The following Management's Discussion and Analysis of Financial Condition and
Results of Operations ("MD&A") is intended to help the reader understand our
results of operations and financial condition. The MD&A is provided as a
supplement to, and should be read in conjunction with, our consolidated
financial statements and notes thereto included in Item 8 - Financial Statements
and Supplementary Data.

The MD&A generally discusses 2021 and 2020 items and year-to-year comparisons
between 2021 and 2020, as well as year-to-year discussions between 2021, 2020,
and 2019, where indicated. Discussions of 2019 items and year-to-year
comparisons between 2020 and 2019 that are not included in this Form 10-K/A can
be found in "Management's Discussion and Analysis of Financial Condition and
Results or Operations" in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2020, filed with the SEC on March 31, 2021.

Business Overview:





We are a vertically integrated Bitcoin mining and cryptocurrency infrastructure
development company principally engaged in enhancing our capabilities to mine
Bitcoin. We also provide the critical mining infrastructure for our
institutional scale clients to mine Bitcoin at our Bitcoin mining facility (the
"Whinstone Facility"). Our Whinstone Facility is believed to be the largest
Bitcoin mining facility, as measured by developed capacity, in North America.

We operate in an environment which is consistently evolving based on the proliferation of Bitcoin and cryptocurrencies in general. A significant component of our strategy is to effectively and efficiently allocate capital between opportunities that generate the highest return on capital.

We operate in three business segments: (1) Bitcoin Mining ("Mining"), (2) Data Center Hosting ("Hosting"), and (3) Electrical Products and Engineering ("Engineering").



Strategic Acquisitions



Whinstone



On May 26, 2021, we completed the acquisition of all of the issued and
outstanding equity interests in Whinstone US, Inc. ("Whinstone") pursuant to the
stock purchase agreement, dated as of April 8, 2021, we entered into with
Northern Data AG ("Northern Data") and Whinstone (the "Whinstone Acquisition").
At the closing of the Whinstone Acquisition, we paid to Northern Data $80
million in cash, subject to customary adjustments set forth in the stock
purchase agreement, and issued to Northern Data 11.8 million shares of our
common stock. We also entered into a shareholder agreement with Northern Data on
the closing date granting Northern Data certain registration rights whereby we
registered the 11.8 million shares issued to Northern Data as part of the
Whinstone Acquisition. Subsequent to December 31, 2021, there were no
registration rights obligations to Northern Data.



32






After closing the Whinstone Acquisition, we announced a large-scale expansion of
the Whinstone Facility by 400 MW, which is anticipated to bring the Whinstone
Facility to 700 MW in total capacity of Bitcoin mining infrastructure. The
expansion of the Whinstone Facility will provide us with the necessary
infrastructure to operate our miners efficiently, and deploy our future miners,
as well as provide additional expansion opportunities in our Hosting business.

ESS Metron



On December 1, 2021, we entered into a membership interest purchase agreement to
acquire all of the issued and outstanding equity interests (the "ESS Metron
Acquisition") of Ferrie Franzmann Industries, LLC (d/b/a ESS Metron) ("ESS
Metron"). At the closing of the ESS Metron Acquisition, we issued to the sellers
$25 million in cash, subject to customary adjustments set forth in the
membership interest purchase agreement, and 715,413 shares of our common stock,
subject to a holdback of 70,165 shares as security for the sellers'
indemnification obligations under the membership interest purchase agreement. We
also granted the sellers certain registration rights relating to the resale by
the sellers of the shares issued to them under the membership interest purchase
agreement, among other things. Pursuant to these registration rights, we
registered the resale of the 645,248 shares issued to the sellers at the closing
of the ESS Metron Acquisition pursuant to the prospectus supplement we filed
with the SEC on December 1, 2021 under our effective Registration Statement on
Form S-3 filed with the SEC on August 31, 2021 (File No. 333-259212). These
registration rights also apply to the 70,165 holdback shares withheld at closing
of the ESS Metron Acquisition, subject to the satisfaction of the conditions to
their release, as set forth in the membership interest purchase agreement.
Accordingly, as provided in the membership interest purchase agreement, we will
be obligated to register under the Securities Act the resale of the holdback
shares that are ultimately issued to the sellers.



