miners purchased from Bitmain in 2019, as well as 3,043 of the miners purchased
from Bitmain in 2020, consisting of 2,003 model S19-Pro miners and 1,040 model
S19 miners.





                                      40



Data Center Hosting:



On May 26, 2021, we completed the Whinstone Acquisition, our wholly owned
subsidiary, which owns and operates the Whinstone Facility, a commercial data
center located in Rockdale, Texas, which is among the largest Bitcoin mining and
hosting facilities in North America. The Whinstone Facility provides third-party
hosting services to other companies, including other cryptocurrency mining
companies, through co-location services agreements, and also provides us with a
self-owned facility where we can deploy our miners and carry out future
strategic expansion initiatives.

Upon completion of the Whinstone Acquisition, we commenced an expansion of the
Whinstone facility to 750 megawatts ("MW"), from its existing 300 MW developed
capacity. We expect the expanded Whinstone Facility to be completed during 2022,
including four new buildings totaling approximately 240,000 square feet of
finished space, with sufficient developed electricity power capacity to support
an estimated 112,000 Antminer model S19j miners based upon current
configurations. We believe this expansion of the Whinstone Facility will provide
sufficient capacity to enable us to deploy a significant quantity of our miners
(including our current deployed fleet and those expected to be delivered in
future shipments) in a self-hosted facility, while allowing Whinstone to
continue to operate and grow its existing data center hosting business. We
believe deploying our miners at the expanded Whinstone Facility has many
advantages for our mining operations, including allowing us to operate our
miners without incurring third-party co-location services fees and to do so at
the fixed low energy costs available to the Whinstone Facility under its
long-term power supply agreement. We also anticipate this expansion of the
Whinstone Facility will provide space for third-party Miner co-location services
and for other enterprise-level data center hosting services.

Whinstone currently hosts Bitcoin mining operations for institutional customers.
In addition to hosting revenue, Whinstone also generates engineering and
construction services revenue from hosting customers on site, including revenue
derived from the fabrication and deployment of immersion cooling technology for
Bitcoin mining.

From the May 26, 2021 acquisition date through September 30, 2021, Whinstone's
total revenue and net income was approximately $14.1 million and $13.8 million,
respectively. Additionally, the majority of our $22.8 million of deferred
revenue as of September 30, 2021 is related to advance payments made by
Whinstone customers, which will be primarily recognized over the remaining lives
of the underlying contracts, or approximately eight years.

Strategic Opportunities:





The Company engaged XMS to assist with evaluating strategic growth
opportunities. XMS is an independent global financial services firm with
expertise in M&A and strategic advisory. The Company engaged XMS to help with
navigating the dynamic Bitcoin landscape and advise the Company on potential
strategic transactions in Bitcoin mining related operations. XMS acted as
exclusive financial advisor to the Company in connection with the Whinstone
Acquisition. The Company does not have a defined timeline for any future
transactions and cannot provide any assurance whether or when future
transactions may be announced or consummated.

Investments in Marketable Equity Securities:



In September 2017 and February 2018, the Company acquired a minority interest
for $9.4 million in Coinsquare Ltd. ("Coinsquare"), which operates a digital
crypto currency exchange platform in Canada. The investment resulted in an
ownership in Coinsquare by the Company of approximately 11.7%, on a fully
diluted basis. In 2020, the Company determined there were indicators that would
cause a 100% impairment of the Coinsquare investment, resulting in the Company
recording an impairment expense of $9.4 million in 2020. The Company elected
under ASU 2016-01 to account for the Coinsquare investment using the measurement
alternative at cost, less any impairment, plus or minus changes resulting from
observable price changes.

During the nine months ended September 30, 2021, under agreements generally
between Coinsquare, Coinsquare's shareholders (including Riot) and Mogo Inc.
(NASDAQ: MOGO) ("Mogo Agreement"), a digital payments and financial technology
company ("Mogo"), Riot sold its 3.4 million common shares of Coinsquare (the
"Coinsquare Shares") in exchange for approximately 3.2 million common shares of
Mogo (the "Mogo Shares") and approximately US $1.8 million in cash.





