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, 2023

☐ 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 May 8, 2023, the registrant had 175,078,000 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.

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RIOT PLATFORMS, INC.

As used in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (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 and the documents incorporated by reference herein contain forward-looking statements which provide current expectations of future events based on certain assumptions that involve risks and uncertainties, as well as assumptions that may not materialize or prove to be correct, which could cause our results to differ materially from those expressed in or implied by such forward-looking statements. All statements other than statements of historical fact are forward-looking statements, 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 data center 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; 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. 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. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law or by the rules and regulations of the Securities and Exchange Commission (the “SEC”). Forward-looking statements are made in reliance on 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 U.S. Private Securities Litigation Reform Act of 1995 (the “PSLRA”). The following are some of the risks, factors, and uncertainties we believe could cause our actual results to differ materially from our historical results or our current expectations or projections expressed in such forward-looking statements:

●	our strategic decision to concentrate on Bitcoin mining ties the success of our business to the success of Bitcoin;

●

our Bitcoin mining operations are subject to unique industry risks outside of our control that could have material adverse effects on our business, including, among others: our need for significant amounts of low-cost and reliable electricity; changes to laws and regulations pertaining to mining, transacting in, or holding Bitcoin; the historical volatility in the demand for, and the price of, Bitcoin; changes in the public perception of Bitcoin; our need for consistent, high-speed, and highly secure Internet connectivity; intense competition for new miners and the necessary infrastructure, personnel, material and components to support industrial-scale Bitcoin mining operations; cybersecurity risks; increased global Bitcoin network hash rate; and competition for a fixed supply of Bitcoin rewards;

●

our Bitcoin mining operations are capital-intensive and our net Bitcoin mining costs may not always be lower than the value of the Bitcoin we mine, which has historically been subject to significant price volatility; and, therefore, our ability to make accurate projections about our business and future contingencies is significantly impaired as a result of this price volatility and other risks that lie largely outside of our control, such as the impact of global macroeconomic, political and public health conditions and events on our suppliers’ operations and delivery schedules, as well as other risks we may not anticipate;

●

we have made significant investments in our development of industrial-scale immersion-cooled Bitcoin mining infrastructure, which is subject to unique risks and uncertainties that could impair our ability to effectively implement this innovative technology; and, therefore, we may not realize the benefits we anticipate from our substantial investment in immersion-cooled Bitcoin mining on the scale or schedule we anticipate;

●	our Bitcoin mining operations are concentrated in discrete locations, and natural disasters, unforeseen environmental issues, or other significant disruptions affecting our facilities or the surrounding areas could severely impact our ability to operate, which

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could have a material adverse effect on our business, results of operations, financial condition, and the market price of our securities;

●

we cannot predict the consequences to our business, our suppliers, and the markets in which we operate of future geo-political events, such as ongoing international conflict and related sanctions, COVID-19, the ongoing global supply chain crisis, and new or future legislation affecting our industry, which significantly impairs our ability to make accurate projections of future revenues, costs, and risks; therefore, we may be unable to properly plan for, insure against, or adjust to, these risks should they come to pass;

●

the growing public awareness of climate change and the negative media attention given to the energy consumption of proof-of-work blockchains may lead to the implementation of new taxes, laws and regulations affecting our access to energy, a decline in the demand for new Bitcoin, or other factors that could have a material adverse effect on our business, results of operations, and the market price of our securities, regardless of our efforts to control the climate impact of our operations;

●	certain accounting standards for Bitcoin mining are not settled, and we may be required to record significant charges or adjustments to earnings or the carrying value of our Bitcoin holdings as a result of future accounting rules;

●

we have made, and expect to continue to make, strategic acquisitions and investments, which entail significant risks and uncertainties that could adversely affect our business, results of operations, and financial condition, such as unforeseen difficulties in integrating the operations of an acquired business into our own, and we may fail to realize the anticipated benefits of these acquisitions on the schedule we expect, if at all;

●

we expect the need to raise additional capital, in the form of equity or debt, to fund our business objectives, goals, and strategies; however, volatility in the trading price of shares of our common stock, the number of authorized shares available for issuance and the price of Bitcoin may jeopardize our ability to raise the necessary additional capital;

●

our Bitcoin mining operations and our Bitcoin assets make us a target for malicious actors on the Internet, and we could be negatively impacted by a security breach, through cyber-attack, cyber-intrusion, insider threats or otherwise, or other significant disruption of our information technology networks and related systems, despite our efforts to protect against such events;

●	we may be unable to attract and retain sufficient personnel to carry out our operations and business strategy without substantially increasing our compensation and other benefits, which could significantly increase our operating costs;

●	our reputation and ability to do business may be impacted by the conduct of our employees, agents or business partners, as well as the actions of third parties engaged in our industry, in ways that are difficult to predict, control, or insure against; and

●	the outcome of litigation and other disputes in which we are involved from time to time is unpredictable, and an adverse decision in any such matter could have a material adverse effect on our financial condition, results of operations, cash flows and equity.