ESS Metron is one of the world's leading designers and manufacturers of power
distribution equipment. The acquisition of ESS Metron provides critical
infrastructure electrical components and engineering expertise to facilitate the
expansion of our Whinstone Facility, as well as future strategic growth
initiatives we may undertake. ESS Metron has also been instrumental in the
design, manufacture, and implementation of our industrial-scale immersion-cooled
Bitcoin mining hardware at our Whinstone Facility.



2022 Trends



We anticipate that 2022 will be a year of consolidation in the Bitcoin mining
industry, and we believe that, given our relative position in the competitive
landscape, we are likely positioned to benefit from this consolidation. As a
result of any strategic action undertaken by us, our business and financial
results may change significantly. We are continuously evaluating strategic
opportunities we may decide to undertake as part of our strategic growth
initiatives; however, we can offer no assurances that any strategic
opportunities we decide to undertake will be achieved on the schedule or within
the budget we anticipate, if at all, in our competitive and evolving industry.
See Part I, Item 1A. "Risk Factors" of this Annual Report for additional
discussion regarding potential impacts our competitive and evolving industry may
have on our business.



Bitcoin Mining



At December 31, 2021, our Mining business operated approximately 30,907 ASIC
miners, with a hash rate capacity of 3.1 exahash per second ("EH/s"), utilizing
approximately 96 megawatts ("MW") of capacity. In 2021, we mined 3,812 Bitcoin,
which represented an increase of 269% over the 1,033 Bitcoin we mined in 2020.
Based on our existing operations and expected deliveries of miners pursuant to
our purchase orders with their manufacturer, Bitmain, we anticipate we will have
approximately 120,150 miners in operation, utilizing approximately 370 MW of
capacity by the end of 2022.



33

Miner Purchases and Deployments





At December 31, 2021, we had purchased, received and/or deployed the following
miners:



                                                                 Number of miners

Miners deployed at January 1, 2021

7,043


Miners received and deployed during the year ended December
31, 2021

23,864

Miners received during the year ended December 31, 2021, but not yet deployed

10,744


Miners under contract, but not yet received

78,495



Total miners under contract, expected to be received, or
deployed at December 31, 2022                                              120,146




During 2021, we received 34,608 additional Antminer model S19-Pro miners
pursuant to purchase orders with their manufacturer, Bitmain, and, as of
December 31, 2021, we had deployed a total of 30,907 miners in our Mining
operation. Additionally, we executed six additional purchase orders with Bitmain
to acquire 43,500 Antminer model S19j (90 Terahash per second) ("TH/s")) miners,
and 9,000 Antminer model S19j-Pro (100 TH/s) miners, and 30,000 of Bitmain's
latest generation Antminer model S19XP (140 TH/s) miners, for a combined total
purchase price of approximately $535.0 million. Pursuant to these agreements,
approximately $301.3 million remains payable to Bitmain in installments in
advance of shipment of the miners, which is scheduled to occur on a monthly

basis through December 2022.



Data Center Hosting




Upon completion of the Whinstone Acquisition, we commenced an expansion of our
Whinstone Facility to 700 MW, from its existing 300 MW of developed capacity. We
expect the expanded Whinstone Facility to be completed during 2022, including
the construction of four new dedicated Bitcoin mining buildings totaling
approximately 240,000 square feet of finished hosting space. Upon completion, we
anticipate our Whinstone Facility will possess sufficient developed electricity
power capacity to support an estimated 112,000 Antminer model S19j miners based
upon current configurations. We believe the expansion of our 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 pursuant to our purchase orders with Bitmain) in a
self-hosted facility, while allowing Whinstone to continue to operate and grow
its existing 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 colocation
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 colocation services and for other enterprise-level data center
hosting services.

Whinstone currently hosts Bitcoin mining operations for institutional-scale
mining customers. In addition to Hosting revenue from customers, Whinstone also
generates, as part of its Hosting revenue, 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 December 31, 2021, Hosting
revenue and net income was approximately $24.5 million and $1.2 million,
respectively. Additionally, the majority of our $22.6 million of deferred
revenue as of December 31, 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.

