What changed in this filing

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Item 1. Business

2022-03-16 compared with 2021-03-31 · 1162 added, 941 removed, 32 unchanged (99% of the section changed)

We are one of the leading Nasdaq publicly traded cryptocurrency mining companies operating in North America.

We have made the strategic decision to focus our efforts on mining bitcoin by deploying special cryptocurrency mining computers (known in the industry as “miners”) designed to mine for bitcoin.

As of the date of this Annual Report on Form 10-K, we exclusively operated the Antminer series of miners manufactured by Bitmain Technologies Limited (“Bitmain”) to mine bitcoin and, to a much lesser extent, litecoin.

We generate substantially all our revenue through our cryptocurrency mining operation.

We generate revenue from the cryptocurrency we earn through our mining activities, which we may hold for our own account and or sell at prices and times as determined by our executive management team in accordance with our corporate strategy.

The Company is also exploring innovative cryptocurrency mining technologies and other strategic initiatives as part of a continual effort to maximize the energy efficiency and cost effectiveness of its cryptocurrency mining activities.

Cryptocurrency Mining

We seek to mine bitcoin by using our miners to solve complex cryptographic algorithms to support the Bitcoin blockchain (in a process known as “solving a block”).

In return for solving a block, we receive a bitcoin or other cryptocurrency reward, depending on the blockchain, which we hold for our account and attempt to sell on the market to generate a profit.

Miners measure their capability in terms of processing power, which is known as in the industry as “hashing”

Hashing power is measured in terms of the number of hashing algorithms solved (or “hashes”) per second, which is the miner’s “hash rate.”

Generally speaking, miners with greater hashing power relative to other miners attempting to solve a block have a higher chance of solving the block and receiving a cryptocurrency award.

However, although newer generations of miners advertise improved energy efficiency, we have observed that increasing hash rate generally requires greater electrical power, which increases the cost of solving a block and, therefore, the relative cost of mining a cryptocurrency.

As additional miners competed for the limited supply of blocks, individuals found that they were working for months without finding a block and receiving any reward for their mining efforts.

To address this variance, miners started organizing into pools to share mining rewards more evenly on a pro rata basis based on total hashing capacity contributed to the mining pool.

Participation in Mining Pools

A “mining pool”

is the pooling of resources by miners, who share their processing power over a network and split rewards according to the amount of hashing power they contributed to the probability of placing a block on the blockchain.

Mining pools emerged in response to the growing difficulty and available hashing power that competes to place a block on the bitcoin blockchain.

The Company participates in mining pool(s) wherein groups of miners associate to pool their resources together to earn cryptocurrency rewards, which are allocated to each miner according to the “hashing”

capacity they contribute to the pool.

The mining pool operator provides a service that coordinates the computing power of the independent mining enterprises participating in the mining pool.

Fees are paid to the mining pool operator to cover the costs of maintaining the pool.

The pool uses software that coordinates the pool members’

hashing power, identifies new block rewards, records how much work all the participants are doing, and assigns block rewards for successful algorithm solutions in-proportion to the individual hash rate that each participant contributed to a given successful mining transaction.

While we do not pay pool fees directly, pool fees are deducted from amounts we may otherwise earn.

Fees (and payouts) fluctuate and historically have been no more than approximately 2% per reward earned, on average.

Mining pools are subject to various risks such as disruption and down time.

In the event that a pool experiences down time or is not yielding returns, our results may be impacted.

Mining Equipment

All of the miners we operate were manufactured by Bitmain, and incorporate application-specific integrated circuit (“ASIC”) chips specialized to solve blocks on the bitcoin blockchains using the 256-bit secure hashing algorithm (“SHA-256”) in return for bitcoin cryptocurrency rewards.

Therefore, the only cryptocurrencies we are able to mine using the miners we presently employ or have ordered from Bitmain are those whose blockchain uses SHA-256, including bitcoin.

If cryptocurrencies, particularly bitcoin, cease using SHA-256, we would likely incur significant costs to replace our existing miners.

We are continually evaluating the effectiveness of the miners we purchase from Bitmain and we continuously explore new technology developments from Bitmain and other manufacturers, including manufacturers located in Asia, Europe, and domestically in the United States.

In late 2019, the Company made a strategic decision to concentrate on increasing its overall hash rate and to update its fleet of miners by acquiring the latest generation Antminer series of miners directly from Bitmain to replace the approximately 7,500 legacy model S9 miners manufactured by Bitmain, which the Company had acquired in third-party transactions in 2017 and 2018.

The Company has chosen to focus on acquiring the latest generation of the Antminers directly from Bitmain because the Company’s management believes, both in terms of hash rate produced and energy efficiency, these new Antminers are the most powerful and energy efficient miners available on the market in sufficient quantities to meet our needs;

however, advances and improvements to the technology are ongoing and may be available in quantities to the market in the near future which may affect our perceived position.

The Company began the process of upgrading its existing mining fleet by ordering ordered 4,000 model S17-Pro Antminers directly from Bitmain in December 2019 for a total purchase price of approximately $6.3 million, which was paid in 2019.

All 4,000 of these new Bitmain model S17-Pro Antminers were received and deployed at the Company’s former Oklahoma City, Oklahoma mining facility (the “OKC Facility”) by February 2020.

As discussed in greater detail under the section entitled “

Mining Facility ”

below, the Company relocated all 4,000 of these new model S17-Pro Antminers from the OKC Facility to the current mining facility of Coinmint LLC, a colocation facility located in Massena, New York in the second quarter of the fiscal year ended December 31, 2020.

Beginning in April 2020, the Company began a series of acquisitions of the latest generation Bitmain model S19 series of Antminers and began retiring its older model S9 miners.

As of December 31, 2020, the Company operated a fleet of 7,043 model S17-Pro, S19, and S19-Pro Antminers, and had ordered an additional 30,603 new model S19-Pro, A19 and S19j-Pro Antminers, form Bitmain.

As set forth in the applicable purchase agreements previously disclosed by the Company as exhibits to current reports on Form 8-K filed with the SEC, which are incorporated by reference herein and included as exhibits to this Annual Report on Form 10-K, the Company pre-paid significant portions of the purchase price for these new Antminers as refundable deposits, with delivery scheduled to occur in installments through October 2021, and the remainder of the purchase price for these new Antminers is payable in installments, with payment due in advance of the scheduled delivery dates set forth in the applicable purchase agreement.

Miner Deliveries Subsequent to December 31, 2020.

Subsequent to December 31, 2020, the Company received the following shipments of new Bitmain Antminers purchased in 2020:

2,500 model S19-Pro Antminers in January 2021;

2,002 model S19-Pro Antminers in February 2021;

2,201 model S19-Pro Antminers in March 2021.

Pursuant to the schedules as set forth in the applicable purchase agreement, the remaining 11,900 model S19-Pro Antminers are set to be delivered in monthly installments through August 2021.

The 12,000 model S19j-Pro Antminers purchased by the Company during the year ended December 31, 2020 are expected to be delivered during September through November 2021, according to the schedule set forth on the applicable purchase agreement.

Miner Purchases Subsequent to December 31, 2020.

As reported by the Company on its current report on Form 8-K filed with the SEC on March 17, 2021, the Company ordered 1,500 model S19j (90 TH /s) Antminers from Bitmain for approximately $7.2 million pursuant to a purchase agreement dated as of March 11, 2021, between the Company and Bitmain.

Consistent with previous Bitmain agreements, the Company prepaid a significant portion of the total purchase price as a refundable deposit, with the remainder due in advance of delivery of the miners, which is expected to occur during late October 2021.

With the full deployment of all 32,103 new Bitmain model S19-Pro, S19j-Pro, and S19j Antminers delivered or scheduled to be delivered in 2021, our total fleet will consist of 39,146 total model S17-Pro, S19 and S19 Pro Antminers, each having a substantially greater hash rate capacity and electrical power usage efficiency than the Bitmain model S9 Antminers we previously operated.

The Company considers this a substantial step forward towards its goal of developing an increasingly powerful and efficient bitcoin miner fleet in order to produce a greater overall hash rate capacity.

Mining Facility

After evaluating the Company’s lease arrangement and power costs at its former Oklahoma mining facility (the “OKC Facility”), the Company made the strategic decision to explore alternative mining locations to reduce its overhead and operating costs.

Effective as of April 8, 2020, the Company and Coinmint, LLC (“Coinmint”) entered into a co-location mining services agreement (the “Coinmint Agreement”) which enabled the Company to relocate all of its miners from the OKC Facility to Coinmint’s Massena, New York facility (the “Coinmint Facility”) and to allow its lease of the OKC Facility to expire by its terms as of June 30, 2020.

Pursuant to the terms of the Coinmint Agreement, Coinmint provides electric power and performs all maintenance necessary to operate Riot’s miners at the Coinmint Facility.

In exchange, Coinmint receives a performance fee based on the net cryptocurrencies earned by Riot’s miners deployed at the Coinmint Facility and is reimbursed for direct production expenses.

The relocation to the Coinmint Facility reduced the Company’s overhead and operating costs, increased the overall uptime of its miners, and provided Riot with the opportunity to continue to expand its total hash rate capacity with potential access to additional megawatts of electric power, as compared to the former OKC Facility.

The initial six (6) month term of the Coinmint Agreement ended on October 8, 2020 and was automatically renewed for a subsequent three (3) month term, which, by the terms of the Coinmint Agreement, is set to automatically renew for successive three (3) month terms until terminated.

The Company is currently evaluating an amendment to the Coinmint Agreement to revise, among other provisions, the total available electric power and the total number of miners it may deploy at the Coinmint Facility under the Coinmint Agreement.

The Company continually evaluates its mining performance, including the status of the Coinmint Agreement, and as part of this evaluation, the Company may explore alternative mining facilities and mining arrangements in connection with its short-, medium- and long-term strategic planning.

Performance Metrics

Riot operates mining hardware which performs computational operations in support of the blockchain measured in “hash rate”

or “hashes per second.”

A “hash”

is the computation run by mining hardware in support of the blockchain;

therefore, a miner’s “hash rate”

refers to the rate at which it is capable of solving such computations.

The original equipment used for mining bitcoin utilized the Central Processing Unit (CPU) of a computer to mine various forms of cryptocurrency.

Due to performance limitations, CPU mining was rapidly replaced by the Graphics Processing Unit (GPU), which offers significant performance advantages over CPUs.

General purpose chipsets like CPUs and GPUs have since been replaced in the mining industry by ASIC chips like those found in the model S17-Pro, S19, S19-Pro, S19j and S19j-Pro Antminers Riot uses and plans to continue to use to mine bitcoin.

These ASIC chips are designed specifically to maximize the rate of hashing operations of the miners in which they are installed;

however, because they are specialized to operate SHA-256, if bitcoin or other cryptocurrencies cease using SHA-256 as the secure hashing algorithm support their blockchain, our miners may have to be replaced, which would likely require a significant capital expenditure by the Company.

Hash Rate Capacity

As of December 31, 2020, the Company’s operational fleet of 7,043 model S17-Pro, S19, and S19-Pro Antminers was capable of producing an estimated aggregate hash rate (the Company’s “hash rate capacity”) of approximately 0.57 exahash per second (EH/s), while utilizing approximately 20 megawatt (MW) of electrical energy.

This hash rate capacity represents an increase of approximately 461% over the hash rate capacity previously capable of being generated by the Company’s older generation model S9 miners as of December 31, 2019.

As of the filing of this Annual Report on Form 10-K, the Company had received a total of 13,746 Antminers from Bitmain and once fully deployed, are expected to produce an estimated hash rate capacity of approximately 1.3 EH/s, while utilizing approximately 43 MW of electrical energy.

This hash rate capacity represents an increase of approximately 1,191% over the hash rate capacity previously capable of being generated by the Company’s older generation model S9 miners as of December 31, 2019.

With the full deployment of all of the latest generation Antminers the Company has ordered from Bitmain as of the filing of this Annual Report on Form 10-K, the Company’s total mining fleet will comprise 39,146 Model S17-Pro, S19, and S19-Pro Antminers.

Each of these 39,146 advanced miners are capable of producing a substantially greater hash rate and use electrical power more efficiently than the older generation model S9 miners we previously operated.

At full deployment, the Company’s management estimates that the Company’s total miner fleet will be capable of producing a hash rate capacity of approximately 4.0 EH/s, while utilizing approximately 127 MW of electrical power, which will represent an increase of approximately 3,824% over the hash rate capacity previously capable of being generated by the Company’s older generation model S9 miners as of December 31, 2019.

The Company’s management considers this a substantial step forward towards its goal of developing an increasingly powerful and efficient bitcoin miner fleet to produce a greater overall hash rate capacity.

Network Hash Rate

In cryptocurrency mining, hash rate is a measure of the processing speed by a mining computer for a specific coin.

An individual miner, such as Riot, has a hash rate total of its miners seeking to mine a specific coin, and the blockchain-wide hash rate for a specific coin (its “Network Hash Rate”) can be understood as the aggregate of the hash rates of all of the miners actively trying to solve a block on the coin’s blockchain at a given time.

Generally, the greater the proportion of a specific coin’s Network Hash Rate that an individual miner’s (or a miner pool’s) total hash rate represents will, over time, result in a greater chance of that miner solving a block on the coin’s blockchain and, therefore, of earning a cryptocurrency reward, as compared to miners with relatively lower total hash rates.

However, as the relative market price for a coin increases, more miners are encouraged to attempt to mine the coin, which increases the coin’s Network Hash Rate.

Therefore, a miner must increase its total hash rate just to maintain its relative possibility of solving a block on the coin’s blockchain.

Thus, a feedback loop is created:

as a coin gains popularity and its relative market price increases, more miners attempt to mine the coin and its Network Hash Rate is increased;

in response, existing miners and new miners devote more and more hash rate to the coin’s blockchain in a process that should, theoretically, replicate itself continually until the supply of available coins is exhausted.

Finally, as more and more hash rate is needed to maintain competitiveness on a given coin’s blockchain, miners deploy more and more machines, which require electrical power to operate, both to directly power hash rate production and also to dissipate the significant amount of heat generated by the machines’

Therefore, as more hash rate is generated, more electric power is consumed, which generally increases the cost of mining a given coin.

In response, miners have attempted to achieve greater hash rate by deploying increasingly sophisticated miners in ever greater quantities.

This has become the cryptocurrency mining industry’s great “arms race.”

There are very few manufacturers of miners capable of producing a sufficient number of machines of adequate quality to meet this need, and scarcity results.

Compounding this phenomenon, we have seen reports that Bitmain, the largest manufacturer of bitcoin miners, increases its prices for new machines as the market price of bitcoin increases.

As a miner of primarily bitcoin, the oldest and most widely mined cryptocurrency, the Company is continually seeking to maximize its relative hash rate on the Bitcoin blockchain, while keeping costs as low as possible.

The Company’s goal, therefore, is to acquire and deploy as powerful of a fleet of miners as possible, while operating as energy-efficiently as possible.

To date, this has involved acquiring large numbers of the latest generation Antminer series of miners manufactured by Bitmain, because the Company’s management believes, to the best of their knowledge, that the S17-Pro, S19, S19-Pro, S19j, and S19j-Pro Antminers offer the best mix of hash rate capacity, reliability, energy efficiency, and cost.

We are a vertically integrated Bitcoin

mining 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 in Rockdale, Texas (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 we believe will generate the highest return on our capital.

We operate in three business segments:

(1) Bitcoin Mining (“Mining”), (2) Data Center Hosting (“Hosting”), and (3) Electrical Products and Engineering

(“Engineering”).

Business Segments

Bitcoin Mining

At December 31, 2021, our Mining business operated

approximately 30,907 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 3,813 Bitcoin, which represented an increase of 269% over the 1,033 Bitcoin we mined

Based on our existing operations and expected deliveries of miners we have purchased, we anticipate having approximately 120,150

miners in operation, utilizing approximately 370 MW of capacity by the end of 2022.

Our Mining operations are focused on maximizing

our ability to successfully mine Bitcoin by growing our hash rate (the amount of computer power we devote to supporting the Bitcoin blockchain)

to increase our chances of successfully verifying transactions to be recorded in the decentralized digital ledger comprising the Bitcoin

blockchain (a process known as “solving a block”).

Generally, the greater share of the Bitcoin blockchain’s total network

hash rate (the aggregate hash rate deployed to solving a block on the Bitcoin blockchain) represented by a miner’s hash rate, the

greater the miner’s chances of earning Bitcoin rewards.

As additional miner operators have entered the market in response to increased

demand for Bitcoin, the Bitcoin blockchain’s network hash rate has grown.

We expect this trend to continue, so we expect to need

to continue to grow our hash rate to compete in our dynamic and highly competitive industry.

We plan to achieve this growth by acquiring

highly specialized computer servers (known in the industry as “miners”) built to operate application-specific integrated circuit

(“ASIC”) chips designed specifically to mine Bitcoin and deploying them at-scale in our Whinstone Facility, including in immersion-cooled

environments.

The Whinstone Facility has a dedicated best-in-class team that supports our mining operations and provides us with the necessary

infrastructure and available power capacity for us to further scale our Mining business in the future.

We believe ASIC miners are the

most effective and energy-efficient miners available today, and we believe deploying them at-scale, including in immersion-cooled environments,

with its more efficient heat dissipation and reduced wear-and-tear versus traditional air-cooled hardware, will enable us to grow our

hash rate and optimize the output and longevity of our miners once they are deployed.

During the year ended December 31, 2021, we

executed additional purchase orders totaling $480 million with Bitmain Technologies Limited (“Bitmain”) for an additional

82,500 ASIC miners, including 30,000 of Bitmain’s latest generation Antminer model S19XP (140 TH/s) miners, and 52,500 S19j and

S19j Pro miners, including 43,500 model S19j (90 TH/s) miners and 9,000 model S19j Pro (100 TH/s) miners, with anticipated monthly delivery

and deployment schedules set through December 2022.

For additional discussion of our purchase orders with Bitmain, see the discussion

under the heading “Mining Operations” in Part II, Item 7.

“Management’s Discussion and Analysis of Financial Condition

and Results of Operations” of this Annual Report, as well as the purchase orders themselves, which are incorporated by reference

as exhibits to this Annual Report.

We also deploy miners with Coinmint, LLC (“Coinmint”)

under a month-to-month co-location mining services agreement (the “Coinmint Agreement”) at Coinmint’s Massena, New York

facility (the “Coinmint Facility”).

We continually evaluate our mining performance at the Coinmint Facility to determine the

optimal deployment strategy.

We have primarily held the Bitcoin we mine on our balance sheet

as a Bitcoin mining company, but we are constantly evaluating our Bitcoin retention policy to determine the most efficient use of that

Data Center Hosting

On May 26, 2021, we completed the strategic acquisition (the

“Whinstone Acquisition”) of Whinstone US, Inc.

(“Whinstone”) from Northern Data AG, a German stock corporation

(the “Northern Data”).

For more information on the Whinstone Acquisition, see Part II, Item 7.

“Management’s Discussion

and Analysis of Financial Condition and Results of Operations” under the heading “Strategic Acquisitions” and Part II,

“Financial Statements and Supplementary Data” under Note 4, “Acquisitions” included in the Notes to our

Consolidated Financial Statements.

Our Hosting business is operated at our Whinstone Facility and

focuses on providing co-location services for institutional-scale Bitcoin mining companies.

The Whinstone Facility provides the critical

infrastructure and workforce necessary for institutional-scale miners to deploy and operate their miners.

We provide our clients with

licensed space in specifically designed buildings to operate large quantities of miners with access to sufficient amounts of electricity

to operate those miners under colocation agreements.

In pursuit of achieving the most efficient power strategy, Whinstone

combines fixed low-cost power agreements, real-time spot power procurement and income from ancillary power services revenue.

Riot benefits

from this low-cost energy to maximize its production margins.

The combination of Riot and Whinstone allows us to rapidly scale our self-mining

business at one of the world’s largest mining facilities with power costs among the lowest in the industry.

After closing the Whinstone Acquisition, we announced a large-scale

expansion of the Whinstone Facility by 400 MW, including 200 MW of immersion-cooled Bitcoin mining infrastructure, 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 efficiently operate our miners, scale our future operations and provide additional

expansion opportunities in our Hosting business.

After completion of the Whinstone expansion, the Whinstone Facility will be comprised

of seven dedicated Bitcoin mining structures, designated as Buildings A through G.

As of December 31, 2021, our 400 MW expansion at the Whinstone

Facility had achieved multiple progress milestones while navigating the challenges with the current state of the global supply chain,

including the completion of the substation expansion to 700 MW, successful installation of the substation busbar, and 400 MW of high-voltage

transformers.

Whinstone also completed construction of Building F, our first self-mining building dedicated to immersion-cooled Bitcoin

mining, while also advancing on its second immersion-cooled dedicated building, Building G.

In December 2021, Whinstone also received

most of the structural components required for Buildings D, E, and G.

The construction completion timeline is currently on-time, despite

global supply chain shortages and delays.

Whinstone also generates engineering and construction services

revenue from hosting customers on site, including revenue derived from the fabrication, installation and maintenance services and deployment

assistance on immersion-cooling technology for Bitcoin mining.

Electrical Products and Engineering

On December 1, 2021, we acquired all of

the issued and outstanding equity interests of Ferrie Franzmann Industries, LLC (d/b/a ESS Metron) (“ESS Metron”).

is one of the world’s leading designers and manufacturers of power distribution equipment.

Our strategic acquisition of ESS Metron

provides us with access to critical electrical components and engineering services in connection with our development of our Hosting business

infrastructure at the Whinstone Facility, as well as with potential future expansion projects.

ESS Metron is a key strategic partner in

our development and deployment of our immersion-cooling technology.

For more information on the ESS Metron Acquisition, see Part II, Item

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the heading “Strategic

Acquisitions” and Part II, Item 8.

“Financial Statements and Supplementary Data” under Note 4, “Acquisitions”

included in the Notes to our Consolidated Financial Statements.

A “mining pool” is a service operated by a mining

pool operator that pools the resources of individual miners to share their processing power over a network and split rewards according

to the amount of hash rate they contributed to the probability of placing a block on the blockchain.

Mining pools emerged in response

to the growing difficulty and network hash rate competing for Bitcoin rewards on the Bitcoin blockchain, as a way of lowering costs and

de-risking an individual miner’s mining activities.

The mining pool operator provides a service that coordinates

the computing power of the independent mining enterprises participating in the mining pool.

The pool uses software that coordinates the

pool members’ hash rate, identifies new block rewards, records how much work all the participants are doing, and assigns Bitcoin

rewards to its participants in proportion to the hash rate each participant contributed to the successful mining transaction.

paid to the mining pool operator to cover the costs of maintaining the pool and are deducted from amounts we may otherwise earn.

(and payouts) fluctuate and historically have been no more than approximately 2% per reward earned, on average.

Mining pools are subject

to various risks such as disruption and down time.

In the event that a pool experiences down time or is not yielding returns, our results

may be impacted.

Bitcoin mining at scale is a highly competitive

environment that operates 24/7 around the world.

The primary drivers of competition are demand for Bitcoin, sufficient capital resources

to acquire large quantities of high-quality miners, the ability to secure these miners from a limited number of suppliers on rapid delivery

schedules, and the ability to execute on those miner deployments with the best-in-class mining infrastructure to generate the highest

productivity.

Recently, there has been a significant

increase in the number of Bitcoin miners attempting to expand their mining operations at scale.

As more Bitcoin miners enter the space,

we expect additional pressure on the industry, with greater competition for access to miners and mining infrastructure which is in limited

Data center hosting-particularly in the

Bitcoin mining space-is also highly competitive.

