10-Q 1 riot-20240331x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

 TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from:         to:        

Commission file number: 001-33675

RIOT PLATFORMS, INC.

(Exact name of registrant as specified in its charter)

Nevada

    

84-1553387

(State or other jurisdiction of Incorporation or organization)

(I.R.S. Employer Identification No.)

3855 Ambrosia Street, Suite 301, Castle Rock, CO

    

80109

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code (303) 794-2000

Securities registered under Section 12(b) of the Securities Exchange Act:

Securities registered under Section 12(b) of the Securities Exchange Act:

Common Stock, no par value per share

    

RIOT

    

The Nasdaq Capital Market

(Title of class)

(Trading Symbol)

(Name of each exchange on which registered)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes      No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes     No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

   

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes     No  

As of April 29, 2024, the registrant had 288,784,946 shares of its common stock, no par value per share, outstanding, which was the only class of its registered securities outstanding as of that date.

RIOT PLATFORMS, INC.

Page

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements (Unaudited)

1

Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

1

Condensed Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023

2

Condensed Consolidated Statements of Comprehensive Income (Loss) for the three months ended March 31, 2024 and 2023

3

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2024 and 2023

4

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

5

Notes to Condensed Consolidated Financial Statements

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

31

Item 4.

Controls and Procedures

32

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

33

Item 5.

Other Information

33

Item 6.

Exhibits

34

Signatures

36

i

RIOT PLATFORMS, INC.

As used in this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024 (this “Quarterly Report”), the terms “we,” “us,” “our,” the “Company,” the “Registrant,” “Riot Platforms,” and “Riot” mean Riot Platforms, Inc., a Nevada corporation, and its consolidated subsidiaries, unless otherwise indicated.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 (the “PSLRA”). The Company may also make forward-looking statements in the other reports and documents filed with the United States Securities and Exchange Commission (the “SEC”), including those documents and filings incorporated by reference herein. All statements in this Quarterly Report and the documents incorporated by reference herein other than statements of historical fact are “forward-looking statements” within the scope of this cautionary note, including, but not limited to, statements concerning: our plans, strategies and objectives for future operations; new equipment, systems, technologies, services or developments, such as our development and implementation of industrial-scale immersion-cooled Bitcoin mining hardware and our one-gigawatt (“GW”) Bitcoin mining facility outside of Corsicana, Texas; future economic conditions, performance, or outlooks; future political conditions; the outcome of contingencies; potential acquisitions or divestitures; the number and value of Bitcoin rewards and transaction fees we earn from our Bitcoin mining operations; future self-mining hash rate capacity; timing of receipt and deployment of miners; expected cash flows or capital expenditures; our beliefs or expectations; activities, events or developments that we intend, expect, project, believe, or anticipate will or may occur in the future; and assumptions underlying or based upon any of the foregoing. Forward-looking statements may be identified by their use of forward-looking terminology, such as “believes,” “expects,” “may,” “should,” “would,” “will,” “intends,” “plans,” “estimates,” “anticipates,” “projects” and similar words or expressions; however, forward-looking statements may be made without such terminology.

Such forward-looking statements reflect our management’s opinions, expectations, beliefs, and assumptions based on information currently available to management regarding future events, which may not materialize or prove to be correct due to certain risks and uncertainties, including those risks which the Company’s management has identified and believes to be material and those which management has not identified, or which management does not believe to be material. Such risk factors are described in greater detail under the heading “Risk Factors” in Part II, Item 1A of this Quarterly Report and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Annual Report”), as well as under similar headings in subsequent filings we may make with the SEC. It is not possible for our management to predict all risks, the potential impact of all factors on our business, or the extent to which any factor, or combination of factors, may cause our actual results to differ, perhaps materially, from those contained in, or implied by, any forward-looking statements we may make. You should not place undue reliance on these forward-looking statements, which reflect our management’s opinions only as of the date the statements are made and are not guarantees of future performance or actual results. Should any risks or uncertainties develop into actual events, these developments could have a material adverse effect on our business, financial condition, results of operations, stockholder’s equity, and cash flows, and the market price of our securities may decline, as a result.

Accordingly, you should read this Quarterly Report, and the other filings we make with the SEC, completely and with the understanding that our future results may be materially different from our historical results and from the results expressed in, or implied by, the forward-looking statements contained in this Quarterly Report and the documents incorporated by reference herein. The forward-looking statements contained in this Quarterly Report and the documents incorporated by reference herein speak only as of the date they are made and, unless otherwise required by applicable securities laws, we disclaim any intention or obligation to update or revise any such forward-looking statements, whether as a result of new information, future events or otherwise. All forward-looking statements attributable to us are expressly qualified by the foregoing cautionary statements and are made in reliance of the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the PSLRA.

ii

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Riot Platforms, Inc.