Electrical Products and Engineering



The Acquisition of ESS Metron provides us with the ability to vertically
integrate many of the critical electrical components and engineering services
necessary for our Whinstone expansion. A key component of our strategy is to
integrate the expertise of the ESS Metron team, which we believe is necessary to
reduce our execution and counter-party risk in ongoing and future expansion
projects. ESS Metron's engineers will also allow us to continue to explore new
methods to optimize and develop a best-in-class Bitcoin mining operation, and
they have been instrumental in the development of our industrial-scale
immersion-cooled Bitcoin mining hardware. ESS Metron also has an existing
electricity distribution product design, manufacture, and installation business
primarily focused on large-scale commercial and governmental customers.

34






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 our current
assessment, however, we do not expect any material impact on our long-term
development, our operations, or our liquidity due to the worldwide spread of
COVID-19, other than the potential impacts of COVID-19 on global logistics
discussed below. We are actively monitoring this situation and the possible
effects on our financial condition, liquidity, operations, suppliers, and
industry.



Global Logistics



Global supply logistics have caused delays across all channels of distribution.
Similarly, we have also experienced delays in certain of our miner delivery
schedules. During 2021, we have been able to effectively mitigate any delivery
delays to avoid materially impacting our miner deployment schedule, however,
there are no assurances we will be able to continue to mitigate any such
delivery delays in 2022. Additionally, the scale of the Whinstone expansion
requires large quantities of specific materials. We have procured and hold many
of the required materials to help mitigate against global supply logistic and
pricing concerns. We monitor developments in the global supply chain and how
that may potentially impact our expansion plans. See Part I, Item 1A. "Risk
Factors" of our Annual Report for additional discussion regarding potential
impacts the global supply chain crisis may have on our operations and plans

for
expansion.

Summary of Mining Results



The following table presents additional information about our Mining activities,
including cryptocurrency production and sales of the cryptocurrency the Company
mined during the years ended December 31, 2021, 2020 and 2019 ($ in thousands):

                                                      Quantities
                                                      (in coins)       Amounts
Balance at January 1, 2019                                    164     $     707
Revenue recognized from cryptocurrencies mined                944

6,741


Mining pool operating fees                                     -           (135 )
Purchase of miner equipment with cryptocurrencies              (9 )         (99 )
Proceeds from sale of cryptocurrencies                       (585 )      (3,196 )
Realized gain on sale/exchange of cryptocurrencies             -

665


Impairment of cryptocurrencies                                 -           (844 )
Balance at December 31, 2019                                  514

3,839


Revenue recognized from cryptocurrencies mined              1,033

11,984


Mining pool operating fees                                     -           (146 )
Proceeds from sale of cryptocurrencies                       (500 )      (8,298 )
Realized gain on sale/exchange of cryptocurrencies             26

5,184


Impairment of cryptocurrencies                                 -           (989 )
Cryptocurrencies received from sale of equipment                5

52


Balance at December 31, 2020                                1,078

11,626


Revenue recognized from cryptocurrencies mined              3,812

184,422


Proceeds from sale of cryptocurrencies                         (6 )        (295 )
Realized gain on sale/exchange of cryptocurrencies             -

253


Impairment of cryptocurrencies                                 -        (36,462 )
Balance at December 31, 2021                                4,884     $ 159,544




35

Results of Operations Comparative Results for the Years Ended December 31, 2021 and 2020:



Revenues:



Total revenue for the years ended December 31, 2021 and 2020, was $213.2 million
and $12.1 million, respectively, and consisted of our Mining revenue, Hosting
revenue, Engineering revenue, and other revenue.



For the years ended December 31, 2021 and 2020, Mining revenue was $184.4
million, and $12.0 million, respectively. The increase of $172.4 million in
mining revenue was due to higher Bitcoin values in the 2021 period, averaging
$45,744 per coin as compared to $11,461 per coin in the 2020 period, combined
with a higher number of Bitcoin mined in 2021, which totaled 3,812, as compared
to 1,033 in the 2020 period.