                                      41



During the nine months ended September 30, 2021, the Company recorded a gain on
sale/exchange of long-term investments of $26.3 million for the sale of its
shares of Coinsquare. Concurrently, in accordance with ASC 321, we recorded the
fair value of the MOGO shares, received in the exchange of $24.8 million in
investments in marketable equity securities within current assets on our
unaudited condensed interim consolidated balance sheets. The fair value was
calculated as 3.2 million shares of Mogo common stock multiplied by the fair
value of the Mogo shares received. During the three and nine months ended
September 30, 2021, we recorded unrealized losses on the shares of approximately
$11.2 million and $10.8 million, respectively, based on the closing price per
share of Mogo common stock on NASDAQ on September 30, 2021 of $4.32. The daily
share price is extremely volatile and may be more or less than the amount
recorded as of September 30, 2021.

COVID-19:





The COVID-19 global pandemic has been unpredictable and unprecedented and is
likely to continue to result in significant national and global economic
disruption, which may adversely affect our business. Based on the Company's
current assessment, however, the Company does not expect any material impact on
its long-term development, its operations, or its liquidity due to the worldwide
spread of COVID-19. However, the Company is actively monitoring this situation
and the possible effects on its financial condition, liquidity, operations,
suppliers, and industry.

Summary of Cryptocurrency Mining Results:





The following table presents additional information about our cryptocurrency
mining activities of Bitcoin ("BTC"), Bitcoin Cash ("BCH") and Litecoin ("LTC")
in coins and amounts ($ in thousands) during the nine months ended September 30,
2021 and 2020:



                                                          Quantities (in coins)          Cryptocurrencies
                                                          BTC                BCH              Amounts

Balance at January 1, 2021                                   1,078                 1     $          11,626
Revenue recognized from cryptocurrencies mined               2,458                -                108,213
Proceeds from sale of cryptocurrencies                          (3 )              -                   (113 )
Realized gain on sale/exchange of cryptocurrencies              -                 -                     94
Impairment of cryptocurrencies                                  -                 -                (17,507 )
Balance at September 30, 2021                                3,533                 1     $         102,313




                                                Quantities (in coins)                Cryptocurrencies
                                          BTC            LTC            BCH              Amounts
Balance at January 1, 2020                    514          3,449              1     $            3,839
Revenue recognized from
cryptocurrencies mined                        730             21             -                   6,717
Mining pool operating fees                     -              -              -                     (94 )
Proceeds from sale of
cryptocurrencies                             (100 )           -              -                  (1,029 )
Realized gain on sale/exchange of
cryptocurrencies                               26         (3,470 )           -                     491
Impairment of cryptocurrencies                 -              -              -                    (989 )
Cryptocurrencies received from sale
of equipment                                    5             -              -                      52
Balance at September 30, 2020               1,175             -            

  1     $            8,987








                                      42

Results of Operations Comparative Results for the Three Months Ended September 30, 2021 and 2020:





Revenue:

Total revenue for the three months ended September 30, 2021 and 2020, was $64.8 million and $2.5 million, respectively, and consisted of our cryptocurrency mining revenue, data center hosting revenue and other revenue.





For the three months ended September 30, 2021 and 2020, cryptocurrency mining
revenue was $53.6 million, and $2.4 million, respectively. The increase of $51.2
million in mining revenue was due to higher Bitcoin values in the 2021 period,
averaging $41,837 per coin as compared to $10,823 per coin in the 2020 period,
combined with a higher number of Bitcoin mined in 2021, which totaled 1,292 as
compared to 222 in the 2020 period.



For the three months ended September 30, 2021, data center hosting revenue was
$11.2 million, and there was no data center hosting revenue for the three months
ended September 30, 2020. Data center hosting revenue includes upfront payments
which we record as deferred revenue and generally recognize as services are
provided. We provide energized space and operating and maintenance services to
third-party mining companies who locate their mining hardware at our Whinstone
Facility under long-term contracts. We account for these agreements as a single
performance obligation for services being delivered in a series with delivery
being measured by daily successful operation of the mining hardware. As such, we
recognize revenue over the life of the contract as its series of performance
obligations are met. The contracts are recognized in the amount for which we
have the right to invoice because we elected the "right to invoice" practical
expedient.

Other revenue consisting of license fees was not significant in either period.



Costs and expenses:



Cost of revenues for cryptocurrency mining for the three months ended September
30, 2021 and 2020 was $13.0 million and $1.3 million, respectively, representing
an increase of approximately $11.7 million. As a percentage of cryptocurrency
mining revenue, cost of revenues totaled 24.3% and 53.4% for each of the three
month periods ended September 30, 2021 and 2020, respectively. Cost of revenues
consists primarily of direct production costs of mining operations, including
electricity, labor, insurance and the variable Coinmint hosting fee, but
excluding depreciation and amortization, which are separately stated. The
increase of $11.7 million in cost of revenues is primarily due to the increases
in variable mining costs, including the variable hosting fees, associated with
increases in mining revenues.