Institutional Bitcoin mining customers demand access to mining infrastructure that can

supply large amounts of reliable, low-cost electricity, with a best-in-class team that can execute on deploying miners on compressed timelines.

We have entered into a long-term power purchase agreement with our energy supplier at the Whinstone Facility, which allows us to control

our power costs and project them long-term, enabling us to focus on developing best-in-class mining infrastructure and delivering best-in-class

Research and Development

During 2021, we announced the first industrial

scale deployment of 200 MW of immersion-cooled Bitcoin mining at the Whinstone Facility.

We expect to continue developing immersion-cooling

Bitcoin mining technologies as we build new infrastructure.

We anticipate immersion-cooling technology will present many unique opportunities

to increase efficiencies in Bitcoin mining.

We are constantly evaluating new and emerging technologies in the Bitcoin ecosystem to make

our mining operations more efficient.

Materials and Suppliers

We maintain several key supplier relationships

that are important to our business to secure mining hardware and infrastructure components and other materials.

Given the complexity of

mining hardware, there are few suppliers that can produce miners at scale.

Our historic purchase orders with Bitmain have future delivery

schedules that can extend out many months before those miners are delivered to our Whinstone Facility.

These fluctuations in delivery

timelines requires us to purchase miners well in advance of when we anticipate deploying those miners.

Our expansion at the Whinstone Facility requires

large quantities of electrical infrastructure components and construction materials.

We seek to procure these materials from our suppliers

in sufficient quantities so that we can deploy miners at scale on accelerated timelines.

Further, our immersion-cooled Bitcoin mining

requires large volumes of specialized non-conductive fluid, with limited manufacturers.

We have procured most of our anticipated key materials

for the expansion of the Whinstone Facility.

Cryptocurrency mining is largely an unregulated

activity at both the state and federal level.

We anticipate that cryptocurrency mining will be a focus for increased regulation in the

near- and long-term, and we cannot predict how future regulations may affect our business or operations.

State regulation of cryptocurrency mining is

important with respect to where we conduct our mining operations.

Our Whinstone Facility is located in the State of Texas, which is one

of the most favorable regulatory environments for cryptocurrency miners.

However, we also have operations in New York, which has generally

been more aggressive in its regulation of cryptocurrency.

Current New York regulations, in our view, do not impact our decision to operate

our miners at the Coinmint Facility in Massena, New York;

however, if the regulatory landscape changes, we would have to evaluate whether

to relocate our miners to our Whinstone Facility in Texas, which could be costly and we would not be able to operate the miners while

they are being relocated.

In January 2022, we received a letter from

a group of Senators and members of Congress requesting information about our current and planned energy usage.

On February 24, we replied

to the letter and provided the Senators and members of Congress with the information they requested.

Further, in March 2022, the United States announced

plans to establish a unified federal regulatory regime for cryptocurrency, and a group of United States Senators sent a letter to the

United States Treasury Department asking Treasury Secretary Yellen to investigate Treasury’s ability to monitor and restrict the

use of cryptocurrencies to evade sanctions imposed by the United States.

We are unable to predict the impact that any new regulations

may have on our business at the time of filing this Annual Report.

We continue to monitor and proactively engage in dialogue on legislative

matters related to our industry.

As the regulatory and legal environment evolves,

we may become subject to new laws, such as further regulation by the SEC and other agencies, which may affect our mining and other activities.

For additional discussion regarding our belief about the potential risks existing and future regulation pose to our business, see Part

“Risk Factors” beginning on page 13 of this Annual Report.

Environmental

There are increasing concerns over the

large energy usage of Bitcoin mining and its effects on the environment.

Many mainstream media reports focus exclusively on the energy

requirements of Bitcoin mining and cite it as an environmental concern.

However, those reports tend to omit the important benefits associated

with that energy consumption.

For instance, in February 2021 and 2022, we voluntarily reduced our operations and curtailed our energy

usage to allow our energy provider to redirect our power allotment back into the ERCOT market.

By curtailing our operations and reducing

our energy usage, we immediately help to stabilize the grid by redirecting our power allotment back out into the ERCOT market where it

can be delivered to the areas of greatest need, such as heating homes and powering hospitals, helping to reduce the frequency and impact

of power failures and price surges.

In exchange for powering down our systems in response to these instances of high electricity demand,

we receive the difference between our cost of power and the price at which it is sold on the ERCOT market (less applicable fees payable

to our consultants who assist with our participation in the ERCOT Demand Response Program), which ultimately benefits us, other consumers

participating in the ERCOT market, and the overall health of the Texas grid.

Human Capital Resources

At December 31, 2021, we had a total workforce

of approximately 335 employees across our entire organization and subsidiaries, including professionals in engineering, information and

technology, operations, construction, finance, legal, communications and Bitcoin mining.

Of our total workforce, approximately 285 employees

were in engineering, construction and Bitcoin mining operations and approximately 50 were in a general and administrative support function,

such as information and technology, finance, legal and communications.

Approximately 53% of our workforce was in Colorado and 44% was

Our strategy with human capital resources

is to align the interests of our employees with our key long-term success drivers.

In execution of this philosophy, we adopted a long-term

performance incentive plan in August 2021 under our Riot Blockchain, Inc.

2019 Equity Incentive Plan, as amended.

Under this performance

plan, all eligible employees are granted performance-based restricted stock units (“PSUs”) that vest based on our achievement

of certain performance milestones as an organization.

Certain eligible employees under the performance plan would be eligible to receive

cash in lieu of PSU awards based on our achievement of these same performance milestones.

We believe our performance plan is a key incentive

for our employees that aligns their long-term interests with our long-term objectives as an organization.

Our management team believes

our relations with our employees to be good.

We want to attract a pool of diverse and

best-in-class candidates and foster their career growth once they become employees.

We seek to hire the best talent available, rather

than solely rely on educational background, and have provided job openings, including in local communities and large cities, for candidates

from various backgrounds.

Our goal is a long-term, growth-oriented career for every employee.

We also believe that our ability to retain

our workforce is dependent on our ability to foster an environment that is sustainably safe, respectful, fair and inclusive of everyone

and promotes diversity, equity and inclusion inside and outside of our business.

We compare salary and wages against quantitative

benchmarks and adjust to ensure wages are competitive, and have a robust process for ensuring pay equity across the Company.

we provide a comprehensive range of benefits options, including medical plan options for employees and family members.

Immersion-cooling

In October 2021, in connection

with the 400 MW expansion of Whinstone, we announced that 200 MW of this expansion would be committed to utilizing immersion-cooling technology.

This development encompasses two buildings currently under construction which are expected to host approximately 46,000 of the S19 Series

Antminer ASIC miners we have purchased from Bitmain, which are expected to be delivered and deployed on a rolling monthly basis throughout

When miners are immersion-cooled,

they operate in a more stable environment that is better able to dissipate the heat generated by the miners’ operation, allowing

the equipment to run at sustained higher productivity rates for longer periods of time.

Based on industry data and the Company’s

own preliminary immersion-cooling test results, an estimated 25% increase in hash rate is expected, with an estimated potential to increase

our miners’ performance by as much as 50% over traditional air-cooled techniques.

We are continuing to test our immersion-cooling

mining operations and, if our desired performance metrics are achieved, we plan to leverage our infrastructure development capabilities

to expand the implementation of our immersion-cooled Bitcoin mining hardware to increase our Bitcoin mining hash rate without relying

solely on purchasing additional new miners and mining equipment, which we believe will result in increased operating efficiencies, and,

thus, improved capital efficiencies.

Mining Results

Mining Production and Cryptocurrency Sales

The Company measures the success of its operations, in one respect, by the number and U.S.

Dollar (US$) value of the cryptocurrency rewards it earns from its cryptocurrency mining activities.

The following table presents additional information regarding our cryptocurrency mining operations, including cryptocurrency production and sales of the cryptocurrency the Company mines, expressed in terms of quantities of coins, including bitcoin (“BTC”), litecoin (“LTC”) and bitcoin cash (“BCH”), mined and in amounts (in thousands of US$):

Quantities (in coins)

Cryptocurrencies

The Company measures the success of its operations,

in one respect, by the number and U.S.

Dollar (“$”) value (in thousands of $) of the cryptocurrency rewards it earns from

its Mining activities.

The following table presents additional information regarding our Mining operations, including cryptocurrency production

and sales of the cryptocurrency the Company mines.

During 2021 we only mined Bitcoin, and during 2020 and 2019, nearly all of our operations

were focused on mining Bitcoin.

Balance at January 1, 2019

1 unchanged sentence

Mining pool operating fees

Proceeds from sale of cryptocurrencies

Purchase of miner equipment with cryptocurrencies

Proceeds from sale of cryptocurrencies

Realized gain on sale/exchange of cryptocurrencies

8 unchanged sentences

Balance at December 31, 2020

As the above table shows, the Company increased the quantity of bitcoin rewards earned from its cryptocurrency mining operations from 944 in fiscal year 2019, to 1,033 in fiscal year 2020, representing an increase of approximately 9.4% in the number of bitcoin mined.

As part of the strategy enacted in December 2019 to focus on using our miners to support the bitcoin blockchain by solving blocks as part of mining pools in exchange for bitcoin rewards, the Company significantly curtailed its litecoin and bitcoin cash mining activities and only received 21 litecoin rewards and did not receive any bitcoin cash rewards from operations during fiscal year 2020.

Despite this, the US$ amount of revenue the Company recognized from its cryptocurrency mining activities increased from approximately $6,741 during fiscal year 2019 to $11,984 during fiscal year 2020, representing an increase of approximately 78% in revenue from the Company’s mining operations.

As discussed in greater detail in the section of this Annual Report on Form 10-K entitled “Factors Affecting Profitability”

below, this is largely attributable to the increased market price of bitcoin during fiscal year 2020.

Revenue Recognition

The Company recognizes revenue under ASC 606, Revenue from Contracts with Customers.

The core principle of the new revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.

The following five steps are applied to achieve that core principle:

Identify the contract with the customer;

Identify the performance obligations in the contract;

Determine the transaction price;

Allocate the transaction price to the performance obligations in the contract;

Recognize revenue when the Company satisfies a performance obligation.

In order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised good or service that is distinct.

A performance obligation meets ASC 606’s definition of a “distinct”

good or service (or bundle of goods or services) if both of the following criteria are met:

The customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer (i.e., the good or service is capable of being distinct), and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the good or service is distinct within the context of the contract).

If a good or service is not distinct, the good or service is combined with other promised goods or services until a bundle of goods or services is identified that is distinct.

The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer.

The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both.

When determining the transaction price, an entity must consider the effects of all of the following:

Variable consideration;  

Constraining estimates of variable consideration;  

The existence of a significant financing component in the contract;  

Noncash consideration;

and  

Consideration payable to a customer.  

Variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved.

The transaction price is allocated to each performance obligation on a relative standalone selling price basis.

The transaction price allocated to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.

The Company has entered into digital asset mining pools by executing contracts with the mining pool operators for Riot to provide its computing power to the mining pool.

The contracts are terminable at any time by either party and the Company’s enforceable right to compensation only begins when the Company provides computing power to the mining pool operator.

In exchange for providing computing power, the Company is entitled to a fractional share of the fixed cryptocurrency award the mining pool operator receives (less net digital asset transaction fees to the mining pool operator which are recorded as a component of cost of revenues), for successfully adding a block to the blockchain.

The Company’s fractional share is based on the proportion of computing power the Company contributed to the mining pool operator to the total computing power contributed by all mining pool participants in solving the current algorithm.

Providing computing power in digital asset transaction verification services is an output of the Company’s ordinary activities.

The provision of providing such computing power is the only performance obligation in the Company’s contracts with mining pool operators.

The transaction consideration the Company receives, if any, is noncash consideration, which the Company measures at fair value on the date received, which is not materially different than the fair value at contract inception or the time the Company has earned the award from the pools.

The consideration is all variable.

It is not probable that a significant reversal of cumulative revenue will occur, and the consideration is constrained until the mining pool operator successfully places a block (by being the first to solve an algorithm) and when the Company receives confirmation of the consideration it will receive, at which time the revenue is recognized.

There is no significant financing component in these transactions.

Fair value of the cryptocurrency award received is determined using the market rate of the related cryptocurrency at the time of receipt.

There is currently no specific definitive guidance under United States Generally Accepted Accounting Principles ("GAAP") or alternative accounting framework for the accounting for cryptocurrencies recognized as revenue or held, and management has exercised significant judgment in determining the appropriate accounting treatment.

In the event authoritative guidance is enacted by the Financial Accounting Standards Board (“FASB”), the Company may be required to change its policies, which could have an effect on the Company’s consolidated financial position and results from operations.

Revenue recognized from cryptocurrencies mined

Proceeds from sale of cryptocurrencies

Realized gain on sale/exchange of cryptocurrencies

Impairment of cryptocurrencies

Balance at December 31, 2021

As the above table shows, we increased the

quantity of Bitcoin rewards earned from our Mining operations from 1,033 Bitcoin mined in fiscal year 2020, to 3,812 Bitcoin mined in

fiscal year 2021, representing an increase of approximately 269% in the number of Bitcoin mined.

The revenue we recognized from our Mining

activities increased from approximately $12.0 million during fiscal year 2020 to $184.4 million during fiscal year 2021, representing

an increase of approximately 1,439% in revenue from our Mining operations.

The increase 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 and an increase in the number of miners deployed from 7,043

as of December 31, 2020 to 30,907 as of December 31, 2021.

The revenue we recognized from our Mining activities

increased from approximately $6.7 million during fiscal year 2019 to $12.0 million during fiscal year 2020, representing an increase of

approximately 78%.

The increase was due to higher Bitcoin values in the 2020 period, averaging $11,461 per coin as compared to $7,405

per coin in the 2019 period and an increase in the number of miners deployed from 4,000 as of December 31, 2019 to 7,043 as of December

See under the heading “Factors Affecting Profitability” below.

Factors Affecting Profitability

Market Price of Bitcoin

Our business is heavily dependent on the spot price of bitcoin.

The prices of cryptocurrencies, specifically bitcoin, have experienced substantial volatility, which may reflect “bubble”

type volatility, meaning that high or low prices may have little or no merit, may be subject to rapidly changing investor sentiment, and may be influenced by factors such as technology, regulatory void or changes, fraudulent actors, manipulation, and media reporting.

Bitcoin (as well as other cryptocurrencies) may have value based on various factors, including their acceptance as a means of exchange by consumers and producers, scarcity, and market demand.

Further affecting the industry, and particularly for the Bitcoin blockchain, the cryptocurrency reward for solving a block is subject to periodic incremental halving.

Halving is a process designed to control the overall supply and reduce the risk of inflation in cryptocurrencies using a Proof-of-Work consensus algorithm.

At a predetermined block, the mining reward is cut in half, hence the term “halving”.

For bitcoin, our most significant cryptocurrency asset to which the majority of our mining power is devoted, the reward was initially set at 50 bitcoin currency rewards per block.

The Bitcoin blockchain has undergone halving three times since its inception as follows:

(1) on November 28, 2012 at block 210,000;

(2) on July 9, 2016 at block 420,000;

(3) on May 11, 2020 at block 630,000, when the reward was reduced to its current level of 6.25 bitcoin per block.

The next halving for the Bitcoin blockchain is anticipated to occur in March 2024 at block 840,000.

This process will reoccur until the total amount of bitcoin currency rewards issued reaches 21 million and the theoretical supply of new bitcoin is exhausted, which is expected to occur around 2140.

Many factors influence the price of bitcoin and the other cryptocurrencies we mine for, and potential increases or decreases in prices in advance of or following a future halving is unknown.

Our business environment is constantly evolving, and cryptocurrency miners can range from individual enthusiasts to professional mining operations with dedicated data centers.

The Company competes with other companies that focus all or a portion of their activities on mining activities at scale.

We face significant competition in every aspect of our business, including, but not limited to, the acquisition of new miners, the ability to raise capital, obtaining the lowest cost of electricity, obtaining access to energy sites with reliable sources of power, and evaluating new technology developments in the industry.

At present, the information concerning the activities of these enterprises may not be readily available as the vast majority of the participants in this sector do not publish information publicly or the information may be unreliable.

Published sources of information include “bitcoin.org”

and “blockchain.info”;

however, the reliability of that information and its continued availability cannot be assured.

We believe, based on available data, that the trend of increasing market prices for bitcoin and other major cryptocurrencies we observed beginning in the third fiscal quarter of calendar year 2020 has resulted in an increase in the scale and sophistication of competition in the cryptocurrency mining industry, with new entrants and existing competitors gaining access to substantial capital resources to build larger and larger mining operations.

If this trend of increasing market prices for bitcoin and other cryptocurrencies continues, which we believe has occurred (though with significant volatility) into calendar year 2021, we believe many new and existing competitors may be encouraged to build or scale bitcoin mining operations.

Despite this trend, we believe, based on available data and assuming full deployment of the miners we have ordered from Bitmain, we have and will continue to maintain a competitive hash rate capacity among both public and private bitcoin miners.

However, to stay competitive in our evolving industry, both against new entrants into the market and existing competitors, we anticipate that we will have to continue to expand our existing miner fleet by purchasing the latest generation of miners, as well as innovating to develop and implement new technologies and mining solutions.

Several public companies (traded in the U.S.

and internationally) and private companies may be considered to compete with us, including the following companies which we have identified as our competitors:

Argo Blockchain PLC;  

Bit Digital, Inc.;  

Bitcoin Investment Trust;  

Bitfarms Technologies Ltd.

(formerly Blockchain Mining Ltd);  

Blockchain Industries, Inc.

(formerly Omni Global Technologies, Inc.);  

Digihost International, Inc.;  

DMG Blockchain Solutions Inc.;  

DPW Holdings, Inc.

(through its ownership of Digital Farms Inc.);  

GMO Internet, Inc.;  

Galaxy Digital Holdings Ltd.;  

HashChain Technology, Inc.;  

Hive Blockchain Technologies Inc.;  

Hut 8 Mining Corp.;  

Layer1 Technologies, Inc.;  

Marathon Digital Holdings, Inc.;  

MGT Capital Investments, Inc.;  

Northern Data AG;  

Overstock.com Inc.;  

and  

SBI Holdings.  

Government Regulation

Blockchain and Bitcoin are increasingly becoming subject to governmental regulation, both in the U.S.

and internationally.

State and local regulations also may apply to our activities and other activities in which we may participate in the future.

Other governmental or semi-governmental regulatory bodies have shown an interest in regulating or investigating companies engaged in the blockchain or cryptocurrency business.

For instance, the Cyber-Digital Task Force of the U.S.

Department of Justice (the “DOJ”) published a report entitled “Cryptocurrency:

An Enforcement Framework”

in October 2020.

This report provides a comprehensive overview of the possible threats and enforcement challenges the DOJ views as associated with the use and prevalence of cryptocurrency, as well as the regulatory and investigatory means the DOJ has at its disposal to deal with these possible threats and challenges.

Further, in early March 2021, the SEC chairperson nominee expressed an intent to focus on investor protection issues raised by bitcoin and other cryptocurrencies.

Presently, we do not believe any U.S.

or State regulatory body has taken any action or position adverse to our main cryptocurrency, bitcoin, with respect to its production, sale, and use as a medium of exchange;

however, future changes to existing regulations or entirely new regulations may affect our business in ways it is not presently possible for us to predict with any reasonable degree of reliability.

Further, following the appreciation of the market price of bitcoin in the second half of 2020, we have observed increasing media attention directed at the environmental concerns associated with cryptocurrency mining, particularly its energy-intensive nature.

While we do not believe any U.S.-based regulators have taken a position adverse to bitcoin mining, in March 2021, we became aware of the actions taken by the governmental authorities for the Chinese province of Inner Mongolia, which represents roughly 8% of the world’s total mining power, to outright ban bitcoin mining in the province due to the industry’s intense electrical power demands and its negative environmental impacts (both in terms of the waste produced by mining the rare Earth metals used to manufacture miners and the production of electrical power used in bitcoin mining).

While we have yet to see whether these miners will be able to relocate to another location in China to continue mining, this action serves as a stark reminder of the power of national and state governments to affect our industry through regulator action.

As the regulatory and legal environment evolves, we may become subject to new laws, such as further regulation by the SEC and other agencies, which may affect our mining and other activities.

For additional discussion regarding our belief about the potential risks existing and future regulation pose to our business, see the Section entitled “Risk Factors”

Our business is heavily dependent on the spot

price of Bitcoin.

The prices of cryptocurrencies, including Bitcoin, have experienced substantial volatility, meaning that high or low

prices may be based on speculation and incomplete information, may be subject to rapidly changing investor sentiment, and may be influenced

by factors such as technology, regulatory void or changes, fraudulent actors, manipulation, and media reporting.

Bitcoin (as well as other

cryptocurrencies) may have value based on various factors, including their acceptance as a means of exchange by consumers and producers,

scarcity, and market demand which are beyond our control.

Further affecting the industry, and particularly

for the Bitcoin blockchain, the cryptocurrency reward for solving a block is subject to periodic incremental halving.

Halving is a process

designed to control the overall supply and reduce the risk of inflation in cryptocurrencies using a Proof-of-Work consensus algorithm.

At a predetermined block, the mining reward is cut in half, hence the term “halving”.

For Bitcoin, our most significant cryptocurrency

asset to which the majority of our mining power is devoted, the reward was initially set at 50 Bitcoin currency rewards per block.

Bitcoin blockchain has undergone halving three times since its inception as follows:

(1) on November 28, 2012 at block height 210,000;

(2) on July 9, 2016 at block height 420,000;

(3) on May 11, 2020 at block height 630,000, when the reward was reduced to its current level

of 6.25 Bitcoin per block.

The next halving for the Bitcoin blockchain is anticipated to occur in May 2024 at block height 840,000.

process will reoccur until the total amount of Bitcoin currency rewards issued reaches 21 million and the theoretical supply of new Bitcoin

is exhausted, which is expected to occur around 2140.

Many factors influence the price of Bitcoin, and potential increases or decreases

in prices in advance of or following a future halving is unknown.

Network Hash Rate and Difficulty

Generally, a Bitcoin miner’s chance of

solving a block on the Bitcoin blockchain and earning a Bitcoin reward is a function of the miner’s hash rate, relative to the global

network hash rate (i.e., the aggregate amount of computing power devoted to supporting the Bitcoin blockchain at a given time).

for Bitcoin has increased, the global network hash rate has increased rapidly, and as more adoption of Bitcoin occurs, we expect the demand

for new Bitcoin will likewise increase as more mining companies are drawn into the industry by this increased demand.

Further, as more

and increasingly powerful miners are deployed, the network difficulty for Bitcoin has increased.

Network difficulty is a measure of how

difficult it is to solve a block on the Bitcoin blockchain, which is adjusted every 2016 blocks (every 2 weeks approximately) so that

the average time between each block remains ten minutes.

A high difficulty means that it will take more computing power to solve a block

and earn a new Bitcoin reward, which, in turn, makes the Bitcoin network more secure by limiting the possibility of one miner or mining

pool gaining control of the network.

Therefore, as new and existing miners deploy additional hash rate, the global network hash rate will

continue to increase, meaning a miner’s share of the global network hash rate (and therefore its chance of earning Bitcoin rewards)

will decline if it fails to deploy additional hash rate at pace with the industry.

For further discussion of the factors affecting

our profitability, see the discussion under Part II, Item 7 “Management’s Discussion and Analysis” under the heading

“Summary of Mining Results” beginning on page 35 of this Annual Report, as well as the discussion of various risks, factors,

and uncertainties we believe may affect our revenue and results of operations under Part I, Item 1A.

“Risk Factors” beginning

on page 13 of this Annual Report.