Condensed Consolidated Balance Sheets

(Unaudited; in thousands, except for share and per share amounts)

March 31, 2024

December 31, 2023

ASSETS

    

  

    

  

Current assets

 

  

 

  

Cash and cash equivalents

$

688,497

$

597,169

Accounts receivable, net

 

14,185

 

24,706

Contract assets, including retainage of $2,517 and $3,166, respectively

 

13,217

 

15,359

Prepaid expenses and other current assets

 

33,589

 

29,107

Bitcoin

 

 

311,178

Derivative asset, current portion

35,609

30,781

Future power credits, current portion

 

 

271

Total current assets

 

785,097

 

1,008,571

Property and equipment, net

 

821,685

 

704,194

Bitcoin

605,595

Deposits

 

261,519

 

215,009

Finite-lived intangible assets, net

 

14,214

 

15,697

Derivative asset, less current portion

88,841

73,437

Operating lease right-of-use assets

21,723

20,413

Future power credits, less current portion

 

589

 

638

Other long-term assets

 

11,980

 

13,121

Total assets

$

2,611,243

$

2,051,080

 

  

 

  

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

Current liabilities

 

  

 

  

Accounts payable

$

13,504

$

23,157

Contract liabilities

 

3,732

 

4,073

Accrued expenses

44,067

62,628

Deferred gain on acquisition post-close dispute settlement

26,007

26,007

Deferred revenue, current portion

 

2,458

 

2,458

Contingent consideration liability - future power credits, current portion

 

 

271

Operating lease liability, current portion

 

2,879

 

2,421

Total current liabilities

 

92,647

 

121,015

 

  

 

  

Deferred revenue, less current portion

 

15,262

 

15,801

Operating lease liability, less current portion

 

20,767

 

18,924

Contingent consideration liability - future power credits, less current portion

 

589

 

638

Other long-term liabilities

 

6,574

 

6,680

Total liabilities

 

135,839

 

163,058

 

  

 

  

Commitments and contingencies - Note 16

 

  

 

  

 

  

 

  

Stockholders’ equity

 

  

 

  

Preferred stock, no par value, 15,000,000 shares authorized:

 

  

 

  

2% Series A Convertible Preferred stock, 2,000,000 shares authorized; no shares issued and outstanding as of March 31, 2024 and December 31, 2023

 

 

0% Series B Convertible Preferred stock, 1,750,001 shares authorized; no shares issued and outstanding as of March 31, 2024 and December 31, 2023

 

 

Common stock, no par value; 340,000,000 shares authorized; 267,991,956 and 230,836,624 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

 

3,063,438

 

2,687,692

Accumulated deficit

 

(588,043)

 

(799,820)

Accumulated other comprehensive income (loss), net

9

150

Total stockholders’ equity

 

2,475,404

 

1,888,022

Total liabilities and stockholders’ equity

$

2,611,243

$

2,051,080

See accompanying Notes to Condensed Consolidated Financial Statements.

1

Riot Platforms, Inc.

Condensed Consolidated Statements of Operations

(Unaudited; in thousands, except for share and per share amounts)

Three Months Ended

March 31, 

    

2024

    

2023

Revenue:

  

  

Bitcoin Mining

$

74,597

$

48,023

Data Center Hosting

 

 

9,042

Engineering

 

4,675

 

16,147

Other revenue

 

24

 

24

Total revenue

 

79,296

 

73,236

 

  

 

  

Costs and expenses:

 

  

 

  

Cost of revenue:

Bitcoin Mining

 

41,084

 

21,899

Data Center Hosting

 

 

25,660

Engineering

 

6,018

 

15,563

Selling, general, and administrative

 

57,652

 

12,675

Depreciation and amortization

 

32,343

 

59,340

Change in fair value of Bitcoin

(234,080)

(83,504)

Change in fair value of derivative asset

 

(20,232)

 

5,778

Power curtailment credits

(5,131)

(3,075)

Casualty-related charges (recoveries), net

(2,300)

1,526

Total costs and expenses

 

(124,646)

 

55,862

Operating income (loss)

 

203,942

 

17,374

 

  

 

  

Other income (expense):

 

  

 

  

Interest income (expense)

7,805

(3,830)

Other income (expense)

8

Total other income (expense)

 

7,813

 

(3,830)

 

  

 

  

Net income (loss) before taxes

 

211,755

 

13,544

 

  

 

  

Current income tax benefit (expense)

 

22

 

(76)

Deferred income tax benefit (expense)

 

 

5,045

Total income tax benefit (expense)

 

22

 

4,969

 

  

 

  

Net income (loss)

$

211,777

$

18,513

Basic net income (loss) per share

$

0.82

$

0.11

Diluted net income (loss) per share

$

0.81

$

0.11

Basic weighted average number of shares outstanding

259,506,242

167,342,500

Diluted weighted average number of shares outstanding

262,358,332

172,114,333

See accompanying Notes to Condensed Consolidated Financial Statements.

2

Riot Platforms, Inc.

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited; in thousands)

Three Months Ended

March 31, 

2024

2023

Net income (loss)

$

211,777

$

18,513

Other comprehensive income (loss):

Unrealized holding gains (losses) on convertible note

(141)

Comprehensive income (loss)

$

211,636

$

18,513

See accompanying Notes to Condensed Consolidated Financial Statements.

3

Riot Platforms, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited; in thousands, except for share amounts)

Three Months Ended March 31, 2024

    

    

    

    

Accumulated other

    

Total

Common Stock

Accumulated

comprehensive

stockholders'

Shares

Amount

deficit

income (loss)

equity

Balance as of January 1, 2024

230,836,624

$

2,687,692

$

(799,820)

$

150

$

1,888,022

Issuance of restricted stock, net of forfeitures and delivery of common stock underlying stock awards, net of tax withholding

 

10,986,032

 

(1,998)

 

 

(1,998)

Issuance of common stock/At-the-market offering, net of offering costs

 

26,169,300

 

345,744

 

 

345,744

Stock-based compensation

 

 

32,000

 

 

32,000

Net income (loss)

 

 

 

211,777

 

211,777

Other comprehensive income (loss)

(141)

Balance as of March 31, 2024

 

267,991,956

$

3,063,438

$

(588,043)

$

9

$

2,475,404

Three Months Ended March 31, 2023

Total

Common Stock

Accumulated

stockholders'

Shares

Amount

deficit

equity

Balance as of January 1, 2023

 

167,751,112

$

1,907,784

$

(756,342)

$

1,151,442

Issuance of restricted stock, net of forfeitures and delivery of common stock underlying stock awards, net of tax withholding

 

(784,346)

 

(1,313)

 

 

(1,313)

Stock-based compensation

 

 

(2,296)

 

 

(2,296)

Net income (loss)

 

 

 

18,513

 

18,513

Balance as of March 31, 2023

 

166,966,766

$

1,904,175

$

(737,829)

$

1,166,346

See accompanying Notes to Condensed Consolidated Financial Statements.