Cost of revenues for data center hosting for the three months ended September
30, 2021, was $12.6 million and there were no data center hosting costs for the
three months ended September 30, 2020. The 2021 costs consisted primarily of
$9.4 million for direct power costs, with the balance primarily incurred for
rent and compensation costs.



Acquisition-related costs for the three months ended September 30, 2021 totaled
$0.6 million, and consisted of expenses incurred in connection with our
acquisition of Whinstone. There were no acquisition-related costs for the three
months ended September 30, 2020.



Selling, general and administrative expenses during the three months ended
September 30, 2021 and 2020 totaled $40.3 million and $2.0 million,
respectively. Selling, general and administrative expenses consist of
stock-based compensation, legal and professional fees and other personnel and
related costs. The increase of $38.3 million is primarily due to an increase in
stock-compensation expense of $35.6 million resulting from additional awards
(including the performance-based plan announce in August 2021), compensation
expense, which increased by $1.8 million due to additional employees to support
the Company's growth, and an increase in consulting fees of $0.7 million
resulting primarily from assistance on internal control systems and procedures.



Depreciation and amortization expenses during the three months ended September
30, 2021 totaled $12.2 million, which is an increase of approximately $10.9
million, as compared to $1.3 million for the three months ended September 30,
2020. The increase is primarily due to the amortization of the customer contract
intangible asset and higher depreciation expense recognized for the Whinstone
Facility and our recently acquired miners.







                                      43



Change in fair value of our derivative asset for the three months ended
September 30, 2021, was $9.9 million, including $7.2 million recorded to adjust
the fair value of our Power Supply Agreement, which was classified as a
derivative asset and measured at fair value on the date of our acquisition of
Whinstone, and $2.7 million from power sales to ERCOT through its demand
response program.



Other income and expenses:



Other expense for the three months ended September 30, 2021 was $11.1 million
and other income for the three months ended September 30, 2020 was $0.4 million.
The increase of $11.5 million is primarily related to an $11.2 million
unrealized loss on the decline in fair value of our marketable equity
securities.

Results of Operations Comparative Results for the Nine Months Ended September 30, 2021 and 2020:





Revenue:

Total revenue for the nine months ended September 30, 2021 and 2020, was $122.4 million and $6.8 million, respectively, and consisted of our cryptocurrency mining revenue, data center hosting revenue and other revenue.





For the nine months ended September 30, 2021 and 2020, cryptocurrency mining
revenue was $108.2 million, and $6.7 million, respectively. The increase of
$101.5 million in mining revenue was due to higher Bitcoin values in the 2021
period, averaging $44,591 per coin as compared to $9,064 per coin in the 2020
period, combined with a higher number of Bitcoin mined in 2021, which totaled
2,458 as compared to 730 in the 2020 period.



For the period from acquisition to September 30, 2021, data center hosting
revenue was $14.1 million, and there was no data center hosting revenue for the
nine months ended September 30, 2020. Data center hosting revenue includes
upfront payments, which we record as deferred revenue and generally recognize as
services are provided. We provide energized space and operating and maintenance
services to third-party mining companies who locate their mining hardware at our
Rockdale, Texas facility under long-term contracts. We account for these
agreements as a single performance obligation for services being delivered in a
series with delivery being measured by daily successful operation of the mining
hardware. As such, we recognize revenue over the life of the contract as its
series of performance obligations are met. The contracts are recognized in the
amount for which we have the right to invoice because we elected the "right

to
invoice" practical expedient.

Other revenue consisting of license fees was not significant in either period.





Costs and expenses:



Cost of revenues for cryptocurrency mining for the nine months ended September
30, 2021 and 2020 was $29.9 million and $4.1 million, respectively, representing
an increase of approximately $25.8 million. As a percentage of cryptocurrency
mining revenue, cost of revenues totaled 27.6% and 61.8% for each of the
nine-month periods ended September 30, 2021 and 2020, respectively. Cost of
revenues consist primarily of direct production costs of mining operations,
including electricity, labor, insurance and, in 2020, rent for the Oklahoma City
facility and, in 2021, the variable Coinmint hosting fee, but excluding
depreciation and amortization which are separately stated. The increase of $25.8
million in cost of revenues is primarily due to the increases in variable mining
costs, including the variable hosting fees associated with increases in mining
revenues.