Performance Metrics

We seek to mine Bitcoin by using our miners

to solve complex cryptographic algorithms to support the Bitcoin blockchain (in a process known as “solving a block”).

return for solving a block, we receive a Bitcoin, depending on the blockchain, which we can hold for our account and attempt to sell on

the market to generate a profit.

Miners generally measure their capability in

terms of hash rate, which is measured in terms of the number of cryptographic hashing algorithms solved (or “hashes”) per

Generally, miners (or mining pools) with a greater hash rate relative to the global Bitcoin network hash rate deployed by miners

on the Bitcoin blockchain at a given time will, over time, have a greater chance of earning a Bitcoin reward, as compared to miners with

relatively lower total hash rates.

However, as the relative market price for Bitcoin

increases, more miners are encouraged to attempt to mine Bitcoin, which increases Bitcoin’s global network hash rate.

to remain competitive, miners seek to continually increase their total hash rate, creating a feedback loop:

as Bitcoin gains popularity

and its relative market price increases, more miners attempt to mine Bitcoin and its network hash rate is increased;

in response, existing

miners and new miners devote more and more hash rate to the Bitcoin blockchain by adding more increasingly powerful miners to attempt

to ensure their ability to earn additional Bitcoin rewards, and, in response, the network difficulty of the Bitcoin network is increased

to maintain the pace of new block additions, spurring miners to seek to deploy yet further hash rate to earn the same relative number

of new Bitcoin rewards.

In theory, this process should continually replicate itself until the supply of available Bitcoin is exhausted.

In response, miners have attempted to achieve

greater hash rate by deploying increasingly sophisticated miners in ever greater quantities.

This has become the Bitcoin mining industry’s

great “arms race.” There are very few manufacturers of miners capable of producing a sufficient number of miners of adequate

quality to meet this need, and scarcity results, leading to higher prices.

Compounding this phenomenon, it has been observed that some

manufacturers of Bitcoin miners may increase the prices for new miners as the market price of Bitcoin increases.

Further, these manufacturers

have been impacted by the ongoing global supply chain crisis resulting from COVID-19, both in terms of increased prices for the components

of these new miners resulting from the constrained supply of the semiconductors used in the production of the highly specialized ASIC

chips miners rely on, and in terms of labor costs to manufacture new miners as workforces are affected by increased absenteeism due to

COVID-19 restrictions and employee burnout.

Thus, miner manufacturers are subject to increasing price pressures due to both increased

demand for new miners and decreased supply of necessary components and labor, ultimately leading to higher prices for new miners.

Intellectual Property

We actively use specific hardware and software for our cryptocurrency mining operation.

In certain cases, source code and other software assets may be subject to an open source license, as much technology development underway in this sector is open source.

For these works, we intend to adhere to the terms of any license agreements that may be in place.

We do not currently own, and do not have any current plans to seek, any patents in connection with our existing and planned blockchain and cryptocurrency related operations.

We do expect to rely upon trade secrets, trademarks, service marks, trade names, copyrights and other intellectual property rights and expect to license the use of intellectual property rights owned and controlled by others.

In addition, we have developed and may further develop certain proprietary software applications for purposes of our cryptocurrency mining operation.

Strategic Initiatives

To assist the Company with identifying new and emerging technologies, as well as other opportunities to enhance its business, the Company engaged XMS Capital Partners, LLC (“XMS”), an experienced M&A financial advisory firm, to identify new transaction partners and strategic opportunities for the Company in the Bitcoin space.

XMS is assisting the Company in navigating the dynamic Bitcoin landscape and is advising the Company on potential strategic transactions in bitcoin mining related operations.

The Company does not have a defined timeline for any transaction and cannot provide any assurance whether or when a transaction may be announced or consummated.

Lancium Pilot Project

In December 2020, we announced a pilot project in Houston, Texas to evaluate the use of immersion cooling technology and electric power cost management strategies for mining bitcoin in the Texas energy market.

We partnered with two leading-edge technology companies, Enigma Digital Assets AG (“Enigma”) and Lancium, LLC (“Lancium”) to launch the pilot project.

The pilot project has the unique dual focus of evaluating Enigma’s next-generation immersion technology to increase mining productivity, in addition to evaluating Lancium’s Smart Response™

software to reduce energy costs.

This software allows data centers to adjust server electricity consumption based on power grid conditions such as price, frequency, or ancillary service revenue, which potentially unlocks significant power savings for operators.

Lancium has also been advising Riot on power strategy in the Texas energy market, known as “ERCOT”.

Immersion cooling is a cooling technique where bitcoin mining units are submerged in a specialized fluid in order to keep the integrated circuits operating at lower temperatures.

When successful, this has the potential to:

prolong equipment life, enhance microchip efficiencies, and provides the opportunity to “overclock”

the rig, i.e., running at speeds beyond factory specified design.

Overclocking, including when assisted by immersion cooling, is a technique that can be used to increase a miner’s overall hash rate.

Lancium will facilitate providing 8 MW of power capacity for the pilot project.

The initial 3 MW will be dedicated to a current-generation Enigma immersion module, for use with S19-Pro ASIC miners.

If the parties decide to proceed with the pilot project after this initial testing stage is complete, a further 5 MW may be made available for Enigma’s next-generation immersion module solution, which is currently in development and expected to be available later in 2021.

This next-generation immersion module solution involves proprietary ASIC chips combined with a new cooling solution.

Both modules are the first of their kind from Enigma.

Riot will control the pilot project with Enigma providing the immersion containers and Lancium licensing its Smart Response™

If successful, Riot may seek to expand upon the pilot project at larger-scale sites.

As of March 25, 2021, we had eight full-time employees.

We believe our employee relations to be good.

Currently, our activities rely on the services of one individual consultant under a full-time agreement.

We actively use specific hardware and software

for our Bitcoin mining operations.

The Bitcoin blockchain is generally built on open-source code and, in certain cases, the source code

and other software assets we use in our mining operations may be subject to an open-source license.

For these works, we adhere to the

terms of any license agreements that may be in place.

We also rely upon the intellectual property rights of others in certain respects

in connection with our immersion-cooling technology.

We currently rely upon trade secrets, trademarks,

service marks, trade names, copyrights, and other intellectual property rights, and to license the use of such intellectual property rights

owned and controlled by others.

In addition, we have developed and may further develop certain proprietary software and hardware applications

in connection with Bitcoin mining operations, including our immersion-cooled Bitcoin mining developments.

Corporate Information

Our principal executive office is located at 202 6 th Street, Suite 401, Castle Rock, CO 80104, which is where our records are kept and the principal business address for our Chief Financial Officer and accounting staff, and our telephone number is (303) 794-2000.

Our principal operating location which is provided under a co-location mining services agreement with Coinmint is in Massena, New York.

We were incorporated on July 24, 2000 in the State of Colorado under the name AspenBio, Inc., which was subsequently changed to AspenBio Pharma, Inc.

We have gone through several subsequent name changes:

in December 2012, we changed our name to Venaxis, Inc.;

in 2016 we changed our name to Bioptix, Inc.;

and, effective October 19, 2017 we adopted our present corporate name, Riot Blockchain, Inc.

and changed our state of incorporation to Nevada.

Our principal executive office is located at

3855 Ambrosia Street, Suite 301, Castle Rock, CO 80109, which is where our records are kept and the principal business address for our

Chief Financial Officer and accounting staff, and our telephone number is (303) 794-2000.

We were incorporated on July 24, 2000 in the

State of Colorado under the name AspenBio, Inc.

We have gone through several subsequent name changes and, effective October 19, 2017,

we adopted our present corporate name, Riot Blockchain, Inc., and changed our state of incorporation to Nevada.

Our website address is www.riotblockchain.com.

Our telephone number is (303) 794-2000.

Available Information

You can access, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports as filed with the SEC under the Securities Exchange Act of 1934, as amended on the SEC’s website www.sec.gov.

These documents may also be accessed on our website:

You can access, free of charge, our annual

reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to these reports as filed with the SEC

under the Securities Exchange Act of 1934, as amended on the SEC’s website www.sec.gov.

These documents may also be accessed on

www.riotblockchain.com.

These documents are placed on our website as soon as is reasonably practicable after their filing with the SEC.

These documents are placed on our website as soon as is reasonably practicable after their filing

with the SEC.

The information contained in, or that can be accessed through, the website is not part of this Annual Report on Form 10-K.

An investment in the Company’s common stock involves a high degree of risk, and an investor should only purchase the Company’s securities if he or she can afford to suffer the loss of his or her entire investment.

Certain factors may have a materially adverse effect on our business, financial condition and results of operations, including the risk factors described below.

You should carefully consider all of the risks and uncertainties described below and elsewhere in this Annual Report on Form 10-K, as well as those risks disclosed in the Company’s other public filings, together with the other information contained in this report and the Company’s other public filings before making an investment decision regarding the Company’s securities.

The risks and uncertainties described below are not the only ones we face.

Additional risks and uncertainties not presently known to us or that we currently believe are not material may also become important factors that could adversely affect our business, financial condition and results of operations, perhaps materially.

If any of the following risks actually occur, our business, financial condition, results of operation and future prospects could be materially and adversely affected.

In that event, the trading price of shares of our common stock could decline, and you could lose part or all your investment.

The risks discussed below also include forward-looking statements, and actual results and events may differ substantially from those discussed or highlighted in those forward-looking statements.

For more information regarding forward-looking statements in this Annual Report, please see the Section entitled “Cautionary Note Regarding Forward-Looking Statements”

on Page 4 of this Annual Report on Form 10-K.

Risks Related to Our Cryptocurrency Mining Business

The cost of obtaining new and replacement miners and parts has historically been capital intensive, and is likely to continue to be very capital intensive, which may have a material and adverse effect on our business and results of operations.

Our mining operations can only be successful and ultimately profitable if the costs, including hardware and electricity costs, associated with mining cryptocurrencies are lower than the price of the cryptocurrencies we mine when we sell them.

Our miners experience ordinary wear and tear from operation and may also face more significant malfunctions caused by factors which may be beyond our control.

Additionally, as the technology evolves, we may acquire newer models of miners to remain competitive in the market.

Over time, we replace those miners which are no longer functional with new miners purchased from third-party manufacturers, who are primarily based in China.

For example, the 30,603 new Bitmain Antminer model S19, S19-Pro and S19j-Pro miners we purchased in the fiscal year ended December 31, 2020, at a cost of approximately $69.5 million, will eventually become obsolete or will degrade due to ordinary wear and tear from usage, and may also be lost or damaged due to factors outside of our control.

Once this happens, these new miners will need to be repaired or replaced along with other equipment from time to time for us to stay competitive.

This upgrading process requires substantial capital investment, and we may face challenges in doing so on a timely and cost-effective basis based on availability of new miners and our access to adequate capital resources.

If we are unable to obtain adequate numbers of new and replacement miners at scale, we may be unable to remain competitive in our highly competitive and evolving industry.

If this happens, we may not be able to mine cryptocurrency as efficiently or in similar amounts as our competition and, as a result, our business and financial results could suffer.

This could, in turn, materially and adversely affect the trading price of our securities and our investors could lose part or all of their investment.

The price of new miners may be linked to the market price of bitcoin and other cryptocurrencies, and, if the current relatively high market price of bitcoin persists, our costs of obtaining new and replacement miners may increase, which may have a material and adverse effect on our financial condition and results of operations.

Reports have been released that the prices of new miners are adjusted according to the price of bitcoin.

As a result, the cost of new machines can be unpredictable, and could also be significantly higher than our historical cost for new miners.

Similarly, as bitcoin prices have risen, we have observed significant increase in the demand for miners.

As a result, at times, we may obtain Bitmain miners and other hardware from Bitmain or from third parties at higher prices, to the extent they are available.

For example, in the second half of 2020 and continuing into 2021, we have observed a significant appreciation in the market price of bitcoin, as well as an increase in the per-unit price of the new Bitmain Antminer model S19-Pro and S19j-Pro miners we purchased during this same period.

While we cannot know definitively if these two phenomena are linked, we have seen a measurable increase in the prices for new miners offered by Bitmain.

As disclosed in this Annual Report on Form 10-K, our financial condition and results of operations are dependent on our ability to sell the bitcoin we mine at a price greater than our costs to produce that bitcoin.

As the price for new miners we buy increases, our cost to produce a single bitcoin also increases, therefore requiring a corresponding increase in the price of bitcoin for us to maintain our results of operations.

We have observed significant fluctuations in market prices for bitcoin, to the extent that we are unable to reasonably predict future prices for the bitcoin we mine.

We incur significant up-front capital costs each time we acquire new miners, and, if future prices of bitcoin are not sufficiently high, we may not realize the benefit of these capital expenditures.

If this occurs, our business, results of operations, and financial condition could be materially and adversely affected, which may have a negative impact on the trading price of our securities, which may have a materially adverse impact on investors’

investment in our Company.

There are several new and existing competitors in our industry that are purchasing mining equipment at scale, which may cause delays or difficulty in us obtaining new miners, which could materially and adversely affect our business and results of operations.

Many of the competitors in our industry have also been purchasing mining equipment at scale, which has caused a world-wide shortage of mining equipment and extended the corresponding delivery schedules for new miner purchases.

There are no assurances that our manufacturer Bitmain, or any other manufacturers, will be able to keep pace with the surge in demand for mining equipment.

It is uncertain how manufacturers will respond to this increased global demand and whether they can deliver on the schedules promised to all of their customers.

In the event Bitmain or other manufacturers are not able to keep pace with demand, we may not be able to purchase miners from Bitmain or other manufacturers in sufficient quantities or on the delivery schedules that meet our business needs.

Additionally, should Bitmain default on its purchase agreements with us, we would have to pursue recourse in an international jurisdiction, which would be costly and time consuming to resolve, and there is no guarantee we would succeed in recovering any of our deposits paid for such mining purchases, which could materially and adversely affect our business and results of operations.

The COVID-19 pandemic has disrupted and may continue to disrupt international shipping and we may not be able to obtain new miners or replacement parts for our existing miner fleet in a timely or cost-effective manner, which could materially and adversely affect our business and results of operations.

The novel strain of the coronavirus ("COVID-19") has spread as a global pandemic throughout the world and has resulted in authorities imposing, and businesses and individuals implementing, numerous unprecedented measures to try to contain the virus.

Although the United States and countries around the world have been releasing a vaccine, there are no assurances that the vaccine will be effective, and what impact it will have on reducing the spread or containment of COVID-19.

In addition to vaccinations, these efforts include travel bans and restrictions, quarantines, shelter-in-place/stay-at-home and social distancing orders, and shutdowns.

These measures have impacted and may further impact our workforce and operations, the operations of our customers, and those of our vendors, suppliers and manufacturing partners.

The extent to which the COVID-19 pandemic will continue to affect our business, results of operations and financial condition is difficult to predict and depends on numerous evolving factors, including:

the duration and scope of the pandemic and its impact on overall global uncertainty;

government, social, business and other actions that have been and will be taken in response to the pandemic;

and the effect of the pandemic on short- and long-term general economic conditions.

Current and future restrictions or disruptions of transportation, such as reduced availability of air and ground transport, port closures or congestion, and increased border controls or closures, can also impact our ability to meet demand and could materially adversely affect us.

We have already observed a significant increase in both air and sea freight costs as a result of the COVID-19 pandemic, which results in higher shipping costs for us as we seek to ship new and replacement miners from manufacturing locations primarily located in Malaysia to our operations in the U.S.

These increased costs could have a material adverse effect on our financial condition and results of operations, particularly if the effects of COVID-19 are prolonged.

The COVID-19 global pandemic has disrupted and may continue to disrupt the manufacture and availability of new miners, which could materially and adversely affect our business and results of operations.

Various COVID-19-related restrictions on travel, work, and movement of goods and supplies, as well as the cumulative impact of the mounting number of lost working days as a result of COVID-19 has already put strain on our manufacturing partners, suppliers and logistics partners to produce and deliver a sufficient number of products needed to meet the global demand for miners.

This has had a particularly strong impact on the global supply chain and availability of semiconductors, which are used in the manufacture of the ASIC chips used in the miners we operate.

The strain on the global supply of semiconductors, largely stemming from manufacturing interruptions due to COVID-19-related disruptions, has resulted in decreased production across many industrial sectors.

While our manufacturing partners and component suppliers mostly have been able to continue to operate to date in compliance with applicable regulations and current limitations, future restrictions on their operations could impact their ability to meet global demand for new miners.

Concurrently, along with an increased trading price of bitcoin and other cryptocurrencies in the fourth quarter of 2020 and continuing into the first quarter of 2021, we have observed an increased demand for ASIC miners during this period.

In the last fiscal quarter of 2020 and through the date of this Annual Report on Form 10-K, we have already experienced increased per-unit costs for new miners, and, if the scarcity of ASIC miners continues, this trend may continue.

If we are unable to acquire new miners, or if our cost for new miners is excessively high, we may not be able to keep up with our competitors, which may materially and adversely affect our business and results of operations.

Our mining operating costs could outpace our mining revenues, which could seriously harm our business or increase our losses.

Our mining operations are costly and our expenses may increase in the future.

This expense increase may not be offset by a corresponding increase in revenue.

Our expenses may be greater than we anticipate, and our investments to make our business more efficient may not succeed and may outpace monetization efforts.

Increases in our costs without a corresponding increase in our revenue would increase our losses and could seriously harm our business and financial performance.

To the extent that the profit margins of bitcoin mining operations are not high, operators of bitcoin mining operations are more likely to immediately sell bitcoin rewards earned by mining in the market, thereby constraining growth of the price of bitcoin that could adversely impact us, and similar actions could affect other cryptocurrencies.

Over the past two years, bitcoin mining operations have evolved from individual users mining with computer processors, graphics processing units and first-generation ASIC servers.

Currently, new processing power is predominantly added by incorporated and unincorporated “professionalized”

mining operations.

Professionalized mining operations may use proprietary hardware or sophisticated ASIC machines acquired from ASIC manufacturers.

Acquiring this specialized hardware at scale requires the investment of significant up-front capital, and miners incur significant expenses related to the operation of this hardware at scale, such as the leasing of operating space (often in data centers or warehousing facilities), incurring of electricity costs to run the miners and the employment of technicians to operate the mining farms.

As a result, professionalized mining operations are of a greater scale than prior miners and have more defined and regular expenses and liabilities.

These regular expenses and liabilities require professionalized mining operations to maintain profit margins on the sale of bitcoin.

To the extent the price of bitcoin declines and such profit margin is constrained, professionalized miners are incentivized to more immediately sell bitcoin earned from mining operations, whereas it is believed that individual miners in past years were more likely to hold newly mined bitcoin for more extended periods.

The immediate selling of newly mined bitcoin greatly increases the trading volume of bitcoin, creating downward pressure on the market price of bitcoin rewards.

The extent to which the value of bitcoin mined by a professionalized mining operation exceeds the allocable capital and operating costs determines the profit margin of such operation.

A professionalized mining operation may be more likely to sell a higher percentage of its newly mined bitcoin rapidly if it is operating at a low profit margin and it may partially or completely cease operations if its profit margin is negative.

In a low profit margin environment, a higher percentage could be sold more rapidly, thereby potentially depressing bitcoin prices.

Lower bitcoin prices could result in further tightening of profit margins for professionalized mining operations creating a network effect that may further reduce the price of bitcoin until mining operations with higher operating costs become unprofitable forcing them to reduce mining power or cease mining operations temporarily.

The foregoing risks associated with bitcoin could be equally applicable to other cryptocurrencies, whether existing now or introduced in the future.

Such circumstances could have a material adverse effect on our ability to continue as a going concern or to pursue our new strategy at all, which could have a material adverse effect on our business, prospects or operations and potentially the value of bitcoin and any other cryptocurrencies we mine or otherwise acquire or hold for our own account, and thus harm investors.

We have a history of operating losses, and we may not be able to achieve or sustain profitability.

Our primary focus is on our digital currency mining operation located at the Coinmint Facility, where we have engaged Coinmint to maintain and provide power to our miners.

Our current strategy will continue to expose us to the numerous risks and volatility associated within this sector.

Further, we have experienced recurring losses and negative cash flows from operations.

As of December

31, 2020, we had approximate balances of cash and cash equivalents of $223.4 million, working capital of $233.9 million, total stockholders’

equity of $277.1 million and an accumulated deficit of $229.9 million.

To date, we have, in large part, relied on equity financings to fund our operations and, if cryptocurrency prices are not sufficiently high to enable us to sell the cryptocurrency we mine at prices above our cost to mine it, then we are likely to continue to be unable to fund our operations without raising additional capital.

Even if prices are sufficiently high for our mining activities, we are likely to need to raise additional capital to fund the acquisition of new miners to replace our existing miners and expand our fleet to be competitive in our volatile and highly competitive industry.

We may be unable to raise additional capital needed to grow our business.

We will likely continue to operate at a loss, at least until our business strategy is implemented, or if cryptocurrency prices decline, and we expect to need to raise additional capital to expand our operations and pursue our growth strategies, including potential acquisitions of complementary businesses, and to respond to competitive pressures or unanticipated working capital requirements.

We may not be able to obtain additional debt or equity financing on favorable terms, if at all, which could impair our growth and adversely affect our existing operations.

If we raise additional equity financing, our stockholders may experience significant dilution of their ownership interests, and the per share value of our common stock could decline.

Furthermore, if we engage in additional debt financing, the holders of debt likely would have priority over the holders of common stock on order of payment preference.

We may be required to accept terms that restrict our ability to incur additional indebtedness or take other actions including terms that require us to maintain specified liquidity or other ratios that could otherwise not be in the interests of our stockholders.

The Company’s reliance on a third-party mining pool service provider for our mining revenue payouts may have a negative impact on the Company’s operations such as a result of cyber-attacks against the mining pool operator and/or our limited recourse against the mining pool operator with respect to rewards paid to us.

We receive cryptocurrency mining rewards from our mining activity through a third-party mining pool operator.

Mining pools allow miners to combine their processing power, increasing their chances of solving a block and getting paid by the network.

The rewards are distributed by the pool operator, proportionally to our contribution to the pool’s overall mining power, used to generate each block.

Should the pool operator’s system suffer downtime due to a cyber-attack, software malfunction or other similar issues, it will negatively impact our ability to mine and receive revenue.

Furthermore, we are dependent on the accuracy of the mining pool operator’s record keeping to accurately record the total processing power provided to the pool for a given bitcoin mining application in order to assess the proportion of that total processing power we provided.

While we have internal methods of tracking both our power provided and the total used by the pool, the mining pool operator uses its own record-keeping to determine our proportion of a given reward.

We have little means of recourse against the mining pool operator if we determine the proportion of the reward paid out to us by the mining pool operator is incorrect, other than leaving the pool.

If we are unable to consistently obtain accurate proportionate rewards from our mining pool operators, we may experience reduced reward for our efforts, which would have an adverse effect on our business and operations.

The primary cryptocurrency for which we mine, bitcoin, is subject to halving;

the cryptocurrency reward for successfully uncovering a block will halve several times in the future and their value may not adjust to compensate us for the reduction in the rewards we receive from our mining efforts.

As disclosed In Part I, Item 1, “Business,”

of this Annual Report on Form 10-K, under the subheading “Halving”

on page 10 hereof, the primary cryptocurrencies for which we mine, bitcoin, are subject to “halving,”

which is the process by which the cryptocurrency reward for solving a block is cut in half –

hence, “halving.”

While bitcoin prices have had a history of price fluctuations around the halving of their respective cryptocurrency rewards, there is no guarantee that the price change will be favorable or would compensate for the reduction in mining reward.

If a corresponding and proportionate increase in the trading price of these cryptocurrencies does not follow these anticipated halving events, the revenue we earn from our mining operations would see a corresponding decrease, which would have a material adverse effect on our business and operations.

We may not be able to realize the benefits of forks.

