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 June 30, 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 August 7, 2023, the registrant had 185,305,831 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.

Table of Contents

RIOT PLATFORMS, INC.

		Page
	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022 (Unaudited)	1
	Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	2
	Condensed Consolidated Statements of Stockholders’ Equity for the Three and Six Months Ended June 30, 2023 and 2022 (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 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	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	35
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 5.	Other Information	36
Item 6.	Exhibits	38
Signatures		40

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RIOT PLATFORMS, INC.

As used in this Quarterly Report on Form 10-Q for the quarter ended June 30, 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 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 herein by reference. 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.

Such forward-looking statements reflect certain 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, 2022 (“2022 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.

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.

Accordingly, you should read this Quarterly Report, and the other filings we make with the SEC, completely and with the understanding that our actual future results may be materially different from our historical results and those 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.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Riot Platforms, Inc.

Condensed Consolidated Balance Sheets

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


	June 30,		December 31,
	2023		2022
ASSETS
Current assets
Cash and cash equivalents	$	289,176	$	230,328
Accounts receivable, net		13,181		26,932
Contract assets, including retainage of $4,222 and $3,012, respectively		19,063		19,743
Prepaid expenses and other current assets		20,132		32,661
Bitcoin		140,931		109,420
Future power credits, current portion		271		24,297
Total current assets		482,754		443,381

Property and equipment, net		699,637		692,555
Deposits		30,414		42,433
Finite-lived intangible assets, net		18,622		21,477
Derivative asset		104,828		97,497
Operating lease right-of-use assets		21,221		21,673
Future power credits, less current portion		638		638
Other long-term assets		816		310
Total assets	$	1,358,930	$	1,319,964

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	12,616	$	18,445
Contract liabilities		3,117		8,446
Accrued expenses		27,307		65,464
Deferred gain on acquisition post-close dispute settlement		26,007		—
Deferred revenue, current portion		2,670		2,882
Contingent consideration liability - future power credits, current portion		271		24,297
Operating lease liability, current portion		2,343		2,009
Total current liabilities		74,331		121,543

Deferred revenue, less current portion		16,853		17,869
Operating lease liability, less current portion		19,510		20,242
Contingent consideration liability - future power credits, less current portion		638		638
Other long-term liabilities		6,688		8,230
Total liabilities		118,020		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 June 30, 2023 and December 31, 2022		—		—
0% Series B Convertible Preferred stock, 1,750,001 shares authorized; no shares issued and outstanding as of June 30, 2023 and December 31, 2022		—		—
Common stock, no par value; 340,000,000 shares authorized; 182,250,554 and 167,751,112 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively		2,080,627		1,907,784
Accumulated deficit		(839,717)		(756,342)
Total stockholders’ equity		1,240,910		1,151,442
Total liabilities and stockholders’ equity	$	1,358,930	$	1,319,964

See accompanying notes to condensed consolidated financial statements.

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Riot Platforms, Inc.

Condensed Consolidated Statements of Operations

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


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
Revenue:
Bitcoin Mining	$	49,742	$	46,151	$	97,765	$	104,096
Data Center Hosting		7,661		9,834		16,703		19,528
Engineering		19,312		16,938		35,459		29,062
Other revenue		24		24		48		48
Total revenue		76,739		72,947		149,975		152,734

Costs and expenses:
Cost of revenue:
Bitcoin Mining		23,647		17,995		45,546		37,089
Data Center Hosting		22,134		15,184		47,794		30,169
Engineering		18,182		15,175		33,745		26,724
Acquisition-related costs		—		—		—		78
Selling, general, and administrative		19,836		10,713		32,511		21,545
Depreciation and amortization		66,162		20,562		125,502		34,807
Change in fair value of derivative asset		(13,109)		(60,931)		(7,331)		(104,614)
Power curtailment credits		(13,470)		(5,706)		(16,545)		(8,258)
Change in fair value of contingent consideration		—		—		—		176
Realized gain on sale of Bitcoin		(19,828)		(15,260)		(33,603)		(24,925)
Gain (loss) on sale/exchange of equipment		30		(8,614)		30		(8,614)
Casualty-related charges (recoveries), net		—		—		1,526		—
Impairment of Bitcoin		5,638		101,419		10,110		127,289
Impairment of goodwill		—		335,648		—		335,648
Total costs and expenses		109,222		426,185		239,285		467,114
Operating income (loss)		(32,483)		(353,238)		(89,310)		(314,380)