Additional details and discussions concerning the various material risks, factors and uncertainties identified by management that could cause future results to differ materially from those expressed or implied in our forward-looking statements are set forth 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, 2022 (the “2022 Annual Report”), as well as under similar headings in subsequent filings we may make with the SEC. The foregoing list of factors and the factors set forth under the heading “Risk Factors” included in our 2022 Annual Report, this Quarterly Report, and the other filings we make with the SEC are not exhaustive. Additional risks and uncertainties not known to us, or that we currently do not believe are material, may adversely impact our business, financial condition, results of operations, stockholder’s equity, and cash flows. 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 any forward-looking statements we may make. 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.

iii

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Riot Platforms, Inc.

Condensed Consolidated Balance Sheets

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


	March 31,		December 31,
	2023		2022
	(unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	158,272	$	230,328
Restricted cash		29,498		—
Accounts receivable, net		19,837		26,932
Contract assets, including retainage of $3,970		13,718		19,743
Prepaid expenses and other current assets		22,233		32,661
Bitcoin		121,850		109,420
Future power credits, current portion		271		24,297
Total current assets		365,679		443,381

Property and equipment, net		717,310		692,555
Deposits		32,205		42,433
Finite-lived intangible assets, net		20,072		21,477
Derivative asset		91,719		97,497
Operating lease right-of-use assets		21,769		21,673
Future power credits, less current portion		638		638
Other long-term assets		923		310
Total assets	$	1,250,315	$	1,319,964

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	19,685	$	18,445
Contract liabilities, net of retainage of $3,970		5,345		8,446
Accrued expenses		82,666		65,464
Deferred revenue, current portion		2,776		2,882
Contingent consideration liability - future power credits, current portion		271		24,297
Operating lease liability, current portion		1,323		2,009
Total current liabilities		112,066		121,543

Deferred revenue, less current portion		17,365		17,869
Operating lease liability, less current portion		20,997		20,242
Contingent consideration liability - future power credits, less current portion		638		638
Other long-term liabilities		7,104		8,230
Total liabilities		158,170		168,522

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, 2023 and December 31, 2022		—		—
0% Series B Convertible Preferred stock, 1,750,001 shares authorized; no shares issued and outstanding as of March 31, 2023 and December 31, 2022		—		—
Common stock, no par value; 340,000,000 shares authorized; 166,966,766 and 167,751,112 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		1,904,175		1,907,784
Accumulated deficit		(812,030)		(756,342)
Total stockholders’ equity		1,092,145		1,151,442
Total liabilities and stockholders’ equity	$	1,250,315	$	1,319,964

See accompanying notes to condensed consolidated financial statements.

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Riot Platforms, Inc.

Condensed Consolidated Statements of Operations

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


	Three Months Ended
	March 31,
	2023		2022
Revenue:
Bitcoin Mining	$	48,023	$	57,945
Data Center Hosting		9,042		9,694
Engineering		16,147		12,124
Other revenue		24		24
Total revenue		73,236		79,787

Costs and expenses:
Cost of revenue:
Bitcoin Mining		21,899		19,094
Data Center Hosting		25,660		14,985
Engineering		15,563		11,549
Selling, general, and administrative		12,675		10,910
Depreciation and amortization		59,340		14,245
Change in fair value of derivative asset		5,778		(43,683)
Power curtailment credits		(3,075)		(2,552)
Change in fair value of contingent consideration		—		176
Realized gain on sale of Bitcoin		(13,775)		(9,665)
Casualty-related charges (recoveries), net		1,526		—
Impairment of Bitcoin		4,472		25,870
Total costs and expenses		130,063		40,929
Operating income (loss)		(56,827)		38,858

Other income (expense):
Interest income (expense)		(3,830)		(357)
Unrealized loss on marketable equity securities		—		(1,611)
Total other income (expense)		(3,830)		(1,968)

Net income (loss) before taxes		(60,657)		36,890

Current income tax benefit (expense)		(76)		(312)
Deferred income tax benefit (expense)		5,045		—
Total income tax benefit (expense)		4,969		(312)

Net income (loss)	$	(55,688)	$	36,578

Basic and diluted net income (loss) per share	$	(0.33)	$	0.31
Basic and diluted weighted average number of shares outstanding		167,342,500		117,042,347

See accompanying notes to condensed consolidated financial statements.