4

Riot Platforms, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited; in thousands)

Three Months Ended

March 31, 

2024

    

2023

Operating activities

    

  

  

    

Net income (loss)

$

211,777

$

18,513

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

 

  

 

  

Stock-based compensation

 

32,000

 

(2,296)

Depreciation and amortization

 

32,343

 

59,340

Amortization of license fee revenue

 

(24)

 

(24)

Noncash lease expense

 

808

 

586

Deferred income tax expense (benefit)

 

 

(5,045)

Change in fair value of Bitcoin

(234,080)

(83,504)

Change in fair value of derivative asset

 

(20,232)

 

5,778

Casualty-related charges

1,526

Revenue recognized from Bitcoin mined

(71,396)

(48,023)

Proceeds from sale of Bitcoin

9,518

44,437

Changes in assets and liabilities:

 

  

 

  

(Increase)/decrease in operating assets

1,743

46,961

Increase/(decrease) in operating liabilities

(20,310)

(5,886)

Net cash provided by (used in) operating activities

 

(57,853)

 

32,363

 

  

 

  

Investing activities

 

  

 

  

Deposits on equipment

 

(139,329)

 

Security deposits

(155)

(23,000)

Purchases of property and equipment, including construction in progress

 

(57,309)

 

(50,955)

Casualty-related recoveries

2,300

Patent costs incurred

 

 

(33)

Net cash provided by (used in) investing activities

 

(194,493)

 

(73,988)

 

  

 

  

Financing activities

 

  

 

  

Proceeds from the issuance of common stock / At-the-market offering

 

353,224

 

Offering costs for the issuance of common stock / At-the-market offering

 

(7,480)

 

Proceeds from Credit and Security Facility

880

Repayments of Credit and Security Facility

(72)

(500)

Repurchase of common shares to pay employee withholding taxes

 

(1,998)

 

(1,313)

Net cash provided by (used in) financing activities

 

343,674

 

(933)

 

  

 

  

Net increase (decrease) in cash and cash equivalents

 

91,328

 

(42,558)

Cash and cash equivalents at beginning of period

 

597,169

 

230,328

Cash and cash equivalents at end of period

$

688,497

$

187,770

Supplemental information:

 

  

 

  

Cash paid for interest

$

13

$

Cash paid for taxes

$

$

Non-cash transactions

 

  

 

  

Reclassification of deposits to property and equipment

$

100,812

$

33,273

Construction in progress included in accrued expenses

$

15,981

$

11,850

Bitcoin exchanged for employee compensation

$

1,461

$

459

Right of use assets exchanged for new operating lease liabilities

$

2,118

$

682

The following reconciles cash, cash equivalents, and restricted cash to the amounts presented above:

Cash, cash equivalents, and restricted cash, beginning of the period:

Cash and cash equivalents

$

597,169

$

230,328

Restricted cash

Total cash, cash equivalents, and restricted cash as presented above

$

597,169

$

230,328

Cash, cash equivalents, and restricted cash, end of the period:

Cash and cash equivalents

$

688,497

$

158,272

Restricted cash

29,498

Total cash, cash equivalents, and restricted cash as presented above

$

688,497

$

187,770

See accompanying Notes to Condensed Consolidated Financial Statements.

5

Riot Platforms, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Table of Contents

Note 1. Organization and Basis of Presentation

Organization

Riot Platforms is a vertically integrated Bitcoin mining company principally engaged in enhancing our capabilities to mine Bitcoin in support of the Bitcoin blockchain. The Company’s large-scale Bitcoin mining facility in Rockdale, Texas (the “Rockdale Facility”) currently provides up to 700 megawatts (“MW”) in total developed capacity for Bitcoin mining. The Company is also developing a second large-scale Bitcoin mining facility located in Corsicana, Texas (the “Corsicana Facility”), which, upon completion, is expected to have approximately 1.0 GW of capacity available for Bitcoin mining, with 200 MW of additional electrical capacity available for development, at the Company’s discretion.

Basis of presentation and principles of consolidation

The accompanying unaudited condensed consolidated financial statements (“Condensed Consolidated Financial Statements”) and these notes (these “Notes”) have been prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of management, the Condensed Consolidated Financial Statements reflect all adjustments, consisting of normal and recurring adjustments, considered necessary for a fair presentation of such interim results. Unless otherwise indicated, amounts are stated in thousands of U.S. Dollars except for share, per share, and miner amounts, and Bitcoin quantities, prices, and hash rate.

The results in the Condensed Consolidated Financial Statements and these Notes include required estimates and assumptions of management, and they are not necessarily indicative of results to be expected for the year ending December 31, 2024, or for any future interim period. Further, the Condensed Consolidated Financial Statements and these Notes do not include all the information and notes required by GAAP for a complete presentation of annual financial statements. As such, the Condensed Consolidated Financial Statements and these Notes should be read in conjunction with the consolidated financial statements for the year ended December 31, 2023, and notes thereto, included in the 2023 Annual Report.