To the extent that a significant majority of users and miners on a cryptocurrency network install software that changes the cryptocurrency network or properties of a cryptocurrency, including the irreversibility of transactions and limitations on the mining of new cryptocurrency, the cryptocurrency network would be subject to new protocols and software.

However, if less than a significant majority of users and miners on the cryptocurrency network consent to the proposed modification, and the modification is not compatible with the software prior to its modification, the consequence would be what is known as a “fork”

of the network, with one prong running the pre-modified software and the other running the modified software.

The effect of such a fork would be the existence of two versions of the cryptocurrency running in parallel, yet lacking interchangeability and necessitating exchange-type transaction to convert currencies between the two forks.

Additionally, it may be unclear following a fork which fork represents the original asset and which is the new asset.

Different metrics adopted by industry participants to determine which is the original asset include:

referring to the wishes of the core developers of a cryptocurrency, blockchains with the greatest amount of hashing power contributed by miners or validators;

or blockchains with the longest chain.

A fork in the network of a particular cryptocurrency could adversely affect an investment in our securities or our ability to operate.

We may not be able to realize the economic benefit of a fork, either immediately or ever, which could adversely affect an investment in our securities.

If we hold a cryptocurrency at the time of a hard fork into two cryptocurrencies, industry standards would dictate that we would be expected to hold an equivalent amount of the old and new assets following the fork.

However, we may not be able, or it may not be practical, to secure or realize the economic benefit of the new asset for various reasons.

For instance, we may determine that there is no safe or practical way to custody the new asset, that trying to do so may pose an unacceptable risk to our holdings in the old asset, or that the costs of taking possession and/or maintaining ownership of the new cryptocurrency exceed the benefits of owning the new cryptocurrency.

Additionally, laws, regulation or other factors may prevent us from benefitting from the new asset even if there is a safe and practical way to custody and secure the new asset.

There is a possibility of cryptocurrency mining algorithms transitioning to proof of stake validation and other mining related risks, which could make us less competitive and ultimately adversely affect our business and the value of our stock.

Proof of stake is an alternative method in validating cryptocurrency transactions.

Should the algorithm shift from a proof of work validation method to a proof of stake method, mining would likely require less energy, which may render any company that maintains advantages in the current climate (for example, from lower priced electricity, processing, real estate, or hosting) less competitive.

We, as a result of our efforts to optimize and improve the efficiency of our cryptocurrency mining operations, may be exposed to the risk in the future of losing the benefit of our capital investments and the competitive advantage we hope to gain from this as a result, and may be negatively impacted if a switch to proof of stake validation were to occur.

Such events could have a material adverse effect on our ability to continue as a going concern or to pursue our new strategy at all, which could have a material adverse effect on our business, prospects or operations and potentially the value of any bitcoin or other cryptocurrencies we mine or otherwise acquire or hold for our own account.

Because our miners are designed specifically to mine bitcoin, our future success will depend in large part upon the value of bitcoin, and any sustained decline in its value could adversely affect our business and results of operations .

Our operating results will depend in large part upon the value of bitcoin because it is the primary cryptocurrency we currently mine.

Specifically, our revenues from our bitcoin mining operations are based upon two factors:

(1) the number of bitcoin rewards we successfully mine and (2) the value of bitcoin.

In addition, our operating results are directly impacted by changes in the value of bitcoin, because under the value measurement model, both realized and unrealized changes will be reflected in our statement of operations (i.e., we will be marking bitcoin to fair value each quarter).

This means that our operating results will be subject to swings based upon increases or decreases in the value of bitcoin.

Furthermore, our business strategy focuses almost entirely on producing bitcoin (as opposed to other cryptocurrencies), and our current application-specific integrated circuit (“ASIC”) miners principally utilize the “SHA-256 algorithm,”

which is designed primarily for mining bitcoin.

We therefore, cannot use these miners to mine other cryptocurrencies, such as ether, that are not mined utilizing this algorithm.

If other cryptocurrencies overtake bitcoin or litecoin in terms of acceptance, the value of bitcoin or litecoin could decline.

Further, if bitcoin or litecoin were to switch its proof of work algorithm from SHA-256 to another algorithm for which our miners would not be suited or if the value of bitcoin or litecoin were to decline for other reasons, particularly if such decline were significant or over an extended period of time, we would likely incur very significant costs in retooling or replacing our existing miners with miners better suited for this new protocols and our operating results could be adversely affected.

This could result in a material adverse effect on our ability to continue as a going concern or to pursue our business strategy at all, which could have a material adverse effect on our business, prospects or operations, and thus harm investors.

Our reliance primarily on a single model of miner may subject our operations to increased risk of mine failure.

The performance and reliability of our miners and our technology is critical to our reputation and our operations.

Because we currently only use Bitmain Antminer type miners, if there are issues with those machines, such as a design flaw in the ASIC chips they employ, our entire system could be affected.

Any system error or failure may significantly delay response times or even cause our system to fail.

Any disruption in our ability to continue mining could result in lower yields and harm our reputation and business.

Any exploitable weakness, flaw, or error common to Bitmain miners affects all our miners;

therefore, if a defect or other flaw exists and is exploited, our entire mine could go offline simultaneously.

Any interruption, delay or system failure could result in financial losses, a decrease in the trading price of our common stock and damage to our reputation.

Our mining operations, including the facilities in which our miners are operated, may experience damages, including damages that are not covered by insurance.

Our current mining operation at the Coinmint Facility is, and any future mines we establish will be, subject to a variety of risks relating to physical condition and operation, including, but not limited to:

the presence of construction or repair defects or other structural or building damage;

any noncompliance with or liabilities under applicable environmental, health or safety regulations or requirements or building permit requirements;

any damage resulting from natural disasters, such as hurricanes, earthquakes, fires, floods and windstorms;

claims by employees and others for injuries sustained at our properties.

For example, our mine could be rendered inoperable, temporarily or permanently, as a result of a fire or other natural disaster or by a terrorist or other attack on the mine.

The security and other measures we take to protect against these risks may not be sufficient.

Additionally, our mine could be materially adversely affected by a power outage or loss of access to the electrical grid or loss by the grid of cost-effective sources of electrical power generating capacity.

Given the power requirement, it would not be feasible to run miners on back-up power generators in the event of a power outage.

Our insurance covers the replacement cost of any lost or damaged miners, but does not cover any interruption of our mining activities;

therefore our insurance therefore may not be adequate to cover the losses we suffer as a result of any of these events.

In the event of an uninsured loss, including a loss in excess of insured limits, at any of the mines in our network, such mines may not be adequately repaired in a timely manner or at all and we may lose some or all of the future revenues anticipated to be derived from such mines.

The potential impact on our business is currently magnified because we are only operating a single mine.

Our existing insurance coverage may not be adequate to cover all of our potential losses, and increased self-insurance and other insurance costs could materially and adversely affect our business and results of operations.

We maintain insurance policies for our business, and our agreement with Coinmint provides us with some protection in the event our miners are lost or damaged while at the Coinmint Facility;

however, these insurance policies and protections may not be adequate to protect us from liabilities that we may incur in connection with the operation of our business.

Certain extraordinary hazards, for example, may not be covered, and insurance may not be available (or may be available only at prohibitively expensive rates) with respect to many other risks.

Moreover, any loss incurred could exceed policy limits, and policy payments made to us may not be made on a timely basis.

Because of the high cost of new miners, if our insurance coverage is insufficient to cover the replacement, or if payment of our existing coverage benefits is significantly delayed, we may be required to expend additional capital resources to replace any miners we lose as a result of casualty events.

Additionally, although we seek to control our insurance risk and costs, the premiums we pay to obtain insurance coverage have increased over time and are likely to continue to increase in the future.

These increases in insurance premiums can occur unexpectedly and without regard to our efforts to limit them, and, because of these rising costs, we may not be able to obtain similar levels of insurance coverage on reasonable terms, or at all.

If this occurs, we may choose or be forced to self-insure our assets, which could expose us to significant financial risk due to the high cost of new miners.

If insurance costs become unacceptably high and we elect to self-insure, and we experience a significant casualty event resulting in the loss of some or all of our miners, we could be forced to expend significant capital resources to acquire new miners to replace those we lose.

Furthermore, if such casualty loss of our miners is not adequately covered by insurance and we do not have access to sufficient capital resources to acquire replacement miners, we may not be able to compete in our rapidly evolving and highly competitive industry, which could materially and adversely affect our financial condition and results of operations, and our business could suffer.

We are subject to risks associated with our need for significant electrical power.

Our bitcoin mining operations have required significant amounts of electrical power, and, as we continue to expand our mining fleet, we anticipate our demand for electrical power will continue to grow.

If we are unable to continue to obtain sufficient electrical power to operate our miners on a cost-effective basis, we may not realize the anticipated benefits of our significant capital investments in new miners.

Additionally, our mining operations could be materially adversely affected by prolonged power outages.

Although our miners may be powered by backup generators on a temporary basis, it would not be feasible or cost-effective to run miners on back-up power generators for extended periods of time.

Therefore, we may have to reduce or cease our operations in the event of an extended power outage, or as a result of the unavailability or increased cost of electrical power.

If this were to occur, our business and results of operations could be materially and adversely affected, and investors in our securities could be harmed.

Our agreement with Coinmint does not guarantee us sufficient power to allow us to operate our expanding fleet of miners at peak capacity and, if we are unable to successfully negotiate for adequate power supply, we may not realize the benefit of our investment in additional miners.

Our Coinmint Agreement only guarantees us access to 9 MW of electrical power for our miners currently deployed and scheduled to be deployed at the Coinmint Facility.

As of the date of this Annual Report on Form 10-K, Coinmint has been able to supply us with sufficient electrical power to allow us to operate our current fleet.

However, we cannot guarantee that this will remain the case under the current terms of the Coinmint Agreement.

We estimate that our full fleet of miners, including the nearly 32,103 Bitmain Antminer model S19-Pro and S19j-Pro miners scheduled to be delivered in 2021 that we purchased in the third and fourth fiscal quarters of 2020, will require approximately 127 MW of electricity to operate at full capacity.

With these miners fully deployed, we estimate that the aggregate hash rate capacity of our miners will approach 4.0 EH/s, which would represent an increase of approximately 3,824% over our aggregate hash rate capacity as of December 31, 2019.

As discussed under Part 1, Item 1, “Business,”

of this Annual Report on Form 10-K, a higher hash rate capacity tends to increase our relative chances of solving a block in the Bitcoin blockchain and, therefore, obtaining a bitcoin reward.

If we are unable to successfully negotiate a sufficient guaranteed power supply for our new miners under our existing understanding with Coinmint, we may be forced to relocate some or all of our new miners to another facility.

If we are forced to relocate some or all of our miners, we may not be successful in identifying adequate replacement facilities to operate our miners.

And even if we do identify such facilities, we may not be successful in securing those facilities at a cost that is economically viable to support our mining activities.

Further, relocating our miners will require us to incur costs to transition to a new facility including, but not limited to, transportation expenses and insurance, downtime while we are unable to mine, legal fees to negotiate the new arrangement, de-installation at our current facility and, ultimately, installation at any new facility we identify.

These costs may be substantial, and we cannot guarantee that we will be successful in transitioning our miners to a new facility.

Therefore, if we are required to move our mine, or if we are unable to secure adequate power supply for our miners, we may not achieve increased hash rate capacity upon the deployment of these new miners and, therefore, we may not realize the benefit of our substantial capital investments in new miners.

If this occurs, our business may suffer, and the results of our operations may be adversely affected.

Interruptions to our power supply and internet access could disrupt our operations, which could adversely affect our business and results of operations.

Our cryptocurrency mining operations require a significant amount of electrical power and access to high-speed internet to be successful.

If we are unable to secure sufficient electrical power, or if we lose internet access for a prolonged period, we may be required to reduce our operations or cease them altogether.

If this occurs, our business and results of operations may suffer, and our investors may be materially and adversely effected.

— RISK FACTORS

Certain factors may have a materially adverse

effect on our business, financial condition, and results of operations, including the risk, factors, and uncertainties described under

this Part I, Item 1A, and elsewhere in this Annual Report.

This is not an exhaustive list, and there are other factors that may be applicable

to our business that are not currently known to us or that we currently do not believe are material.

Any of these risks could have an

adverse effect on our business, financial condition, operating results, or prospects, which could cause the trading price of our common

stock to decline, and you could lose part or all of your investment.

You should carefully consider the risks, factors, and uncertainties

described below, together with the other information contained in this Annual Report, as well as the risk, factors, uncertainties, and

other information we disclose in other filings we make with the SEC before making an investment decision regarding our securities.

Risks Related to Our Ability to Grow Our Business

If we fail to grow our hash rate, we

may be unable to compete, and our results of operations could suffer.

Generally, a Bitcoin miner’s chance of

solving a block on the Bitcoin blockchain and earning a Bitcoin reward is a function of the miner’s hash rate (i.e., the amount

of computing power devoted to supporting the Bitcoin blockchain), relative to the global network hash rate.

As demand for Bitcoin has

increased, the global network hash rate has increased, and as more adoption of Bitcoin occurs, we expect the demand for Bitcoin will increase,

drawing more mining companies into the industry and further increasing the global network hash rate.

As new and more powerful miners are

deployed, the global network hash rate will continue to increase, meaning a miner’s chance of earning Bitcoin rewards will decline

unless it deploys additional hash rate at pace with the industry.

Accordingly, to compete in this highly competitive industry, we believe

we will need to continue to acquire new miners, both to replace those lost to ordinary wear-and-tear and other damage, and to increase

our hash rate to keep up with a growing global network hash rate.

We plan to grow our hash rate by acquiring

newer, more effective and energy-efficient miners.

These new miners are highly specialized servers that are very difficult to produce

As a result, there are limited producers capable of producing large numbers of sufficiently effective miners, and, as demand

for new miners has increased in response to increased Bitcoin prices, we have observed the price of these new miners has increased.

we can’t acquire sufficient numbers of new miners or access sufficient capital to fund our acquisitions, our results of operations

and financial condition, which could adversely affect investments in our securities.

We may be impacted by macroeconomic conditions

due to the global COVID-19 pandemic and the resulting global supply chain crisis.

Global trade conditions and consumer trends

that originated during the COVID-19 pandemic continue to persist and may also have long-lasting adverse impact on us and our industry.

For example, pandemic-related issues have exacerbated port congestion and intermittent supplier shutdowns and delays, resulting in additional

expenses to expedite delivery of new miners, as well as critical materials needed for our expansion plans.

Further, miner manufacturers

have been impacted by the constrained supply of the semiconductors used in the production of the highly specialized ASIC chips miners

rely on, and increased labor costs to manufacture new miners as workforces and global supply chains continue to be affected by COVID-19,

which has ultimately lead to higher prices for new miners.

Thus, until the global supply chain crisis is resolved and these extraordinary

pressures are alleviated, we expect to continue to incur higher than usual costs to obtain and deploy new miners and we may face difficulties

obtaining the new miners we need at prices or in quantities we find acceptable, if at all, and our business and results of operations

may suffer as a result.

In addition, labor shortages resulting from

the pandemic may lead to increased difficulty and labor costs in hiring and retaining the highly qualified and motivated people we need

to conduct our business and execute on our strategic growth initiatives.

Sustaining our growth plans will require the ongoing readiness

and solvency of our suppliers and vendors, a stable and motivated production workforce, and government cooperation, each of which may

be affected by macroeconomic factors outside of our immediate control.

We cannot predict the duration or direction

of current global trends or their sustained impact.

Ultimately, we continue to monitor macroeconomic conditions to remain flexible and

to optimize and evolve our business as appropriate, and we will have to accurately project demand and infrastructure requirements globally

and deploy our workforce and capital resources accordingly.

If we experience unfavorable global market conditions, or if we cannot or

do not maintain operations at a scope that is commensurate with such conditions or are later required to or choose to suspend such operations

again, our business, prospects, financial condition and operating results may be harmed.

We expect the cost of acquiring new miners

to continue to be affected by the global supply chain crisis.

Similarly, the global supply chain crisis,

coupled with increased demand for computer chips, has created a shortfall of semiconductors, resulting in challenges for the supply chain

and production of the miners we employ in our Bitcoin mining operations.

The miners are highly specialized servers built around ASIC chips,

which very few manufacturers are able to produce in sufficient scale and quality to suit our operations.

As a result, the cost to produce

these miners has increased, which their manufacturers have passed on to purchasers like us.

Therefore, until the global supply chain crisis

is resolved and these extraordinary pressures are alleviated, we expect to continue to incur higher than usual costs to obtain and deploy

new miners, which could adversely affect our financial condition and results of operations.

We may not be able to timely complete

our future strategic growth initiatives or within our anticipated cost estimates, if at all.

As part of our efforts to grow our hash rate

and remain competitive in the market, we acquired thousands of new state-of-the-art miners from their manufacturer in 2020 and 2021, which

we have begun to deploy at our Whinstone Facility.

To accommodate these new miners, we are expanding the Whinstone Facility’s capacity

to 700 MW of electrical power through the construction of four new 100 MW structures and the associated power and facilities infrastructure

needed to operate them for industrial scale Bitcoin mining.

Moreover, we have carried out this expansion during the ongoing global supply

chain crisis and COVID-19, and our costs of supplies, labor, and material have increased as a result.

While our present expansion project

is proceeding on time as expected, we cannot guarantee we will complete this expansion (or any future strategic growth initiatives) on

time or within our cost estimates, if at all, due in part to the ongoing effects of the global supply chain crisis related to COVID-19

and changing conditions within the United States labor market.

If we are unable to complete our planned expansion on schedule and within

our anticipated cost estimates, our deployment of newly purchased miners may be delayed, which could affect our competitiveness and our

results of operation, which could have a material adverse effect on our financial condition and the market price for our securities.

We may be unable to access sufficient

additional capital for future strategic growth initiatives.

The expansion of our miner fleet and of our

Whinstone Facility have been capital-intensive projects, and we anticipate that future strategic growth initiatives will likewise be capital-intensive.

We expect to raise additional capital to fund these future strategic growth initiatives;

however, we may be unable to do in a timely manner,

in sufficient quantities, or on terms acceptable to us, if at all.

If we are unable to raise the additional capital needed to execute

these future strategic growth initiatives, we may be less competitive in our industry and our results of operations and financial condition

may suffer, and the market price for our securities may be materially and adversely affected.

Expansion of our Whinstone Facility potentially

exposes us to additional risks.

We are expanding and expect to continue to

expand our Whinstone Facility, which potentially exposes us to significant risks we may otherwise not be exposed to, including risks related

to, among other sources:

construction delays;

lack of availability of parts and/or labor, increased prices, and delays for data center

labor disputes and work stoppages, including interruptions in work due to the ongoing COVID-19 pandemic;

unanticipated environmental

issues and geological problems;

delays related to permitting and approvals to open from public agencies and utility companies;

in site readiness leading to our failure to meet commitments made in connection with such expansion.

All construction related projects depend on

the skill, experience, and attentiveness of our personnel throughout the design and construction process.

Should a designer, general contractor,

significant subcontractor or key supplier experience financial problems or other problems during the design or construction process, we

could experience significant delays, increased costs to complete the project and/or other negative impacts to our expected returns.

If we are unable to overcome these risks and

additional pressures to complete our expansion projects in a timely manner, if at all, we may not realize their anticipated benefits,

and our business and financial condition may suffer as a result.

Failure to successfully integrate acquired

businesses could negatively impact our balance sheet and results of operations.

Strategic acquisitions such as the Whinstone

Acquisition and the ESS Metron Acquisition are an important element of our growth strategy and the success of any acquisition we make

depends in part on our ability to integrate the acquired business and realize anticipated synergies.

Integrating acquired businesses may

involve unforeseen difficulties and may require a disproportionate amount of our management’s attention and may require us to shift

our financial and other resources.

For example, we may encounter challenges in

the integration process such as:

challenges and difficulties associated with managing the resulting larger and more complex company;

administrative and corporate structures and standards, controls, procedures and policies, business cultures, and compensation and benefits

structures, coordinating geographically dispersed operations;

and our ability to deliver on our strategy going forward.

Further, our acquisitions may subject us to

new liabilities and risks, some of which may be unknown.

Although we and our advisors conduct due diligence on the operations of businesses

we acquire, there can be no guarantee that we are aware of all liabilities of an acquired company.

These liabilities, and any additional

risks and uncertainties related to an acquired company not known to us or that we may deem immaterial or unlikely to occur at the time

of the acquisition, could negatively impact our future business, financial condition and results of operations.

We can give no assurance that we will ultimately

be able to effectively integrate and manage the operations of any acquired business or realize anticipated synergies.

The failure to successfully

integrate the cultures, operating systems, procedures and information technologies of an acquired business could have a material adverse

effect on our financial condition and results of operations.

We may experience increased compliance

costs as a result our strategic acquisitions.

The financial statements and internal controls

of both Whinstone and ESS Metron have not, historically, been required to be in compliance with Section 404 of the Sarbanes-Oxley Act

of 2002 (“Sarbanes-Oxley Act”).

The accounting costs of bringing our subsidiaries’ financial records and internal controls

in alignment with the Sarbanes-Oxley Act following these strategic acquisitions have been within our expectations;

however, we may encounter

unanticipated costs.

Further, future strategic acquisitions could carry substantial compliance burdens, which may limit our ability to

realize the anticipated benefits of such acquisitions, and which may require our management and personnel to shift their focus to such

compliance burdens and away from their other functions.

Such increased costs and compliance burdens could affect our ability to realize

the anticipated benefits of such strategic acquisitions, and our business, results of operations, and financial condition may suffer as

We have financed our strategic growth

primarily by issuing new shares of our common stock in public offerings, which dilutes the ownership interests of our current stockholders,

and which may adversely affect the market price of our securities.

We have raised capital to finance our strategic

growth of our business through public offerings of our common stock, and we expect to need to raise additional capital through similar

public offerings to finance the completion of current and future expansion initiatives.

We may not be able to obtain additional debt or

equity financing on favorable terms, if at all, which could impair our growth and adversely impact our existing operations.

additional equity financing, our stockholders may experience significant dilution of their ownership interests, and the per share value

of our common stock could decline.

Furthermore, if we engage in debt financing, the holders of any debt we issue would likely have priority

over the holders of shares of our common stock in terms of order of payment preference.

We may be required to accept terms that restrict

our ability to incur additional indebtedness or take other actions including terms that require us to maintain specified liquidity or

other ratios that could otherwise not be in the interests of our stockholders.

We have a history of operating losses,

and we may report additional operating losses in the future.

Our primary focus is on Bitcoin mining, and

we have recorded historical losses and negative cash flow from our operations when the value of Bitcoin we mine does not exceed our associated

Further, as part of our strategic growth plans, we have made capital investments in expanding our Mining operations, including

the expansion of our Whinstone Facility, increased our employee base, and incurred additional costs associated with owning and operating

a self-mining facility.

However, future market prices of Bitcoin are difficult to predict, and we cannot guarantee that our future Mining

revenue will exceed our associated costs.

Risks Related to the Price of Bitcoin

The trading price of shares of our common stock has appeared at times to have been correlated to the trading price of bitcoin, which may be subject to pricing risks, including “bubble”

type risks, and has historically been subject to wide swings.

The trading prices of our common stock has appeared at times to have been correlated with the trading prices of bitcoin.

Specifically, we have experienced adverse effects on our stock price when the value of bitcoin has fallen, and we may experience similar outcomes if our stock price tracks the general status of that cryptocurrency.

Furthermore, if the market for bitcoin company stocks or the stock market in general experiences a loss of investor confidence, the trading price of our stock could decline for reasons unrelated to our business, operating results or financial condition.