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Riot Platforms, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

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

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)	—		—		(55,688)		(55,688)
Balance as of March 31, 2023	166,966,766	$	1,904,175	$	(812,030)	$	1,092,145

Three Months Ended March 31, 2022


									Total
	Preferred Stock			Common Stock			Accumulated		stockholders’
	Shares	Amount		Shares	Amount		deficit		equity
Balance as of January 1, 2022	2,199	$	11	116,748,472	$	1,595,147	$	(246,789)	$	1,348,369
Issuance of restricted stock, net of forfeitures and delivery of common stock underlying stock awards, net of tax withholding	—		—	553,633		(8,307)		—		(8,307)
Conversion of preferred stock to common stock	(2,199)		(11)	2,199		11		—		—
Stock-based compensation	—		—	—		3,042		—		3,042
Net income (loss)	—		—	—		—		36,578		36,578
Balance as of March 31, 2022	—	$	—	117,304,304	$	1,589,893	$	(210,211)	$	1,379,682

See accompanying notes to condensed consolidated financial statements.

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Riot Platforms, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)


	Three Months Ended March 31,
	2023		2022
Operating activities
Net income (loss)	$	(55,688)	$	36,578
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Stock-based compensation		(2,296)		3,042
Depreciation and amortization		59,340		14,245
Amortization of license fee revenue		(24)		(24)
Amortization of right of use assets		586		357
Deferred income tax expense (benefit)		(5,045)		—
Impairment of Bitcoin		4,472		25,870
Change in fair value of derivative asset		5,778		(43,683)
Change in fair value of contingent consideration		—		176
Realized gain on sale of Bitcoin		(13,775)		(9,665)
Unrealized loss on marketable equity securities		—		1,611
Casualty-related charges		1,526		—
Bitcoin Mining revenue		(48,023)		(57,945)
Changes in assets and liabilities:
(Increase)/decrease in operating assets		91,398		(1,549)
Increase/(decrease) in operating liabilities		(5,886)		(14,331)
Net cash provided by (used in) operating activities		32,363		(45,318)

Investing activities
Deposits on equipment		—		(103,161)
Security deposits		(23,000)		—
Purchases of property and equipment, including construction in progress		(50,955)		(37,079)
Patent costs incurred		(33)		(26)
Net cash provided by (used in) investing activities		(73,988)		(140,266)

Financing activities
Payments on contingent consideration liability - future power credits		—		(4,843)
Proceeds from Credit and Security Facility		880		—
Repayments of Credit and Security Facility		(500)		—
Repurchase of common shares to pay employee withholding taxes		(1,313)		(8,307)
Net cash provided by (used in) financing activities		(933)		(13,150)

Net increase (decrease) in cash, cash equivalents, and restricted cash		(42,558)		(198,734)
Cash, cash equivalents, and restricted cash at beginning of period		230,328		312,315
Cash, cash equivalents, and restricted cash at end of period	$	187,770	$	113,581


Supplemental information:
Cash paid for interest	$	—	$	—
Cash paid for taxes	$	—	$	—
Non-cash transactions
Reclassification of deposits to property and equipment	$	33,273	$	38,965
Construction in progress included in accrued expenses	$	11,850	$	946
Bitcoin exchanged for employee compensation	$	459	$	1,283
Conversion of preferred stock to common stock	$	—	$	11
Right of use assets exchanged for new operating lease liabilities	$	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	$	230,328	$	312,315
Restricted cash		—		—
Total cash, cash equivalents, and restricted as presented above	$	230,328	$	312,315
Cash, cash equivalents, and restricted cash, end of the period:
Cash and cash equivalents	$	158,272	$	113,581
Restricted cash		29,498		—
Total cash, cash equivalents, and restricted as presented above	$	187,770	$	113,581

See accompanying notes to condensed consolidated financial statements.

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Riot Platforms, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Organization and Operation of Our Business

Nature of Operations

Riot is a vertically integrated Bitcoin mining company principally engaged in enhancing our capabilities to mine Bitcoin in support of the Bitcoin blockchain. The Company also provides comprehensive and critical infrastructure for institutional-scale hosted clients to mine Bitcoin at its Bitcoin mining facility in Rockdale, Texas (the “Rockdale Facility”). The Rockdale Facility currently has 700 megawatts (“MW”) in total developed capacity for Bitcoin mining and data center hosting services for institutional-scale hosted clients. The Rockdale Facility is believed to be the largest Bitcoin mining facility in North America, as measured by developed capacity, and the Company is currently evaluating further growing its capacity. The Company is also developing a second large-scale Bitcoin mining and data center facility located outside of Corsicana, Texas (the “Corsicana Facility”), which, upon completion, is expected to have approximately one gigawatt of capacity available for Bitcoin mining and data center hosting services for institutional-scale hosted clients.