As described in Note 18. Segment Information, the Company’s two reportable segments are: Bitcoin Mining and Engineering.

Note 2. Significant Accounting Policies and Recent Accounting Pronouncements

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenue and expenses during the reporting periods. Actual results may differ materially from those estimates. The most significant accounting estimates inherent in the preparation of the Company’s financial statements include: revenue recognition; valuing the derivative asset classified under Level 3 on the fair value hierarchy; determining the useful lives and recoverability of long-lived assets; impairment analysis of fixed assets and finite-lived intangibles; stock-based compensation; and the valuation allowance associated with the Company’s deferred tax assets.

Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation in the Condensed Consolidated Financial Statements and these Notes. The reclassifications did not have a material impact on the Condensed Consolidated Financial Statements and related disclosures. The impact on any prior period disclosures was immaterial.

Significant Accounting Policies

During 2024, Riot made the strategic decision to temporarily cease the sale of all its Bitcoin production and instead, increase its Bitcoin holdings. As a result of its intent to hold its Bitcoin, the Company began classifying its Bitcoin held as a non-current asset on its Condensed Consolidated Balance Sheet as of March 31, 2024. For the three months ended March 31, 2024, all sales of Bitcoin occurred before the strategic decision and, as the Bitcoin was sold nearly immediately after receipt by the Company, the proceeds were recognized within Operating activities on the Condensed Consolidated Statements of Cash Flows.

6

Riot Platforms, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Table of Contents

Effective January 1, 2024, the Company changed the estimated useful life of its miners and mining equipment from 2 years to 3 years. See Note 6. Property and Equipment, for a description of the change and its impact.

Change in Reportable Segments

Previously, the Company operated in three reportable business segments: Bitcoin Mining, Data Center Hosting, and Engineering. Commencing for the three months ended March 31, 2024, the Company’s reportable segments have changed to reflect the termination of its legacy Data Center Hosting business, with Bitcoin Mining and Engineering as the Company’s two remaining reportable business segments. See Note 18. Segment Information for more information.

Except for the changes noted above, see the Company’s 2023 Annual Report for a detailed discussion of the Company’s significant accounting policies.

Recently Issued Accounting Pronouncements

The Company continually assesses new accounting pronouncements to determine their applicability. When it is determined that a new accounting pronouncement affects the Company’s financial reporting, the Company undertakes a study to determine the consequences of such change to its Condensed Consolidated Financial Statements and assures that there are proper controls in place to ascertain that the Company’s Condensed Consolidated Financial Statements properly reflect the change.

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 expands existing income tax disclosures for rate reconciliations by requiring disclosure of certain specific categories and additional reconciling items that meet quantitative thresholds and expands disclosures for income taxes paid by requiring disaggregation by certain jurisdictions. ASU 2023-09 is effective for annual periods beginning after December 15, 2024; early adoption is permitted. The Company does not expect the updated guidance to have a material impact on its disclosures.

In December 2023, the FASB issued ASU 2023-08, Intangibles - Goodwill and Other - Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets (“ASU 2023-08”), which establishes accounting guidance for crypto assets meeting certain criteria. Bitcoin meets these criteria. The amendments require crypto assets meeting the criteria to be recognized at fair value with changes recognized in net income each reporting period. Upon adoption, a cumulative-effect adjustment was made to the opening balance of retained earnings as of the beginning of the annual reporting period of adoption. ASU 2023-08 is effective for fiscal years beginning after December 15, 2024, including interim periods within those fiscal years, with early adoption permitted. The Company elected to early adopt ASU 2023-08 for the year ended December 31, 2023, effective as of January 1, 2023. As a result of the adoption, the Company recorded a cumulative-effect adjustment to its Accumulated deficit balance of approximately $6.0 million as of January 1, 2023, as a result of recognizing its Bitcoin held as of January 1, 2023, at fair value.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 is intended to enhance reportable segment disclosures by requiring disclosures of significant segment expenses regularly provided to the chief operating decision maker (“CODM”), requiring disclosure of the title and position of the CODM and explanation of how the reported measures of segment profit and loss are used by the CODM in assessing segment performance and allocation of resources. ASU 2023-07 is effective for the Company for annual periods beginning after December 31, 2023. The Company does not expect the updated guidance to have a material impact on its disclosures.

Note 3. Revenue from Contracts with Customers

Disaggregated revenue

Revenue disaggregated by reportable segment is presented in Note 18. Segment Information.

Contract balances

Contract assets relate to uncompleted Engineering contracts. As of March 31, 2024, and December 31, 2023, contract assets were $13.2 million and $15.4 million, respectively.

7

Riot Platforms, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Table of Contents

Contract liabilities primarily relate to upfront payments and consideration received from a legacy data center hosting customer and uncompleted Engineering contracts. The following table presents changes in contract liabilities and deferred revenue:

    

Three Months Ended

March 31, 2024

Beginning balance

$

22,332

Revenue recognized

 

(1,593)

Other changes in contract liabilities

713

Ending balance

$

21,452

Remaining performance obligation

The following table presents the estimated future recognition of the Company’s remaining performance obligations, which represent the transaction price of current contracts for work to be performed.