For the period from the acquisition of Whinstone on May 26, 2021 to December 31,
2021, Hosting revenue was $24.5 million, and there was no Hosting revenue for
the year ended December 31, 2020. 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.

For the period from the acquisition of ESS Metron on December 1, 2021 to
December 31, 2021, Engineering revenue was $4.2 million, and there was no
Engineering revenue for the year ended December 31, 2020. Engineering revenue is
derived from the sale of custom products built to customers' specifications
under fixed-price contracts with one identified performance obligation.
Engineering revenues are recognized over time as performance creates or enhances
an asset with no alternative use, and for which the Company has an enforceable
right to receive compensation as defined under the contract.

Other revenue consisting of license fees earned from our legacy animal bioscience business was not significant in either period.

Costs and expenses:


Cost of revenues for Mining for the years ended December 31, 2021 and 2020 was
$45.5 million and $6.3 million, respectively, representing an increase of
approximately $39.2 million. As a percentage of Mining revenue, cost of revenues
totaled 24.7% and 52.2% for each of the years ended December 31, 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 $39.2 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 Hosting for the period from the acquisition of Whinstone on
May 26, 2021 to December 31, 2021 was $33.0 million and there were no Hosting
costs for the year ended December 31, 2020. The 2021 costs consisted primarily
of $25.8 million for direct power costs, with the balance primarily incurred for
compensation and rent costs.




Cost of revenues for Engineering for the period from the acquisition of ESS
Metron on December 1, 2021 to December 31, 2021 was $3.6 million and there were
no Engineering costs for the year ended December 31, 2020. The 2021 costs
consisted primarily of $3.6 million for direct materials and labor, as well as
indirect manufacturing costs.



Acquisition-related costs for the year ended December 31, 2021 totaled $21.2
million and consisted of expenses incurred in connection with our acquisitions
of Whinstone and ESS Metron. There were no acquisition-related costs for the
year ended December 31, 2020.





36






Selling, general and administrative expenses during the years ended December 31,
2021 and 2020 totaled $87.4 million and $10.3 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
$77.2 million is primarily due to an increase in stock-compensation expense of
$65.1 million resulting from additional awards (including the performance-based
plan announced in August 2021), compensation expense, which increased by $5.7
million due to additional employees to support the Company's growth, and an
increase in consulting fees of $2.6 million resulting primarily from assistance
on internal control systems and procedures.



Depreciation and amortization expense during the year ended December 31, 2021
totaled $26.3 million, which is an increase of approximately $21.8 million, as
compared to $4.5 million for the year ended December 31, 2020. The increase is
primarily due to higher depreciation expense recognized for the Whinstone
Facility and our recently acquired miners.



Change in fair value of our derivative asset for the period from the acquisition
of Whinstone to December 31, 2021, was $18.6 million, including $12.1 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 $6.5 million from power sales to ERCOT through its
demand response programs. There were no derivative assets for the year ended
December 31, 2020.



Impairment of long-term investments of $9.4 million recognized during the year
ended December 31, 2020 was recorded in connection with the impairment of our
investment in Coinsquare Ltd., a Canadian cryptocurrency exchange
("Coinsquare").



Impairment of cryptocurrencies for the years ended December 31, 2021 and 2020
was $36.5 million and $1.0 million respectively, arising from the decline in
Bitcoin prices during the periods.



Other Income:



Other income for the years ended December 31, 2021 and 2020 was $14.7 million
and $1.5 million, respectively. The increase of $13.2 million is primarily
related to a $26.3 million realized gain on the sale/exchange of long-term
investment recognized in connection with the exchange of our shares of
Coinsquare, partially offset by a $13.7 million unrealized loss on the decline
in fair value our marketable equity securities.

Income Taxes:



For the year ended December 31, 2021 the Company recorded an income tax expense
of $0.3 million. There was no income tax expense or benefit recorded for the
year ended December 31, 2020.