The trading price of our common stock could be subject to arbitrary pricing factors that are not necessarily associated with traditional factors that influence stock prices or the value of non-cryptocurrency assets such as revenue, cash flows, profitability, growth prospects or business activity levels since the value and price, as determined by the investing public, may be influenced by future anticipated adoption or appreciation in value of cryptocurrencies or blockchains generally, factors over which we have little or no influence or control.

Bitcoin and other cryptocurrency market prices, which have historically been volatile and are impacted by a variety of factors (including those discussed below), are determined primarily using data from various exchanges, over-the-counter markets and derivative platforms.

Furthermore, such prices may be subject to factors such as those that impact commodities, more so than business activities, which could be subjected to additional influence from fraudulent or illegitimate actors, real or perceived scarcity, and political, economic, regulatory or other conditions.

Pricing may be the result of, and may continue to result in, speculation regarding future appreciation in the value of cryptocurrencies, or our share price, making their market prices more volatile or creating “bubble”

type risks for the trading price of bitcoin.

During the year ended December 31, 2020, the trading price of bitcoin has appreciated significantly, from a low closing value of approximately $5,000 per bitcoin in March 2020, to a high closing value of approximately $29,400 per bitcoin in December 2020.

During the 2021 interim period, prior to the date of this Annual Report on Form 10-K, the trading price of bitcoin had a high reported closing value of approximately $61,000 per bitcoin (an all-time-high).

During this time, the trading price for shares of our common stock has experienced unprecedented growth.

In 2017, the trading price of bitcoin increased to nearly $20,000 per bitcoin (an all-time high at that time), only to decline significantly and sharply to a low of approximately $3,400 per bitcoin in December 2018, during which time the trading price for shares of our common stock likewise declined significantly.

We cannot give any assurances that similar fluctuations in the trading price of bitcoin will not occur in the future.

Accordingly, since the trading price of our securities appears to be at times correlated to the trading price of bitcoin, if the trading price of bitcoin again experiences a significant decline, we could experience a similar decline in the trading price for shares of our common stock.

If this occurs, you may not be able to sell the shares of our common stock which you purchased at or above the price you paid for them and you may lose your investment.

The markets for bitcoin and other cryptocurrencies and the existing markets may be underregulated;

as a result, the market price of most cryptocurrencies may be subject to significant volatility, which could decrease consumer confidence in cryptocurrencies, which could have a materially adverse effect on our business and results of operations.

Cryptocurrencies that are represented and trade on a ledger-based platform may not necessarily benefit from viable trading markets.

Stock exchanges have listing requirements and vet issuers, requiring them to be subjected to rigorous listing standards and rules, and monitor investors transacting on such platform for fraud and other improprieties.

These conditions may not necessarily be replicated on a distributed ledger platform, depending on the platform’s controls and other policies.

The more lax a distributed ledger platform is about vetting issuers of cryptocurrency assets or users that transact on the platform, the higher the potential risk for fraud or the manipulation of the ledger due to a control event.

Bitcoin and other cryptocurrency market prices have historically been volatile, are impacted by a variety of factors, and are determined primarily using data from various exchanges, over-the-counter markets and derivative platforms.

type risks for both bitcoin and shares of our common stock.

These factors may inhibit consumer trust in and market acceptance of cryptocurrencies as a means of exchange which could have a material adverse effect on our business, prospects, or operations and potentially the value of any bitcoin or other cryptocurrencies we mine or otherwise acquire or hold for our own account.

The development and acceptance of cryptographic and algorithmic protocols governing the issuance of and transactions in cryptocurrencies is subject to a variety of factors that are difficult to evaluate.

The use of cryptocurrencies to, among other things, buy and sell goods and services and complete transactions, is part of a new and rapidly evolving industry that employs cryptocurrency assets based upon a computer-generated mathematical and/or cryptographic protocol.

Large-scale acceptance of cryptocurrencies as a means of payment has not, and may never, occur.

The growth of this industry in general, and the use of cryptocurrencies in particular, is subject to a high degree of uncertainty, and the slowing or stopping of the development or acceptance of developing protocols may occur unpredictably.

The factors include, but are not limited to:

continued worldwide growth in the adoption and use of cryptocurrencies as a medium of exchange;  

governmental and quasi-governmental regulation of cryptocurrencies and their use, or restrictions on or regulation of access to and operation of the network or similar cryptocurrency systems;  

changes in consumer demographics and public tastes and preferences;  

the maintenance and development of the open-source software protocol of the network;  

the increased consolidation of contributors to the Bitcoin blockchain through mining pools;  

the availability and popularity of other forms or methods of buying and selling goods and services, including new means of using fiat currencies;  

the use of the networks supporting cryptocurrencies for developing smart contracts and distributed applications;  

general economic conditions and the regulatory environment relating to cryptocurrencies;

and  

negative consumer sentiment and perception of bitcoin specifically and cryptocurrencies generally.  

The outcome of these factors could have negative effects on our ability to continue as a going concern or to pursue our business strategy at all, which could have a material adverse effect on our business, prospects or operations as well as potentially negative effects on the value of any bitcoin or other cryptocurrencies we mine or otherwise acquire or hold for our own account, which would harm investors in our securities.

Banks and financial institutions may not provide banking services, or may cut off services, to businesses that engage in cryptocurrency-related activities or that accept cryptocurrencies as payment, including financial institutions of investors in our securities.

Although a number of significant U.S.

banks and investment institutions, such as Goldman Sachs, Citi Group, J.

Morgan and BlackRock, have indicated they plan to begin allowing customers to carry and invest in bitcoin and other cryptocurrencies, either directly or indirectly their acceptance and use by banks remains far from mainstream.

Indeed, a number of companies and individuals engaged in bitcoin and/or other cryptocurrency-related activities have been unable to find banks or financial institutions that are willing to provide them with banking services.

Similarly, a number of companies and individuals or businesses associated with cryptocurrencies may have had and may continue to have their existing banking services discontinued with financial institutions in response to government action, particularly in China, where regulatory response to cryptocurrencies has been to exclude their use for ordinary consumer transactions within China.

We also may be unable to obtain or maintain these services for our business.

The difficulty that many businesses that provide bitcoin and/or derivatives on other cryptocurrency-related activities have and may continue to have in finding banks and financial institutions willing to provide them services may be decreasing the usefulness of cryptocurrencies as a payment system and harming public perception of cryptocurrencies, and could decrease their usefulness and harm their public perception in the future.

The usefulness of cryptocurrencies as a payment system and the public perception of cryptocurrencies could be damaged if banks or financial institutions were to close the accounts of businesses engaging in bitcoin and/or other cryptocurrency-related activities.

This could occur as a result of compliance risk, cost, government regulation or public pressure.

The risk applies to securities firms, clearance and settlement firms, national stock and derivatives on commodities exchanges, the over-the-counter market, and the Depository Trust Company, which, if any of such entities adopts or implements similar policies, rules or regulations, could negatively affect our relationships with financial institutions and impede our ability to convert cryptocurrencies to fiat currencies.

Such factors could have a material adverse effect on our ability to continue as a going concern or to pursue our new strategy at all, which could have a material adverse effect on our business, prospects or operations and harm investors.

We may face risks of Internet disruptions, which could have an adverse effect on the price of cryptocurrencies.

A disruption of the Internet may affect the use of cryptocurrencies and subsequently the value of our securities.

Generally, cryptocurrencies and our business of mining cryptocurrencies is dependent upon the Internet.

A significant disruption in Internet connectivity could disrupt a currency’s network operations until the disruption is resolved and have an adverse effect on the price of cryptocurrencies and our ability to mine cryptocurrencies.

The impact of geopolitical and economic events on the supply and demand for cryptocurrencies is uncertain.

Geopolitical crises may motivate large-scale purchases of bitcoin and other cryptocurrencies, which could increase the price of bitcoin and other cryptocurrencies rapidly.

This may increase the likelihood of a subsequent price decrease as crisis-driven purchasing behavior dissipates, adversely affecting the value of our inventory following such downward adjustment.

Such risks are similar to the risks of purchasing commodities in general uncertain times, such as the risk of purchasing, holding or selling gold.

Alternatively, as an emerging asset class with limited acceptance as a payment system or commodity, global crises and general economic downturn may discourage investment in cryptocurrencies as investors focus their investment on less volatile asset classes as a means of hedging their investment risk.

As an alternative to fiat currencies that are backed by central governments, cryptocurrencies, which are relatively new, are subject to supply and demand forces.

How such supply and demand will be impacted by geopolitical events is largely uncertain but could be harmful to us and investors in our common stock.

Political or economic crises may motivate large-scale acquisitions or sales of cryptocurrencies either globally or locally.

Such events could have a material adverse effect on our ability to continue as a going concern or to pursue our new strategy at all, which could have a material adverse effect on our business, prospects or operations and potentially the value of any bitcoin or any other cryptocurrencies we mine or otherwise acquire or hold for our own account.

Acceptance and/or widespread use of cryptocurrency is uncertain.

There are increasing public reports of businesses, insurance companies, and local governments, among other organizations, either holding or planning to utilize cryptocurrencies, specifically bitcoin, as a store of value or as a medium of exchange and payment method.

For example, in February 2021, Tesla, Inc.

publicly announced plans to accept bitcoin as a form of payment from consumers.

Other companies, typically through partnerships with digital currency processors, have also begun to increase the adoption of cryptocurrencies in the retail and commercial marketplace.

Despite these public reports, there is still a relatively limited use of any cryptocurrency in the retail and commercial marketplace, thus contributing to price volatility that could adversely affect an investment in our securities.

Banks and other established financial institutions may refuse to process funds for cryptocurrency transactions, process wire transfers to or from cryptocurrency exchanges, cryptocurrency-related companies or service providers, or maintain accounts for persons or entities transacting in cryptocurrency.

Conversely, a significant portion of cryptocurrency demand is generated by investors seeking a long-term store of value or speculators seeking to profit from the short- or long-term holding of the asset.

Price volatility undermines any cryptocurrency’s role as a medium of exchange, as retailers are less likely to accept it as a direct form of payment.

Market capitalization for a cryptocurrency as a medium of exchange and payment method may always be low.

The relative lack of acceptance of cryptocurrencies in the retail and commercial marketplace, or a reduction of such use, limits the ability of end users to use them to pay for goods and services.

Such lack of acceptance or decline in acceptance could have a material adverse effect on our ability to continue as a going concern or to pursue our new strategy at all, which could have a material adverse effect on our business, prospects or operations and potentially the value of bitcoin or any other cryptocurrencies we mine or otherwise acquire or hold for our own account.

Transactional fees may decrease demand for bitcoin and prevent expansion.

As the number of bitcoins currency rewards awarded for solving a block in a blockchain decreases, the incentive for miners to continue to contribute to the Bitcoin network may transition from a set reward to transaction fees.

In order to incentivize miners to continue to contribute to the Bitcoin network, the Bitcoin network may either formally or informally transition from a set reward to transaction fees earned upon solving a block.

This transition could be accomplished by miners independently electing to record in the blocks they solve only those transactions that include payment of a transaction fee.

If transaction fees paid for bitcoin transactions become too high, the marketplace may be reluctant to accept bitcoin as a means of payment and existing users may be motivated to switch from bitcoin to another cryptocurrency or to fiat currency.

Either the requirement from miners of higher transaction fees in exchange for recording transactions in a blockchain or a software upgrade that automatically charges fees for all transactions may decrease demand for bitcoin and prevent the expansion of the Bitcoin network to retail merchants and commercial businesses, resulting in a reduction in the price of bitcoin that could adversely impact an investment in our securities.

Decreased use and demand for bitcoin may adversely affect its value and result in a reduction in the price of bitcoin and the value of our common stock.

The decentralized nature of cryptocurrency systems may lead to slow or inadequate responses to crises, which may negatively affect our business .

The decentralized nature of the governance of cryptocurrency systems may lead to ineffective decision making that slows development or prevents a network from overcoming emergent obstacles.

Governance of many cryptocurrency systems is by voluntary consensus and open competition with no clear leadership structure or authority.

To the extent lack of clarity in corporate governance of cryptocurrency systems leads to ineffective decision making that slows development and growth of such cryptocurrencies, the value of our common stock may be adversely affected.

It may be illegal now, or in the future, to acquire, own, hold, sell or use bitcoin, ether, or other cryptocurrencies, participate in blockchains or utilize similar cryptocurrency assets in one or more countries, the ruling of which would adversely affect us.

Although currently cryptocurrencies generally are not regulated or are lightly regulated in most countries, several countries such as China, India and Russia, may continue taking regulatory actions in the future that could severely restrict the right to acquire, own, hold, sell or use these cryptocurrency assets or to exchange for fiat currency.

For example in China and Russia (India is currently proposing new legislation), it is illegal to accept payment in bitcoin and other cryptocurrencies for consumer transactions and banking institutions are barred from accepting deposits of cryptocurrencies.

Such restrictions may adversely affect us as the large-scale use of cryptocurrencies as a means of exchange is presently confined to certain regions globally.

Such circumstances could have a material adverse effect on us, which could have a material adverse effect on our business, prospects or operations and potentially the value of any bitcoin or other cryptocurrencies we mine or otherwise acquire or hold for our own account, and thus harm investors.

Our operations, investment strategies and profitability may be adversely affected by competition from other methods of investing in cryptocurrencies.

We compete with other users and/or companies that are mining cryptocurrencies and other potential financial vehicles, including securities backed by or linked to cryptocurrencies through entities similar to us.

Market and financial conditions, and other conditions beyond our control, may make it more attractive to invest in other financial vehicles, or to invest in cryptocurrencies directly, which could limit the market for our shares and reduce their liquidity.

The emergence of other financial vehicles and exchange-traded funds have been scrutinized by regulators and such scrutiny and the negative impressions or conclusions resulting from such scrutiny could be applicable to us and impact our ability to successfully pursue our strategy or operate at all, or to establish or maintain a public market for our securities.

Such circumstances could have a material adverse effect on our business, prospects or operations and potentially the value of any bitcoin or other cryptocurrencies we mine or otherwise acquire or hold for our own account, and thus harm investors.

The development and acceptance of competing blockchain platforms or technologies may cause consumers to use alternative distributed ledgers or other alternatives.

The development and acceptance of competing blockchain platforms or technologies, including competing cryptocurrencies which our miners may not be able to mine, such as cryptocurrencies being developed by popular social media platforms, online retailers, or government sponsored cryptocurrencies, may cause consumers to use alternative distributed ledgers or an alternative to distributed ledgers altogether.

Our business utilizes presently existent digital ledgers and blockchains and we could face difficulty adapting to emergent digital ledgers, blockchains, or alternatives thereto.

This may adversely affect us and our exposure to various blockchain technologies and prevent us from realizing the anticipated profits from our investments.

investments in our securities.

Cryptocurrencies face significant scaling obstacles that can lead to high fees or slow transaction settlement times.

Cryptocurrencies face significant scaling obstacles that can lead to high fees or slow transaction settlement times, and attempts to increase the volume of transactions may not be effective.

Scaling cryptocurrencies is essential to the widespread acceptance of cryptocurrencies as a means of payment, which widespread acceptance is necessary to the continued growth and development of our business.

Many cryptocurrency networks face significant scaling challenges.

For example, cryptocurrencies are limited with respect to how many transactions can occur per second.

Participants in the cryptocurrency ecosystem debate potential approaches to increasing the average number of transactions per second that the network can handle and have implemented mechanisms or are researching ways to increase scale, such as increasing the allowable sizes of blocks, and therefore the number of transactions per block, and sharding (a horizontal partition of data in a database or search engine), which would not require every single transaction to be included in every single miner’s or validator’s block.

However, there is no guarantee that any of the mechanisms in place or being explored for increasing the scale of settlement of cryptocurrency transactions will be effective, or how long they will take to become effective, which could adversely affect an investment in our securities.

The price of cryptocurrencies may be affected by the sale of such cryptocurrencies by other vehicles investing in cryptocurrencies or tracking cryptocurrency markets.

The global market for cryptocurrency is characterized by supply constraints that differ from those present in the markets for commodities or other assets such as gold and silver.

The mathematical protocols under which certain cryptocurrencies are mined permit the creation of a limited, predetermined amount of currency, while others have no limit established on total supply.

Increased numbers of miners and deployed mining power globally will likely continue to increase the available supply of bitcoin and other cryptocurrencies, which may depress their market price.

Further, large “block sales”

involving significant numbers of bitcoin following appreciation in the market price of bitcoin may also increase the supply of bitcoin available on the market, which, without a

corresponding increase in demand, may cause its price to fall.

Additionally, to the extent that other vehicles investing in cryptocurrencies or tracking cryptocurrency markets form and come to represent a significant proportion of the demand for cryptocurrencies, large redemptions of the securities of those vehicles and the subsequent sale of cryptocurrencies by such vehicles could negatively affect cryptocurrency prices and therefore affect the value of the cryptocurrency inventory we hold.

Such events could have a material adverse effect on our business, prospects or operations and potentially the value of any bitcoin or other cryptocurrencies we mine or otherwise acquire or hold for our own account.

We may not adequately respond to price fluctuations and rapidly changing technology, which may negatively affect our business.

Competitive conditions within the cryptocurrency industry require that we use sophisticated technology in the operation of our business.

The industry for blockchain technology is characterized by rapid technological changes, new product introductions, enhancements and evolving industry standards.

New technologies, techniques or products could emerge that might offer better performance than the software and other technologies we currently utilize, and we may have to manage transitions to these new technologies to remain competitive.

We may not be successful, generally or relative to our competitors in the cryptocurrency industry, in timely implementing new technology into our systems, or doing so in a cost-effective manner.

During the course of implementing any such new technology into our operations, we may experience system interruptions and failures during such implementation.

Furthermore, there can be no assurances that we will recognize, in a timely manner or at all, the benefits that we may expect as a result of our implementing new technology into our operations.

As a result, our business and operations may suffer, and there may be adverse effects on the price of our common stock.

Our cryptocurrencies may be subject to loss, theft or restriction on access.

There is a risk that some or all of our cryptocurrencies could be lost or stolen.

Cryptocurrencies are stored in cryptocurrency sites commonly referred to as “wallets”

by holders of cryptocurrencies which may be accessed to exchange a holder’s cryptocurrency assets.

Access to our cryptocurrency assets could also be restricted by cybercrime (such as a denial of service attack) against a service at which we maintain a hosted hot wallet.

A hot wallet refers to any cryptocurrency wallet that is connected to the Internet.

Generally, hot wallets are easier to set up and access as compared to wallets in cold storage, but they are also more susceptible to hackers and other technical vulnerabilities.

Cold storage refers to any cryptocurrency wallet that is not connected to the Internet.

Cold storage is generally more secure than hot storage, but is not ideal for quick or regular transactions and we may experience lag time in our ability to respond to market fluctuations in the price of our cryptocurrency assets.

We hold all of our cryptocurrencies in cold storage to reduce the risk of malfeasance, but the risk of loss of our cryptocurrency assets cannot be wholly eliminated.

Hackers or malicious actors may launch attacks to steal, compromise or secure cryptocurrencies, such as by attacking the cryptocurrency network source code, exchange miners, third-party platforms, cold and hot storage locations or software, or by other means.

We may be in control and possession of one of the more substantial holdings of cryptocurrency.

Our ability to achieve profitability

is largely dependent on the price of Bitcoin, which has historically been volatile.

Our primary focus on our Bitcoin mining operations

and the associated expansion of our Whinstone Facility is largely based on our assumptions regarding the future value of Bitcoin, which

has been subject to significant historical volatility and may be subject to influence from malicious actors, real or perceived scarcity,

political, economic, and regulatory conditions, and speculation making its price more volatile or creating “bubble” type risks

for the trading price of Bitcoin.

Further, unlike traditional stock exchanges, which have listing requirements and vet issuers, requiring

them to comply with rigorous listing standards and rules, and which monitor transactions for fraud and other improprieties, markets for

Bitcoin and other cryptocurrencies tend to be underregulated, if they are regulated at all.

Less stringent cryptocurrency markets have

a higher risk of fraud or manipulation and any lack of oversight or perceived lack of transparency could reduce confidence in the price

of Bitcoin and other cryptocurrencies, which could adversely affect the price of Bitcoin.

These factors make it difficult to accurately

predict the future market price of Bitcoin and may also inhibit consumer trust in and market acceptance of cryptocurrencies as a means

of exchange, which could limit the future adoption of Bitcoin and, as a result, our assumptions could prove incorrect.

If our assumptions

prove incorrect and the future price of Bitcoin is not sufficiently high, our income from our Bitcoin mining operations may not exceed

our costs, and our operations may never achieve profitability.

Bitcoin is subject to halving, and our

mining operations may generate less revenue as a result.

As disclosed in Part I, Item 1, “Business”

of this Annual Report, under the subheading “Halving”, the number of new Bitcoin awarded for solving a block is cut in half

– hence, “halving” – at mathematically predetermined intervals.

While Bitcoin prices have historically increased

around these halving events, there is no guarantee that the price change will be favorable or would compensate for the reduction in mining

If a corresponding and proportionate increase in the price of the Bitcoin does not follow future halving events, the revenue

we earn from our Mining operations would see a decrease, which could have a material adverse effect on our results of operations and financial

Transaction fees may decrease demand for Bitcoin and prevent

As the number of Bitcoins currency rewards

awarded for solving a block in a blockchain has decreased, transaction fees have increasingly been used to incentivize miners to continue

to contribute to the Bitcoin network.

However, high Bitcoin transaction fees may slow the adoption of Bitcoin as a means of payment, which

may decrease demand for Bitcoin and future prices of Bitcoin may suffer as a result.

If Bitcoin prices are not sufficiently high, our

Mining revenue may not exceed our associated costs, and our results of operations and financial condition may suffer.

Further, because

the price of shares of our common stock may be linked to the price of Bitcoin, if demand for Bitcoin decreases, causing future Bitcoin

prices to decrease, the market price of our securities may be materially and adversely affected, limiting our ability to raise additional

capital to fund our strategic growth plans.

Cryptocurrencies face significant scaling obstacles that can

lead to high fees or slow transaction settlement times.

Cryptocurrencies face significant scaling obstacles

that can lead to high fees or slow transaction settlement times, and attempts to increase the volume of transactions may not be effective.

Scaling cryptocurrencies is essential to the widespread acceptance of cryptocurrencies as a means of payment, including Bitcoin.

cryptocurrency networks face significant scaling challenges.

For example, cryptocurrencies are limited with respect to how many transactions

can occur per second.

Participants in the cryptocurrency ecosystem debate potential approaches to increasing the average number of transactions

per second that the network can handle and have implemented mechanisms or are researching ways to increase scale, such as increasing the

allowable sizes of blocks, and therefore the number of transactions per block, and sharding (a horizontal partition of data in a database

or search engine), which would not require every single transaction to be included in every single miner’s or validator’s

However, there is no guarantee that any of the mechanisms in place or being explored for increasing the scale of settlement of

cryptocurrency transactions will be effective.

If adoption of Bitcoin (and cryptocurrencies,

generally) as a means of payment does not occur on the schedule or scale we anticipate, the demand for Bitcoin may stagnate or decrease,

which could adversely affect future Bitcoin prices, and our results of operations and financial condition, which could have a material

adverse effect on the market price for our securities.

Risks Related to our Operations

To remain competitive in our industry,

we seek to grow our hash rate to match the growing network hash rate and increasing network difficulty of the Bitcoin blockchain, and

if we are unable to grow our hash rate at pace with the network hash rate, our chance of earning Bitcoin from our Mining operations would

As the adoption of Bitcoin has increased, the

price of Bitcoin has generally appreciated, causing the demand for new Bitcoin rewards for successfully solving blocks on the Bitcoin

blockchain to likewise increase.