As described in Note 19. Segment Information, we operate in three business segments: Bitcoin Mining, Data Center Hosting, and Engineering.

Note 2. Liquidity and Financial Condition

At March 31, 2023, the Company had approximate balances of cash and cash equivalents of $158.3 million, working capital of $253.6 million, total stockholders’ equity of $1.1 billion and an accumulated deficit of $812.0 million. To date, the Company has, in large part, relied on equity financings to fund its operations. During the three months ended March 31, 2023, the Company sold 1,975 Bitcoin for proceeds of approximately $44.4 million. The Company monitors its balance sheet on an ongoing basis and continuously evaluates the level of Bitcoin retained from monthly production in consideration of the cash requirements and its ongoing operations and expansion. Bitcoin is classified on the balance sheet as a current asset due to the ability for it to be sold in a highly liquid marketplace and the Company’s intent to liquidate its Bitcoin to support operations when needed.

Subsequent to March 31, 2023, through the date of this Report, the Company issued 7,871,700 shares of common stock for net proceeds of approximately $95.7 million, at a weighted average price of $12.41 per share (see Note 13. Stockholders’ Equity).

COVID-19

The COVID-19 pandemic was unprecedented and unpredictable, and its impact may continue to result in national and global economic disruption, which may adversely affect our business. Presently, the Company has not experienced and does not expect any material impact on its long-term strategic plans, its operations, or its liquidity due to the long-term impacts of COVID-19. We will monitor any future COVID-19 related developments and the possible effects on the Company’s financial condition, liquidity, operations, suppliers, and the industry.

Inflation

We have experienced, and are experiencing, the impact of domestic and global inflationary pressures largely outside of our control. This inflationary pressure impacts our cost structure by increasing the cost of materials, parts and labor, making both our operations and development more expensive for us, despite a continued focus on controlling our costs where possible. In addition, sustained inflationary pressures have led to central banks raising interest rates, raising the cost of debt financing, which may precipitate a broad-based macroeconomic slowdown, including a possible recession in the United States and in other key financial markets. Management is unable to accurately predict when, or if, these inflationary pressures will subside, or whether and to what extent a significant recession will arise following central banks’ efforts to constrain such inflationary pressures. As a result, management is unable to predict the impact of these inflationary pressures, or the possible follow-on conditions, on our business and results of operations, as well as our access to debt financing. See the discussion under the heading “Risk Factors” under Part I, Item 1A of our 2022 Annual Report for additional discussion regarding potential impacts sustained elevated inflationary pressures may have on our operations and plans for expansion.

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Riot Platforms, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 3. Basis of Presentation, Summary of Significant Accounting Policies and Recent Accounting Pronouncements

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of such interim results. Amounts are in thousands except for share, per share and miner amounts.

The results in the unaudited condensed consolidated statements of operations are not necessarily indicative of results to be expected for the fiscal year ending December 31, 2023 or for any future interim period. The unaudited condensed consolidated financial statements do not include all the information and notes required by GAAP for complete financial statements. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements for the fiscal year ended December 31, 2022, and notes thereto, included in the 2022 Annual Report.

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 could differ significantly from those estimates. The most significant accounting estimates inherent in the preparation of the Company’s financial statements include estimates associated with valuing contingent consideration for a business combination and periodic reassessment of its fair value, allocating the fair value of purchase consideration to assets acquired and liabilities assumed in business acquisitions, revenue recognition, valuing the derivative asset classified under Level 3 fair value hierarchy, determining the useful lives and recoverability of long-lived assets, impairment analysis of goodwill, 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 unaudited condensed consolidated financial statements and accompanying notes. The reclassifications did not have a material impact on the Company’s unaudited condensed consolidated financial statements and related disclosures. The impact on any prior period disclosures was immaterial.

Significant Accounting Policies

For a detailed discussion about the Company’s significant accounting policies, see the Company’s December 31, 2022 consolidated financial statements included in its 2022 Annual Report.

Recently Issued and Adopted Accounting Pronouncements

The Company assesses any 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 the change to its condensed consolidated financial statements and assures that there are proper controls in place to ascertain that the Company’s unaudited condensed consolidated financial statements properly reflect the change.

Note 4. Revenue from Contracts with Customers

Disaggregated revenue

Revenue disaggregated by reportable segment is presented in Note 19. Segments Information.

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Riot Platforms, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Contract balances

Contract assets relate to uncompleted Engineering contracts. As of March 31, 2023 and December 31, 2022, contract assets were $13.7 million and $19.7 million, respectively.