Cost of revenues for data center hosting for the period from acquisition to
September 30, 2021, was $16.3 million and there were no data center hosting
costs for the nine months ended September 30, 2020. The 2021 costs consisted
primarily of $12.5 million for direct power costs, with the balance primarily
incurred for rent and compensation costs.



Acquisition-related costs for the nine months ended September 30, 2021, totaled
$18.9 million, and consisted of expenses incurred in connection with our
acquisition of Whinstone. There were no acquisition-related costs for the nine
months ended September 30, 2020.







                                      44



Selling, general and administrative expenses during the nine months ended
September 30, 2021 and 2020 totaled $48.0 million and $8.0 million,
respectively. Selling, general and administrative expenses consist of
stock-based compensation, legal and professional fees and other personnel and
related costs. The increase of $40.0 million is primarily due to an increase in
stock-compensation expense of $35.1 million resulting from additional awards
(including the performance-based plan announce in August 2021), compensation
expense, which increased by $3.2 million due to additional employees to support
the Company's growth, and an increase in consulting fees of $1.3 million
resulting primarily from assistance on internal control systems and procedures.



Depreciation and amortization expense during the nine months ended September 30,
2021 totaled $20.8 million, which is an increase of approximately $18.0 million,
as compared to $2.8 million for the nine months ended September 30, 2020. The
increase is primarily due to the amortization of the customer contract
intangible asset and higher depreciation expense recognized for the Whinstone
Facility and our recently acquired miners.



Change in fair value of our derivative asset for the nine months ended September
30, 2021, was $27.5 million, including $23.8 million recorded to adjust the fair
value of our Power Supply Agreement, which was classified as a derivative asset
and measured at fair value on the date of our acquisition of Whinstone, and $3.7
million from power sales to ERCOT through its demand response programs.

Impairment of long-term investments of $9.4 million recognized during the nine
months ended September 30, 2020 was recorded in connection with the impairment
of our investment in Coinsquare.



Impairment of cryptocurrencies for the nine months ended September 30, 2021 and
2020, was $17.5 million and $1.0 million respectively, arising from the decline
in Bitcoin prices during the periods.



Other income:



Other income for the nine months ended September 30, 2021 and 2020 was $17.3
million and $1.9 million, respectively. The increase of $15.4 million is
primarily related to a $26.3 million realized gain on the exchange of marketable
equity securities recognized in connection with the exchange of our shares of
Coinsquare, partially offset by a $10.8 million unrealized loss on our
marketable equity securities.

Liquidity and Capital Resources:





At September 30, 2021, we had working capital of approximately $153.5 million,
which included cash and cash equivalents of $57.9 million. We reported net
income of $11.5 million during the nine months ended September 30, 2021. Net
income included $42.1 million in non-cash items consisting primarily of a
realized gain on the sale of marketable equity securities of $26.3 million and
the change in fair value of our derivative asset of $23.8 million, offset by
stock-based compensation expense of $37.9 million, the impairment of
cryptocurrencies of $17.5 million, depreciation and amortization of $20.8
million, an unrealized loss on marketable securities of $10.8 million, deferred
income tax expense of $3.7 million and the issuance of common stock warrants of
$1.2 million.

Coinmint Co-location Mining Services Agreement:





On April 8, 2020, the Company entered into a co-location agreement (the
"Coinmint Agreement") with Coinmint, LLC ("Coinmint), pursuant to which Coinmint
agreed to provide up to approximately 9.5 MW of electrical power and to perform
all maintenance necessary to operate Riot's miners deployed at Coinmint's data
center facility in Massena NY (the "Coinmint Facility"). In exchange, Coinmint
is reimbursed for direct production expenses and receives a performance fee
based on the net cryptocurrencies generated by Riot's miners deployed at the
Coinmint Facility. The amount of electrical power supplied to Riot's miners at
the Coinmint Facility has subsequently been increased to accommodate Riot's
expanding miner fleet. However, the Company has not entered into a formal
written amendment to the Coinmint Agreement and there is no assurance that the
Company will have continued use of the Coinmint Facility. The initial term of
the Coinmint Agreement was six (6) months, with automatic renewals for
subsequent three (3) month terms until terminated as provided in the Coinmint
Agreement.