This has encouraged more miners to attempt to mine Bitcoin, which increases the global network hash rate

deployed in support of the Bitcoin blockchain.

Because a miner’s relative chance of

successfully solving a block and earning a new Bitcoin reward is generally a function of the ratio the miner’s individual hash rate

bears to the global network hash rate, as the global network hash rate increases, a miner must increase its individual hash rate to maintain

its chances of earning new Bitcoin rewards.

Therefore, as new miners enter the industry and as miners deploy greater and greater numbers

of more and more powerful machines, existing miners must seek to continually increase their hash rate to remain competitive.

Thus, a feedback

loop is created:

as Bitcoin gains popularity and its relative market price increases, more miners attempt to mine Bitcoin and the Bitcoin

network hash rate is increased;

in response, existing miners and new miners devote more and more hash rate to the Bitcoin blockchain by

deploying greater numbers of increasingly powerful machines to attempt to ensure their ability to earn additional Bitcoin rewards does

not decrease.

Compounding this feedback loop, the network difficulty of the Bitcoin network (i.e., the amount of work (measured in hashes)

necessary to solve a block) is periodically adjusted to maintain the pace of new block additions (with one new block added to the blockchain

approximately every ten minutes), and thereby control the supply of Bitcoin.

As miners deploy more hash rate and the Bitcoin network hash

rate is increased, the Bitcoin network difficult is adjusted upwards by requiring more hash rate to be deployed to solve a block.

miners are further incentivized to grow their hash rate to maintain their chance of earning new Bitcoin rewards.

In theory, these dual

processes should continually replicate themselves until the supply of available Bitcoin is exhausted.

In response, miners have attempted

to achieve greater hash rate by deploying increasingly sophisticated miners and expensive miners in ever greater quantities.

become the Bitcoin mining industry’s great “arms race.” Moreover, because there are very few manufacturers of miners

capable of producing a sufficient number of miners of adequate quality to meet this need, scarcity results, leading to higher prices.

Compounding this phenomenon, it has been observed that some manufacturers of Bitcoin miners may increase the prices for new miners as

the market price of Bitcoin increases.

Accordingly, to maintain our chances of earning

new Bitcoin rewards and remaining competitive in our industry, we must seek to continually add new miners to grow our hash rate at pace

with the growth in the Bitcoin network hash rate.

However, as demand has increased and scarcity in the supply of new miners has resulted,

the price of new miners has increased sharply, and we expect this process to continue in the future as demand for Bitcoin increases.

if the price of Bitcoin is not sufficiently high to allow us to fund our hash rate growth through new miner acquisitions and if we are

otherwise unable to access additional capital to acquire these miners, our hash rate may stagnate and we may fall behind our competitors.

If this happens, our chances of earning new Bitcoin rewards would decline and, as such, our results of operations and financial condition

Because our miners are designed specifically

to mine Bitcoin and may not be readily adaptable to mining other cryptocurrencies, a sustained decline in Bitocin’s value could

adversely affect our business and results of operations .

We have invested substantial capital in acquiring

miners using ASIC chips designed specifically to mine Bitcoin and other cryptocurrencies using the SHA-256 algorithm as efficiently and

as rapidly as possible on our assumption that we will be able to use them to mine Bitcoin and generate revenue from our operations.

our Mining operations focus exclusively on mining Bitcoin, and our Mining revenue is based on the value of Bitcoin we mine.

if the value of Bitcoin declines and fails to recover, for example, because of the development and acceptance of competing blockchain

platforms or technologies, including competing cryptocurrencies which our miners may not be able to mine, the revenue we generate from

our mining operations will likewise decline.

Moreover, because our miners use these highly specialized ASIC chips, we may not be able

to successfully repurpose them in a timely manner, if at all, if we decide to switch to mining a different cryptocurrency (or to another

purpose altogether) following a sustained decline in Bitcoin’s value or if Bitcoin is replaced by another cryptocurrency not using

the SHA-256 algorithm.

This would result in a material adverse effect on our business and could potentially impact our ability to continue

as a going concern.

Our reliance primarily on a single model of miner may subject

our operations to increased risk of design flaws.

The performance and reliability of our miners

and our technology is critical to our reputation and our operations.

Because we currently only use Bitmain Antminer type miners, if there

are issues with those machines, such as a design flaw in the ASIC chips they employ, our entire system could be affected.

have encountered, and may in the future encounter, software and firmware complications associated with adapting our miners to operate

in our immersion-cooled Bitcoin mining hardware, which may delay or otherwise limit the benefits we anticipate from our adoption of immersion-cooled

Any system error or failure may significantly delay response times or even cause our system to fail.

Any disruption in our ability

to continue mining could result in lower yields and harm our reputation and business.

Any exploitable weakness, flaw, or error common

to Bitmain miners could affect all our miners;

therefore, if a defect or other flaw exists and is exploited, our entire miner fleet could

be adversely impacted.

Any interruption, delay or system failure could result in financial losses, a decrease in the trading price of

our common stock and damage to our reputation.

Our use of third-party mining pools exposes

us to additional risks.

We receive Bitcoin rewards from our mining activity

through third-party mining pool operators.

Mining pools allow miners to combine their processing power, increasing their chances of solving

a block and getting paid by the network.

The rewards are distributed by the pool operator, proportionally to our contribution to the pool’s

overall mining power, used to solve a block on the Bitcoin blockchain.

Should the pool operator’s system suffer downtime due to

a cyber-attack, software malfunction or other issue, it will negatively impact our ability to mine and receive revenue.

Furthermore, we

are dependent on the accuracy of the mining pool operator’s record keeping to accurately record the total processing power provided

to the pool for a given Bitcoin mining application in order to assess the proportion of that total processing power we provided.

we have internal methods of tracking both the hash rate we provide and the total used by the pool, the mining pool operator uses its own

record-keeping to determine our proportion of a given reward, which may not match our own.

If we are unable to consistently obtain accurate

proportionate rewards from our mining pool operators, we may experience reduced reward for our efforts, which would have an adverse effect

on our business and operations.

We may not be able to realize the benefits of forks.

The Bitcoin blockchain is subject to modification

based on a consensus of the users on its network.

When a significant minority of users on the network agree to a modification that is

not compatible with the prior network protocol, a “fork” of the network results, with one prong running the pre-modified protocol

and the other running the modified protocol.

The effect of such a fork would be the existence of two “versions” of the blockchain

running in parallel that are not interchangeable, which requires exchange-type transaction to convert between the two forks.

Additionally,

it may be unclear following a fork which of the two protocols represents the original and which is the new protocol.

Different metrics

adopted by industry participants to determine which is the original asset include:

referring to the wishes of the core developers of a

cryptocurrency;

determining based on the blockchain with the greatest amount of hash rate contributed by miners or validators;

or by reference

to the “length” of blockchain (i.e., the time between the first transaction recorded in the blockchain’s distributed

ledger, and the date of the most recent transaction).

Accordingly, we may not be able to realize the economic benefit of a fork, either

immediately or ever, which could adversely affect an investment in our securities.

Cyber-attacks, data breaches or malware

may disrupt our operations and trigger significant liability for us, which could harm our operating results and financial condition, and

damage our reputation or otherwise materially harm our business.

As a publicly traded company, we experience

cyber-attacks and other attempts to gain unauthorized access to our systems on a regular basis, and we anticipate continuing to be subject

to such attempts.

There is a risk that some or all of our cryptocurrencies could be lost or stolen as a result of one or more of these

As we increase in size, we may become a more appealing target of hackers, malware, cyber-attacks or other security threats,

Any of these events may adversely affect our operations and, consequently, our investments and profitability.

The loss or destruction of a private key required to access our digital wallets may be irreversible and we may be denied access for all time to our cryptocurrency holdings or the holdings of others held in those compromised wallets.

Our loss of access to our private keys or our experience of a data loss relating to our digital wallets could adversely affect our investments and assets.

Cryptocurrencies are controllable only by the possessor of both the unique public and private keys relating to the local or online digital wallet in which they are held, which wallet’s public key or address is reflected in the network’s public blockchain.

We will publish the public key relating to digital wallets in use when we verify the receipt of transfers and disseminate such information into the network, but we will need to safeguard the private keys relating to such digital wallets.

To the extent such private keys are lost, destroyed or otherwise compromised, we will be unable to access our cryptocurrency rewards and such private keys may not be capable of being restored by any network.

Any loss of private keys relating to digital wallets used to store our cryptocurrencies could have a material adverse effect on our ability to continue as a going concern or to pursue our new strategy at all, which could have a material adverse effect on our business, prospects or operations and potentially the value of any bitcoin or other cryptocurrencies we mine or otherwise acquire or hold for our own account.

Our security procedures and protocols may be ineffective in reducing our exposure to hacking or adverse software events.

In order to minimize risk, Riot has established processes to manage wallets that are associated with our cryptocurrency holdings.

There can be no assurances that any processes we have adopted or will adopt in the future are or will be secure or effective, and we would suffer significant and immediate adverse effects if we suffered a loss of our cryptocurrency due to an adverse software or cybersecurity event.

Riot utilizes several layers of threat reduction techniques, including:

(i) the use of hardware wallets to store sensitive private key information;

(ii) performance of transactions offline;

and (iii) offline generation storage and use of private keys.

The Company periodically evaluates third-party custodial wallet alternatives, but there can be no assurance Riot will utilize such services, as other new options may develop in the future, and if a custodial wallet is used there can be no assurance that such services will be more secure than those the Company presently employs.

Human error and the constantly evolving state of cybercrime and hacking techniques may render present security protocols and procedures ineffective in ways which we cannot predict.

Our cryptocurrency assets are not subject to FDIC or SPIC insurance and may not be adequately covered by private insurance;

therefore, if our security procedures and protocols are ineffectual and our cryptocurrency assets are compromised by cybercriminals, we may not have adequate recourse to recover our losses stemming from such compromise and we may lose much of the accumulated value of our cryptocurrency mining activities.

This would have a negative impact on our business and operations.

Incorrect or fraudulent cryptocurrency transactions may be irreversible.

Cryptocurrency transactions are irrevocable and stolen or incorrectly transferred cryptocurrencies may be irretrievable.

As a result, any incorrectly executed or fraudulent cryptocurrency transactions could adversely affect our investments and assets.

Cryptocurrency transactions are not, from an administrative perspective, reversible without the consent and active participation of the recipient of the cryptocurrencies from the transaction.

In theory, cryptocurrency transactions may be reversible with the control or consent of a majority of processing power on the network, however, we do not now, nor is it feasible that we could in the future, possess sufficient processing power to effect this reversal.

Once a transaction has been verified and recorded in a block that is added to a blockchain, an incorrect transfer of a cryptocurrency or a theft thereof generally will not be reversible and we may not have sufficient recourse to recover our losses from any such transfer or theft.

It is possible that, through computer or human error, or through theft or criminal action, our cryptocurrency rewards could be transferred in incorrect amounts or to unauthorized third parties, or to uncontrolled accounts.

Further, according to the SEC, at this time, there is no specifically enumerated U.S.

or foreign governmental, regulatory, investigative or prosecutorial authority or mechanism through which to bring an action or complaint regarding missing or stolen cryptocurrency.

We are, therefore, presently reliant on existing private investigative entities, such as Chainanalysis and Kroll to investigate any potential loss of our cryptocurrency assets.

These third-party service providers rely on data analysis and compliance of ISPs with traditional court orders to reveal information such as the IP addresses of any attackers who may target us.

To the extent that we are unable to recover our losses from such action, error or theft, such events could have a material adverse effect on our ability to continue as a going concern or to pursue our new strategy at all, which could have a material adverse effect on our business, prospects or operations of and potentially the value of any bitcoin or other cryptocurrencies we mine or otherwise acquire or hold for our own account.

If a malicious actor or botnet obtains control of more than 50% of the processing power on a cryptocurrency network, such actor or botnet could manipulate blockchains to adversely affect us, which would adversely affect an investment in us or our ability to operate.

If a malicious actor or botnet (a volunteer or hacked collection of computers controlled by networked software coordinating the actions of the computers) obtains a majority of the processing power dedicated to mining a cryptocurrency, it may be able to alter blockchains on which transactions of cryptocurrency reside and rely by constructing fraudulent blocks or preventing certain transactions from completing in a timely manner, or at all.

The malicious actor or botnet could control, exclude or modify the ordering of transactions, though it could not generate new units or transactions using such control.

The malicious actor could “double-spend”

its own cryptocurrency (i.e., spend the same bitcoin in more than one transaction) and prevent the confirmation of other users’

transactions for as long as it maintained control.

To the extent that such malicious actor or botnet does not yield its control of the processing power on the network or the cryptocurrency community does not reject the fraudulent blocks as malicious, reversing any changes made to blockchains may not be possible.

The foregoing description is not the only means by which the entirety of blockchains or cryptocurrencies may be compromised but is only an example.

Although there are no known reports of malicious activity or control of blockchains achieved through controlling over 50% of the processing power on the network, it is believed that certain mining pools may have exceeded the 50% threshold in bitcoin.

The possible crossing of the 50% threshold indicates a greater risk that a single mining pool could exert authority over the validation of bitcoin transactions.

To the extent that the bitcoin ecosystem, and the administrators of mining pools, do not act to ensure greater decentralization of bitcoin mining processing power, the feasibility of a botnet or malicious actor obtaining control of the blockchain’s processing power will increase, because such botnet or malicious actor could more readily infiltrate and seize control over the blockchain by compromising a single mining pool, if the mining pool compromises more than 50% of the mining power on the blockchain, than it could if the mining pool had a smaller share of the blockchain’s total hashing power.

Conversely, if the blockchain remains decentralized it is inherently more difficult for the botnet or malicious actor to aggregate enough processing power to gain control of the blockchain.

If this were to occur, the public may lose confidence in the bitcoin blockchain, and blockchain technology more generally.

This would likely have a material and adverse effect on the price of bitcoin, which could have a material adverse effect on our business, financial results and operations, and harm investors.

If the award of cryptocurrency rewards for solving blocks are not sufficiently high, miners may not have adequate incentive to continue mining and may cease mining operations, which may make the blockchains they support with their mining activity less stable.

As the number of cryptocurrency rewards awarded for solving a block in a blockchain decreases, the relative cost of producing a single cryptocurrency will also increase, unless there is a corresponding increase in demand for that cryptocurrency.

Even relatively stable demand may not be sufficient to support the costs of mining, because as new miners begin working to solve blocks, the relative amount of energy expended to obtain a cryptocurrency award will tend to increase.

This increased energy directly relates to an increased cost of mining, which means an increased cost of obtaining a cryptocurrency award.

This increased cost, if not met with a corresponding increase in the market price for the cryptocurrency resulting from increased scarcity and demand, may lead miners to conclude they do not have an adequate incentive to continue mining and, therefore, may cease their mining operations.

This reduction in active miners supporting a blockchain may result in a reduction in the aggregate hash rate devoted to the blockchain as its cryptocurrency award is reduced.

We believe this would tend to adversely affect the confirmation process for transactions (i.e., temporarily decreasing the speed at which blocks are added to a blockchain until the next scheduled adjustment in difficulty for block solutions) and make cryptocurrency networks more vulnerable to a malicious actor or botnet obtaining control in excess of 50% of the processing power active on a blockchain.

This could permit such malicious actor or botnet to manipulate a blockchain in a manner that adversely affects our activities.

A reduction in confidence in the confirmation process or processing power of the network could result and be irreversible.

Such events could have a material adverse effect on our ability to continue to pursue our strategy at all, which could have a material adverse effect on our business, prospects or operations and potentially the value of any bitcoin or other cryptocurrencies we mine or otherwise acquire or hold for our own account.

Cryptocurrencies, including those maintained by or for us, may be exposed to cybersecurity threats and hacks.

As with any computer code generally, flaws in cryptocurrency codes may be exposed by malicious actors.

Several errors and defects have been found previously, including those that disabled some functionality for users and exposed users’

Exploitations of flaws in the source code that allow malicious actors to take or create money have previously occurred.

Despite our efforts and processes to prevent breaches, our devices, as well as our miners, computer systems and those of third parties that we use in our operations, are vulnerable to cyber security risks, including cyber-attacks such as viruses and worms, phishing attacks, denial-of-service attacks, physical or electronic break-ins, employee theft or misuse, and similar disruptions from unauthorized tampering with our miners and computer systems or those of third parties that we use in our operations.

We have an evolving business model which is subject to various uncertainties.

As cryptocurrency assets and blockchain technologies become more widely available, we expect the services and products associated with them to evolve.

In order to stay current with the industry, our business model may need to evolve as well.

From time to time, we may modify aspects of our business model relating to our strategy.

We cannot offer any assurance that these or any other modifications will be successful or will not result in harm to our business.

We may not be able to manage growth effectively, which could damage our reputation, limit our growth and negatively affect our operating results.

Further, we cannot provide any assurance that we will successfully identify all emerging trends and growth opportunities in this business sector and we may lose out on those opportunities.

Such circumstances could have a material adverse effect on our business, prospects or operations.

and, despite our implementation of strict security measures and frequent security audits, it is impossible to eliminate all such vulnerability.

For instance, we may not be able to ensure the adequacy of the security measures employed by third parties, such as our service providers

and Whinstone’s colocation customers.

Efforts to limit the ability of malicious actors to disrupt the operations of the internet

or undermine our own security efforts may be costly to implement and may not be successful.

Such breaches, whether attributable to a vulnerability

in our systems or otherwise, could result in claims of liability against us, damage our reputation and materially harm our business.

We have not to date experienced a material

however, the occurrence of any such event in the future could subject us to liability to our customers, suppliers, business

partners and others, give rise to legal and/or regulatory action, which could damage our reputation or otherwise materially harm our business,

operating results, and financial condition.

Incorrect or fraudulent Bitcoin transactions may be irreversible

and we could lose access to our Bitcoin.

Bitcoin transactions are not, from an administrative

perspective, reversible without the consent and active participation of the recipient of the Bitcoin from the transaction.

the decentralized nature of the Bitcoin blockchain, once a transaction has been verified and recorded in a block that is added to the

Bitcoin blockchain, an incorrect transfer of a Bitcoin or a theft thereof generally will not be reversible, and we may not have sufficient

recourse to recover our losses from any such transfer or theft.

It is possible that, through computer or human error, or through theft

or criminal action, our cryptocurrency rewards could be transferred in incorrect amounts or to unauthorized third parties, or to uncontrolled

Though recent high profile enforcement actions against individuals laundering stolen Bitcoin have demonstrated some means of

bringing malicious actors to justice for their theft, the stolen Bitcoin is likely to remain unrecoverable.

Furthermore, we must possess

both the unique public and private keys to our digital wallets to gain access to our Bitcoin, and the loss of a private key required may

be irreversible.

Therefore, if we lose, or if a malicious actor successfully denies us access to our private keys, we may be permanently

denied access to the Bitcoin held in the wallet corresponding to the lost, stolen or blocked keys.

Though we have taken and continue to

take reasonable steps to secure our private keys and to store our Bitcoin with institutional custodians, if we were to lose access to

our private keys or otherwise experience data loss relating to our digital wallets, we could effectively lose access to and the ability

to use our Bitcoin assets.

Moreover, we may be unable to secure insurance policies for our Bitcoin assets at rates or on terms acceptable

to us, if at all, and we may choose to self-insure.

To the extent that we are unable to recover our losses from such action, error or

theft, such events could have a material adverse effect on our business, results of operations and financial condition.

The Whinstone Facility may not be adaptable

to new technologies.

The market for data centers is characterized

by rapidly changing technology, evolving industry standards, frequent new product introductions, and changing customer demands.

in industry practice or in technology could also reduce demand for the physical hosting space and infrastructure that we provide or make

previous improvements in the Whinstone Facility obsolete.

Our ability to deliver technologically sophisticated infrastructure at the Whinstone

Facility, including power and cooling, is a significant factor in our customers’ decisions to collocate with us at the Whinstone

The Whinstone Facility’s infrastructure may become obsolete due to the development of new systems that deliver power to,

or eliminate heat from, the miners or other customer equipment that we house, which may require us to expend significant capital resources

to retrofit or otherwise upgrade our current systems to compete with data centers deploying these new systems.

While we believe the Whinstone Facility is

primed to be adaptable, new technology can be, by its nature, unpredictable.

Moreover, even if we are able to respond, we may not be able

to efficiently upgrade or change these systems without incurring significant costs.

Further, operations may be negatively impacted by

these upgrades as they are in process.

This may impact our customers’ experience in the short term, which may have a negative impact

on operating cash flows, liquidity, and financial condition.

The Whinstone Facility is subject to

a ten-year ground lease, and if we are unable to renew its term, we may be unable to fully realize the anticipated benefits of our acquisition

of Whinstone and the ongoing development of the site.

The Whinstone Facility is subject to a ground

lease with an initial term of ten years, followed by three ten-year renewal periods, unless terminated earlier.

The long-term success

of our plans for the Whinstone Facility is largely based on our ability to maintain the lease in effect and to renew it going forward.

If we fail to maintain the lease or renew it once its initial term expires and the landlord requires Whinstone to vacate the premises,

we will likely incur significant costs in relocating Whinstone’s operations, if we could do so at all, and our Mining and Hosting

operations would be interrupted during such relocation.

Further, if we fail to renew the lease on terms favorable to us, and our costs

are increased, then we may not realize the anticipated benefits of our investment in the Whinstone Acquisition or any future development

of its remaining available capacity.

Any disruptions or changes to Whinstone’s present relationship with the landlord for the Whinstone

Facility could disrupt our business and our results of operations negatively.

Our business could be harmed by prolonged

power and internet outages, shortages, or capacity constraints.

Our operations require a significant amount

of electrical power and access to high-speed internet to be successful.

If we are unable to secure sufficient electrical power, or if

we lose internet access for a prolonged period, we may be required to reduce our operations or cease them altogether.

If this occurs,

our business and results of operations may be materially and adversely affected.

We are subject to risks associated with

our need for significant electrical power.

Our operations have required significant amounts

of electrical power, and, as we continue to expand our mining fleet and our Whinstone Facility, we anticipate our demand for electrical

power will continue to grow.

If we are unable to continue to obtain sufficient electrical power on a cost-effective basis, we may not

realize the anticipated benefits of our significant capital investments.

Additionally, our operations could be materially

adversely affected by prolonged power outages.

Although our Whinstone Facility may be powered by backup generators on a temporary basis,

it would not be feasible or cost-effective to run miners on back-up power generators for extended periods of time.

Therefore, we may have

to reduce or cease our operations in the event of an extended power outage, or as a result of the unavailability or increased cost of

electrical power.

If this were to occur, our business and results of operations could be materially and adversely affected.

Our operations could be adversely affected

by events outside of our control, such as natural disasters.

We may be impacted by natural disasters, wars,

health epidemics, weather conditions, the long-term effects of climate change, power outages or other events outside of our control.

example, we voluntarily halted operations at our Whinstone Facility during the severe winter storms in the first quarter of 2022 and 2021

that had a widespread impact on utilities and transportation.

In the future, regulators or power providers may, under new or revised rules,

require us to power down the Whinstone Facility during such events.

If major disasters such as earthquakes, floods or other climate-related

events occur, the Whinstone Facility or our other offices are severely damaged, or our information system or communications could break

down or operate improperly, which may interrupt our operations.

We may incur expenses or delays relating to such events outside of our

control, which could have a material adverse impact on our business, operating results and financial condition.

Increased scrutiny and changing expectations

from stakeholders with respect to our ESG practices and the impacts of Climate Change may result in additional costs or risks.

Companies across many industries are facing

increasing scrutiny related to their environmental, social, and governance (“ESG”) practices.

Investor advocacy groups, certain

institutional investors, investment funds and other influential investors are also increasingly focused on ESG practices and in recent

years have placed increasing importance on the non-financial impacts of their investments.