Non-GAAP Measures





In addition to consolidated U.S. GAAP financial measures, we consistently
evaluate our use and calculation of the non-GAAP financial measure, "Adjusted
EBITDA." Adjusted EBITDA is a financial measure defined as our EBITDA, adjusted
to eliminate the effects of certain non-cash and / or non-recurring items, that
do not reflect our ongoing strategic business operations. EBITDA is computed as
net income before interest, taxes, depreciation, and amortization. Adjusted
EBITDA is EBITDA further adjusted, for certain income and expenses, management
believes results in a performance measurement that represents a key indicator of
the Company's core business operations of Bitcoin mining. The adjustments
include fair value adjustments such as derivative power contract adjustments,
equity securities value changes, and non-cash stock-based compensation expense,
in addition to financing and legacy business income and expense items. In 2021,
we included impairments of cryptocurrencies and gain or losses on sales of
cryptocurrencies as part of our calculation of Adjusted EBITDA. Based upon
recent SEC comments to another issuer, we have determined to exclude impairments
of cryptocurrencies and gain or losses on sales of cryptocurrencies from our
calculation of Adjusted EBITDA as of December 31, 2021. We will continue to
evaluate the positions of FASB and SEC on the accounting treatment of
cryptocurrencies.

We believe Adjusted EBITDA can be an important financial measure because it allows management, investors, and our board of directors to evaluate and compare our operating results, including our return on capital and operating efficiencies, from period-to-period by making such adjustments.


Adjusted EBITDA is provided in addition to, and should not be considered to be a
substitute for, or superior to net income, the comparable measure under U.S.
GAAP. Further, Adjusted EBITDA should not be considered as an alternative to
revenue growth, net income, diluted earnings per share or any other performance
measure derived in accordance with U.S. GAAP, or as an alternative to cash flow
from operating activities as a measure of our liquidity. Adjusted EBITDA has
limitations as an analytical tool, and you should not consider such measures
either in isolation or as substitutes for analyzing our results as reported

under U.S. GAAP.





37

Reconciliations of Adjusted EBITDA to the most comparable U.S. GAAP financial metric for historical periods are presented in the table below:





           Reconciliation of GAAP and Non-GAAP Financial Information



                                                        Years Ended December 31,
(in thousands)                                   2021             2020             2019

Net income (loss)                           $     (7,926 )   $    (12,667 )        (20,303 )
  Interest (income) expense                          296              (85 )             -
  Income tax expense (benefit)                       254               -              (143 )
  Depreciation and amortization                   26,324            4,494              119
EBITDA                                            18,948           (8,258 )        (20,279 )

Adjustments:


Non-cash/non-recurring operating
expenses:
  Stock-based compensation expense                68,491            3,407              745
  Acquisition-related costs                       21,198               -                -
  Change in fair value of derivative

asset (gain) loss                                (12,112 )             -                -
  Change in fair value of contingent
consideration (gain) loss                            975               -                -
  Realized (gain) on sale/exchange of
long-term investment                             (26,260 )             -                -
  Unrealized (gain) loss on marketable
equity securities                                 13,655               -                -
  Reversal of registration rights penalty             -            (1,358 )             -
  Loss on issuance of convertible notes,
common stock and warrants                             -                -

6,155


  Change in fair value of warrant
liability                                             -                -

2,869


  Change in fair value of convertible
notes                                                 -                -   

         3,896
  Gain on deconsolidation of Tess                     -                -            (1,139 )
  Gain on sale of equipment                           -               (29 )             -
  Other (income) expense                          (2,378 )              6             (874 )
Other revenue, (income) expense items:
  License fees                                       (97 )            (97 )            (96 )
Adjusted EBITDA                             $     82,420           (6,329 )   $     (8,723 )

Results of Operations Comparative Results for the Years Ended December 31, 2020 and 2019:



Revenues:

Mining revenues for the years ended December 31, 2020 and 2019, totaled
approximately $12.0 million and $6.7 million, respectively. Other revenue
consisted of license payments of approximately $0.1 million in each period.
Revenues from cryptocurrency mining are impacted significantly by volatility in
Bitcoin prices, as well as increases in the Bitcoin blockchain's network hash
rate resulting from the growth in the overall quantity and quality of miners
working to solve blocks on the Bitcoin blockchain and the difficulty index
associated with the secure hashing algorithm employed in solving the blocks.