Remainder of

2024

    

2025

    

2026

    

2027

2028

    

Thereafter

    

Total

Legacy data center hosting contract

 

$

1,771

 

$

2,362

 

$

2,362

 

$

2,362

$

2,362

 

$

6,040

 

$

17,259

Engineering

 

3,732

 

 

 

 

 

3,732

Other

73

97

97

97

97

461

Total contract liabilities

$

5,576

$

2,459

$

2,459

$

2,459

$

2,459

$

6,040

$

21,452

Note 4. Bitcoin

The following table presents information about the Company’s Bitcoin holdings:

    

Quantity

    

Amounts

Balance as of January 1, 2024

7,362

$

311,178

Revenue recognized from Bitcoin mined

1,364

71,396

Change in Bitcoin receivable

7

(80)

Proceeds from sale of Bitcoin

(212)

(9,518)

Exchange of Bitcoin for employee compensation

(31)

(1,461)

Change in fair value of Bitcoin

234,080

Balance as of March 31, 2024

8,490

$

605,595

Carrying value of Bitcoin as of March 31, 2024 (a)

$

267,448

Realized gains on the sale of Bitcoin for the three months ended March 31, 2024 (b)

$

7,182

Balance as of January 1, 2023

6,974

$

115,415

Revenue recognized from Bitcoin mined

2,115

48,023

Proceeds from sale of Bitcoin

(1,975)

(44,437)

Exchange of Bitcoin for employee compensation

(20)

(459)

Change in fair value of Bitcoin

83,504

Balance as of March 31, 2023

7,094

$

202,046

Carrying value of Bitcoin as of March 31, 2023 (a)

$

125,699

Realized gains on the sale of Bitcoin for the three months ended March 31, 2023 (b)

$

13,893

(a)The carrying value of Bitcoin is equal to the post-impairment value of all Bitcoin held as of the adoption of ASU 2023-08 on January 1, 2023, and, for Bitcoin produced subsequent to the adoption of ASU 2023-08, the initial value of the Bitcoin as determined for revenue recognition purposes.
(b)Bitcoin is sold on a first in, first out (FIFO) basis. During the three months ended March 31, 2024 and 2023, gains were recognized on all sales of Bitcoin and are included in Change in fair value of Bitcoin on the Condensed Consolidated

8

Riot Platforms, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Table of Contents

Statements of Operations.  

All additions of Bitcoin were the result of Bitcoin generated by the Company’s Bitcoin Mining operations (see Note 3. Revenue from Contracts with Customers). All dispositions of Bitcoin were the result of sales on the open market to fund Company operations and for compensation for certain employees.

Note 5. Investment

Convertible note

During the year ended December 31, 2023, the Company invested in a $4.5 million convertible note at face value. The convertible note has a three-year term and earns interest at a rate of 12% per annum, which may be paid in cash or in-kind, and converts into equity of the issuer of the convertible note at the end of the three-year term.

The fair value measurement of the convertible note is based on significant inputs not observable in the market and thus represents a Level 3 measurement on the fair value hierarchy. The significant assumptions used to estimate fair value of the convertible note as of March 31, 2024 included a discount rate of 14.1%, which reflected the issuance date spread premium over the selected yield for the remaining time to maturity.

The following table presents information about the convertible note:

Fair value as of December 31, 2023

 

$

4,709

Accrued interest

 

 

135

Amortized costs basis

 

 

4,844

Unrealized holding gains (losses) in accumulated other comprehensive income

(141)

Fair value as of March 31, 2024

 

$

4,703

Note 6. Property and Equipment

The following table presents the Company’s property and equipment:

    

March 31, 

December 31, 

    

2024

    

2023

Buildings and building improvements

$

358,201

$

348,865

Land rights and land improvements

 

10,320

 

10,320

Miners and mining equipment

 

597,542

 

496,230

Machinery and facility equipment

39,992

39,144

Office and computer equipment

 

2,431

 

2,108

Construction in progress

 

203,503

 

166,970

Total cost of property and equipment

 

1,211,989

 

1,063,637

Less accumulated depreciation

 

(390,304)

 

(359,443)

Property and equipment, net

$

821,685

$

704,194

The Company did not incur any impairment charges for its property and equipment during the three months ended March 31, 2024 and 2023.

During the three months ended March 31, 2024 and 2023, depreciation expense related to property and equipment totaled $30.9 million and $57.9 million, respectively.

Miners and mining equipment

As of March 31, 2024, the Company had a total deployed hash rate capacity of 12.4 EH/s, all in its Bitcoin Mining operation at the Rockdale Facility.

During 2023, the Company entered into a long-term master purchase and sales agreement, dated as of June 23, 2023, as amended, (the “Master Agreement”) to acquire miners from MicroBT Electronics Technology Co., LTD, through its manufacturing affiliate,

9

Riot Platforms, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Table of Contents

SuperAcme Technology (Hong Kong) Limited (collectively “MicroBT”). In 2023, we executed purchase orders with MicroBT to acquire U.S.-manufactured miners with a total hash rate of 25.6 EH/s, for a total purchase price of approximately $453.4 million, subject to downward adjustment, as provided under the Master Agreement. Delivery of these miners to the Corsicana Facility, where they will be deployed in immersion cooling systems, began in 2023, and all miners under these purchase orders are expected to be received and deployed by mid-2025. The Master Agreement also provides the Company with an option to purchase additional miners with a total hash rate of approximately 75 EH/s, on the same terms as the initial order.

During the three months ended March 31, 2024, the Company entered into an additional purchase order with MicroBT under the Master Agreement to acquire 31,500 air-cooled miners with a total hash rate of 5.9 EH/s for a total purchase price of approximately $96.7 million. This purchase order is in addition to existing purchase options under the Master Agreement. Delivery of these miners is expected to occur in the second quarter of 2024, for deployment at the Rockdale Facility. Approximately 17,000 of these miners are expected to replace underperforming miners currently installed at the Rockdale Facility, with the remaining 14,500 miners expected to be deployed in available capacity at the facility.