Furthermore, increased public awareness and

concern regarding environmental risks, including global climate change, may result in increased public scrutiny of our business and our

industry, and our management team may divert significant time and energy away from our operations and towards responding to such scrutiny

and reassuring our employees.

In addition, the physical risks of climate

change may impact the availability and cost of materials and natural resources, sources and supply of energy, demand for Bitcoin and other

cryptocurrencies, and could increase our insurance and other operating costs, including, potentially, to repair damage incurred as a result

of extreme weather events or to renovate or retrofit facilities to better withstand extreme weather events.

If environmental laws or regulations

or industry standards are either changed or adopted and impose significant operational restrictions and compliance requirements on our

operations, or if our operations are disrupted due to physical impacts of climate change, our business, capital expenditures, results

of operations, financial condition and competitive position could be negatively impacted.

Risks Related to Governmental Regulation and Enforcement

Regulatory changes or actions may alter the nature of an investment in us or restrict the use of cryptocurrencies in a manner that adversely affects our business, prospects or operations.

As cryptocurrencies have grown in both popularity and market size, governments around the world have reacted differently to cryptocurrencies;

certain governments have deemed them illegal, and others have allowed their use and trade without restriction, while in some jurisdictions, such as in the U.S., subject to extensive, and in some cases overlapping, unclear and evolving regulatory requirements.

Changing environmental regulation and

public energy policy may expose our business to new risks.

Our Bitcoin mining operations require a substantial

amount of power and can only be successful, and ultimately profitable, if the costs we incur, including for electricity, are lower than

the revenue we generate from our operations.

As a result, any mine we establish can only be successful if we can obtain sufficient electrical

power for that mine on a cost-effective basis, and our establishment of new mines requires us to find locations where that is the case.

For instance, our plans and strategic initiatives for the Whinstone Facility are based, in part, on our understanding of current environmental

and energy regulations, policies, and initiatives enacted by federal and Texas regulators.

If new regulations are imposed, or if existing

regulations are modified, the assumptions we made underlying our plans and strategic initiatives may be inaccurate, and we may incur additional

costs to adapt our planned business, if we are able to adapt at all, to such regulations.

In addition, there continues to be a lack of

consistent climate legislation, which creates economic and regulatory uncertainty for our business because the cryptocurrency mining industry,

with its high energy demand, may become a target for future environmental and energy regulation.

New legislation and increased regulation

regarding climate change could impose significant costs on us and our suppliers, including costs related to increased energy requirements,

capital equipment, environmental monitoring and reporting, and other costs to comply with such regulations.

Further, any future climate

change regulations could also negatively impact our ability to compete with companies situated in areas not subject to such limitations.

For example, legislation proposed in the state of New York, if passed, could restrict the ability of electricity suppliers to provide

electricity to cryptocurrency mining operations in times of electricity shortage, or at all.

Given the political significance and uncertainty

around the impact of climate change and how it should be addressed, we cannot predict how legislation and regulation will affect our financial

condition and results of operations.

Further, even without such regulation, increased awareness and any adverse publicity in the global

marketplace about potential impacts on climate change by us or other companies in our industry could harm our reputation.

Any of the foregoing

could result in a material adverse effect on our business and financial condition.

The compliance costs of responding to

new and changing regulation could adversely affect our operations at our Whinstone Facility.

We (along with those from whom we purchase

electricity) are subject to various federal, state, local, and international environmental laws and regulations, including those relating

to the generation, storage, handling, and disposal of hazardous substances and wastes.

Certain of these laws and regulations also impose

joint and several liability, without regard to fault, for investigation and cleanup costs on current and former owners and operators of

real property and persons who have disposed of or released hazardous substances into the environment.

Our operations may involve the use

of hazardous substances and materials, such as petroleum fuel for emergency generators, as well as batteries, cleaning solutions, and

other materials.

Electricity costs could also be affected due

to existing or new regulations on greenhouse gas emissions, whether such regulations apply to all consumers of electricity or just to

specified uses, such as Bitcoin mining.

These regulations may be federal, or we may be newly exposed to such regulations due to the acquisition

of Texas-based Whinstone.

There has been interest in the U.S.

Congress and in the Legislature of the State of Texas in addressing climate

change, including through regulation of Bitcoin mining.

Past legislative proposals to address climate change include measures ranging

from taxes on carbon use or generation to federally imposed limits on greenhouse gas emissions.

Further, although Texas has historically

sought to maintain some degree of energy independence from the United States as a whole, it is unclear how future legislation and regulation

will affect the Whinstone Facility.

The course of future legislation and regulation in the United States and in Texas remains difficult

to predict, and potential increased costs associated with new legislation or regulation cannot be estimated at this time.

Regulatory changes or actions may alter

the nature of an investment in us or restrict the use of cryptocurrencies in a manner that adversely affects our business, prospects,

or operations.

As cryptocurrencies have grown in both popularity

and market size, governments around the world have reacted differently to cryptocurrencies;

certain governments have deemed them illegal,

and others have allowed their use and trade without restriction, while in some jurisdictions, such as in the U.S., subject the mining,

ownership and exchange of cryptocurrencies to extensive, and in some cases overlapping, unclear and evolving regulatory requirements.

Ongoing and future regulatory actions could have a material adverse effect on our business, prospects or operations.

Because cryptocurrencies may be determined to be investment securities, we may inadvertently violate the Investment Company Act and incur large losses as a result and potentially be required to register as an investment company or terminate operations and we may incur third party liabilities.

We believe that we are not engaged in the business of investing, reinvesting, or trading in securities, and we do not hold ourselves out as being engaged in those activities.

However, under the Investment Company Act a company may be deemed an investment company under section 3(a)(1)(C) thereof if the value of its investment securities is more than 40% of its total assets (exclusive of government securities and cash items) on an unconsolidated basis.

As a result of our investments and our mining activities, including investments in which we do not have a controlling interest, the investment securities we hold could exceed 40% of our total assets, exclusive of cash items and, accordingly, we could determine that we have become an inadvertent investment company.

The cryptocurrency we own, acquire or mine may be deemed an investment security by the SEC, although we do not believe any of the cryptocurrencies we own, acquire or mine are securities.

An inadvertent investment company can avoid being classified as an investment company if it can rely on one of the exclusions under the Investment Company Act.

One such exclusion, Rule 3a-2 under the Investment Company Act, allows an inadvertent investment company a grace period of one year from the earlier of (a) the date on which an issuer owns securities and/or cash having a value exceeding 50% of the issuer’s total assets on either a consolidated or unconsolidated basis and (b) the date on which an issuer owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of government securities and cash items) on an unconsolidated basis.

We may be required to take actions to cause the investment securities held by us to be less than 40% of our total assets, which may include acquiring assets with our cash and cryptocurrency on hand or liquidating our investment securities or cryptocurrency or seeking a no-action letter from the SEC if we are unable to acquire sufficient assets or liquidate sufficient investment securities in a timely manner.

As the Rule 3a-2 exception is available to a company no more than once every three years, and assuming no other exclusion were available to us, we would have to keep within the 40% limit for at least three years after we cease being an inadvertent investment company.

This may limit our ability to make certain investments or enter into joint ventures that could otherwise have a positive impact on our earnings.

In any event, we do not intend to become an investment company engaged in the business of investing and trading securities.

Classification as an investment company under the Investment Company Act requires registration with the SEC.

If an investment company fails to register, it would have to stop doing almost all business, and its contracts would become voidable.

Registration is time consuming and restrictive and would require a restructuring of our operations, and we would be very constrained in the kind of business we could do as a registered investment company.

Further, we would become subject to substantial regulation concerning management, operations, transactions with affiliated persons and portfolio composition, and would need to file reports under the Investment Company Act regime.

The cost of such compliance would result in the Company incurring substantial additional expenses, and the failure to register if required would have a materially adverse impact to conduct our operations.

Our interactions with a blockchain may expose us to SDN or blocked persons or cause us to violate provisions of law that did not contemplate distribute ledger technology.

The Office of Financial Assets Control (“OFAC”) of the U.S.

Department of Treasury requires us to comply with its sanction program and not conduct business with persons named on its specially designated nationals (“SDN”) list.

However, because of the pseudonymous nature of blockchain transactions we may inadvertently and without our knowledge engage in transactions with persons named on OFAC’s SDN list.

Our Company’s policy prohibits any transactions with such SDN individuals, but we may not be adequately capable of determining the ultimate identity of the individual with whom we transact with respect to selling cryptocurrency assets.

Moreover, federal law prohibits any U.S.

person from knowingly or unknowingly possessing any visual depiction commonly known as child pornography.

Recent media reports have suggested that persons have imbedded such depictions on one or more blockchains.

Because our business requires us to download and retain one or more blockchains to effectuate our ongoing business, it is possible that such digital ledgers contain prohibited depictions without our knowledge or consent.

To the extent government enforcement authorities literally enforce these and other laws and regulations that are impacted by decentralized distributed ledger technology, we may be subject to investigation, administrative or court proceedings, and civil or criminal monetary fines and penalties, all of which could harm our reputation and affect the value of our common stock.

We are subject to risks associated with our need for significant electrical power.

Government regulators may potentially restrict the ability of electricity suppliers to provide electricity to mining operations, such as ours.

The operation of a bitcoin or other cryptocurrency mine can require massive amounts of electrical power.

Further, our mining operations can only be successful and ultimately profitable if the costs, including electrical power costs, associated with mining a bitcoin are lower than the price of a bitcoin.

As a result, any mine we establish can only be successful if we can obtain sufficient electrical power for that mine on a cost-effective basis, and our establishment of new mines requires us to find locations where that is the case.

There may be significant competition for suitable mine locations, and government regulators may potentially restrict the ability of electricity suppliers to provide electricity to mining operations in times of electricity shortage, or may otherwise potentially restrict or prohibit the provision or electricity to mining operations.

For example, the board of commissioners of Chelan County Public Utility District in Washington voted to stop reviewing applications for mining facilities following a review of the impact of existing operations.

Additionally, our mines could be materially adversely affected by a power outage.

Given the power requirement, it would not be feasible to run miners on back-up power generators in the event of a government restriction on electricity or a power outage.

If we are unable to receive adequate power supply and are forced to reduce our operations due to the availability or cost of electrical power, our business would experience materially negative impacts.

Governmental action in the Peoples’

Republic of China may have a materially adverse effect on the cryptocurrency mining industry as a whole, which would have an adverse effect on our business and results of operations.

China is the world’s largest producer of bitcoin and the large majority of the world’s cryptocurrency mining power (some observers estimate that China produces as high as 80% of the world’s cryptocurrency mining power).

China has already made transacting in cryptocurrencies illegal for Chinese citizens in mainland China, and additional restrictions may follow.

However, thus far, China has permitted bitcoin mining on a national scale, but provincial governments have taken action to restrict and even ban bitcoin mining within their province.

For example, on March 2, 2021, we became aware of the actions taken by the governmental authorities for the Chinese province of Inner Mongolia, which represents roughly 8% of the world’s total mining power, to outright ban bitcoin mining in the province due to the industry’s intense electrical power demands and its negative environmental impacts (both in terms of the waste produced by mining the rare Earth metals used to manufacture miners and the production of electrical power used in bitcoin mining).

While we have yet to see whether these miners will be able to relocate to another location in China to continue mining, we cannot quantify the effects of this regulatory action on our industry as a whole.

If further regulation follows, it is possible that our industry may not be able to cope with the sudden and extreme loss of mining power.

Because we are unable to influence or predict future regulatory actions taken by governments in China, we may have little opportunity or ability to respond to rapidly evolving regulatory positions which may have a materially adverse effect on our industry and, therefore, our business and results of operations.

If further extreme regulatory action is taken by governments in China or elsewhere, including the United States, our business may suffer and investors in our securities may lose part or all of their investment.

Climate change, and the regulatory and legislative developments related to climate change, may materially adversely affect our business and financial condition.

The potential physical impacts of climate change on our operations are highly uncertain and would be particular to the geographic circumstances in areas in which we operate.

These may include changes in rainfall and storm patterns and intensities, water shortages, changing sea levels and changing temperatures.

The impacts of climate change may materially and adversely impact the cost, production and financial performance of our operations.

Further, any impacts to our business and financial condition as a result of climate change are likely to occur over a sustained period of time and are therefore difficult to quantify with any degree of specificity.

For example, extreme weather events may result in adverse physical effects on portions of our infrastructure, which could disrupt our supply chain and ultimately our business operations.

In addition, disruption of transportation and distribution systems could result in reduced operational efficiency and customer service interruption.

Climate related events have the potential to disrupt our business, including the business of our customers, and may cause us to experience higher attrition, losses and additional costs to resume operations.

In addition, a number of governments or governmental bodies have introduced or are contemplating legislative and regulatory changes in response to various climate change interest groups and the potential impact of climate change.

Given the very significant amount of electrical power required to operate cryptocurrency miners, as well the environmental impact of mining for the Rare Earth Metals used in the production of mining servers, the cryptocurrency mining industry may become a target for future environmental and energy regulation.

Legislation and increased regulation regarding climate change could impose significant costs on us and our suppliers, including costs related to increased energy requirements, capital equipment, environmental monitoring and reporting, and other costs to comply with such regulations.

Any future climate change regulations could also negatively impact our ability to compete with companies situated in areas not subject to such limitations.

Given the political significance and uncertainty around the impact of climate change and how it should be addressed, we cannot predict how legislation and regulation will affect our financial condition, operating performance and ability to compete.

Furthermore, even without such regulation, increased awareness and any adverse publicity in the global marketplace about potential impacts on climate change by us or other companies in our industry could harm our reputation.

Any of the foregoing could result in a material adverse effect on our business and financial condition.

The Company previously received a subpoena from the SEC, the costs of which may not be covered, in whole or in part by director and officer insurance.

On April 9, 2018, the Company received a subpoena from the SEC requesting certain information from the Company.

The Company fully cooperated with the SEC request.

The Company notified its insurance carrier and is in a dispute regarding potential coverage, although there can be no assurance that the costs of compliance with the subpoena or any related matters will be eligible for insurance coverage.

Nevertheless, the circumstances involving that subpoena may continue to entail cost and management’s attention.

As reported on its Current Report on Form 8-K filed on February 3, 2020, the Company received written notice on January 29, 2020 from the Division of Enforcement of the SEC that it had concluded its investigation of Riot.

According to the notice, the SEC has concluded its investigation of Riot and, based on the information available to the SEC as of the date of the notice, the SEC does not intend to recommend an enforcement action against Riot with respect to the matters investigated by the SEC.

Any investigation of the Company in the future by the SEC could have a materially adverse effect on the Company, its business or operations.

Our interactions with a blockchain may

expose us to SDN or blocked persons and new legislation or regulation could adversely impact our business or the market for cryptocurrencies.

Office of Financial Assets Control (“OFAC”) of the U.S.

Department of Treasury requires us to comply with its sanction program

and not conduct business with persons named on its specially designated nationals (“SDN”) list.

However, because of the pseudonymous

nature of blockchain transactions we may inadvertently and without our knowledge engage in transactions with persons named on OFAC’s

Our Company’s policy prohibits any transactions with such SDN individuals, but we may not be adequately capable of determining

the ultimate identity of the individual with whom we transact with respect to selling cryptocurrency assets.

Moreover, the

use of cryptocurrencies, including Bitcoin, as a potential means of avoiding federally-imposed sanctions, such as those imposed in connection

with the Russian invasion of Ukraine.

For example, on March 2, 2022, a group of United States Senators sent the Secretary of the United

States Treasury Department a letter asking Secretary Yellen to investigate its ability to enforce such sanctions vis-à-vis Bitcoin,

and on March 8, 2022, President Biden announced an executive order on cryptocurrencies which seeks to establish a unified federal regulatory

regime for cryptocurrencies.

We are unable to predict the nature or extent of new and proposed legislation and regulation affecting the

cryptocurrency industry, or the potential impact of the use of cryptocurrencies by SDN or other blocked or sanctioned persons, which could

have material adverse effects on our business and our industry more broadly.

Further, we may be subject to investigation, administrative

or court proceedings, and civil or criminal monetary fines and penalties as a result of any regulatory enforcement actions, all of which

could harm our reputation and affect the value of our common stock.

Bitcoin and Bitcoin mining, as well as

cryptocurrencies generally, may be made illegal in certain jurisdictions, including the ones we operate in, which could adversely affect

our business prospects and operations.

Although we do not anticipate any material

adverse regulations on Bitcoin mining in our jurisdictions of operation, it is possible that state or federal regulators may seek to impose

harsh restrictions or total bans on cryptocurrency mining which may make it impossible for us to do business without relocating our mining

operations, which could be very costly and time consuming.

Further, although Bitcoin and Bitcoin mining, as well as cryptocurrencies generally,

are largely unregulated in most countries (including the United States), regulators in certain jurisdictions may undertake new or intensify

existing regulatory actions in the future that could severely restrict the right to mine, acquire, own, hold, sell, or use cryptocurrency

or to exchange it for traditional fiat currency such as the United States Dollar.

Such restrictions may adversely affect us as the large-scale

use of cryptocurrencies as a means of exchange is presently confined to certain regions globally.

Such circumstances could have a material

adverse effect on us, which could have a material adverse effect on our business, prospects or operations and potentially the value of

any Bitcoin or other cryptocurrencies we mine or otherwise acquire or hold for our own account, and thus harm investors.

Risks Related to Ownership of Our Common Stock

The trading price of our common stock has been, and is likely to continue to be, volatile;

you might not be able to sell your shares at or above the price that you paid for them and we may not be able to stop the decline of our stock price.

The trading price of our common stock has been, and is likely to continue to be, volatile, and may be influenced by numerous factors, some of which are beyond our control;

you might not be able to sell your shares at or above the price that you paid for them.

In addition, the trading prices of bitcoin have been highly unpredictable, and the trading prices of our common stock has generally been highly and directly correlated with the trading prices of bitcoin.

Specifically, we have experienced adverse effects on our stock price when the value of bitcoin has fallen, and we anticipate similar outcomes as our stock price tracks the general status of that cryptocurrency.

That is, the trading price of our common stock is subject to arbitrary pricing factors that are not necessarily associated with traditional factors that influence stock prices or the value of non-cryptocurrency assets such as revenue, cash flows, profitability, growth prospects or business activity levels since the value and price, as determined by the investing public, may be influenced by future anticipated adoption or appreciation in value of cryptocurrencies or blockchains generally, factors over which we have little or no influence or control.

Other factors which could cause volatility in the market price of our common stock include, but are not limited to:

actual or anticipated fluctuations in our financial condition and operating results or those of companies perceived to be similar to us;  

actual or anticipated changes in our growth rate relative to our competitors;  

commercial success and market acceptance of blockchain, bitcoin and other cryptocurrencies;  

actions by our competitors, such as new business initiatives, acquisitions and divestitures;  

strategic transactions undertaken by us;  

integration of new businesses and opportunities into our existing business;  

implementation of new technologies in the industry;  

additions or departures of key personnel;  

prevailing economic conditions;  

disputes concerning our intellectual property or other proprietary rights;  

sales of our common stock by our officers, directors or significant stockholders;  

other actions taken by our stockholders;  

future sales or issuances of equity or debt securities by us;  

business disruptions caused by earthquakes, tornadoes or other natural disasters;  

issuance of new or changed securities analysts’

reports or recommendations regarding us;  

legal proceedings involving our company, our industry or both;  

changes in market valuations of companies similar to ours;  

the prospects of the industry in which we operate;  

speculation or reports by the press or investment community with respect to us or our industry in general;  

the level of short interest in our stock;

and  

other risks, uncertainties and factors described in this Annual Report on Form 10-K.  

In addition, the stock markets in general have experienced extreme volatility that has often been unrelated to the operating performance of the issuer.

These broad market fluctuations may negatively impact the price or liquidity of our common stock.

When the price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the issuer, and we have been impacted in that way.

See Item 3 –

Legal Proceedings, which provides that “we, and some of our current and former officers and directors, have been named as parties to various lawsuits arising out of, or related to, allegedly false and misleading statements made in prior securities filings, and those lawsuits could adversely affect us, require significant management time and attention, result in significant legal expenses or damages, and cause our business, financial condition, results of operations and cash flows to suffer.”

We may be unable to comply with the applicable continued listing requirements of the Nasdaq Capital Market, which may adversely impact our access to capital markets and may cause us to default certain of our agreements.

Our common stock is currently traded on the Nasdaq Capital Market.

Nasdaq rules require us to maintain a minimum closing bid price of $1.00 per share of our common stock.

The closing bid price of our common stock has fluctuated below $1.00 per share in 2020.

If the closing bid price of our common stock were to remain below $1.00 per share for 30 consecutive trading days, or we do not meet other listing requirements, we would not be in compliance with Nasdaq’s rules for listing standards.

There can be no assurance that we will continue to meet the minimum bid price requirement, or any other requirement in the future.

If we fail to meet the minimum bid price requirement, Nasdaq may initiate the delisting process with a notification letter.

If we were to receive such a notification, we would be afforded a grace period of 180 calendar days to regain compliance with the minimum bid price requirement.

In order to regain compliance, shares of our common stock would need to maintain a minimum closing bid price of at least $1.00 per share for a minimum of 10 consecutive trading days.

In addition, we may be unable to meet other applicable Nasdaq listing requirements, including maintaining minimum levels of stockholders’

equity or market values of our common stock, in which case our common stock could be delisted.

In the event that our common stock is delisted from Nasdaq and is not eligible for quotation or listing on another market or exchange, trading of our common stock could be conducted only in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the OTC.

In such event, it could become more difficult to dispose of, or obtain accurate price quotations for our common stock and there would likely also be a reduction in our coverage by securities analysts and the news media, which could cause the price of our common stock to decline further.

In addition, the delisting of our common stock from the Nasdaq Capital Market may result in us defaulting under our Sales Agreement with H.C.

Wainwright & Co.

and our ability to raise additional capital may be severely impacted, which may negatively affect our plans and the results of our operations.

Article XIV of our Bylaws, as amended, designates the courts of the State of New York as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our shareholders, and therefore may limit our shareholders’

ability to choose a forum for disputes with us or our directors, officers, employees, or agents.

Article XIV of our Bylaws, as amended provides that, to the fullest extent permitted by law, and unless we consent to the selection of an alternative forum, the state and federal courts in and for the State of New York shall be the sole and exclusive forum for the resolution of certain actions and proceedings that may be initiated by our shareholders, and that, by purchasing our securities, our shareholders are deemed to have notice of and consented to this forum selection clause.

The trading price of shares of our common

stock has been subject to volatility.

The trading price of our common stock has been,

and is likely to continue to be, volatile, and may be influenced by including the risks, uncertainties and factors described in this Annual

Report and our other filings with the SEC, as well as factors beyond our control or of which we may be unaware.

If these risks come to

pass and our business and results of operation suffer as a result, the market price of our securities may decline, which could have a

material adverse effect on an investment in our securities..

We have a classified board of directors;

therefore, only one-third of the Board is up for election at each annual shareholders’ meeting, which could limit shareholders’

ability to influence directors’ decision making.

Our Bylaws provide for a classified board of

directors consisting of three classes of directors serving staggered three-year terms, and each year our stockholders elect one class

of our directors.

We believe that a classified board structure facilitates continuity and stability of leadership and policy by helping

ensure that, at any given time, a majority of our directors have prior experience as directors of our Company and are familiar with our

business and operations.

In our view, this permits more effective long-term planning and helps create long-term value for our stockholders.

The classified board structure, however, could prevent a party who acquires control of a majority of our outstanding voting stock from

obtaining control of our board of directors until the second annual stockholders’ meeting following the date that party obtains

control of a majority of our voting stock.