Other income (expense):
Interest income (expense)		4,843		—		1,013		(357)
Realized loss on sale of marketable equity securities		—		(1,624)		—		(1,624)
Unrealized loss on marketable equity securities		—		(4,837)		—		(6,448)
Other income (expense)		65		(59)		65		(59)
Total other income (expense)		4,908		(6,520)		1,078		(8,488)

Net income (loss) before taxes		(27,575)		(359,758)		(88,232)		(322,868)

Current income tax benefit (expense)		(112)		(427)		(188)		(739)
Deferred income tax benefit (expense)		—		6,626		5,045		6,626
Total income tax benefit (expense)		(112)		6,199		4,857		5,887

Net income (loss)	$	(27,687)	$	(353,559)	$	(83,375)	$	(316,981)

Basic and diluted net income (loss) per share	$	(0.17)	$	(2.71)	$	(0.51)	$	(2.56)
Basic and diluted weighted average number of shares outstanding		167,342,813		130,405,502		162,559,956		123,760,839

See accompanying notes to condensed consolidated financial statements.

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Riot Platforms, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

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

Three Months Ended June 30, 2023


						Total
	Common Stock			Accumulated		stockholders’
	Shares	Amount		deficit		equity
Balance as of April 1, 2023	166,966,766	$	1,904,175	$	(812,030)	$	1,092,145
Issuance of restricted stock, net of forfeitures and delivery of common stock underlying stock awards, net of tax withholding	(663,377)		(11,638)		—		(11,638)
Issuance of common stock/At-the-market offering, net of offering costs	15,877,000		184,661		—		184,661
Issuance of common stock in connection with acquisition of ESS Metron	70,165		—		—		—
Stock-based compensation	—		3,429		—		3,429
Net income (loss)	—		—		(27,687)		(27,687)
Balance as of June 30, 2023	182,250,554	$	2,080,627	$	(839,717)	$	1,240,910

Three Months Ended June 30, 2022


						Total
	Common Stock			Accumulated		stockholders’
	Shares	Amount		deficit		equity
Balance as of April 1, 2022	117,304,304	$	1,589,893	$	(210,211)	$	1,379,682
Issuance of restricted stock, net of forfeitures and delivery of common stock underlying stock awards, net of tax withholding	122,052		(508)		—		(508)
Issuance of common stock/At-the-market offering, net of offering costs	30,559,817		267,022		—		267,022
Stock-based compensation	—		701		—		701
Net income (loss)	—		—		(353,559)		(353,559)
Balance as of June 30, 2022	147,986,173	$	1,857,108	$	(563,770)	$	1,293,338

Six Months Ended June 30, 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	(1,447,723)		(12,951)		—		(12,951)
Issuance of common stock/At-the-market offering, net of offering costs	15,877,000		184,661		—		184,661
Issuance of common stock in connection with acquisition of ESS Metron	70,165		—		—		—
Stock-based compensation	—		1,133		—		1,133
Net income (loss)	—		—		(83,375)		(83,375)
Balance as of June 30, 2023	182,250,554	$	2,080,627	$	(839,717)	$	1,240,910

Six Months Ended June 30, 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	—		—	675,685		(8,815)		—		(8,815)
Issuance of common stock/At-the-market offering, net of offering costs	—		—	30,559,817		267,022		—		267,022
Conversion of preferred stock to common stock	(2,199)		(11)	2,199		11		—		—
Stock-based compensation	—		—	—		3,743		—		3,743
Net income (loss)	—		—	—		—		(316,981)		(316,981)
Balance as of June 30, 2022	—	$	—	147,986,173	$	1,857,108	$	(563,770)	$	1,293,338

See accompanying notes to condensed consolidated financial statements.