Effective January 1, 2024, as a result of new information about the actual lives of Bitcoin miners, the Company determined the estimated useful life of its Bitcoin miners will be increased from two years to three years. In making this determination, the Company took into consideration its first-hand experience of miners remaining in service beyond a two-year period, as well as its increased use of immersion-based mining, which the Company anticipates will extend the useful life of miners, due to improved heat removal and reduced exposure to particulates, as compared to traditional air-cooled mining. For the three months ended March 31, 2024, the effect of this change in estimate was a reduction in depreciation expense and an increase in net income of approximately $27.1 million, and an increase in basic and diluted earnings per share of $0.10.

Casualty-related charges (recoveries), net

In December 2022, the Rockdale Facility was damaged during severe winter storms in Texas. As of March 31, 2024, the Company estimated that total damages of $10.3 million had been incurred. During the three months ended March 31, 2024, the Company received net insurance recoveries of $2.3 million, in addition to the $7.5 million recovered during the year ended December 31, 2023. Recoveries are recognized when they are probable of being received.

Construction in progress

In 2022, the Company initiated development of the Corsicana Facility to expand its Bitcoin Mining capabilities, on a 265-acre site in Navarro County, Texas, located near the Navarro Switch. Once complete, the Company expects the Corsicana Facility to have 1.0 GW of developed capacity for its Bitcoin Mining operations, with 200 MW of additional capacity available for development, at the Company’s discretion.

The initial phase of development of the Corsicana Facility involves the construction of 400 MW of immersion-cooled Bitcoin Mining infrastructure, including a high-voltage power substation and electrical and water transmission facilities to supply power and water to the facility. Operations of this initial phase of the development commenced in April 2024, following energization of the substation.

During the year ended December 31, 2023, the Company entered into a purchase agreement to acquire immersion cooling systems for use in the first 200 MW Bitcoin mining data center facilities developed at the Corsicana Facility. Delivery and installation of these immersion cooling systems commenced in the first quarter of 2024, and is anticipated to be completed in the second quarter of 2024. The purchase agreement also provides the Company an option to purchase up to an additional 400 MW of immersion cooling systems from the same manufacturer, on the same terms as the initial order, through December 31, 2025.

During the three months ended March 31, 2024, the Company entered into a purchase agreement to acquire immersion cooling systems for use in the second 200 MW Bitcoin mining data center facilities developed at the Corsicana Facility. Delivery of these immersion cooling systems is expected to be completed in the second quarter of 2024.

Through March 31, 2024, the Company had incurred total costs of approximately $270.8 million related to the development of the Corsicana Facility, including $10.1 million paid to acquire the land on which the facility is being developed, $256.0 million of initial developments costs and equipment (exclusive of miners), and a $4.7 million deposit for future power usage.

10

Riot Platforms, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Table of Contents

Note 7. Finite-Lived Intangible Assets

The following table presents the Company’s finite-lived intangible assets as of March 31, 2024:

    

Weighted-

Gross

Accumulated

Net book

average life

    

book value

    

amortization

    

value

    

(years)

Customer contracts

$

6,300

$

(1,447)

$

4,853

 

10

Trademark

 

5,000

 

(1,167)

 

3,833

 

10

UL Listings

 

2,700

 

(525)

 

2,175

 

12

Patents

 

10,060

 

(6,707)

 

3,353

 

Various

Finite-lived intangible assets

$

24,060

$

(9,846)

$

14,214

The following table presents the Company’s finite-lived intangible assets as of December 31, 2023:

    

Weighted-

Gross

    

Accumulated

    

Net book

average life

    

book value

    

amortization

    

value

    

(years)

Customer contracts

$

6,300

$

(1,292)

$

5,008

 

10

Trademark

 

5,000

 

(1,042)

 

3,958

 

10

UL Listings

 

2,700

 

(469)

 

2,231

 

12

Patents

 

10,060

 

(5,560)

 

4,500

 

Various

Finite-lived intangible assets

$

24,060

$

(8,363)

$

15,697

During the three months ended March 31, 2024 and 2023, amortization expense related to finite-lived intangible assets was $1.5 million and $1.4 million, respectively.

The following table presents the estimated future amortization of the Company’s finite-lived intangible assets as of March 31, 2024:

Remainder of 2024

$

4,340

2025

 

1,355

2026

 

1,355

2027

 

1,355

2028

 

1,355

Thereafter

 

4,455

Total

$

14,214

The Company did not identify any impairment of its finite-lived intangible assets during the three months ended March 31, 2024 and 2023.

Note 8. Power Purchase Agreement

Power Supply Contract and Demand Response Services Programs

In May 2020, the Company’s subsidiary, Whinstone US, Inc. (“Whinstone”), entered into a long-term power purchase agreement (the “PPA”) to provide power at fixed prices to the Rockdale Facility, via the nearby Sandow Switch. Pursuant to the PPA, the Company has agreed to acquire a total of 345 MW of long-term, fixed-price power, in multiple blocks, as follows: 130 MW contracted in May 2020, through April 30, 2030; 65 MW contracted in March 2022, through April 30, 2030; and 150 MW contracted in November 2022, through October 31, 2027. Additionally, the PPA also allows the purchase of additional power, at market prices, as needed.      