38






From early 2019 to the end of 2020 the Bitcoin blockchain's network hash rate
increased by approximately 249% as a result of, among other factors, the
increased number of miners working to solve blocks on the Bitcoin blockchain
during that period, many of which make use of newer, more efficient ASIC chips
that are specially designed to solve blocks using the SHA-256 set of
cryptographic hash functions employed on the Bitcoin blockchain. For years ended
December 31, 2020 and 2019, the average network hash rate working on the Bitcoin
blockchain was 142.74 EH/s and 98.67 EH/s, respectively. Further, the difficulty
index increased over 231% in the past two fiscal years. The cumulative
difficulty index increase over each of years ended December 31, 2020 and 2019
was 43.79% and 97.67%, respectively.

Cost and Expenses:


Cost of revenue for the year ended December 31, 2020 of approximately $6.3
million consisted primarily of direct production costs of the mining operations,
including rent and utilities and fees paid to Coinmint pursuant to the Coinmint
Agreement, but excluding depreciation and amortization, which are separately
stated. The cost of revenue for the year ended December 31, 2019 was
approximately $6.1 million. The cost of revenue for the years ended December 31,
2020 and 2019 as a percentage of mining revenue totaled 52.2% and 90.4%,
respectively. The improvement in 2020 resulted from higher average Bitcoin
values for mined Bitcoin and lower fixed and variable costs incurred for costs
of revenue for the second half of 2020 following the relocation to the Coinmint
Facility.

During the year ended December 31, 2020, we recorded a gain on the sale / exchange of cryptocurrencies of approximately $5.2 million. During the year ended December 31, 2019 the gain on sale of cryptocurrencies was $0.7 million.

Selling, General and Administrative Expenses:



Selling, general and administrative expenses for the year ended December 31,
2020 totaled approximately $10.3 million, which is an approximately $1.1
million, or a 11.9% increase, as compared to $9.2 million in the 2019 period.
Compensation related expense decreased by approximately $0.6 million due
primarily to staff reductions during 2019, net of severance costs and the
compensation expense of $0.3 for Tess Pay, Inc. ("Tess") in the 2019 period,
which in 2020 is no longer reported in our consolidated financial statements.
Stock-based compensation increased by approximately $2.7 million for the year
ended December 31, 2020 as compared with the 2019 period due to the 2020
issuance of 1,544,359 restricted stock units and the accelerated vesting of
471,544 restricted stock units due to the resignation of a member of the
Company's board. Legal fees decreased by approximately $0.6 million due to legal
matters associated primarily with the fees for the class action and derivative
suits and special SEC related matters being higher in the 2019 period. Audit
fees decreased approximately $0.3 million due to the higher level of financial
activities and the audit of internal controls over financial reporting incurred
for the year ended December 31, 2019.

Depreciation and Amortization:


Depreciation and amortization expenses in the year ended December 31, 2020
totaled approximately $4.5 million, which is an increase of approximately $4.4
million, compared to $0.1 million during the year ended December 31, 2019. The
increase is primarily due to higher average depreciable equipment levels in the
year ended December 31, 2020 resulting from the Company's acquisition of 7,043
new miners, which the Company depreciates over their two-year estimated usable
lives using the straight-line method.

Asset Impairment Charges:



Impairment of long-term investments of $9.4 million recognized during the year
ended December 31, 2020 was recorded in connection with the impairment of our
investment in Coinsquare. The Company recorded this 100% impairment as a result
of the OSC Order and Settlement Agreement in which Coinsquare and certain of its
executives and directors admitted to violations of Ontario securities laws and
conduct contrary to the public interest in connection with their operation of
the Coinsquare Market.

Impairment charges for cryptocurrencies was $1.0 million for the year ended December 31, 2020, which was recorded to recognize an impairment of our cryptocurrencies during the three months ended March 31, 2020.



Asset impairment charges of $1.5 million were recognized during the year ended
December 31, 2019 and were related to $0.8 million for the impairment of our
cryptocurrencies accounted for as intangible assets and $0.7 million related to
our intangible assets acquired in connection with our former RiotX / Logical
Brokerage business.