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Riot Platforms, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited, in thousands)


	Six Months Ended June 30,
	2023		2022
Operating activities
Net income (loss)	$	(83,375)	$	(316,981)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Stock-based compensation		1,133		3,743
Depreciation and amortization		125,502		34,807
Amortization of license fee revenue		(48)		(48)
Noncash lease expense		1,134		807
Deferred income tax expense (benefit)		(5,045)		(6,626)
Impairment of Bitcoin		10,110		127,289
Impairment of goodwill		—		335,648
Change in fair value of derivative asset		(7,331)		(104,614)
Change in fair value of contingent consideration		—		176
Realized loss on sale of marketable equity securities		—		1,624
Realized gain on sale of Bitcoin		(33,603)		(24,925)
Unrealized loss on marketable equity securities		—		6,448
Gain (loss) on sale/exchange of equipment		30		(8,614)
Casualty-related charges		1,526		—
Bitcoin Mining revenue		(97,765)		(104,096)
Proceeds from sale of Bitcoin		89,162		33,116
Changes in assets and liabilities:
(Increase)/decrease in operating assets		29,226		18,983
Increase/(decrease) in operating liabilities		(36,440)		(11,130)
Net cash provided by (used in) operating activities		(5,784)		(14,393)

Investing activities
Proceeds from the sale of marketable equity securities		—		704
Deposits on equipment		—		(192,485)
Security deposits		—		(709)
Purchases of property and equipment, including construction in progress		(107,424)		(77,403)
Patent costs incurred		(34)		(28)
Net cash provided by (used in) investing activities		(107,458)		(269,921)

Financing activities
Proceeds from the issuance of common stock / At-the-market offering		188,430		272,737
Offering costs for the issuance of common stock / At-the-market offering		(3,769)		(5,715)
Payments on contingent consideration liability - future power credits		—		(15,725)
Proceeds from Credit and Security Facility		880		—
Repayments of Credit and Security Facility		(500)		—
Repurchase of common shares to pay employee withholding taxes		(12,951)		(8,815)
Net cash provided by (used in) financing activities		172,090		242,482

Net increase (decrease) in cash and cash equivalents		58,848		(41,832)
Cash and cash equivalents at beginning of period		230,328		312,315
Cash and cash equivalents at end of period	$	289,176	$	270,483


Supplemental information:
Cash paid for interest	$	17	$	—
Cash paid for taxes	$	—	$	—
Non-cash transactions
Reclassification of deposits to property and equipment	$	33,273	$	96,348
Construction in progress included in accrued expenses	$	7,353	$	2,020
Bitcoin exchanged for employee compensation	$	585	$	1,362
Conversion of preferred stock to common stock	$	—	$	11
Right of use assets exchanged for new operating lease liabilities	$	682	$	8,784
Property and equipment obtained in exchange transaction	$	—	$	10,409

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 its own Bitcoin Mining, as well as provides such infrastructure for institutional-scale hosted clients to mine Bitcoin at its Bitcoin mining facility in Rockdale, Texas (the “Rockdale Facility”). Currently, the Rockdale Facility has 700 megawatts (“MW”) in total developed capacity for Riot’s Bitcoin Mining and Data Center Hosting services for institutional-scale hosted clients. The Company is also developing a second large-scale Bitcoin Mining and Data Center Services facility located outside of Corsicana, Texas (the “Corsicana Facility”), which, upon completion, is expected to have approximately one gigawatt of capacity available for Riot’s Bitcoin Mining and Data Center Hosting services for institutional-scale hosted clients. The Company also provides Engineering services, which includes providing engineered electrical equipment products to third-party customers and customized electrical infrastructure essential to the Company’s Bitcoin Mining and hosting of institutional-scale clients.