Concurrently with the PPA, Whinstone entered into an interconnection agreement for the extension of delivery system transmission/substation facilities to facilitate delivery of electricity to the Rockdale Facility (the “Facilities Agreement”). Power costs incurred under the Facilities Agreement are determined every 15 minutes using settlement information provided by the Electric Reliability Council of Texas (“ERCOT”) and are recorded in Cost of revenue on the Condensed Consolidated Statements of Operations.

11

Riot Platforms, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Table of Contents

ERCOT has implemented Demand Response Services Programs for customers like the Company that have the ability to reduce or modify electricity use in response to ERCOT instructions or signals. These Demand Response Services Programs provide the ERCOT market with valuable grid reliability and economic services by helping to preserve system reliability, enhancing competition and load predictability, mitigating price spikes, and stabilizing the grid by encouraging the demand side of the market to give more visibility and control of their power consumption to grid operators. Market participants with flexible electrical loads, like the Company, may participate in these Demand Response Service Programs directly by offering their electrical loads into the ERCOT markets, or indirectly by voluntarily reducing their energy usage in response to increasing power demand in the ERCOT marketplace.

Under these Demand Response Services Programs, the Company can participate in a variety of programs known as “ancillary services” by electing to designate a portion of its available electrical load for participation in such programs on a forward basis. For each respective Demand Response Services Program, the Company receives compensation based on hourly rates for power and the amount of electrical load which it has bid into the program. Through ancillary services, the Company competitively bids amongst other market participants to sell ERCOT the ability to control the Company’s electrical load on demand, which requires the Company to remain powered on during the times in which its power is bid into ancillary services, and giving ERCOT the ability to direct the Company to power down the amount of power bid into the program. The Company receives compensation for its participation in ancillary services whether or not the Company is actually called to power down.

The Company also participates in ERCOT’s Four Coincident Peak (“4CP”) program, which refers to the highest-load settlement intervals in each of the four summer months (June, July, August, and September), during which time, demand for power is typically at its highest across the ERCOT grid. 4CP participants may voluntarily power down operations during these times and in doing so, reduce the electrical load demand on the ERCOT grid. Participants that reduce their load in these peak periods receive credits to transmission costs on future power bills during the subsequent year, reducing overall power costs for the year. As a result of participation in 4CP in 2023, the Company’s transmission charges in its ongoing 2024 monthly power bills are substantially reduced.

Under the PPA, the Company may also elect not to utilize its long-term, fixed-price power for its operations, and instead elect to sell that power in exchange for credits against future power costs when there is a benefit to the Company, depending on the spot market price of electricity. The Company’s power strategy combines participation in Demand Response Services Programs, participation in 4CP, and sales of power, to attempt to manage operating costs most efficiently.

During the three months ended March 31, 2024 and 2023, the Company earned credits against future power costs in exchange for power resold of approximately $5.1 million and $3.1 million, respectively. These amounts are recorded in Power curtailment credits on the Condensed Consolidated Statements of Operations.

The Company determined the PPA meets the definition of a derivative because it allows for net settlement. However, because the Company has the ability to offer the power back for sale, rather than taking physical delivery, the Company determined that physical delivery is not probable through the entirety of the contract and therefore, the Company does not believe the normal purchases and normal sales scope exception applies to the PPA. Accordingly, the PPA (a non-hedging derivative contract) is accounted for as a derivative and recorded at its estimated fair value each reporting period in Derivative asset on the Condensed Consolidated Balance Sheets with the change in the fair value recorded in Change in fair value of derivative asset on the Condensed Consolidated Statements of Operations. The PPA is not designated as a hedging instrument.

The estimated fair value of the Company’s derivate asset is classified under Level 3 of the fair value hierarchy due to the significant unobservable inputs utilized in the valuation. Specifically, the Company’s discounted cash flow estimation models contain quoted commodity exchange spot and forward prices and are adjusted for basis spreads for load zone-to-hub differentials through the term of the PPA, which is scheduled to end as of April 30, 2030. The significant assumptions used to estimate fair value of the derivative contract include a discount rate of 22.9%, which reflected the nature of the contract as it relates to the risk and uncertainty of the estimated future mark-to-market adjustments, forward price curves of the power supply, broker/dealer quotes and other similar data obtained from quoted market prices or independent pricing vendors. The discount rate includes observable market inputs, but also includes unobservable inputs based on qualitative judgment related to company-specific risk factors.

The terms of the PPA require margin-based collateral, calculated as exposure resulting from fluctuations in the market cost rate of electricity versus the fixed price stated in the contract. As of March 31, 2024, the margin-based collateral requirement of the Company was zero.

While the Company manages operating costs at the Rockdale Facility in part by periodically selling back unused or uneconomical power, the Company does not consider such actions to be trading activities.

12

Riot Platforms, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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The following table presents changes in the estimated fair value of the Derivative asset:

Balance as of December 31, 2023

$

104,218

Change in fair value of derivative asset

 

20,232

Balance as of March 31, 2024

$

124,450

Note 9. Deposits

The following table presents the activity of the Company’s deposits paid:

Deposits on equipment:

 

  

Balance as of December 31, 2023

$

185,294

Additions

 

147,167

Reclassifications to property and equipment

 

(100,812)

Balance as of March 31, 2024

231,649

Security deposits

 

29,870

Total long-term deposits

$

261,519

Deposits on Equipment

During the three months ended March 31, 2024, the Company made deposits and advance payments of $114.8 million to MicroBT for the purchase of miners and made deposits of $32.4 million for the purchases of other property and equipment, primarily consisting of electrical components and immersion tanks used in the development of the Corsicana Facility. During the three months ended March 31, 2024, the Company reclassified $95.9 million of deposits made to MicroBT and $4.9 million of other deposits to property and equipment in connection with the receipt of the equipment. See Note 6. Property and Equipment.