39






Other Income and Expense:

During the year ended December 31, 2020, we recognized income of approximately $1.4 million in connection with the reversal of our registration rights penalty.



During the year ended December 31, 2019, we recognized losses related to the
issuance of convertible notes of approximately $6.2 million and expenses
totaling $6.8 million to revalue the notes and the related warrant liability to
fair value.

During the year ended December 31, 2019, we recorded a gain of approximately $1.1 million on the deconsolidation of Tess, due to our reduced ownership interest from 50.2% to 8.8%. No such expense was recognized during the year ended December 31, 2020.

During the years ended December 31, 2020 and 2019, interest income and interest expense was nominal.



Other expense for the year ended December 31, 2020 was nominal. Other income was
approximately $0.9 million for the year ended December 31, 2019, due to a $0.4
million gain on forgiveness of our payable and interest in connection with our
former agreement with BMSS, and a $0.5 million gain on forgiveness of various
accounts payable balances.

Income Taxes:

For the years ended December 31, 2020 and 2019, the Company recorded income tax benefits of zero and $0.1 million, respectively.

LIQUIDITY AND CAPITAL RESOURCES





At December 31, 2021, we had working capital of approximately $463.7 million,
which included cash and cash equivalents of $312.3 million. We reported a net
loss of $7.9 million during the year ended December 31, 2021. Net loss included
$108.9 million in non-cash items consisting primarily of a realized gain on the
sale/exchange of long-term investment of $26.3 million and the change in fair
value of our derivative asset of $12.1 million, offset by stock-based
compensation expense of $68.5 million, the impairment of cryptocurrencies of
$36.5 million, depreciation and amortization of $26.3 million, an unrealized
loss on marketable securities of $13.7 million, the issuance of common stock
warrants of $1.2 million and income tax expense of $0.3 million.



40






Contractual Commitments

At December 31, 2021, we had the following contractual commitments (in
thousands):

                       Original
                       Purchase        Open Purchase
Agreement Date *      Commitment        Commitment        Deposit Balance

Expected Shipping


                                                                               First Quarter 2022 - Fourth
April 5, 2021       $      138,506     $      52,838     $          85,668

Quarter 2022


                                                                               Second Quarter 2022 - Third
October 29, 2021            56,250            31,950                24,300

Quarter 2022


                                                                               Third Quarter 2022 - Fourth
November 22, 2021           32,550            21,158                11,392

Quarter 2022


                                                                               Third Quarter 2022 - Fourth
December 10, 2021           97,650            63,472                34,178

Quarter 2022


                                                                               Third Quarter 2022 - Fourth
December 24, 2021          202,860           131,859                71,001     Quarter 2022
      Total         $      527,816     $     301,277     $         226,539

* Pursuant to the Company's agreements with Bitmain, the Company is responsible for all shipping charges incurred in connection with the delivery of the miners.

Coinmint Co-location Mining Services Agreement


On April 8, 2020, the Company entered into an agreement with Coinmint (the
"Coinmint Agreement"), 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 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, no formal written amendment
to the Coinmint Agreement solidifying Riot's continuing access to sufficient
power to operate its expanding fleet of miners has been entered into with
Coinmint. The initial term of the Coinmint Agreement was six months, with
automatic renewals for subsequent three month terms until terminated as provided
in the agreement.

Miners



During 2021, we entered into six purchase agreements with Bitmain to acquire
52,500 Antminer model S19j (90 Terahash per second) ("TH/s") miners and 30,000
of their latest Antminer model S19XP (140 TH/s) miners for a combined total
purchase price of approximately $535.0 million. Pursuant to these agreements,
approximately $301.3 million remains payable to Bitmain in installments in
advance of shipment of the miners, which is scheduled to occur on a monthly
basis through December 2022. Of the remaining miners to be delivered, 48,495 new
S19j-Pro model miners and 30,000 new S19XP model miners are all scheduled to be
delivered throughout the year ended December 31, 2022.