Contract liabilities primarily relate to upfront payments and consideration received from customers for data center hosting and uncompleted Engineering contracts. The following table presents changes in contract liabilities:


	Three Months Ended
	March 31, 2023
Beginning balance	$	29,197
Revenue recognized		(610)
Other changes in contract liabilities		(3,101)
Ending balance	$	25,486

Remaining performance obligation

Remaining performance obligations represent the transaction price of contracts for work that has not yet been performed. Amounts related to Bitcoin mining are not included because the Company elected the practical expedient to not disclose amounts related to contracts with a duration of one year or less.


	2023		2024		2025		2026		Thereafter		Total
Data Center Hosting	$	2,089	$	2,362	$	2,362	$	2,362	$	10,408	$	19,583
Engineering		5,345		—		—		—		—		5,345
Other		73		97		97		97		194		558
Total contract liabilities	$	7,507	$	2,459	$	2,459	$	2,459	$	10,602	$	25,486

Note 5. Bitcoin

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


	Three Months Ended
	March 31, 2023
Beginning balance	$	109,420
Revenue recognized from Bitcoin mined		48,023
Proceeds from sale of Bitcoin		(44,437)
Exchange of Bitcoin for employee compensation		(459)
Realized gain on sale of Bitcoin		13,775
Impairment of Bitcoin		(4,472)
Ending balance	$	121,850

During the three months ended March 31, 2022, the Company recorded impairment charges on its Bitcoin holdings of $25.9 million.

Applying the market price of one Bitcoin on March 31, 2023 of approximately $28,478 to the Company’s 7,094 Bitcoin held, results in an estimated fair value of the Company’s Bitcoin of $202.0 million. Applying the market price of one Bitcoin on December 31, 2022 of approximately $16,548 to the Company’s 6,974 Bitcoin held, results in an estimated fair value of the Company’s Bitcoin of $115.4 million. The valuation of Bitcoin held is classified under Level 1 of the fair value hierarchy as it is based on quoted prices in active markets for identical assets.

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Riot Platforms, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 6. Property and Equipment

Property and equipment consist of the following:


	March 31,		December 31,
	2023		2022
Buildings and building improvements	$	273,641	$	229,685
Land rights and land improvements		10,164		10,164
Miners and mining equipment		485,706		441,324
Machinery and facility equipment		37,241		35,125
Office and computer equipment		1,453		1,206
Construction in progress		89,069		97,231
Total cost of property and equipment		897,274		814,735
Less accumulated depreciation		(179,964)		(122,180)
Property and equipment, net	$	717,310	$	692,555

The Company did not incur any impairment charges for its property and equipment for the three months ended March 31, 2023 and 2022.

During the three months ended March 31, 2023 and 2022, depreciation expense related to property and equipment totaled $57.9 million and $13.9 million, respectively.

Miners and mining equipment

As of March 31, 2023, the Company had a total of 94,176 miners deployed in its Bitcoin mining operation, all at the Rockdale Facility, excluding 17,040 miners currently offline as a result of damage sustained during severe winter storms affecting Texas in December 2022.

As of December 31, 2022, the Company had outstanding executed purchase agreements for the purchase of miners from Bitmain Technologies Limited (“Bitmain”) for a total of 5,130 S19 series miners, which were received in January 2023. As of March 31, 2023, the Company did not have any outstanding executed purchase agreements for the purchase of miners.

Casualty-related charges (recoveries), net

In December 2022, the Rockdale Facility was damaged during severe winter storms in Texas, impacting approximately 2.5 exahash per second (“EH/s”) of our hash rate capacity. Repairs have been ongoing and the Company continues to bring its hash rate capacity back online.

The Company has estimated that total damages of $11.2 million were incurred. No insurance recoveries have been received. Recoveries will be recognized when they are probable of being received.

Construction in progress

In 2021, the Company commenced expansion of our Rockdale Facility to 700 MW from its initial 300 MW of developed capacity. As of December 31, 2022, the 400 MW expansion at the Rockdale Facility had achieved multiple progress milestones while navigating challenges with the current state of the global supply chain. We also completed construction of three new buildings in 2022, and a fourth is nearing completion in the second quarter of 2023, which, when completed, will finalize our Rockdale Facility expansion.

In 2022, the Company initiated a large-scale development to expand its Bitcoin mining and data center hosting capabilities on a 265-acre site in Navarro County, Texas, strategically located next to the Navarro switch (the “Corsicana Facility”). Once complete, the Company expects the Corsicana Facility to have one-gigawatt of developed capacity for its Bitcoin mining and data center operations.

The initial phase of the development of the Corsicana Facility involves the construction of 400 MW of immersion-cooled Bitcoin mining and data center hosting infrastructure spread across multiple buildings, as well as a high-voltage power substation and

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

transmission facilities to supply power and water to the facility. Construction of the substation and the data centers is expected to be carried out through 2023, with Bitcoin Mining and Data Center Hosting operations expected to commence following the commissioning of the substation.