Security Deposits

During the year ended December 31, 2023, the Company paid $23.0 million, all of which remains held as a deposit as of March 31, 2024, as a security deposit in connection with its 215 MW increase to the long-term, fixed-price power secured under the PPA, resulting in a total of 345 MW under contract at fixed prices. See Note 8. Power Purchase Agreement.

During the year ended December 31, 2022, the Company paid approximately $4.7 million as a security deposit for the development of the Corsicana Facility, all of which remains held as a deposit as of March 31, 2024.

The Company has other security deposits totaling approximately $2.2 million for its offices and facilities, including $1.8 million associated with its ground lease.

Note 10. Accrued Expenses

Accrued expenses consist of the following:

    

March 31, 

December 31, 

2024

2023

Construction in progress

$

15,981

$

23,451

Power related costs and remittances

 

10,765

 

11,114

Compensation

6,627

14,888

Insurance

 

4,342

 

7,490

Other

 

6,352

 

5,685

Total accrued expenses

$

44,067

$

62,628

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Riot Platforms, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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Note 11. Debt

Credit and Security Facility

The Company’s subsidiary, ESS Metron, LLC (“ESS Metron”), has a Credit and Security Facility Agreement, as amended, which provides for a $10.0 million credit and security facility consisting of a $6.0 million revolving line of credit (the “Revolving Line of Credit”) and a $4.0 million equipment guidance line (the “Equipment Guidance Line”).

The Revolving Line of Credit matures on December 31, 2024, with interest due monthly and principal due at maturity. All amounts borrowed under the Revolving Line of Credit carry a variable interest of not less than 4.0% and are secured by the assets of ESS Metron. As of March 31, 2024, the interest rate was 8.5%. During the three months ended March 31, 2024, there were no borrowings or payments under the Revolving Line of Credit. As of March 31, 2024 and December 31, 2023, the outstanding balance on the Revolving Line of Credit was $0.

The Equipment Guidance Line matures on December 31, 2024, and permits the Company to finance up to 80.0% of certain equipment purchases. All amounts borrowed under the Equipment Guidance Line carry a variable interest of not less than 4.0% and are secured by the assets of ESS Metron. As of March 31, 2024, the interest rate was 8.5%. During the three months ended March 31, 2024, there were no borrowings under the Equipment Guidance Line and approximately $0.5 million outstanding under the Equipment Guidance Line converted to a fixed rate term loan (see below). As of March 31, 2024 and December 31, 2023, the outstanding balance on the Equipment Guidance Line was $0 and $0.5 million, relatively.

All borrowings and accrued interest under the Equipment Guidance Line convert to fixed rate term loans every six months, which have either five-year terms for borrowings used to acquire vehicles and manufacturing equipment (“Manufacturing Term Loans”) or three-year terms for borrowings of equipment other than vehicles and manufacturing equipment (“Equipment Term Loans”). The Manufacturing Term Loans made upon the first conversion of guidance line loans carry interest at a fixed rate equal to the five-year treasury rate plus 2.5% as of conversion and the Equipment Term Loans made upon the first conversion of guidance line loans carry interest at a fixed rate equal to the three-year treasury rate plus 2.5% as of conversion. All subsequent conversions to Manufacturing Term Loans and Equipment Term Loans carry interest at a fluctuating rate equal to the lender’s prime rate.

During the three months ended March 31, 2024, approximately $0.5 million outstanding under the Equipment Guidance Line was converted into a three-year Equipment Term Loan with a fixed interest rate of 6.6%. As of March 31, 2024 and December 31, 2023, the outstanding balance of the Equipment Term Loans was approximately $0.8 million and $0.3 million, respectively.

As of March 31, 2024, the outstanding balance on the Equipment Guidance Line and Equipment Term Loans was recognized net of deferred financing costs of approximately $0.1 million. The net current outstanding debt balance of $0.3 million was recognized within Accrued Expenses and the net long-term outstanding debt balance of $0.4 million was recognized within Other long-term liabilities on the Condensed Consolidated Balance Sheets.

As of March 31, 2024, ESS Metron was not in compliance with its EBITDA covenant of the Credit and Security Facility Agreement. However, a waiver of non-compliance was received from the lender.

Note 12. Leases

As of March 31, 2024 and December 31, 2023, operating lease right of use assets were $21.7 million and $20.4 million, respectively, and operating lease liabilities were $23.6 million and $21.3 million, respectively.

The following table presents the components of the Company’s lease expense:

    

Three Months Ended

    

March 31, 

2024

    

2023

Operating lease cost

$

1,089

$

903

Variable lease cost

 

110

 

55

Operating lease expense

$

1,199

$

958

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Riot Platforms, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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The following table presents supplemental lease information:

Three Months Ended

March 31, 

2024

2023

Operating leases net operating cash outflows

$

208

$

874

Right of use assets exchanged for new operating lease liabilities

$

2,118

$

682

Weighted-average remaining lease term – operating leases

 

7.0

 

8.2

Weighted-average discount rate – operating leases

 

6.8

%  

 

6.6

%

The following table represents the Company’s future minimum operating lease payments as of March 31, 2024:

    

Ground lease

    

Office and other leases

    

Total

Remainder of 2024

$

1,498

$

1,772

$

3,270

2025

 

2,058

 

2,371

 

4,429

2026

2,119

2,073

4,192