                                      45



Miners:



As of September 30, 2021, the Company had outstanding executed purchase
agreements for the purchase of miners from Bitmain for a total of 13,500 new
S19j-Pro model miners, scheduled to be delivered through October 2021, and had
paid a deposit of 20% of the total purchase price for the acquisition of an
additional 42,000 model S19j miners pursuant to a purchase agreement entered
into by the Company and Bitmain, dated effective as of April 5, 2021.



On April 5, 2021, the Company entered into a purchase agreement with Bitmain to
acquire approximately 42,000 Antminer model S19j miners, which are scheduled to
be delivered, on a monthly basis, between November 2021 and October 2022. As of
September 30, 2021 a deposit of $56.0 million had been paid against the
approximate $138.5 million purchase price, payable as follows: (i) 20% of the
purchase price paid as a refundable down payment in connection with the
execution of the agreement; (ii) 30% of the purchase price per batch due 6
months in advance of the shipment date for such batch; and (iii) the remaining
50% per batch due 30 days in advance of the shipment date for such batch.

Revenue from Operations:


Funding our operations on a go-forward basis will rely significantly on our
ability to continue to mine cryptocurrency and the spot or market price of the
cryptocurrency we mine and our data center hosted customers. We expect to
generate ongoing revenues from the production of cryptocurrencies, primarily
Bitcoin currency rewards, for example, in our mining facilities and our ability
to liquidate Bitcoin currency rewards at future values will be evaluated from
time to time to generate cash for operations. Generating Bitcoin currency
rewards, for example, which exceed our production and overhead costs will
determine our ability to report profit margins related to such mining
operations, although accounting for our reported profitability is significantly
complex. Furthermore, regardless of our ability to generate revenue from the
sale of our cryptocurrency assets or our data center hosting facility, we may
need to raise additional capital in the form of equity or debt to fund our
operations and pursue our business strategy.



The ability to raise funds as equity, debt or conversion of cryptocurrency to
maintain our operations is subject to many risks and uncertainties and, even if
we were successful, future equity issuances would result in dilution to our
existing stockholders and any future debt or debt securities may contain
covenants that limit our operations or ability to enter into certain
transactions. Our ability to realize revenue through Bitcoin production and
successfully convert Bitcoin into cash or fund overhead with Bitcoin is subject
to a number of risks, including regulatory, financial and business risks, many
of which are beyond our control. Additionally, we have observed significant
historical volatility in the market price of Bitcoin and, as such, future prices
cannot be predicted.




If we are unable to generate sufficient revenue from our Bitcoin production or
hosting operations when needed or secure additional sources of funding, it may
be necessary to significantly reduce our current rate of spending or explore
other strategic alternatives.

At-the-Market Equity Offerings:

2021 ATM Offering





In August 2021, the Company entered into a Sales Agreement with Cantor
Fitzgerald & Co., B. Riley FBR, Inc., BTIG, LLC, Compass Point Research &
Trading, LLC and Roth Capital Partners, LLC (the "Sales Agents") dated August
31, 2021 (the "Sales Agreement"), pursuant to which the Company may, from time
to time, sell up to $600.0 million in shares of the Company's common stock
through the Sales Agents, acting as the Company's sales agent and/or principal,
in a continuous at-the-market offering (the "2021 ATM Offering"). All sales of
the shares in connection with the ATM Offering have been made pursuant to an
effective shelf registration statement on Form S-3 (Registration No. 333-259212)
filed with the SEC. The Company pays the Sales Agents a commission of up to 3.0%
of the aggregate gross proceeds the Company receives from all sales of the
Company's common stock under the Sales Agreement. During the period August 31,
2021 to September 30, 2021, the Company received gross proceeds of approximately
$35.7 million ($34.8 million, net of $0.9 million in commissions and expenses)
from the sale of 1,227,991 shares of common stock, with an average fair value of
$29.07 per share, in the 2021 ATM Offering.



Subsequent to September 30, 2021, in connection with the Company's 2021 ATM
Offering, the Company received gross proceeds of approximately $564.3 million
from the sale of 18.7 million shares of common stock, which completed the 2021
ATM Offering.