This first phase of the development of the Corsicana Facility includes land acquisition, site preparation, substation development, and transmission construction, along with construction buildings utilizing the Company’s immersion-cooling infrastructure and technology, and ancillary buildings. Through March 31, 2023, the Company had incurred costs of approximately $70.0 million related to the development of the Corsicana Facility, including $10.1 million for land, $55.2 million of initial developments costs and equipment, and a $4.7 million deposit for future power usage.

Note 7. Finite-Lived Intangible Assets

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


							Weighted-
	Gross		Accumulated		Net book		average life
	book value		amortization		value		(years)
Customer contracts	$	6,300	$	(827)	$	5,473	10
Trademark		5,000		(667)		4,333	10
UL Listings		2,700		(300)		2,400	12
Patents		10,060		(2,194)		7,866	Various
Finite-lived intangible assets	$	24,060	$	(3,988)	$	20,072

The following table presents the Company’s finite-lived intangible assets as of December 31, 2022:


							Weighted-
	Gross		Accumulated		Net book		average life
	book value		amortization		value		(years)
Customer contracts	$	6,300	$	(671)	$	5,629	10
Trademark		5,000		(542)		4,458	10
UL Listings		2,700		(244)		2,456	12
Patents		10,060		(1,126)		8,934	Various
Finite-lived intangible assets	$	24,060	$	(2,583)	$	21,477

During the three months ended March 31, 2023 and 2022, amortization expense related to finite-lived intangible assets totaled $1.4 million and $0.4 million, respectively.

The following table presents the estimated future amortization of the Company’s finite-lived intangible assets as of March 31, 2023:


Remainder of 2023	$	4,705
2024		5,815
2025		1,355
2026		1,355
2027		1,355
Thereafter		5,487
Total	$	20,072

The Company did not identify any impairment of its finite-lived intangible assets during the three months ended March 31, 2023 and 2022.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 8. Power Supply Contract

Power Supply Contract and Demand Response Services Programs

In May 2020, the Company entered into a Power Supply Agreement with TXU Energy Retail Company LLC (“TXU”) (the “Power Supply Agreement”) to provide the delivery of 130 MW of electricity by TXU to the Rockdale Facility, via the facility owned by Oncor Electric Delivery Company, LLC (“Oncor”), at fixed prices through April 30, 2030. In March and November 2022, the Company and TXU agreed to increase the amount of electricity to be provided under the Power Supply Agreement by 65 MW and 150 MW, respectively, of electricity at fixed prices through April 30, 2030 and October 31, 2027, respectively, for a total of 345 MW under contract at fixed prices.

If electricity used exceeds the amount contracted, the cost of the excess electricity is incurred at the current spot rate. Concurrently with the Power Supply Agreement, the Company entered into an agreement with Oncor for the extension of delivery system transmission/substation facilities to facilitate delivery of the 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: Data Center Hosting on the Condensed Consolidated Statements of Operations.

In collaboration with market participants such as the Company, ERCOT has a Demand Response Services Program for customers that have the ability to reduce or modify electricity use in response to instructions or signals. The Demand Response Services Program provides the ERCOT market with valuable reliability and economic services by helping to preserve system reliability, enhancing competition, mitigating price spikes, and encouraging the demand side of the market to respond better to wholesale price signals. Market participants with electrical loads like the Company may participate in the Demand Response Service Program directly by offering their electrical loads into the ERCOT markets, or indirectly by voluntarily reducing their energy usage in response to increasing wholesale prices.

Under the Demand Response Services Program, the Company can participate in a variety of programs by electing to designate a portion of its available electrical load for participation in such programs on an hourly basis. The Company receives a cash payment from ERCOT based on hourly rates for electricity and the amount of electrical load it bids into each respective Demand Response Services Program.

Under the Company’s Power Supply Agreement with TXU, we may offer electricity back to TXU for sale on the ERCOT marketplace, in exchange for credits against future power costs, rather than using the power for the Company’s operations, when there is a benefit to our Company, depending on the spot market price of electricity. Our power strategy combines our participation in Demand Response Services Programs and sales of power during times of peak demand, to most efficiently manage our operating costs. During the three months ended March 31, 2023 and 2022, we sold approximately $3.1 million and $2.6 million, respectively, in electricity back to ERCOT in exchange for credits against future power costs. These sales back to ERCOT are recorded in Power curtailment credits on the Condensed Consolidated Statements of Operations.