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

Note 2. Liquidity and Financial Condition

At June 30, 2023, the Company had approximate balances of cash and cash equivalents of $289.2 million, working capital of $408.4 million, total stockholders’ equity of $1.2 billion and an accumulated deficit of $839.7 million. To date, the Company has, in large part, relied on equity financing to fund its operations and growth. During the six months ended June 30, 2023, the Company sold 3,575 Bitcoin for proceeds of approximately $89.2 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 cash requirements and its ongoing operations and expansion. Bitcoin is classified on the balance sheet as a current asset due to its ability to be sold in a highly liquid marketplace and the Company’s intent to liquidate its Bitcoin to support its operations when needed.

During the six months ended June 30, 2023, the Company issued 15,877,000 shares of common stock, at a weighted average price of $11.87 per share, for net proceeds of approximately $184.7 million. During July 2023, the Company issued 570,645 shares of common stock, at a weighted average price of $11.78 per share, for net proceeds of approximately $6.6 million (see Note 13. Stockholders’ Equity).

Inflation

The Company has experienced, and is experiencing, the impact of domestic and global inflationary pressures largely outside of its control, as well as the impact of central banks’ responses to such pressures. This inflationary pressure impacts the Company’s cost structure by increasing the cost of materials, parts, and labor, making both its operations and development more expensive, despite a continued focus on controlling our costs where possible. The development of the Corsicana Facility has been impacted by increased materials prices, labor costs, and higher rates for services, all of which may adversely affect the Company’s ability to complete the planned expansion on time and within its anticipated budget. Management is unable to accurately predict when, or if, these inflationary pressures will subside, or whether and to what extent a broad-based economic recession will arise in connection with these pressures. As a result, management is unable to predict the impact these inflationary pressures and possible follow-on conditions may have on the business and results of operations, as well as access to financing. See the Company’s 2022 Annual Report for additional discussion regarding the potential impacts of sustained, elevated inflationary pressures may have on its operations and plans for expansion.

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”). In the opinion of management, the accompanying unaudited

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Riot Platforms, Inc.

Notes to Condensed Consolidated Financial Statements

(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 stated in thousands of U.S. Dollars except for share, per share and miner amounts.

The results in the accompanying 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 accompanying unaudited condensed consolidated financial statements do not include all the information and notes required by GAAP for complete financial statements and, as such, 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 these 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 2022 Annual Report.

Recently Issued and Adopted Accounting Pronouncements

The Company has evaluated all recently issued accounting pronouncements and believes such pronouncements do not have a material effect on the Company’s financial statements.

Note 4. Revenue from Contracts with Customers

Disaggregated revenue

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

Contract balances

Contract assets relate to uncompleted Engineering contracts. As of June 30, 2023 and December 31, 2022, contract assets were $19.1 million and $19.7 million, respectively.

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Riot Platforms, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Contract liabilities primarily relate to upfront payments and consideration received for Data Center Hosting services and uncompleted Engineering contracts. The following table presents changes in contract liabilities and deferred revenue:


	Six Months Ended
	June 30, 2023
Beginning balance	$	29,197
Revenue recognized		(8,763)
Other changes in contract liabilities		2,206
Ending balance	$	22,640

Remaining performance obligation

The following table presents the Company’s remaining performance obligations, which represent the transaction price of contracts for work that has not yet been performed.


	2023		2024		2025		2026		2027		Thereafter		Total
Data Center Hosting	$	1,394	$	2,362	$	2,362	$	2,362	$	2,362	$	8,147	$	18,989
Engineering		3,117		—		—		—		—		—		3,117
Other		49		97		97		97		97		97		534
Total contract liabilities	$	4,560	$	2,459	$	2,459	$	2,459	$	2,459	$	8,244	$	22,640

Note 5. Bitcoin

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


	Six Months Ended
	June 30, 2023
Beginning balance	$	109,420
Revenue recognized from Bitcoin mined		97,765
Proceeds from sale of Bitcoin		(89,162)
Exchange of Bitcoin for employee compensation		(585)
Realized gain on sale of Bitcoin		33,603
Impairment of Bitcoin		(10,110)
Ending balance	$	140,931

During the three and six months ended June 30, 2023, the Company recorded impairment charges on its Bitcoin holdings of $5.6 million and $10.1 million, respectively.