During the year ended December 31, 2020, the Company entered into purchase
agreements with Bitmain for the acquisition of a total of 33,646 of their model
S19, S19-Pro, and S19j-Pro Antminer series of miners, to be shipped and
delivered during 2020 and 2021. During the year ended December 31, 2020, the
Company received 3,043 model S19 Antminers of these 33,646 new miners, all of
which were deployed at the Coinmint Facility. The remaining 30,603 of these new
miners were delivered in monthly shipments through January 2022.

During December 2019, the Company purchased 4,000 Bitmain model S17-Pro
Antminers for a total purchase price of approximately $6.3 million directly from
Bitmain. During the year ended December 31, 2020, the Company relocated all
4,000 of these miners from its former Oklahoma facility to the Coinmint Facility
in Massena, New York.

41






Revenue from Operations




Funding our operations on a go-forward basis will rely significantly on our
ability to mine Bitcoin at a price above our Mining costs and revenue generated
from our Hosting and Engineering customers. We expect to generate ongoing
revenues from Bitcoin rewards from our Mining operations and our ability to
liquidate Bitcoin rewards at future values will be evaluated from time-to-time
to generate cash for operations.



Generating Bitcoin 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 Bitcoin from our Mining business, 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 through the sale of equity, debt financings, or the
sale of Bitcoin to maintain our operations is subject to many risks and
uncertainties and, even if we were successful, future equity issuances or
convertible debt offerings could 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. See the
discussion of risks affecting our business under Part I, Item 1A. "Risk Factors"
of this Annual Report.




If we are unable to generate sufficient revenue from our Mining operations,
Hosting operations or Engineering 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, we 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 we sold $600 million in shares of our common
stock through the Sales Agents, acting as our 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 were made pursuant to an effective
shelf registration statement on Form S-3 (Registration No. 333-259212) filed
with the SEC on August 31, 2021. During the period August 31, 2021 to December
31, 2021, we received gross proceeds of $600 million ($587.2 million, net of
$12.8 million in commissions paid to the Sales Agents and expenses) from the
sale of 19,910,589 shares of our common stock, with an average fair value of
$29.53 per share, in the 2021 ATM Offering. As of December 31, 2021, all $600
million in shares of our common stock registered under the December 2021
Registration Statement had been issued and, accordingly, we completed the 2021
ATM Offering.

2020 ATM Offering



During January 2021, in connection with the Second Amendment to the
At-the-Market Sales Agreement, as amended, with our sales agent under such
agreement, H.C. Wainwright, we 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
pursuant to the registration statement on Form S-3 (File No. 333-251149) filed
with the SEC on December 4, 2020 (the "December 2020 ATM Offering"). With the
sale and issuance of these shares and of the shares previously sold and issued
during the year ended December 31, 2020, all $200 million in shares of our
common stock registered under the December 2020 Registration Statement had been
issued and we completed the December 2020 ATM Offering. Under the terms of the
December 2020 ATM Offering, only shares of our common stock were issued.

As of October 15, 2020, the Company and H.C. Wainwright entered into the first
amendment to the Sales Agreement (the "First Amendment to the Sales Agreement").
Pursuant to the First Amendment to the Sales Agreement, the Company sold,
through H.C. Wainwright as its sales agent, $100.0 million in shares of the
Company's common stock in an at-the-market offering (the "October 2020 ATM
Offering"). The Company paid H.C. Wainwright a commission of up to 3.0% of the
aggregate gross proceeds the Company received from all sales of its common stock
in the October 2020 ATM Offering.



42






2019 ATM Offering



During the year ended December 31, 2020, we received net proceeds of
approximately $257.5 million (after deducting $7.3 million in commissions and
expenses) from sales of 49,932,051 shares of its common stock, no par value, at
a weighted average gross sales price of $5.30 per share pursuant to an
At-The-Market Sales Agreement, dated effective as of May 24, 2019, as amended
(the "2019 ATM Sales Agreement"), with its sales agent, H.C. Wainwright & Co.,
LLC ("Wainwright").



For a more detailed discussion of our At-the-Market Equity Offerings, see Note
12, "Stockholders' Equity", to our Consolidated Financial Statements for the
fiscal years ended December 31, 2021, 2020 and 2019, beginning on page F-37 of
this Annual Report on Form 10-K/A.

© Edgar Online, source Glimpses