The Company determined the Power Supply Agreement meets the definition of a derivative because it allows for net settlement. However, because we have the ability to offer the power back to the grid rather than take physical delivery, physical delivery is not probable through the entirety of the contract and therefore, we do not believe the normal purchases and normal sales scope exception applies to the Power Supply Agreement. Accordingly, the Power Supply Agreement (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 Power Supply Agreement 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, our 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 Power Supply Agreement, which ends in December 2030. The significant assumptions used to estimate fair value of the derivative contract include a discount rate of 21.7%, 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 utilized of approximately 21.7% includes observable market inputs, but also includes unobservable inputs based on qualitative judgment related to company-specific risk factors.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

The terms of the Power Supply Agreement 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, 2023, 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 unused or uneconomical power back to TXU for sale on the ERCOT marketplace, the Company does not consider such actions to be trading activities and does not engage in speculation in the power market as part of its ordinary activities.

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


Balance as of December 31, 2022	$	97,497
Change in fair value of derivative asset		(5,778)
Balance as of March 31, 2023	$	91,719

Note 9. Long-Term Assets

Deposits

Deposits consist of the following:


	March 31,		December 31,
	2023		2022
Deposits on equipment	$	—		33,273
Security deposits		32,205		9,160
Total deposits	$	32,205	$	42,433

Deposits on Equipment

As of December 31, 2022, the Company had outstanding executed purchase agreements for the purchase of miners from Bitmain for a total of 5,130 S19 series miners, which were received in January 2023. During the three months ended March 31, 2023, the Company reclassified the outstanding deposit of $33.3 million to property and equipment in connection with the receipt of the miners at the Rockdale Facility. See Note 6, Property and Equipment.

Security Deposits

During the three months ended March 31, 2023, the Company paid $23.0 million in connection with its 215 MW increase to the Power Supply Agreement with TXU, resulting in a total of 345 MW under contract at fixed prices.

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. As of December 31, 2022, $1.8 million of the $3.1 million paid to Oncor in 2021 in connection with an amended and restated Transmission/Substation Facility Extension Agreement for the construction of the Oncor-owned Delivery System facilities to serve the expansion of the Rockdale Facility, remains held as a deposit and the Company has other security deposits totaling approximately $2.7 million, including its ground lease of $1.8 million.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 10. Accrued Expenses

Accrued expenses consist of the following:


	March 31,		December 31,
	2023		2022
Construction in progress	$	11,850	$	16,621
Power related costs and remittances		58,952		32,632
Accrued compensation		4,629		8,582
Insurance		2,304		3,660
Other		4,931		3,969
Total accrued expenses	$	82,666	$	65,464

Note 11. Debt

Credit and Security Facility

ESS Metron, a wholly-owned subsidiary of the Company, has a $10.0 million Credit and Security Facility, which consists of a $6.0 million Revolving Line of Credit and a $4.0 Equipment Guidance Line.

The $6.0 million Revolving Line of Credit has a term of one year 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, 2023, the interest rate was 7.5%.

The $4.0 million Equipment Guidance Line has a term of one year 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, 2023, the interest rate was 7.5%.

Total borrowings under the Credit and Security Facility during the three months ended March 31, 2023, were approximately $0.9 million and payments were $0.5 million. As of March 31, 2023 and December 31, 2022, the outstanding balance was approximately $0.3 million and less than $0.1 million, respectively, and was recognized within Other long-term liabilities on the Condensed Consolidated Balance Sheets.

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 carry interest at a fixed rate equal to the five-year treasury rate plus 2.5% as of conversion and the Equipment Term Loans carry interest at a fixed rate equal to the three-year treasury rate plus 2.5% as of conversion. As of March 31, 2023, no amounts were due under Manufacturing Term Loans or Equipment Term Loans.

As of March 31, 2023, the Company was in compliance with all covenants of the Credit and Security Facility.

Note 12. Leases

As of March 31, 2023 and December 31, 2022, operating lease right of use assets were $21.8 million and $21.7 million, respectively, and operating lease liabilities were $22.3 million and $22.3 million, respectively.

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Riot Platforms, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

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


	Three Months Ended
	March 31,
	2023		2022
Operating lease cost	$	903	$	622
Variable lease cost		55		45
Operating lease expense	$	958	$	667

The following table presents supplemental lease information:


	Three Months Ended
	March 31,
	2023			2022
Operating cash outflows for operating leases	$	874		$	—
Right of use assets exchanged for new operating lease liabilities	$	682		$	8,784
Weighted-average remaining lease term – operating leases		8.2			6.9
Weighted-average discount rate – operating leases		6.6	%		6.5	%

The following table represents our future minimum operating lease payments as of March 31, 2023:


	Ground lease		Office and other leases		Total
Remainder of 2023	$	1,455	$	1,622	$	3,077
2024		1,998		1,661		3,659
2025		2,058		1,347		3,405
2026		2,119		1,273		3,392
2027		2,183		1,148		3,331
Thereafter		9,618		3,227		12,845
Total undiscounted lease payments		19,431		10,278		29,709
Less present value discount		(5,720)		(1,669)		(7,389)
Present value of lease liabilities	$	13,711	$	8,609	$	22,320

Note 13. Stockholders’ Equity

During the three months ended March 31, 2023, 757,258 shares of common stock were issued to the Company’s board of directors, officers, employees, and advisors of the Company in settlement of an equal number of fully vested restricted stock awards awarded to such individuals by the Company under the Company’s 2019 Equity Incentive Plan, as amended. The Company withheld 263,533 of these shares, at a fair value of approximately $1.3 million, to cover the withholding taxes related to the settlement of these vested restricted stock awards, as permitted by the 2019 Equity Incentive Plan.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

At-the-Market (“ATM”) Equity Offerings

2022 ATM Offering

In March 2022, the Company entered into an ATM sales agreement under which it could offer and sell up to $500.0 million in shares of the Company’s common stock. During the three months ended March 31, 2023, no shares were sold by the Company under its 2022 ATM sales agreement.

Subsequent to March 31, 2023, through the date of this Report, the Company received net proceeds of approximately $95.7 million ($97.7 million of gross proceeds, net of $2.0 million in commissions and expenses) from the sale of 7,871,700 shares of its common stock at a weighted average fair value of $12.41 per share under its 2022 ATM sales agreement.

Note 14. Stock-Based Compensation

The 2019 Equity Incentive Plan authorizes the granting of stock-based compensation awards to directors, employees, and consultants in the form of restricted stock awards or stock options that settle in shares of the Company’s common stock upon vesting.

The following table presents stock-based compensation expense by category:


	Three Months Ended
	March 31,
	2023		2022
Performance-based stock awards	$	(10,890)	$	1,760
Service-based stock awards		8,594		1,282
Total stock-based compensation	$	(2,296)	$	3,042

Stock-based compensation expense is recognized in Selling, general and administrative on the Condensed Consolidated Statements of Operations.

Restricted Common Stock Awards

Performance-based awards

Performance-based awards vest over a three-year performance period upon the successful completion of specified milestones related to added infrastructure capacity and Adjusted EBITDA through December 31, 2023.

The following table presents a summary of the Company’s performance-based awards activity:


		Weighted Average
		Grant-Date
	Number of Shares	Fair Value
Balance as of January 1, 2023	3,918,935	$	25.92
Granted	111,700	$	4.22
Vested	(373,520)	$	25.78
Forfeited	(224,900)	$	35.83
Balance as of March 31, 2023	3,432,215	$	24.58

As of March 31, 2023, there was approximately $3.6 million of unrecognized compensation cost related to the performance-based awards, which is expected to be recognized over a remaining weighted-average vesting period of approximately eight months.

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Notes to Condensed Consolidated Financial Statements

(Unaudited)

Service-based awards

Service-based awards generally vest over a one-to-two-year service period.

The following table presents a summary of the Company’s service-based awards activity:


		Weighted Average
		Grant-Date
	Number of Shares	Fair Value
Balance as of January 1, 2023	8,855,744	$	6.84
Granted	356,484	$	4.51
Vested	(381,864)	$	7.10
Forfeited	(764,097)	$	6.79
Balance as of March 31, 2023	8,066,267	$	6.77

As of March 31, 2023, there was approximately $38.5 million of unrecognized compensation cost related to the service-based awards, which is expected to be recognized over a remaining weighted-average vesting period of approximately 14 months.

Note 15. Fair Value Measurements

Assets and liabilities measured at fair value on a recurring basis:

The Company’s assets and liabilities measured at fair value on a recurring basis consisted of the following as of March 31, 2023, and December 31, 2022:


	Fair value measured as of March 31, 2023
							Significant
			Quoted prices in		Significant other		unobservable
	Total carrying		active markets		observable inputs		inputs
	Value		(Level 1)		(Level 2)		(Level 3)
Derivative asset (a)	$	91,719	$	—	$	—	$	91,719
Contingent consideration liability (b)	$	909	$	—	$	—	$	909

Fair value measured as of December 31, 2022

Significant

Quoted prices in

Significant other

unobservable

Total carrying

active markets

observable inputs

inputs

Value

(Level 1)

(Level 2)

(Level 3)

Derivative asset (a)

97,497

—

		Page
	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets as of March 31, 2023 (Unaudited) and December 31, 2022	1
	Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	2
	Condensed Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2023 and 2022 (Unaudited)	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	33

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3.	Defaults Upon Senior Securities	34
Item 4.	Mine Safety Disclosures	34
Item 5.	Other Information	34
Item 6.	Exhibits	35
Signatures		36