During the three and six months ended June 30, 2022, the Company recorded impairment charges on its Bitcoin holdings of $101.4 million and $127.3 million, respectively.

Applying the market price of one Bitcoin on June 30, 2023 of approximately $30,477 to the Company’s 7,265 Bitcoin held at that date resulted in an estimated fair value of the Company’s Bitcoin of $221.4 million. Applying the market price of one Bitcoin on December 31, 2022 of approximately $16,548 to the Company’s 6,974 Bitcoin held at that date resulted 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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Note 6. Property and Equipment

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


	June 30,		December 31,
	2023		2022
Buildings and building improvements	$	312,128	$	229,685
Land rights and land improvements		10,164		10,164
Miners and mining equipment		491,783		441,324
Machinery and facility equipment		38,030		35,125
Office and computer equipment		1,649		1,206
Construction in progress		90,257		97,231
Total cost of property and equipment		944,011		814,735
Less accumulated depreciation		(244,374)		(122,180)
Property and equipment, net	$	699,637	$	692,555

The Company did not incur any impairment charges for its property and equipment during the three and six months ended June 30, 2023 and 2022.

During the three months ended June 30, 2023 and 2022, depreciation expense related to property and equipment totaled $64.7 million and $20.2 million, respectively, and during the six months ended June 30, 2023 and 2022, totaled $122.6 million and $34.1 million, respectively.

Miners and mining equipment

As of June 30, 2023, the Company had a total of 95,904 miners deployed in its Bitcoin mining operation at the Rockdale Facility, excluding 17,040 miners currently offline as a result of damage sustained to the facility’s infrastructure during severe winter storms affecting Texas in December 2022.

In June 2023, the Company entered into a purchase agreement with MicroBT Electronics Technology Co., LTD, through its manufacturing affiliate, SuperAcme Technology (Hong Kong) Limited (collectively, “MicroBT”) to acquire 8,320 M56S+ model miners and 24,960 M56S++ model miners, primarily for its Corsicana Facility, for a total purchase price of approximately $162.9 million. Delivery of the miners is expected to begin in December 2023, with all miners expected to be received and deployed by mid-2024. The purchase agreement also provides the Company an option to purchase up to an additional 66,560 additional M56S++ miners, on the same terms as the initial order, through December 31, 2024.

In July 2023, the Company entered into a purchase agreement with Midas Green Technologies, LLC (d/b/a “Midas Immersion Cooling”) (“Midas”) for the purchase of 200 MW of immersion cooling systems for its Corsicana Facility. Delivery of the immersion cooling systems is expected to begin in the third quarter of 2023 and be completed by the end of 2023. The purchase agreement also provides the Company an option to purchase up to an additional 400 MW of immersion cooling systems, on the same terms as the initial order, through December 31, 2025.

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 June 30, 2023, the Company did not have any outstanding purchase agreements for the purchase of miners from Bitmain.

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 hash rate capacity.

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.

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Construction in progress

In 2021, the Company commenced expansion of the Rockdale Facility to 700 MW from its initial 300 MW of developed capacity. As of June 30, 2023, the 400 MW expansion of the Rockdale Facility had been completed.

In 2022, the Company initiated development of the Corsicana Facility to expand its Bitcoin mining and data center hosting capabilities, on a 265-acre site in Navarro County, Texas, located next to the Navarro switch. 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, as well as a high-voltage power substation and transmission facilities to supply power and water to the facility. Construction of the substation and the data centers is ongoing and Bitcoin Mining and Data Center Hosting operations are expected to commence following the commissioning of the substation.

Through June 30, 2023, the Company had incurred costs of approximately $102.0 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, $87.2 million of initial developments costs and equipment, and a $4.7 million deposit for future power usage.

Commitments

In July 2023, the Company paid a deposit of $48.9 million to MicroBT for the purchase of miners described herein, leaving an additional commitment of approximately $114.0 million due in installments through approximately April 2024 based on the estimated delivery schedule.

In July 2023, the Company paid a deposit of $20.8 million to Midas for the purchase of immersion cooling systems described herein, leaving an additional commitment of approximately $31.2 million due in installments through approximately February 2024 based on the estimated delivery schedule.