                                      46



2020 ATM Offering



During January 2021, in connection with the Second Amendment to the
At-the-Market Sales Agreement, as amended, between the Company and its sales
agent, H.C. Wainwright, the Company received gross proceeds of approximately
$84.8 million ($82.7 million net, after $2.1 million in expenses) from the sale
of 4,433,468 shares of common stock, with an average fair value of $19.13 per
share, in the December 2020 ATM Offering. With the sale and issuance of these
shares, all $200 million in shares of the Company's common stock registered
under the December 2020 Registration Statement had been issued and the Company
completed the December 2020 ATM Offering. Under the terms of the December 2020
ATM Offering, the Company only issued shares of its common stock.



Operating Activities:



Net cash used in operating activities was $61.0 million during the nine months
ended September 30, 2021. Cash was generated from operations by income of $11.5
million, less non-cash items of $42.1 million, consisting primarily of a
realized gain on the sale of marketable equity securities of $26.3 million and
the change in fair value of our derivative asset of $23.8 million, offset by
stock-based compensation expense of $37.9 million, the impairment of
cryptocurrencies of $17.5 million, depreciation and amortization of $20.8
million, an unrealized loss on marketable securities of $10.8 million, deferred
income tax expense of $3.7 million and the issuance of common stock warrants of
$1.2 million, net of other immaterial items. The change in assets and
liabilities of $114.6 million consisted primarily of increased cryptocurrencies
of $108.2 million, increased security deposits of $3.1 million, increased
accounts receivable of $2.6 million, decreased prepaid expenses and other
current assets of $1.9 million, increased accounts payable and accrued expenses
of $4.5 million, change in fair value of future power credits of $0.4 million,
increased customer deposits of $6.1 million, and decreased deferred revenue

of
$12.8 million.



Net cash used in operating activities was $8.8 million during the nine months
ended September 30, 2020. Cash was consumed from continuing operations by the
loss of $16.6 million, less non-cash items of $14.4 million, consisting of the
impairment of our investment in Coinsquare totaling $9.4 million, stock-based
compensation totaling $2.8 million, impairment to our cryptocurrencies of $1.0
million, depreciation and amortization totaling $2.8 million, and amortization
of our right of use assets of $0.4 million, offset by, $1.4 million for the
reversal of our accrual for the registration rights penalty and $0.5 million
related to the gain from the exchange of cryptocurrencies, net of other
immaterial items. Cryptocurrencies increased by $6.6 million and prepaid
expenses and other current assets decreased $0.5 million, offset by, a decrease
in our lease liability of $0.4 million and a decrease in accounts payable and
accrued expenses of $0.2 million.

Investing Activities:





Net cash used in investing activities during the nine months ended September 30,
2021 was $221.0 million, primarily consisting of deposits on equipment of $103.2
million, our acquisition of Whinstone of $40.9 million, net and purchases of
property and equipment of $78.9 million, offset by proceeds of $1.8 million
received for our Mogo investment.



Net cash used in investing activities during the nine months ended September 30,
2020 was $16.5 million, consisting of deposits on equipment of $11.4 million,
purchases of property and equipment of $6.3 million, offset by proceeds received
from the sale of cryptocurrencies of $1.0 million and proceeds received from the
sale of property and equipment of $0.1 million.





                                      47



Financing Activities:



Net cash provided by financing activities was $116.5 million during the nine
months ended September 30, 2021, which consisted of net proceeds from the
issuance of our common stock in connection with our ATM Offerings of $117.5
million and proceeds received from the exercise of common stock warrants of $0.8
million, offset by the repurchase of common stock to pay employee withholding
taxes of $1.8 million.

Net cash provided by financing activities was $48.0 million during the nine months ended September 30, 2020, which consisted of net proceeds from the issuance of our common stock in connection with our At-The-Market Sales Agreement, dated effective as of May 24, 2019, as amended, ("2019 ATM Offering") of $48.0 million and proceeds received from the exercise of common stock warrants of $0.4 million, offset by the repurchase of common stock to pay director and employee withholding taxes of $0.4 million.

Critical Accounting Policies and Significant Judgments and Estimates:


Our critical accounting policies and significant estimates are detailed in our
2020 Annual Report. Our critical accounting policies and significant estimates
have not changed from those previously disclosed in our 2020 Annual Report,
except for those accounting subjects mentioned in the section of the notes to
the unaudited condensed interim consolidated financial statements titled
"Recently Issued and Adopted Accounting Pronouncements."

Recently Issued and Adopted Accounting Pronouncements:

The Company has evaluated all recently issued accounting pronouncements and believes such pronouncements do not have a material effect on the Company's financial statements. See Note 3 of the unaudited condensed interim consolidated financial statements at September 30, 2021.

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