The classified board structure may discourage a third party from initiating a proxy contest,

making a tender offer or otherwise attempting to obtain control of us, as the structure makes it more difficult for a stockholder to replace

a majority of our directors.

Article XIV of our Bylaws, as amended,

designates the courts of the State of New York as the sole and exclusive forum for certain types of actions and proceedings that may be

initiated by our shareholders, and therefore may limit our shareholders’ ability to choose a forum for disputes with us or our directors,

officers, employees, or agents.

Article XIV of our Bylaws, as amended, provides

that, to the fullest extent permitted by law, and unless we consent to the selection of an alternative forum, the state and federal courts

in and for the State of New York shall be the sole and exclusive forum for the resolution of certain actions and proceedings that may

be initiated by our stockholders, and that, by purchasing our securities, our stockholders are deemed to have notice of and consented

to this forum selection clause.

Under Article XIV of our Bylaws, the following claims are subject to this forum selection clause:

(a) any derivative action or proceeding brought on behalf of the Company, (b) any action or proceeding asserting a claim of breach of a fiduciary duty owed by any director or officer of the Company to the Company or the Company’s shareholders, (c) any action or proceeding asserting a claim against the Company arising pursuant to any provision of the Nevada Revised Statutes or the Company’s articles of incorporation or Bylaws (as either might be amended from time to time), or (d) any action or proceeding asserting a claim against the Company governed by the internal affairs doctrine.

By its terms, the forum selection clause in our Bylaws applies to the foregoing claims to the fullest extent permitted by law, and, as such, should not be interpreted as precluding our shareholders from bringing claims under the Exchange Act in the appropriate federal court with jurisdiction over such claims, as provided by Section 27 of the Exchange Act.

Likewise, the forum selection clause in our Bylaws should not be interpreted as precluding our shareholders from bringing claims under the Securities Act in the appropriate state or federal court with jurisdiction over such claims, as provided by Section 22 of the Securities Act.

We believe the choice-of-forum provision in our Bylaws will help provide for the orderly, efficient, and cost-effective resolution of legal issues affecting us by designating courts located in the State of New York as the exclusive forum for cases involving such issues.

However, this provision may limit a shareholder’s ability to bring a claim in a judicial forum that it believes to be favorable for disputes with us or our directors, officers, employees, or agents, which may discourage such actions against us and our directors, officers, employees, and agents.

Nevada revised statutes permit us to make this selection in our Bylaws, and, while there is no New York case law addressing the enforceability of this type of provision, New York courts have on prior occasion found persuasive authority in Delaware case law in favor of the enforceability of forum selection clauses in the absence of statutory or case law specifically addressing an issue of corporate law.

However, if a court were to find the choice-of-forum provision in our Bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition, or results of operations.

Nevada law contains provisions that could discourage, delay or prevent a change in control of our company, prevent attempts to replace or remove current management and reduce the market price of our stock.

Provisions in Nevada corporate law may discourage, delay or prevent a merger or acquisition involving us that our stockholders may consider favorable.

For example, Nevada corporate law contains strong “anti-takeover”

provisions, which prohibit us from entering into a business combination with an “interested stockholder”

or their affiliates for a period of two years after they become an “interested stockholder”

unless certain provisions are met.

As a result, a proposed merger favored by our stockholders could be blocked by operation of Nevada law.

If securities or industry analysts do not publish research or publish unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by whether industry or securities analysts publish research and reports about us, our business, our market or our competitors and, if any analysts do publish such reports, what they publish in those reports.

We may not obtain or maintain analyst coverage in the future.

Any analysts that do cover us may make adverse recommendations regarding our stock, adversely change their recommendations from time to time and/or provide more favorable relative recommendations about our competitors.

If analysts who may cover us in the future were to cease coverage of our company or fail to regularly publish reports on us, or if analysts fail to cover us or publish reports about us at all, we could lose (or never gain) visibility in the financial markets, which in turn could cause the stock price of our common stock or trading volume to decline.

Moreover, if our operating results do not meet the expectations of the investor community, one or more of the analysts who cover our company may change their recommendations regarding our company and our stock price could decline.

Because we do not intend to pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their shares unless they sell them.

We intend to retain any future earnings to finance the development and expansion of our business.

We do not anticipate paying any cash dividends on our common stock in the foreseeable future.

any derivative action or proceeding brought on behalf of the Company;

(b) any action or proceeding asserting a claim of breach of a fiduciary

duty owed by any director or officer of the Company to the Company or the Company’s stockholders;

a claim against the Company arising pursuant to any provision of the Nevada Revised Statutes or the Company’s Articles of Incorporation

or Bylaws (as either might be amended from time to time);

or (d) any action or proceeding asserting a claim against the Company governed

by the internal affairs doctrine.

By its terms, the forum selection clause in

our Bylaws applies to the foregoing claims to the fullest extent permitted by law, and, as such, should not be interpreted as precluding

our stockholders from bringing claims under the Exchange Act in the appropriate federal court with jurisdiction over such claims, as provided

by Section 27 of the Exchange Act.

Likewise, the forum selection clause in our Bylaws should not be interpreted as precluding our stockholders

from bringing claims under the Securities Act in the appropriate state or federal court with jurisdiction over such claims, as provided

by Section 22 of the Securities Act.

We believe the choice-of-forum provision in

our Bylaws will help provide for the orderly, efficient, and cost-effective resolution of legal issues affecting us by designating courts

located in the State of New York as the exclusive forum for cases involving such issues.

However, this provision may limit a stockholder’s

ability to bring a claim in a judicial forum that it believes to be favorable for disputes with us or our directors, officers, employees,

or agents, which may discourage such actions against us and our directors, officers, employees, and agents.

Nevada revised statutes permit us to make this

selection in our Bylaws, and, while there is no New York case law addressing the enforceability of this type of provision, New York courts

have on prior occasion found persuasive authority in Delaware case law in favor of the enforceability of forum selection clauses in the

absence of statutory or case law specifically addressing an issue of corporate law.

However, if a court were to find the choice-of-forum

provision in our Bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings,

we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business,

financial condition, or results of operations.

Nevada law contains provisions that could

discourage, delay or prevent a change in control of our company, prevent attempts to replace or remove current management and reduce the

market price of our stock.

Certain provisions of Nevada law described

below may make us a less attractive candidate for acquisition, which may adversely impact the value of the shares of our capital stock

held by our stockholders.

We have not opted out of these provisions in our Bylaws, as permitted under the Nevada Revised Statutes.

Nevada Revised Statutes Sections 78.411 through

78.444 (the “Nevada Combinations Statute”) generally prohibit “combinations” including mergers, consolidations,

sales and leases of assets, issuances of securities and similar transactions by a Nevada corporation having a requisite number of stockholders

of record (of which we are one) with any person who beneficially owns (or any affiliate or associate of the corporation who within the

previous two years owned), directly or indirectly, 10% or more of the voting power of the outstanding voting shares of the corporation

(an “interested stockholder”), within two years after such person first became an interested stockholder unless (i) the board

of directors of the corporation approved the combination or transaction by which the person first became an interested stockholder before

the person first became an interested stockholder or (ii) the board of directors of the corporation has approved the combination in question

and, at or after that time, such combination is approved at an annual or special meeting of the stockholders of the target corporation,

and not by written consent, by the affirmative vote of holders of stock representing at least 60% of the outstanding voting power of the

target corporation not beneficially owned by the interested stockholder or the affiliates or associates of the interested stockholder.

Two years after the date the person first became

an interested stockholder, the Nevada Combinations Statute prohibits any combination with that interested stockholder unless (i) the board

of directors of the corporation approved the combination or transaction by which the person first became an interested stockholder before

the person first became an interested stockholder or (ii) such combination is approved by a majority of the outstanding voting power of

the corporation not beneficially owned by the interested stockholder or any affiliate or associate of the interested stockholder.

Nevada Combinations Statute does not apply to combinations with an interested stockholder after the expiration of four years from when

the person first became an interested stockholder.

Because we do not currently intend to

pay any cash dividends on our common stock, our stockholders will not be able to receive a return on their shares unless they sell them.

We currently intend to retain any future earnings

to finance the development and expansion of our business.

We do not anticipate paying any cash dividends on our common stock in the foreseeable

Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them.

There is no assurance that stockholders will be able to sell shares when desired.

The volatility in the trading price of our common stock and the large proportion held by retail investors may make our common stock a target of online campaigns to artificially influence its trading price, which may trigger markets or trading platforms to impose restrictions on the trading of our securities;

as a result, investors in our common stock may incur substantial losses.

The trading price of our common stock has experienced, and may continue to experience, significant volatility and trading volume.

Further, a significant majority of the issued and outstanding shares of our common stock are held by individual, non-institutional investors (i.e.

“retail investors”).

We are aware of reports surrounding social media sites and online forums influencing the trading price of certain publicly traded securities.

Some of these reports indicated that the organizers of these campaigns selected specific securities as a result of, among other factors, significant volatility in their trading price and volume, as well as a perception that their trading prices were undervalued or subject to significant short positions.

We are also aware of reports that a number of significant trading platforms catering to retail investors allegedly halted or otherwise restricted trading of a number of securities on their platforms following these reports.

As a significant proportion of the outstanding shares of our common stock are held by retail investors who may make use of these trading platforms, if these trading platforms take similar action with respect to shares of our common stock, those of our investors who make use of these platforms may be unable to transact in our securities in response to changes in the trading price of shares of our common stock.

As a result, we cannot guarantee that we have not become subject to such a campaign or that we will not become subject to such a campaign in the future.

If we do become subject to such a campaign, we can give no assurances that we will be able to respond to the campaign and the trading price of our common stock may, therefore, not be tied to our business or industry.

As a result, the trading price of our common stock may suffer and investors in our securities may experience may lose part or all of their investment.

Because there has been limited precedent set for financial accounting of bitcoin and other cryptocurrency assets, the determination that we have made for how to account for cryptocurrency assets transactions may be subject to change.

Because there has been limited precedent set for the financial accounting of cryptocurrencies and related revenue recognition and no official guidance has yet been provided by the FASB or the SEC, it is unclear how companies may in the future be required to account for cryptocurrency transactions and assets and related revenue recognition.

A change in regulatory or financial accounting standards could result in the necessity to change our accounting methods and restate our financial statements.

Such a restatement could adversely affect the accounting for our newly mined cryptocurrency rewards and more generally negatively impact our business, prospects, financial condition and results of operations.

Such circumstances would have a material adverse effect on our ability to continue as a going concern or to pursue our new strategy at all, which would have a material adverse effect on our business, prospects or operations as well as and potentially the value of any cryptocurrencies we hold or expects to acquire for our own account and harm investors.

Our loss of any of our management team, our inability to execute an effective succession plan, or our inability to attract and retain qualified personnel, could adversely affect our business.

Our success and future growth will depend to a significant degree on the skills and services of our management, including our Chief Executive Officer and Chief Financial Officer.

We will need to continue to grow our small executive management to alleviate pressure on our existing team including with regard to meeting our public company reporting requirements, and to continue to develop our business.

If our management, including any new hires that we may make, fails to work together effectively and to execute our plans and strategies on a timely basis, our business could be harmed.

Furthermore, if we fail to execute an effective contingency or succession plan with the loss of any member of management, the loss of such management personnel may significantly disrupt our business.

The loss of key members of management could inhibit our growth prospects.

Our future success also depends in large part on our ability to attract, retain and motivate key management and operating personnel.

As we continue to develop and expand our operations, we may require personnel with different skills and experiences, and who have a sound understanding of our business and the cryptocurrency industry.

The market for highly qualified personnel in this industry is very competitive and we may be unable to attract such personnel.

If we are unable to attract such personnel, our business could be harmed.

We, and some of our current officers and directors, have been named as parties to various lawsuits arising out of, or related to, allegedly false and misleading statements made in prior securities filings, and those lawsuits could adversely affect us, require significant management time and attention, result in significant legal expenses or damages, and cause our business, financial condition, results of operations and cash flows to suffer.

A number of securities class action complaints and a stockholder derivative action have been filed against us and certain of our current officers and directors, as described more fully in Item 3, “Legal Proceedings”.

Stockholders have filed three class action complaints against us in three states, accusing us of violations of the federal securities laws based on purported material misrepresentations or omissions allegedly made by the Company.

Each class action complaint seeks unspecified money damages and other relief on behalf of a putative class of persons who purchased or otherwise acquired our common stock between November 13, 2017 and February 15, 2018.

The stockholder derivative case alleges similar disclosure violations and seeks unspecified monetary damages and corporate governance reforms.

If these matters cannot be resolved expeditiously, management’s attention may be diverted to this matter and there can be no assurance that the litigation would be settled.

If the current litigation proceeds or if additional claims are filed, the legal and other costs associated with the defense of these actions and their ultimate outcomes could have a material adverse effect on our business, financial condition and results of operations.

While we expect insurance to cover many of the costs associated with defending such litigation, including claims for indemnification made by our existing and former management team and members of our Board of Directors, insurance coverage may be insufficient and could require a diversion of our resources.

There also may be adverse publicity associated with litigation that could negatively affect customer perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable.

We incur significant costs and demands upon our management and accounting and finance resources as a result of complying with the laws and regulations affecting public companies;

if we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and our reputation .

As a public reporting company, we are required to, among other things, maintain a system of effective internal control over financial reporting.

Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be re-evaluated frequently.

Substantial work will continue to be required to further implement, document, assess, test and remediate our system of internal controls.

If our internal control over financial reporting is not effective, we may be unable to issue our financial statements in a timely manner, we may be unable to obtain the required audit or review of our financial statements by our independent registered public accounting firm in a timely manner or we may be otherwise unable to comply with the periodic reporting requirements of the SEC, and, as a result, our common stock listing on the Nasdaq could be suspended or terminated and our stock price could materially suffer.

In addition, we or members of our management could be subject to investigation and sanction by the SEC and other regulatory authorities and to stockholder lawsuits, which could impose significant additional costs on us and divert management attention.

We have identified material weaknesses in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our financial statements or cause us to fail to meet our periodic reporting obligations.

We are required to comply with certain provisions of Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”).

Section 404 requires that we document and test our internal control over financial reporting and issue management’s assessment of our internal control over financial reporting.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020.

In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control —

Integrated Framework.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

Based on our assessment, as of December 31, 2020, we concluded that our internal control over financial reporting contained material weaknesses.

To remediate these material weaknesses, our management has been implementing and continues to implement measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are designed, implemented, and operating effectively.

We believe that these actions will remediate the material weakness.

The weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and our management has concluded, through testing, that these controls are operating effectively.

If we fail to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, the accuracy and timeliness of the filing of our annual and quarterly reports may be materially adversely affected and could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.

In addition, a material weakness in the effectiveness of our internal control over financial reporting could result in an increased chance of fraud and the loss of customers, reduce our ability to obtain financing and require additional expenditures to comply with these requirements, each of which could have a material adverse effect on our business, results of operations and financial condition.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position could be harmed.

We plan to rely upon trademarks, copyright and trade secret protection (and possibly also patents in the future), as well as non-disclosure agreements and invention assignment agreements with employees, consultants and third parties, to protect all confidential and proprietary information.

Significant elements of our intended products and services are based on unpatented trade secrets and know-how that are not publicly disclosed.

In addition to contractual measures, we try to protect the confidential nature of our proprietary information using physical and technological security measures.

Such measures may not, for example, in the case of misappropriation of a trade secret by an employee or third party with authorized access, provide adequate protection for our proprietary information.

The security measures may not prevent an employee or consultant from misappropriating our trade secrets and providing them to a competitor, and the recourse we take against such misconduct may not provide an adequate remedy to protect our interests fully.

Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive and time consuming, and the outcome is unpredictable.

In addition, trade secrets may be independently developed by others in a manner that could prevent legal recourse by us.

If any of our confidential or proprietary information, such as our trade secrets, were to be disclosed or misappropriated, or if any such information was independently developed by a competitor, our competitive position could be harmed.

We may infringe the intellectual property rights of others, which may prevent or delay our product development efforts and stop us from commercializing or increase the costs of commercializing the intended products and services.

Our commercial success depends significantly on our ability to operate without infringing the patents and other intellectual property rights of third parties however, due to the open-source and constantly evolving nature of our business, we may not always be able to determine that we are using or accessing protected information or software.

For example, there could be issued patents of which we are not aware that our products infringe.

There also could be patents that we believe we do not infringe, but that we may ultimately be found to infringe.

Moreover, patent applications are in some cases maintained in secrecy until patents are issued.

The publication of discoveries in scientific or patent literature frequently occurs substantially later than the date on which the underlying discoveries were made and patent applications were filed.

Because patents can take many years to issue, there may be currently pending applications of which we are unaware that may later result in issued patents that our products infringe.

Accordingly, we could expend significant resources defending against patent infringement and other intellectual property right claims;

which could require us to divert resources away from operations.

Any damages we are required to pay or injunctions against our continued use of such intellectual property in resolution of such claims may cause a material adverse effect to our business and operations, which could adversely affect the trading price of our securities and harm our investors.

Our insurance may by inadequate to cover existing and future claims against the Company and our ability to pay for such claims may be limited, which may adversely affect our business.

As discussed under Item 3, “Legal Proceedings,”

hereof, we currently face several stockholder derivative cases and we may face additional claims in the future, all of which may result in claims for indemnification by our officers and directors (both present and past) named in such claims.

If our existing insurance policies expire or are otherwise inadequate to cover such liabilities and claims for indemnification, we may be required to pay for such liabilities directly, which could negatively affect our liquidity.

To the extent we are required to pay for such liabilities directly, our available cash reserves will be affected, which may affect our ability to respond to market conditions and to pay for other emergent expenses, which could negatively affect the results of our operations and our business.

We incur significant costs and devote substantial management time as a result of operating as a public company and additional resources would be required if we lose our “smaller reporting company”

and “non-accelerated filer”

As a public company, we operate in an increasingly demanding regulatory environment, which requires us to comply with applicable provisions of the Sarbanes-Oxley Act of 2002 and the related rules and regulations of the SEC, expanded disclosure requirements, accelerated reporting requirements and more complex accounting rules.

Company responsibilities required by the Sarbanes-Oxley Act include establishing corporate oversight and adequate internal control over financial reporting and disclosure controls and procedures.

Effective internal controls are necessary for us to produce reliable financial reports and are important to help prevent financial fraud.

However, we are currently a “smaller reporting company”

and “non-accelerated filer”

under the current SEC rules.

As such we take advantage of exemptions from certain reporting requirements.

We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions.

However, for as long as we remain a “smaller reporting company”

and “non-accelerated filer”, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that do not qualify under these categories including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and other exemptions as permitted under the Exchange Act.

We intend to take advantage of these reporting exemptions as long as we remain eligible to do so under the related rules.

We will qualify as a smaller reporting company if, as of the last day of the second quarter of our fiscal year (June 30 th ):

(1) our public float is less than $250 million;

or (2) we have less than $100 million in annual revenues and public float of less than $700 million.

Under applicable Exchange Act rules, we are required to calculate our public float for purpose of determining our filer status each year as of the end of the year based on the trading price of our common stock, as reported on the Nasdaq Capital Market (or such other market as may be applicable at that time) as of June 30 th of each year.

Based on our public float as of the date of this Annual Report on Form 10-K, we believe we may lose our smaller reporting company status, as well as our non-accelerated filer status, effective for our 2021 annual report.

Should we lose these statuses, we may no longer be exempt from these requirements and expect that compliance with the requirements will increase our legal and financial compliance costs and will make some activities more time consuming and costly.

In addition, our management and other personnel will need to divert attention from operational and other business matters to devote substantial time to these public company requirements.

In particular, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404(b) of the Sarbanes-Oxley Act.

no assurance that stockholders will be able to sell shares when desired.

We, and some of our current officers

and directors, have been named as parties to various lawsuits arising out of, or related to, allegedly false and misleading statements

made in prior securities filings, and those lawsuits could adversely affect us, require significant management time and attention, result

in significant legal expenses or damages, and cause our business, financial condition, results of operations and cash flows to suffer.

A number of securities class action complaints

and a stockholder derivative action have been filed against us and certain of our current officers and directors, as described more fully

in Item 3, “Legal Proceedings”.

Stockholders have filed three class action complaints against us in three states, accusing

us of violations of the federal securities laws based on purported material misrepresentations or omissions allegedly made by the Company.

Each class action complaint seeks unspecified money damages and other relief on behalf of a putative class of persons who purchased or

otherwise acquired our common stock between November 13, 2017 and February 15, 2018.

The stockholder derivative case alleges similar disclosure

violations and seeks unspecified monetary damages and corporate governance reforms.

If these matters cannot be resolved expeditiously,

management’s attention may be diverted to this matter and there can be no assurance that the litigation would be settled.

current litigation proceeds or if additional claims are filed, the legal and other costs associated with the defense of these actions

and their ultimate outcomes could have a material adverse effect on our business, financial condition and results of operations.

we expect insurance to cover many of the costs associated with defending such litigation, including claims for indemnification made by

our existing and former management team and members of our Board of Directors, insurance coverage may be insufficient and could require

a diversion of our resources.

There also may be adverse publicity associated with litigation that could negatively affect customer perception

of our business, regardless of whether the allegations are valid or whether we are ultimately found liable.

Because there has been limited precedent

set for financial accounting of Bitcoin and other cryptocurrency assets, the determination that we have made for how to account for cryptocurrency

assets transactions may be subject to change.

Because there has been limited precedent set

for the financial accounting of cryptocurrencies and related revenue recognition and no official guidance has yet been provided by the

FASB or the SEC, it is unclear how companies may in the future be required to account for cryptocurrency transactions and assets and related

revenue recognition.

A change in regulatory or financial accounting standards could result in the necessity to change our accounting methods

and restate our financial statements.

Such a restatement could adversely affect the accounting for our newly mined cryptocurrency rewards

and more generally negatively impact our business, prospects, financial condition and results of operations.

Such circumstances would

have a material adverse effect on our ability to continue as a going concern or to pursue our new strategy at all, which would have a

material adverse effect on our business, prospects or operations as well as and potentially the value of any cryptocurrencies we hold

or expects to acquire for our own account and harm investors.

We have identified material weaknesses

in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain

an effective system of internal controls, which may result in material misstatements of our financial statements or cause us to fail to

meet our periodic reporting obligations.

We are required to comply with certain provisions

of Section 404 of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley Act”).

Section 404 requires that we document and test our

internal control over financial reporting and issue management’s assessment of our internal control over financial reporting.

assessed the effectiveness of our internal control over financial reporting as of December 31, 2021.

In making this assessment, we used

the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that

there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or

detected on a timely basis.

Based on our assessment, as of December 31, 2021, we concluded that our internal control over financial reporting

contained material weaknesses.

To remediate these material weaknesses, our management has been implementing and continues to implement

measures designed to ensure that control deficiencies contributing to the material weakness are remediated, such that these controls are

designed, implemented, and operating effectively.

We believe that these actions will remediate

the material weakness.

However, the remediation cannot be deemed successful until the applicable controls operate for a sufficient period

of time and our management has concluded, through testing, that these controls are operating effectively.

If we fail to comply with the

requirements of Section 404 of the Sarbanes-Oxley Act, the accuracy and timeliness of the filing of our annual and quarterly reports may

be materially adversely affected and could cause investors to lose confidence in our reported financial information, which could have

a negative effect on the trading price of our common stock.

In addition, a material weakness in the effectiveness of our internal control

over financial reporting could result in an increased chance of fraud and the loss of customers, reduce our ability to obtain financing

and require additional expenditures to comply with these requirements, each of which could have a material adverse effect on our business,

results of operations and financial condition.

UNRESOLVED STAFF COMMENTS.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business