Related party land transaction

During the year ended December 31, 2022, the Company began an initiative to provide certain on-site temporary housing for stakeholders, including partners, analysts, stockholders, employees, vendors, and other visitors to the Rockdale Facility, which is located in a relatively remote area of central Texas, with limited accommodations for visitors. In July 2023, Riot completed its acquisition of the property and land for the development of temporary housing from Lyle Theriot (indirectly, through a limited liability company controlled by Mr. Theriot) for approximately $1.1 million, consisting of $0.2 million for land and $0.9 million for buildings and improvements. Mr. Theriot is part of the management team at Riot and is considered a related party of Riot. The transaction was accounted for as an asset acquisition.

Note 7. Finite-Lived Intangible Assets

The following table presents the Company’s finite-lived intangible assets as of June 30, 2023:


							Weighted-
	Gross		Accumulated		Net book		average life
	book value		amortization		value		(years)
Customer contracts	$	6,300	$	(982)	$	5,318	10
Trademark		5,000		(792)		4,208	10
UL Listings		2,700		(357)		2,343	12
Patents		10,060		(3,307)		6,753	Various
Finite-lived intangible assets	$	24,060	$	(5,438)	$	18,622

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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 June 30, 2023 and 2022, amortization expense related to finite-lived intangible assets was $1.4 million and $0.3 million, respectively, and during the six months ended June 30, 2023 and 2022, was $2.9 million and $0.7 million, respectively.

The following table presents the estimated future amortization of the Company’s finite-lived intangible assets as of June 30, 2023:


Remainder of 2023	$	3,535
2024		5,815
2025		1,355
2026		1,355
2027		1,355
Thereafter		5,207
Total	$	18,622

The Company did not identify any impairment of its finite-lived intangible assets during the three and six months ended June 30, 2023 and 2022.

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 then-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 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.

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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. Through ancillary services, the Company competitively bids to sell ERCOT the ability to control Riot’s electrical load on demand, and to power down when needed in order to stabilize the grid. The Company receives compensation for its participation in ancillary services directly from ERCOT whether or not Riot is actually called to power down.

Riot 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 of June, July, August, and September, during which demand for power is at its highest. Market participants can voluntarily power down operations during these times and in doing so, make more electrical load available to the 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. As a result of Riot’s participation in 4CP in 2022, the Company’s transmission charges in its ongoing 2023 monthly power bills are substantially reduced.

Under the Company’s Power Supply Agreement with TXU, the Company 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 the Company, depending on the spot market price of electricity. The Company’s power strategy combines participation in Demand Response Services Programs and sales of power during times of peak demand, to manage operating costs most efficiently. During the three months ended June 30, 2023 and 2022, the Company sold approximately $13.5 million and $5.7 million, respectively, in electricity back to ERCOT in exchange for credits against power costs. During the six months ended June 30, 2023 and 2022 sold approximately $16.5 million and $8.3 million, respectively, in electricity back to ERCOT in exchange for credits against power costs. These sales 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 the Company has 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, the Company does 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, 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 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 23.3%, 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 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 June 30, 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.

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		7,331
Balance as of June 30, 2023	$	104,828

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Note 9. Long-Term Assets

Deposits

The following table presents the Company’s deposits:


	June 30,		December 31,
	2023		2022
Deposits on equipment	$	—		33,273
Security deposits		30,414		9,160
Total deposits	$	30,414	$	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 six months ended June 30, 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.

In July 2023, the Company paid a deposit of $48.9 million to MicroBT for the purchase of miners and a deposit of $20.8 million to Midas for the purchase of immersion cooling systems. See Note 6, Property and Equipment.

Security Deposits

During the six months ended June 30, 2023, the Company paid $23.0 million as a security deposit 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, all of which was outstanding as of June 30, 2023. As of June 30, 2023, all $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, had been utilized. The Company has other security deposits totaling approximately $2.7 million, which includes $1.8 million on the ground lease.

Note 10. Accrued Expenses

Accrued expenses consist of the following: